Filed electronically with the Securities and Exchange Commission
on October 10, 1997.
File No. 33-22059
File No. 811-5565
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
--
Post-Effective Amendment No. 10
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 12
--
Scudder Mutual Funds, Inc.
(Exact name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston, MA 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
--------
on November 1, 1997 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(i)
--------
X on November 1, 1997 pursuant to paragraph (a)(i)
--------
75 days after filing pursuant to paragraph (a)(ii)
--------
on ________________________ pursuant to paragraph (a)(ii)
-------- of Rule 485
If appropriate, check the following:
this post-effective amendment designates a new effective
-------- date for a previously filed post-effective amendment
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its fiscal
year on August 28, 1997.
<PAGE>
SCUDDER MUTUAL FUNDS, INC.
SCUDDER GOLD FUND
CROSS-REFERENCE SHEET
Items Required by Form N-1A
---------------------------
PART A
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<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
<S> <C> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
RISK FACTORS
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FINANCIAL HIGHLIGHTS
FUND ORGANIZATION--Investment adviser, Transfer agent
DIRECTORS AND OFFICERS
SHAREHOLDER BENEFITS--A Team Approach to Investing
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
Securities gains distributions
FUND ORGANIZATION
SHAREHOLDER BENEFITS--Toll-Free Telephone Service and
Information, Dividend reinvestment plan
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being PURCHASES
Offered TRANSACTION INFORMATION
SHAREHOLDER BENEFITS--Dividend reinvestment plan
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference-Page 1
<PAGE>
SCUDDER GOLD FUND
(continued)
PART B
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Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
Policies PORTFOLIO TRANSACTIONS POLICIES
14. Management of the Fund DIRECTORS AND OFFICERS
REMUNERATION
15. Control Persons and Principal DIRECTORS AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference-Page 2
<PAGE>
This prospectus sets forth concisely the information about Scudder Gold Fund, a
series of Scudder Mutual Funds, Inc., an open-end management investment company,
that a prospective investor should know before investing. Please retain it for
future reference.
If you require more detailed information, a Statement of Additional Information
dated November 1, 1997, as amended from time to time, may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov).
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.
Contents--see page 4.
NOT FDIC-INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Scudder Gold Fund
Prospectus
November 1, 1997
A pure no-load(TM) (no sales charges) mutual fund series which seeks maximum
return consistent with investing primarily in a portfolio of gold-related equity
securities and gold.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Gold Fund (the "Fund").* By reviewing this
table and those in other mutual funds' prospectuses, you can compare the Fund's
fees and expenses with those of other funds. With Scudder's pure no-load(TM)
funds, you pay no commissions to purchase or redeem shares, or to exchange from
one fund to another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE**
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended June 30, 1997.
Investment management fee 1.00%
12b-1 fees NONE
Other expenses 0.60%
----
Total Fund operating expenses 1.60%
====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$16 $50 $87 $190
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* This information also includes expenses of a wholly-owned subsidiary of
Scudder Mutual Funds, Inc., the capital of which is limited to 25% of the
Fund's assets. (See "Investment objective and policies--Investments.")
** You may redeem by writing or calling the Fund. If you wish to receive
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
2
<PAGE>
Financial highlights
The following table includes selected consolidated data for a share
outstanding throughout each period and other performance information derived
from the audited financial statements.
If you would like more detailed information concerning the Fund's performance,
a complete portfolio listing and audited financial statements are available in
the Fund's Annual Report dated June 30, 1997 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
September 2,
1988
(commencement
Years Ended June 30, of operations)
to June 30,
1997(a) 1996(a) 1995(a) 1994(a) 1993(a) 1992(a) 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------------
period ....................... $15.34 $12.86 $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58 $12.00
----------------------------------------------------------------------------------------------
Income from investment
operations: .................. (.08) (.09) (.08) (.10) (.08) (.12) (.04) .07 (.06)
Net investment income (loss)
Net realized and unrealized
gain (loss) on investment
transactions ................. (2.12) 4.28 1.02 .85 3.02 (.56) (.30) (.34) (1.36)
Total from investment ----------------------------------------------------------------------------------------------
operations ................... (2.20) 4.19 .94 .75 2.94 (.68) (.34) (.27) (1.42)
----------------------------------------------------------------------------------------------
Less distributions:
From net investment income ...... -- -- -- -- -- -- -- (.01) --
In excess of net investment
income ....................... (2.39) (1.08) (.25) (.24) -- -- -- -- --
From net realized gains on
investment transactions ...... (.26) (.63) (.47) -- -- -- -- (.03) --
From paid-in capital ............ -- -- -- -- -- -- -- (.06) --
----------------------------------------------------------------------------------------------
Total distributions ............. (2.65) (1.71) (.72) (.24) -- -- -- (.10) --
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net asset value, end of period .. $10.49 $15.34 $12.86 $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58
----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................ -17.72 36.91 7.50 6.35 31.99 (6.89)(c) (3.33)(c) (2.71)(c) (11.83)(c)**
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................. 164 173 126 130 90 31 33 17 9
Ratio of operating expenses to
average net assets (%) ....... 1.60 1.50 1.65 1.69 2.17 2.54 2.54 2.60 3.00*
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) ................... 1.60 1.50 1.65 1.69 2.17 2.57 2.82 3.74 6.59*
Ratio of net investment income
(loss) to average net
assets (%) ................... (.62) (.61) (.69) (.81) (.81) (1.34) (.59) .34 (1.06)*
Portfolio turnover rate (%) ..... 38.9 29.7 42.0 50.8 59.2 57.5 71.4 80.6 34.5*
Average commission rate
paid (b) ..................... $.0213 $.0309 $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after June 30, 1997.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $125 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans. Services available to all
shareholders include toll-free access to the professional service
representatives of Scudder Investor Relations, easy exchange among funds,
shareholder reports, informative newsletters and the walk-in convenience of
Scudder Investor Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Gold Fund
Investment objective
o maximum return consistent with investing primarily in a portfolio of
gold-related equity securities and gold
Investment characteristics
o convenient and cost-effective way to broaden an investment portfolio
o opportunity to participate in possible increases in the price of gold
Investors in the Fund must be willing to accept above-average risk and should
not consider the Fund a complete investment program.
Contents
Investment objective and policies 5
Why invest in the Fund? 7
Additional information about policies
and investments 8
Risk factors 9
Distribution and performance information 13
Fund organization 13
Transaction information 15
Shareholder benefits 18
Purchases 21
Exchanges and redemptions 22
Investment products and services 24
How to contact Scudder 25
4
<PAGE>
Investment objective and policies
Investment objective
Scudder Gold Fund (the "Fund"), a series of Scudder Mutual Funds, Inc. (the
"Corporation"), seeks maximum return (principal change and income) consistent
with investing in a portfolio of gold-related equity securities and gold. When
making portfolio investments, the Fund will emphasize the potential for growth
of the proposed investment, although it may also consider the income generating
capacity of a stock as one factor among others in evaluating investment
opportunities.
Although the Fund is non-diversified under the Investment Company Act of 1940
(the "1940 Act"), it is designed as a convenient and cost-effective means for
investors to provide diversity to their investments and to participate in
possible increases in the price of gold. Investors in the Fund must be willing
to accept above-average risk compared to that available from larger companies
such as those in the Standard & Poor's 500 Stock Index. Investors should not
consider the Fund a complete investment program.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund pursues its objective primarily through a portfolio of gold-related
investments. Under normal market conditions, at least 65% of the Fund's total
assets will be invested in:
o equity securities (defined as common stock, investment-grade preferred
stock and debt securities that are convertible into or exchangeable for
common stock) of U.S. and foreign companies primarily engaged in the
exploration, mining, fabrication, processing or distribution of gold,
o gold bullion, and
o gold coins.
A company will be considered "primarily engaged" in a business or an activity if
it devotes or derives at least 50% of its assets, revenues and/or operating
earnings from that business or activity.
The remaining 35% of the Fund's assets may be invested in any precious metals
other than gold; in equity securities of companies engaged in activities
primarily relating to precious metals and minerals other than gold; in reverse
repurchase agreements on gold or other precious metals and minerals; in
investment-grade debt securities, including zero coupon bonds, of companies
engaged in activities relating to gold or other precious metals and minerals;
warrants; and in certain debt securities, a portion of the return on which is
indexed to the price of precious metals and money market instruments. In
addition, the Fund may engage in short sales against the box and strategic
transactions and to a limited extent, may invest in illiquid and restricted
securities.
Investment-grade preferred stock and debt securities are securities rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or higher by
Standard & Poor's ("S&P"), or, if unrated, are deemed by the Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), to be of equivalent
quality.
Up to 10% of the Fund's total assets may be invested directly in gold, silver,
platinum and palladium bullion and in gold and silver coins. In addition, the
Fund's assets may be invested in wholly-owned subsidiaries of the Corporation
that invest in gold, silver, platinum and palladium bullion (and reverse
repurchase agreements thereon) and in gold and silver coins (see "Risk
5
<PAGE>
factors--Precious metals").
When deemed appropriate by the Adviser, the Fund may temporarily invest up to
30% of its assets to maintain liquidity. For temporary defensive purposes, the
Fund may vary from its investment policies during periods when the Adviser
determines that it is advisable to do so because of conditions in the securities
markets or other economic or political conditions. During such periods, the Fund
may hold without limit cash, high quality cash equivalents (including foreign
money market instruments, such as bankers' acceptances, certificates of deposit,
commercial paper, short-term government and corporate obligations, and
repurchase agreements), obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities ("Government Securities"), and domestic
repurchase agreements. The Fund may also, for hedging purposes, invest up to 10%
of its assets in foreign currencies in the form of bank deposits (see "Risk
factors"). It is impossible to accurately predict for how long such alternative
strategies may be utilized. To the extent the Fund holds cash or is not invested
in securities used to pursue its investment objective, the Fund will not achieve
its investment objective.
How investments are selected
The Adviser considers a variety of factors when making investments in securities
related to gold and other precious metals. Some of these factors may include the
ore quality of metals mined by a company, the company's mining, processing and
fabricating costs and techniques, and the quantity of unmined reserves. Other
factors that may be evaluated include a company's financial condition, potential
development of property, capital spending plans, quality of management, nature
of any affiliations, current and prospective tax liability, labor relations and
marketability of a company's equity or debt securities.
Bullion and coins in which the Fund invests will be bought from and sold to
institutions such as U.S. and foreign banks, regulated U.S. commodities
exchanges, exchanges affiliated with a regulated U.S. stock exchange, and
dealers who are members of, or affiliated with, a regulated U.S. commodities
exchange and who are qualified to provide an accepted certification of purity.
Coins will be purchased for their metallic value and not for their currency or
numismatic value. While bullion and coins do not generate income and may subject
the Fund to certain taxes, insurance, shipping and storage costs, the Adviser
believes that such investments could serve to moderate fluctuations in the value
of the Fund's shares. Historically, prices of precious metals have tended not to
fluctuate as widely as shares of companies engaged in precious metals-related
businesses.
The Fund generally invests in equity securities of established companies listed
on U.S. or foreign securities exchanges but may also invest in securities traded
over-the-counter. Investments include companies of varying size as measured by
assets, sales or capitalization. The Fund may invest in certain closed-end
investment companies holding foreign securities in accordance with the
limitations of the 1940 Act.
Why invest in the Fund?
The Fund is designed as a convenient and cost-effective means for investors to
provide diversity to their investment holdings and to participate in possible
long-term increases in the value of gold. By owning shares of the Fund,
investors can benefit from a professionally managed portfolio of gold and other
precious metals-related investments.
An investment in the Fund may appeal to both individuals and institutions for a
variety of reasons. First, gold can offer the potential for a return higher than
other investments for the long-term investor willing to accept above-average
risk. Although gold bullion normally provides no current income, in certain
periods, precious metals such as gold have generated capital returns (capital
6
<PAGE>
change) that compare favorably with the total returns (capital change plus
income) of other more traditional types of investments, such as common stocks.
In 1969, central banks abandoned fixing the private market price of gold at $35
per ounce. Since then, gold as a tangible asset has not moved in close
correlation with other financial assets. Gold has been viewed as a hedge against
inflation, making it a potentially effective means for protecting the purchasing
power of long-term savings. Investors have also purchased gold investments to
diversify an existing portfolio of stocks, bonds and money market investments.
Investors may consider allocating some portion of their assets to gold or other
precious metals, thereby potentially reducing the volatility of their overall
investment portfolio. Investing in shares of the Fund is not intended to provide
a complete investment program for an investor, but should be considered part of
an overall investment plan.
In addition, investing directly in gold and gold related securities can be
expensive and inconvenient for many individuals. The Adviser is responsible for
all phases of investment research and portfolio management, as well as
acquiring, storing and insuring all direct precious metals holdings.
Scudder Gold Fund also offers all of the benefits of the Scudder Family of
Funds. Scudder, Stevens & Clark, Inc. manages a diverse family of pure
no-load(TM) funds and provides a wide range of services to help investors meet
their investment needs. Please refer to "Investment products and services" for
additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except through reverse repurchase agreements or as
a temporary measure for extraordinary or emergency purposes and may not make
loans except through the lending of portfolio securities, the purchase of debt
securities or through repurchase agreements.
A more complete description of these and other polices and restrictions is
contained under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Despite the risk of price volatility,
however, common stocks have traditionally offered the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
invest its assets in repurchase agreements with selected domestic and foreign
banks and broker/dealers. Under a repurchase agreement, the Fund acquires
securities, subject to the seller's agreement to repurchase them at a specified
time and price.
Reverse repurchase agreements
The Fund is permitted, either directly or through Scudder Precious Metals, Inc.,
to enter into reverse repurchase agreements on gold and other precious metals
and minerals with any entity that has been determined by the Adviser to be
7
<PAGE>
creditworthy. Under a reverse repurchase agreement, the Fund would sell gold,
for example, and agree to repurchase it at a mutually agreed date and price. At
the time the Fund enters into a reverse repurchase agreement, it will establish
and maintain a segregated account, with its custodian or a designated
subcustodian, containing cash or any liquid obligations, having a value not less
than the repurchase price (including accrued interest).
Warrants
Warrants are securities that give the holder the right, but not the obligation,
to purchase newly created equity issues of the company issuing the warrants, or
a related company, at a fixed price either on a date certain or during a set
period.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain.
These strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities.
Some Strategic Transactions may also be used to enhance potential gain although
no more than 5% of the Fund's assets will be committed to Strategic Transactions
entered into for non-hedging purposes. Any or all of these investment techniques
may be used at any time and in any combination, and there is no particular
strategy that dictates the use of one technique rather than another, as use of
any Strategic Transaction is a function of numerous variables including market
conditions.
The ability of the Fund to utilize these Strategic Transactions successfully
will depend on the Adviser's ability to predict pertinent market movements,
which cannot be assured. The Fund will comply with applicable regulatory
requirements when implementing these strategies, techniques and instruments.
Strategic Transactions involving financial futures and options thereon will be
purchased, sold or entered into only for bona fide hedging, risk management or
portfolio management purposes and not for speculative purposes. Please refer to
"Risk factors--Strategic Transactions and derivatives" for more information.
8
<PAGE>
Risk factors
Precious metals
The Fund "concentrates" (for purposes of the 1940 Act) its assets in securities
related to gold and gold bullion and coins, which means that at least 25% of its
assets will be invested in these holdings at all times. As a result, the Fund
may be subject to greater market fluctuation than a fund which has securities
representing a broader range of investment alternatives.
In addition to investing up to 10% of its total assets directly in precious
metals, the Fund may invest up to 25% of its assets in wholly-owned subsidiaries
of the Corporation which invest in gold, silver, platinum and palladium bullion
(and reverse repurchase agreements thereon) and in gold and silver coins. The
subsidiaries will incur expenses for the storage and insurance of precious
metals purchased. However, the subsidiaries may realize capital gains from the
sale of metals and may pay distributions to the Fund from such gains. Currently,
Scudder Precious Metals, Inc. is the Corporation's only subsidiary. There is
currently no market for such company's shares, and no market is expected to
develop.
Investments in precious metals and in precious metals-related securities and
companies involve a relatively high degree of risk. Prices of gold and other
precious metals can be influenced by a variety of global economic, financial and
political factors and may fluctuate markedly over short periods of time. Among
other things, precious metals values can be affected by changes in inflation,
investment speculation, metal sales by governments or central banks, changes in
industrial and commercial demand, and any governmental restrictions on private
ownership of gold or other precious metals.
Mining and exploration risks
The business of gold mining by its nature involves significant risks and
hazards, including environmental hazards, industrial accidents, labor disputes,
discharge of toxic chemicals, fire, drought, flooding and other acts of God. The
occurrence of any of these hazards can delay production, increase production
costs and result in liability to the operator of the mines. A mining operation
may become subject to liability for pollution or other hazards against which it
has not insured or cannot insure, including those in respect of past mining
activities for which it was not responsible.
Exploration for gold and other precious metals is speculative in nature,
involves many risks and frequently is unsuccessful. There can be no assurance
that any gold mineralisation discovered will result in an increase in the proven
and probable reserves of a mining operation. If reserves are developed, it can
take a number of years from the initial phases of drilling and identification of
mineralisation until production is possible, during which time the economic
feasibility of production may change. Substantial expenditures are required to
establish ore reserves properties and to construct mining and processing
facilities. As a result of these uncertainties, no assurance can be given that
the exploration programs undertaken by a particular mining operation will
actually result in any new commercial mining.
Non-diversification
The Fund is classified as non-diversified under the 1940 Act, which means that
the Fund is not limited by the 1940 Act in the proportion of its assets that it
may invest in the obligations of a single issuer. The investment of a large
percentage of the Fund's assets in the securities of a small number of issuers
may cause the Fund's share price to fluctuate more than that of a diversified
investment company.
Repurchase agreements
If the seller under a repurchase agreement becomes insolvent, the Fund's right
to dispose of the securities may be restricted, or the value of the securities
may decline before the Fund is able to dispose of them. In the event of the
9
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commencement of bankruptcy or insolvency proceedings with respect to the seller
of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs, including a decline in
the value of the securities, before being able to sell the securities.
Reverse repurchase agreements
Reverse repurchase agreements involve the risk that the market value of the
securities purchased with the proceeds of the sale of gold, for example,
received by the Fund may decline below the price of the gold the Fund is
obligated to repurchase. In the event the buyer of gold or another precious
metal or mineral under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the buyer or its trustee or receiver may receive an extension
of time to determine whether to enforce the Fund's obligations to repurchase the
gold or another precious metal or mineral, and the Fund's use of proceeds of the
reverse repurchase agreement may effectively be restricted pending the decision.
Use of reverse repurchase agreements, like use of other forms of leverage, could
also increase the risk of fluctuation in the Fund's net asset value. Reverse
repurchase agreements will be treated as borrowings for purposes of calculating
the Fund's borrowing limitation.
Illiquid and restricted investments
The absence of a trading market can make it difficult to ascertain a market
value for illiquid or restricted investments. Disposing of illiquid or
restricted investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Fund to sell them
promptly at an acceptable price.
Foreign securities
Because of the Fund's policy of investing primarily in securities of companies
engaged in gold related investments, a substantial part of the Fund's assets is
generally invested outside the United States (including the Cayman Islands, the
domicile of Scudder Precious Metals, Inc.). In addition, the Fund may make money
market investments in the obligations of foreign banks.
Investments in foreign securities involve economic and political considerations
not typically found in U.S. markets. These considerations, which may favorably
or unfavorably affect the Fund's performance, include changes in exchange rates
and exchange rate controls (which may include suspension of the ability to
transfer currency from a given country), costs incurred in conversions between
currencies, non-negotiable brokerage commissions, less publicly available
information, different accounting standards, lower trading volume and greater
market volatility, the difficulty of enforcing obligations in other countries,
less securities regulation, different tax provisions (including withholding on
dividends paid to the Fund), war, expropriation, political and social
instability, and diplomatic developments. Further, the settlement period of
securities transactions in foreign markets may be longer than in domestic
markets. These considerations generally are more of a concern in developing (or
emerging) countries, in which the Fund also intends to invest.
Investing in emerging markets. Securities of many issuers in emerging markets
may be less liquid and more volatile than securities of comparable domestic
issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
not kept pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Fund is uninvested and no return is
earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of
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those securities or, if the Fund has entered into a contract to sell a security,
in possible liability to the purchaser.
Certain emerging markets may require governmental approval for the repatriation
of investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in an emerging market's
balance of payments or for other reasons, a country could impose temporary
restrictions on foreign capital remittances. The Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation of capital, as well as by the application to the Fund of any
restrictions on investments.
Throughout the last decade many emerging markets have experienced, and continue
to experience, high rates of inflation. In certain countries inflation has at
times accelerated rapidly to hyperinflationary levels, creating a negative
interest rate environment and sharply eroding the value of outstanding financial
assets in those countries. Increases in inflation could have an adverse effect
on the Fund's non-dollar denominated securities.
For a more complete description of the risks of investing in emerging markets,
please refer to the Fund's Statement of Additional Information.
Short sales against the box
The Fund may make short sales of common stocks up to 30% of the Fund's assets
if, at all times when a short position is open, the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further consideration, into the shares of common stock sold short. Short
sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to the Fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. The Fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a special
account with the custodian.
Correlation of gold and gold securities
The Adviser believes that the value of the securities of firms that deal in gold
will correspond generally, over time, with the prices of the underlying metal.
At any given time, however, changes in the price of gold may not strongly
correlate with changes in the value of securities related to gold, which are
expected to constitute the principal part of the Fund's assets. In fact, there
may be periods in which the price of gold stocks and gold will move in different
directions. The reason for this potential disparity is that political and
economic factors, including behavior of the stock market, may have differing
impacts on gold versus gold stocks.
Debt securities
Up to 35% of the Fund's assets may be invested in bonds rated Baa by Moody's or
BBB by S&P. Moody's considers bonds it rates Baa to have speculative elements as
well as investment-grade characteristics. Zero coupon bonds (which do not pay
interest until maturity) and pay-in-kind securities which pay interest in the
form of additional securities, may be more speculative than securities which pay
income periodically and in cash.
Warrants
At the time of issue, the cost of a warrant is substantially less than the cost
of the underlying securities themselves, and price movements in the underlying
securities are generally magnified in the price movements of the warrant. This
leveraging effect increases an investor's risk, however, in the event of a
decline in the value of the underlying security and can result in a complete
loss of the investment in the warrant.
Strategic Transactions and derivatives
Strategic Transactions, including derivative contracts, have risks associated
with them including possible default by the other party to the transaction,
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illiquidity and, to the extent the Adviser's view as to certain market movements
is incorrect, the risk that the use of such Strategic Transactions could result
in losses greater than if they had not been used. Use of put and call options
may result in losses to the Fund, force the sale or purchase of portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount of appreciation the Fund can realize on its investments or
cause the Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of settlements
or the inability to deliver or receive a specified currency.
The use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized. The Strategic Transactions that the Fund may
use and some of their risks are described more fully in the Fund's Statement of
Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
any net realized capital gains resulting from Fund investment activity in
December to prevent application of federal excise tax. Any dividends or capital
gains distributions declared in October, November or December with a record date
in such a month and paid during the following January will be treated by
shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. According to preference, shareholders may receive
distributions in cash or have them reinvested in additional shares of the Fund.
If an investment is in the form of a retirement plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income whether received in cash or additional shares.
Long-term capital gains distributions, if any, are taxable as long-term capital
gains regardless of the length of time shareholders have owned their shares.
Short-term capital gains and any other taxable income distributions are taxable
as ordinary income. Shareholders may be able to claim a credit or deduction on
their income tax returns for their pro rata portion of qualified taxes paid by
the Fund to foreign countries.
The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.
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Shareholders should consult their tax advisers regarding specific questions as
to the federal and local tax consequences of investing in the Fund.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and the life of the Fund as of a stated ending date. "Cumulative total
return" represents the cumulative change in value of an investment in the Fund
for various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Gold Fund is a non-diversified series of Scudder Mutual Funds, Inc., an
open-end, management investment company registered under the 1940 Act. The
Corporation was organized as a Maryland corporation in March 1988 and currently
offers shares of one investment portfolio.
The Fund's activities are supervised by the Corporation's Board of Directors.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Corporation is not required to hold and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Directors, changing
fundamental investment policies or approving an investment management contract.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Director as if Section 16(c) of the 1940 Act were
applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Corporation's Board of
Directors. The Directors have overall responsibility for the management of the
Fund under Maryland law.
The Adviser receives monthly an investment management fee for its services which
fee equals approximately 1% of the Fund's average daily net assets on an annual
basis. The fee is higher than that charged to most other investment companies
but not necessarily higher than fees charged to funds with investment objectives
similar to those of the Fund.
The Fund's fee is payable monthly, provided that the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
The Fund's expenses are paid out of gross investment income and, to the extent
necessary, the Fund's net assets. Shareholders pay no direct charges or fees for
investment services.
Scudder, Stevens & Clark, Inc. is located at
345 Park Avenue, New York, New York.
Scudder has entered into an agreement with Zurich Insurance Company ("Zurich"),
an international insurance and financial services organization, pursuant to
which Scudder will form a new global investment organization by combining with
Zurich's subsidiary, Zurich Kemper Investments, Inc., and change its name to
Scudder Kemper Investments, Inc. After the transaction is completed, Zurich will
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own approximately 70% of the new organization with the balance owned by the new
organization's officers and employees.
Consummation of the transaction is subject to a number of contingencies,
including regulatory approvals. The transaction is expected to close in the
fourth quarter of 1997. Upon consummation of the transaction the investment
management agreement with Scudder, Stevens & Clark, Inc., will terminate. The
Directors have approved an investment management agreement with Scudder Kemper
Investments, Inc. which is substantially identical to the current investment
management agreement to become effective upon the termination of the current
investment management agreement.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records for the Fund.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone prior to the expiration of the seven-day period will not
be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
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The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By exchange. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Directors. Your new
account will have the same registration and address as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "QuickBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.
If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
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<PAGE>
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-225-5163 for
more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "QuickSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
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Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of regular trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. The Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Directors. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
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value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other Information" in the Fund's Statement of
Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Gold Fund is managed by a team of Scudder investment professionals who
each play an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund's
portfolio. They are supported by Scudder's large staff of economists, research
analysts, traders, and other investment specialists who work in our offices
across the United States and abroad. Scudder believes its team approach benefits
Fund investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Clay L. Hoes assumed responsibility for the Fund's
day-to-day management in 1997. Mr. Hoes joined Scudder as a mining equity
research analyst and portfolio manager before becoming the lead portfolio
manager in 1997. Prior to joining Scudder, Mr. Hoes had nine years of metals and
mining experience in the investment industry. For the past five years he has
worked as an equity research analyst in natural resources and as an equity
research analyst in metals and mining.
William J. Wallace, Portfolio Manager, has been a member of Scudder Gold Fund's
team since 1991 and also serves as a Portfolio Manager for Scudder Value Fund.
Mr. Wallace, who has over 16 years of investment experience, contributes
expertise in quantitative analysis.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
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event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds. For more information,
please call 1-800-225-5163.) Telephone and fax redemptions and exchanges are
subject to termination and their terms are subject to change at any time by the
Fund or the transfer agent. In some cases, the transfer agent or Scudder
Investor Services, Inc. may impose additional conditions on telephone
transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder's more
than 75-year heritage of providing investment counsel to large corporate and
private clients. If you have $100,000 or more to invest initially and would like
more information about Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
19
<PAGE>
<TABLE>
<CAPTION>
Purchases
<S> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number. Then call
1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing
additional shares Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the
Scudder Funds." complete Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number.
-----------------------------------------------------------------------------------------------------------------------
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy for more details.
o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
20
<PAGE>
Exchanges and redemptions
Exchanging shares
Minimum investments: $2,500 to establish a new account;
$100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM), Scudder's Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption proceeds sent to your
predesignated bank account, or redemption proceeds of up to $100,000 sent to your
address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000. See Transaction
information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically. Call
Withdrawal 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
21
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from
their taxable income, and all investment earnings accrue on a tax-deferred
basis. The Scudder No-Fee IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans. The Scudder Keogh
charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
22
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
23
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
</TABLE>
24
<PAGE>
SCUDDER GOLD FUND
An Investment Portfolio of Scudder
Mutual Funds, Inc.
A Pure No-Load(TM) (No Sales Charges) mutual fund
series which invests in gold-related equity
securities and gold
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Scudder Gold Fund dated November 1, 1997,
as amended from time to time, a copy of which may be obtained without charge by
writing to Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES.............................................................1
General Investment Objective and Policies.......................................................1
Investment Restrictions........................................................................13
PURCHASES...............................................................................................15
Additional Information About Opening an Account................................................15
Additional Information About Making Subsequent Investments by QuickBuy.........................16
Additional Information About Making Subsequent Investments By Telephone
Order.....................................................................................16
Checks.........................................................................................17
Wire Transfer of Federal Funds.................................................................17
Share Price....................................................................................17
Share Certificates.............................................................................17
Other Information..............................................................................17
EXCHANGES AND REDEMPTIONS...............................................................................18
Exchanges......................................................................................18
Redemption by Telephone........................................................................19
Redemption by QuickSell........................................................................19
Redemption by Mail or Fax......................................................................20
Redemption-In-Kind.............................................................................20
Other Information..............................................................................20
FEATURES AND SERVICES OFFERED BY THE FUND...............................................................21
The Pure No-Load(TM) Concept...................................................................21
Internet access................................................................................22
Dividend and Capital Gain Distribution Options.................................................23
Scudder Investor Centers.......................................................................23
Reports to Shareholders........................................................................23
Transaction Summaries..........................................................................23
THE SCUDDER FAMILY OF FUNDS.............................................................................24
SPECIAL PLAN ACCOUNTS...................................................................................28
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals......................................28
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals.................................................................28
Scudder IRA: Individual Retirement Account....................................................28
Scudder 403(b) Plan............................................................................29
Automatic Withdrawal Plan......................................................................29
Group or Salary Deduction Plan.................................................................30
Automatic Investment Plan......................................................................30
Uniform Transfers/Gifts to Minors Act..........................................................30
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS...............................................................31
PERFORMANCE INFORMATION.................................................................................31
Average Annual Total Return....................................................................31
Cumulative Total Return........................................................................32
Total Return...................................................................................33
Comparison of Fund Performance.................................................................33
FUND ORGANIZATION.......................................................................................37
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
INVESTMENT ADVISER......................................................................................38
Personal Investments by Employees of the Adviser...............................................40
DIRECTORS AND OFFICERS..................................................................................41
Responsibilities of the Board--Board and Committee Meetings....................................42
Compensation of Officers and Directors.........................................................43
DISTRIBUTOR.............................................................................................43
TAXES...................................................................................................44
PORTFOLIO TRANSACTIONS..................................................................................47
Brokerage Commissions..........................................................................47
Portfolio Turnover.............................................................................48
NET ASSET VALUE.........................................................................................48
ADDITIONAL INFORMATION..................................................................................49
Experts........................................................................................49
Other Information..............................................................................49
FINANCIAL STATEMENTS....................................................................................50
DESCRIPTION OF S&P AND MOODY'S RATINGS..................................................................51
Description of S&P preferred stock and corporate bond ratings:.................................51
</TABLE>
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies," "Additional information about
policies and investments," and "Risk factors" in the Fund's prospectus.)
General Investment Objective and Policies
Scudder Gold Fund (the "Fund"), a series of Scudder Mutual Funds, Inc.
(the "Corporation"), is a pure no-load(TM), non-diversified mutual fund which
seeks maximum return (principal change and income) consistent with investing in
a portfolio of gold-related equity securities and gold. The Fund is designed as
a convenient and cost-effective means for investors to provide diversity to
their investments and to participate in possible increases in the price of gold.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. There can be
no assurance that the Fund will achieve its objective.
Foreign Securities. Because of the Fund's policy of investing primarily in
gold-related investments, a substantial part of the Fund's assets is generally
invested in securities of companies primarily outside the United States,
wherever domiciled or operating (as well as in the Cayman Islands, the domicile
of Scudder Precious Metals, Inc.). Although the percentages of fund assets
invested outside the United States will vary, the Fund expects that a
substantial portion of its assets at any time will consist of non-U.S.
securities. Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
affect the Fund's performance favorably or unfavorably. As foreign companies are
not generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange"), and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets is less than that in the U.S.
market and at times, volatility of price can be greater than in the U.S.
Further, foreign markets have different clearance and settlement procedures and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems either
could result in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Fixed commissions
on some foreign stock exchanges are generally higher than negotiated commissions
on U.S. exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. Further, the Fund may encounter
difficulties or be unable to pursue legal remedies and obtain judgments in
foreign courts. There is generally less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the U.S. It may be more difficult for the Fund's agents to keep
currently informed about corporate actions such as stock dividends or other
matters which may affect the prices of portfolio securities. Communications
between the U.S. and foreign countries may be less reliable than within the
U.S., thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. Payment for securities without
delivery may be required in certain foreign markets. In addition, with respect
to certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries. Investments
in foreign securities may also entail certain risks such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights in
other countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.
Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
For example, the possibility of revolution and the dependence on foreign
economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management.
<PAGE>
Investing in Emerging Markets. Most emerging securities markets may have
substantially less volume and are subject to less government supervision than
U.S. securities markets. Securities of many issuers in emerging markets may be
less liquid and more volatile than securities of comparable domestic issuers. In
addition, there is less regulation of securities exchanges, securities dealers,
and listed and unlisted companies in emerging markets than in the U.S.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.
In the course of investment in emerging markets, the Fund will be
exposed to the direct or indirect consequences of political, social and economic
changes in one or more emerging markets. While the Fund will manage its assets
in a manner that will seek to minimize the exposure to such risks, there can be
no assurance that adverse political, social or economic changes will not cause
the Fund to suffer a loss of value in respect of the securities in the Fund's
portfolio.
The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease or
may be substantially curtailed and prices for the Fund's securities in such
markets may not be readily available. The Corporation may suspend redemption of
its shares for any period during which an emergency exists, as determined by the
Securities and Exchange Commission (the "SEC"). Accordingly, if the Fund
believes that appropriate circumstances exist, it will promptly apply to the SEC
for a determination that an emergency is present. During the period commencing
from the Fund's identification of such condition until the date of the SEC
action, the Fund's securities in the affected markets will be valued at fair
value determined in good faith by or under the direction of the Corporation's
Board of Directors.
Volume and liquidity in most foreign markets are less than in the U.S.
and securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies. Fixed commissions on foreign securities
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of business and industry practices, securities exchanges, brokers,
dealers and listed companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less reliable than within the U.S., thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
emerging markets, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect the Fund's investments in those countries. Moreover, individual
emerging market economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.
Income from securities held by the Fund could be reduced by a
withholding tax on the source or other taxes imposed by the emerging market
countries in which the Fund makes its investments. The Fund's net asset value
may also be affected by changes in the rates or methods of taxation applicable
to the Fund or to entities in which the Fund has invested. The Adviser will
consider the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the taxes will not be subject to
change.
Many emerging markets have experienced substantial, and in some periods
extremely high rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain emerging market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain countries. Of these countries, some, in recent years, have
begun to control inflation through prudent economic policies.
Emerging market governmental issuers are among the largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. Certain emerging market governmental issuers have
not been able to make payments of interest on or principal of debt obligations
as those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
2
<PAGE>
Governments of many emerging market countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some of the
largest in any given country. As a result, government actions in the future
could have a significant effect on economic conditions in emerging markets,
which in turn, may adversely affect companies in the private sector, general
market conditions and prices and yields of certain of the securities in the
Fund's portfolio. Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar developments have
occurred frequently over the history of certain emerging markets and could
adversely affect the Fund's assets should these conditions recur.
The ability of emerging market country governmental issuers to make
timely payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.
Another factor bearing on the ability of emerging market countries to
repay debt obligations is the level of international reserves of the country.
Fluctuations in the level of these reserves affect the amount of foreign
exchange readily available for external debt payments and thus could have a
bearing on the capacity of emerging market countries to make payments on these
debt obligations.
To the extent that an emerging market country cannot generate a trade
surplus, it must depend on continuing loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and on inflows of foreign investment. The access of emerging
markets to these forms of external funding may not be certain, and a withdrawal
of external funding could adversely affect the capacity of emerging market
country governmental issuers to make payments on their obligations. In addition,
the cost of servicing emerging market debt obligations can be affected by a
change in international interest rates since the majority of these obligations
carry interest rates that are adjusted periodically based upon international
rates.
Foreign Currencies. Investments in foreign securities usually will involve
currencies of foreign countries. Moreover, the Fund temporarily may hold funds
in bank deposits in foreign currencies during the completion of investment
programs. Because of these factors, the value of the assets of the Fund as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Fund
may incur costs in connection with conversions between various currencies.
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer. The Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or through strategic
transactions involving currencies. (See "Strategic Transactions and
Derivatives.")
Because the Fund normally will be invested in both U.S. and foreign
securities markets, changes in the Fund's share price may not have a high
correlation with movements in the U.S. markets. The Fund's share price will
reflect the movements of both the different stock and bond markets in which it
is invested and of the currencies in which the investments are denominated; the
strength or weakness of the U.S. dollar against foreign currencies may account
for part of the Fund's investment performance. U.S. and foreign securities
markets do not always move in step with each other and the total returns from
different markets may vary significantly.
Because of the Fund's investment policies and the investment
considerations discussed herein and in the Prospectus, an investment in shares
of the Fund is not intended to provide a complete investment program for an
investor.
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Mining and exploration risks. The business of gold mining by its nature involves
significant risks and hazards, including environmental hazards, industrial
accidents, labor disputes, discharge of toxic chemicals, fire, drought, flooding
and other acts of God. The occurrence of any of these hazards can delay
production, increase production costs and result in liability to the operator of
the mines. A mining operation may become subject to liability for pollution or
other hazards against which it has not insured or cannot insure, including those
in respect of past mining activities for which it was not responsible.
Exploration for gold and other precious metals is speculative in nature,
involves many risks and frequently is unsuccessful. There can be no assurance
that any mineralisation discovered will result in an increase in the proven and
probable reserves of a mining operation. If reserves are developed, it can take
a number of years from the initial phases of drilling and identification of
mineralisation until production is possible, during which time the economic
feasibility of production may change. Substantial expenditures are required to
establish ore reserves properties and to construct mining and processing
facilities. As a result of these uncertainties, no assurance can be given that
the exploration programs undertaken by a particular mining operation will
actually result in any new commercial mining.
Illiquid and Restricted Investments. The Fund may invest a portion of its assets
in securities for which there is not an active trading market including
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 or which are otherwise not
readily marketable. The absence of a trading market can make it difficult to
ascertain a market value for illiquid or restricted investments. Disposing of
illiquid or restricted investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for the Fund to sell them
promptly at an acceptable price. The Fund may have to bear the extra expense of
registering such securities for resale and the risk of substantial delay in
effecting such registration. Also market quotations are less readily available.
The judgment of the Fund's investment adviser, Scudder, Stevens & Clark, Inc.
(the "Adviser"), may at times play a greater role in valuing these securities
than in the case of liquid or unrestricted securities.
Debt Securities. The Fund may invest in investment-grade debt securities
convertible into or exchangeable for common stock. Investment grade-debt
securities are those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc.
("Moody's") or AAA, AA, A or BBB by Standard & Poor's ("S&P") or, if unrated,
judged to be of equivalent quality as determined by the Adviser. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. (See "DESCRIPTION OF S&P AND MOODY'S
RATINGS").
Asset-Indexed Securities. The Fund may purchase asset-indexed securities which
are debt securities usually issued by companies in precious metals related
businesses such as mining, the principal amount, redemption terms, or interest
rates of which are related to the market price of a specified precious metal.
The Fund will only enter into transactions in publicly traded asset-indexed
securities. Market prices of asset-indexed securities will relate primarily to
changes in the market prices of the precious metals to which the securities are
indexed rather than to changes in market rates of interest. However, there may
not be a perfect correlation between the price movements of the asset-indexed
securities and the underlying precious metals. Asset-indexed securities
typically bear interest or pay dividends at below market rates (and in certain
cases at nominal rates). The Fund may purchase asset-indexed securities to the
extent permitted by law.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System, any foreign bank when the repurchase
agreement is fully secured by government securities of the particular
jurisdiction, or with any domestic or foreign broker/dealer which is recognized
as a reporting government securities dealer if the creditworthiness of the bank
or broker/dealer has been determined by the Adviser to be at least as high as
that of other obligations the Fund may purchase.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
Purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities is kept at least equal to the
repurchase price on a daily basis. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Fund together with the repurchase price on the date of repurchase. In either
case, the income to the Fund is unrelated to the interest rate on the Obligation
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itself. Obligations will be held by the Fund's custodian or in the Federal
Reserve Book Entry System.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
Obligation subject to the repurchase agreement and is therefore subject to the
Fund's investment restriction applicable to loans. It is not clear whether a
court would consider the Obligation purchased by the Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Delays
may involve loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at the risk of losing some
or all of the principal and income involved in the transaction. As with
unsecured debt obligations purchased for the Fund, the Adviser seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the Obligation. However, if the market value of the
Obligation subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the Obligation to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price. It is
possible that the Fund will be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund sells
a portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, the Fund will
maintain liquid assets in a segregated custodial account to cover its obligation
under the agreement. The Fund will enter into reverse repurchase agreements only
with parties whose creditworthiness has been found satisfactory by the Adviser.
Such transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.
Short Sales Against the Box. The Fund may make short sales of common stocks if,
at all times when a short position is open, the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further consideration, into the shares of common stock sold short. Short
sales of this kind are referred to as short sales "against the box." The
broker/dealer that executes a short sale generally invests cash proceeds of the
sale until they are paid to the Fund. Arrangements may be made with the
broker/dealer to obtain a portion of the interest earned by the broker on the
investment of short sale proceeds. The Fund will segregate the common stock or
convertible or exchangeable preferred stock or debt securities in a special
account with the Custodian.
Lending of Portfolio Securities. The Fund has the ability to lend portfolio
securities to brokers, dealers and other financial organizations. Loans of
portfolio securities will be collateralized by cash, letters of credit or
Government Securities which are maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. From time to
time, the 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, 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 Government Securities are used as
collateral. The Fund will adhere to 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 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 occurs, the Corporation's Board of Directors must
terminate the loan and regain the right to vote the 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 Fund's account. The Fund has no current intention to
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loan portfolio securities.
Zero Coupon Bonds. The Fund may invest in zero coupon bonds which pay no
periodic interest payments and are sold at substantial discounts from their
value at maturity. When held to maturity, their entire income, which consists of
accretion of discount, comes from the difference between the issue price and
their value at maturity. Zero coupon bonds are subject to greater market value
fluctuations from changing interest rates than debt obligations of comparable
maturities which make current distributions of interest (cash).
Warrants. The Fund may purchase warrants issued by domestic and foreign issuers
to purchase newly created equity issues consisting of common and preferred
stock, convertible preferred stock and warrants that themselves are only
convertible into common, preferred or convertible preferred stock. The equity
issue underlying an equity warrant is outstanding at the time the equity warrant
is issued or is issued together with the warrant. At the time the Fund acquires
an equity warrant convertible into a warrant, the terms and conditions under
which the warrant received upon conversion can be exercised will have been
determined; the warrant received upon conversion will only be convertible into a
common, preferred or convertible preferred stock.
Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. The value of a warrant may decline because of a
decline in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future price of
the underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.
Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities in the Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
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of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
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to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
the Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 10% of its assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, equity securities (including convertible
securities) and Eurodollar instruments (whether or not it holds the above
securities in its portfolio), and on securities indices, currencies and futures
contracts other than futures on individual corporate debt and individual equity
securities. The Fund will not sell put options if, as a result, more than 50% of
the Fund's assets would be required to be segregated to cover its potential
obligations under such put options other than those with respect to futures and
options thereon. In selling put options, there is a risk that the Fund may be
required to buy the underlying security at a disadvantageous price above the
market price.
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General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by the Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
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The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
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sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by the Fund will require the Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by the Fund on an index will require the Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
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a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate cash or liquid assets equal to the amount of the Fund's
obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to the Fund's net obligation,
if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
Investment Considerations. In non-U.S. markets, issuers often issue new shares
on a partially-paid basis. The aggregate purchase price is paid in installments
over a specified period, generally not more than nine months, during which time
the shares trade freely on a partially-paid basis. The Fund anticipates that it
may purchase partially-paid shares from time to time.
Foreign securities such as those purchased by the Fund may be subject
to foreign government taxes which could reduce the yield on such securities,
although a shareholder of the Fund may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund. (See
"TAXES.")
Because direct investments in precious metals do not generate income,
they may be subject to greater fluctuations in value than interest-paying and
dividend-paying securities. Investors should also be aware that gold coins trade
at approximately the current or spot price of the underlying gold bullion plus a
premium which reflects, among other things, fabrication costs incurred in
producing the coins. This premium has ranged from 2.5% to 15%. Any change in
this premium will affect the value of the Fund's shares.
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Changes in portfolio securities are normally made on the basis of
investment considerations.
The Fund cannot guarantee a gain or eliminate the risk of loss. The net
asset value of the Fund's shares will increase or decrease with changes in the
market price of the Fund's investments.
Investment Restrictions
The policies set forth below have been adopted by the Corporation with
respect to the Fund as fundamental policies and may not be changed without
approval of a majority of the outstanding voting securities of the Fund which,
under the 1940 Act and the rules thereunder and as used in this Statement of
Additional Information, means the lesser of (1) 67% or more of the shares
present at such meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (2) more than 50% of
the outstanding shares of the Fund.
The Fund may not:
(1) make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance
with its investment objectives and investment policies may be
deemed to be loans;
(2) act as an underwriter of securities issued by others, except
to the extent that it may be deemed an underwriter in
connection with the disposition of portfolio securities of the
Fund;
(3) purchase or sell real estate (except that the Fund may invest
in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of
the Fund's ownership of securities);
(4) purchase or sell physical commodities or contracts relating to
physical commodities, except for contracts for the future
delivery of gold, and gold, silver, platinum and palladium
bullion or coins;
(5) purchase any securities (other than securities issued by
wholly-owned subsidiaries of the Corporation) which would
cause more than 25% of the market value of its total assets at
the time of such purchase to be invested in the securities of
one or more issuers having their principal business activities
in the same industry, provided that there is no limitation
with respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, and except that the Fund will invest at
least 25% of its total assets in securities of companies that
are primarily engaged in the exploration, mining, fabrication,
processing or distribution of gold and other precious metals
and in gold bullion and coins;
(6) borrow money, except as a temporary measure for extraordinary
or emergency purposes or except in connection with reverse
repurchase agreements; provided that the Fund maintains asset
coverage of 300% for all borrowings;
(7) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for
shares of the separate classes or series of the Corporation,
provided that collateral arrangements with respect to
currency-related contracts, futures contracts, options or
other permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of
senior securities for purposes of this restriction.
Other Investment Policies. The Directors of the Corporation have voluntarily
adopted certain policies and restrictions which are observed in the conduct of
the Fund's affairs. These represent intentions of the Directors based upon
current circumstances. They differ from fundamental investment policies in that
they may be changed or amended by action of the Directors without requiring
prior notice to or approval of shareholders.
In accordance with such policies and guidelines the Corporation may
not, for or on behalf of the Fund:
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(1) purchase restricted securities (for these purposes restricted
security means a security with a legal or contractual
restriction on resale in the principal market in which the
security is traded), including repurchase agreements maturing
in more than seven days, over-the-counter options and
securities (other than securities of wholly-owned subsidiaries
of the Corporation) which are illiquid if as a result more
than 10% of the value of the Fund's net assets (valued at
market at purchase) would be invested in such securities;
(2) invest in oil, gas, or other mineral leases, or exploration or
development programs (although it may invest in issuers which
own or invest in such interests);
(3) participate on a joint or joint and several basis in any
securities trading account, but may for the purpose of
possibly achieving better net results on portfolio
transactions or lower brokerage commission rates join with
other investment companies and client accounts managed by the
Fund's investment adviser in the purchase or sale of
securities;
(4) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund
at any time do not exceed 20% of its net assets; or sell put
options on securities if, as a result, the aggregate value of
the obligations underlying such put options would exceed 50%
of the Fund's net assets;
(5) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to all futures contracts
entered into on behalf of the Fund and the premiums paid for
options on futures contracts does not exceed 5% of the fair
market value of the Fund's total assets; provided that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing
the 5% limit;
(6) purchase warrants if as a result such securities taken at the
lower of cost or market value would represent more than 10% of
the value of the Fund's total net assets (for this purpose,
warrants attached to securities will be deemed to have no
value);
(7) with respect to 75% of its total assets, taken at market
value, purchase (except for the exercise of stock subscription
rights) securities of any one issuer (other than wholly-owned
subsidiaries of the Corporation) if as a result more than 10%
of the outstanding voting securities of such issuer would be
held in the Fund's portfolio, except those issued or
guaranteed by the government of the U.S.;
(8) purchase time deposits if as a result more than 10% of the
value of the Fund's total assets would be invested in time
deposits maturing in more than seven calendar days;
(9) invest in the securities of other open-end investment
companies, except that the Fund may (i) purchase the
securities of a "money market" fund whose investment adviser
is the same person as the Fund's investment adviser, or an
affiliate thereof but only to the extent authorized by an
order of the SEC; or (ii) purchase the securities of another
investment company by purchase in the open market when no
commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, except
when such purchase, though not made on the open market, is
part of a plan of merger or consolidation; or (iii) that the
Fund may purchase the securities of an investment company
which invests in the securities of issuers located in a
foreign country which, under the laws and/or regulations of
such foreign country, the Fund may not acquire directly;
(10) purchase securities if, as a result thereof, more than 10% of
the value of the Fund's total assets would be invested in
restricted securities (for these purposes a restricted
security means a security with a legal or contractual
restriction on resale in the principal market in which the
security is traded);
(11) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the
time any loan is made; all loans of portfolio securities will
be fully collateralized and marked to market daily. The Fund
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has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund's
total assets;
(12) purchase or sell real estate limited partnerships;
(13) purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is
made upon the same conditions, except in connection with
arbitrage transactions and except that the Fund may obtain
such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(14) purchase securities of any issuer (other than wholly-owned
subsidiaries of the Corporation) with a record of less than
three years continuous operations, including predecessors,
except U.S. Government securities, obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities and securities of closed-end investment
companies, if such purchase would cause the investments of the
Fund in all such issuers to exceed 5% of the total assets of
the Fund taken at market value;
(15) purchase or retain securities of any issuer (other than
wholly-owned subsidiaries of the Corporation) any of whose
officers, directors, trustees or security holders is an
officer or director of the Corporation or a member, officer,
director or trustee of the investment adviser of the Fund if
one or more of such individuals owns beneficially more than
one-half of one percent (1/2%) of the outstanding shares or
securities or both (taken at market value) of such issuer and
such individuals owning more than one-half of one percent
(1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both; or
(16) borrow money in excess of 5% of its total assets (taken at
market value) except for temporary or emergency purposes or
borrow other than from banks.
The 1940 Act limits the Fund's investment in other investment
companies. To the extent that the Fund invests in shares of other investment
companies, pursuant to the 1940 Act, additional fees and expenses in addition to
those incurred by the Fund may be deducted from such investments.
If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies" above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of the Funds assets will
not be considered a violation of the restriction. In order to permit sale of the
Fund's shares in certain states, the Corporation may make commitments more
restrictive than the investment restrictions described above with respect to the
Fund. Should the Corporation determine that any such commitment is no longer in
the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of the Fund's shares in the state involved.
PURCHASES
(See "Purchases" and "Transaction information" in the Fund's prospectus.)
Additional Information About Opening an Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of Scudder, Stevens & Clark, Inc. or of any affiliated organization and their
immediate families, members of the National Association of Securities Dealers,
Inc. ("NASD") and banks may, if they prefer, subscribe initially for at least
$2,500 through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
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members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($2,500 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the tax identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, Account Number 9903-5552, ABA Number 011000028. The investor must give
the Scudder fund name, account name and new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.
The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.
Additional Information About Making Subsequent Investments by QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before 4 p.m. eastern time. Proceeds in the
amount of your purchase will be transferred from your bank checking account two
or three business days following your call. For requests received by the close
of regular trading on the Exchange, shares will be purchased at the net asset
value per share calculated at the close of trading on the day of your call.
QuickBuy requests received after the close of regular trading on the Exchange
will begin their processing and be purchased at the net asset value calculated
the following business day. If you purchase shares by QuickBuy and redeem them
within seven days of the purchase, the Fund may hold the redemption proceeds for
a period of up to seven business days. If you purchase shares and there are
insufficient funds in your bank account the purchase will be canceled and you
will be subject to any losses or fees incurred in the transaction. QuickBuy
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Additional Information About Making Subsequent Investments By Telephone Order
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone or fax by members of the NASD, by banks and by established
shareholders (except by Scudder Individual Retirement Account (IRA), Scudder
Profit Sharing and Money Purchase Pension Plans, and Scudder 401(k) and Scudder
403(b) Planholders). Orders placed in this manner may be directed to any office
of the Distributor listed in the Fund's prospectus. An invoice of the purchase
will be mailed out promptly following receipt of a request to buy. Payment
should be attached to a copy of the invoice for proper identification. Federal
regulations require that payment be received within three (3) business days. If
payment is not received within that time, the shares may be canceled. In the
event of such cancellation or cancellation at the purchaser's request, the
purchaser will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund shall have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse the Fund or the principal underwriter for
the loss incurred. Net losses on such transactions which are not recovered from
the purchaser will be absorbed by the principal underwriter. Any net profit on
the liquidation of unpaid shares will accrue to the Fund.
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Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on, or
payable through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Corporation reserves the right to cancel the purchase
immediately and the purchaser will be responsible for any loss incurred by the
Corporation, the Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, the Corporation will have the
authority, as agent of the shareholder, to redeem shares in the account to
reimburse the Fund or the principal underwriter for the loss incurred. Investors
whose orders have been canceled may be prohibited from or restricted in placing
future orders in any of the Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange (normally 4 p.m. eastern time) on a selected day, your
bank must forward federal funds by wire transfer and provide the required
account information so as to be available to the Corporation prior to 4 p.m.
eastern time.
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays a fee for receipt by State
Street Bank and Trust Company (the "Custodian"), of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include: Columbus Day (the 2nd Monday in October), and
Veterans' Day (November 11). Investors are not able to purchase shares by wiring
federal funds on such holidays because the Custodian is not open to receive such
funds on behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will be executed at the next business day's net
asset value. If the order has been placed by a member of the NASD, other than
the Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.
Share Certificates
Due to the desire of the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to the Transfer
Agent for cancellation and credit to such shareholder's account. Shareholders
who prefer may hold the certificates in their possession until they wish to
exchange or redeem such shares.
Other Information
If purchases or redemptions of Fund shares are arranged and settlement
made at the investor's election through a member of the NASD, other than the
Distributor, that member may, at its discretion, charge a fee for that service.
The Board of Directors and the Distributor, the Fund's principal
underwriter, each has the right to limit, for any reason, the amount of
purchases by, and to refuse to sell to any person; and each may suspend or
terminate the offering of shares of the Fund at any time for any reason.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g., from exempt investors, certification of exempt status) may be
returned to the investor unless a correct, certified tax identification number
and certain other required certificates are supplied.
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The Corporation may issue shares of the Fund at net asset value in
connection with any merger or consolidation with, or acquisition of the assets
of, any investment company or personal holding company, subject to the
requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction
information" in the Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $2,500. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain a signature guarantee as described under
"Transaction Information--Redeeming shares--By mail or fax" in the Fund's
prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Corporation and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Corporation employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Corporation does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Corporation will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Corporation and the Transfer Agent each reserves the right to
suspend or terminate the privilege of exchanging by telephone or fax at any
time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
18
<PAGE>
Redemption by Telephone
In order to request redemptions by telephone, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which the redemption proceeds are to be sent.
Shareholders currently receive automatically, without having to elect it, the
right to redeem up to $100,000 to their address of record. Shareholders may
request to have the proceeds mailed or wired to their predesignated bank
account.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate
section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder Pension and Profit-Sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption payments
should either return a Telephone Redemption Option Form
(available upon request) or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. A signature and a signature guarantee
are required for each person in whose name the account is
registered.
Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
The Corporation employs procedures, including recording telephone
calls, testing a caller's identity, and sending written confirmation of
telephone transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Corporation does not follow such procedures, it may be liable for
losses due to unauthorized or fraudulent telephone instructions. The Corporation
will not be liable for acting upon instructions communicated by telephone that
it reasonably believes to be genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption by QuickSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickSell program may sell shares of the Fund by telephone. To sell
shares by QuickSell, shareholders should call before 4 p.m. eastern time.
Redemptions must be for at least $250. Proceeds in the amount of your redemption
will be transferred to your bank checking account two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day. QuickSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
19
<PAGE>
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with a signature guarantee as explained in the
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not limited to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
any redemptions to ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, trust, fiduciary agent,
attorney or partnership, the Transfer Agent requires, in addition to the stock
power, certified evidence of authority to sign. These procedures are for the
protection of shareholders and should be followed to ensure prompt payment.
Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within seven business days
after receipt by the Transfer Agent of a request for redemption that complies
with the above requirements. Delays of more than seven days of payment for
shares tendered for repurchase or redemption may result but only until the
purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
Redemption-In-Kind
The Corporation reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Corporation and valued as they are for purposes of computing the Fund's net
asset value (a redemption-in-kind). If payment is made in securities, a
shareholder may incur transaction expenses in converting these securities into
cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940
Act as a result of which the Fund is obligated to redeem shares, with respect to
any one shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Other Information
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive, in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. The
Corporation does not impose a redemption or repurchase charge, although a wire
charge may be applicable for redemption proceeds wired to an investor's bank
account. Redemptions of shares of the Fund, including an exchange into another
series of the Corporation, if any, or another Scudder fund, may result in tax
consequences (gain or loss) to the shareholder and the proceeds of such
redemptions may be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
20
<PAGE>
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted for any reason, (c)
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) the SEC may
by order permit such a suspension for the protection of the Trust's
shareholders; provided that applicable rules and regulations of the SEC (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in (b) or (c) exist.
Shareholders should maintain a share balance worth at least $2,500
($1,000 for IRAs, Uniform Gift to Minor Act, and Uniform Trust to Minor Act
accounts), which amount may be changed by the Board of Directors. Scudder
retirement plans have similar or lower minimum balance requirements. A
shareholder may open an account with at least $1,000 ($500 for an IRA), if an
automatic investment plan (AIP) of $100/month ($50/month for an IRA) is
established.
Shareholders who maintain a non-fiduciary account balance of less than
$2,500 in the Fund, without establishing an AIP, will be assessed an annual
$10.00 per fund charge with the fee to be reinvested in the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder at the address
of record. Reductions in value that result solely from market activity will not
trigger an involuntary redemption. UGMA, UTMA, IRA and other retirement accounts
will not be assessed the $10.00 charge or be subject to automatic liquidation.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset based sales charges and service fees are typically
paid pursuant to distribution plans adopted under Rule 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
21
<PAGE>
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Scudder No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund Load Fund with 0.75% 0.25% 12b-1 Fee
12b-1 Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- -------------------------------------------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- -------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability.
A section entitled "Planning Resources" provides information on asset
allocation, tuition, and retirement planning to users who fill out interactive
"worksheets." Investors can easily establish a "Personal Page," that presents
price information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
22
<PAGE>
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call MeTM feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call MeTM feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be received by the Transfer Agent in writing at least five days
prior to a dividend record date. Shareholders may change their dividend option
either by calling 1-800-225-5163 or by sending written instructions to the
Transfer Agent. See "How to contact Scudder" in the Prospectus for the address.
Please include your account number with your written request.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gains distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by Scudder
Investor Services, Inc. listed in the Prospectus. The Centers are designed to
provide individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder Family
of Funds, redeeming shares or opening retirement plans. Checks should not be
mailed to the Centers but should be mailed to "The Scudder Funds" at the address
listed under "How to contact Scudder" in the Prospectus.
Reports to Shareholders
The Corporation issues shareholders semiannual financial statements
(audited annually by independent accountants) including a list of investments
held and statements of assets and liabilities, statements of operations,
statements of changes in net assets and financial highlights.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
23
<PAGE>
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' prospectuses.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in most Scudder funds must be at least $2,500 or $1,000 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower. The minimum initial purchase required
for the Cash Fund's Premium Shares is $25,000 and subsequent purchases must be
for $1,000 or more. The minimum initial required purchase for each Fund's
Managed Shares is $100,000 and subsequent purchases must be for $1,000 or more.
The minimum initial purchase required for a Fund's Institutional Shares is
$1,000,000 and there is no minimum subsequent purchase. Please see the
respective prospectuses for these classes of shares for further information
regarding minimum balance requirements.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices
and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share and declares
dividends daily. The institutional class of shares of this Fund is not
within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with
as high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund
invests exclusively in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities that have remaining
maturities of not more than 397 calendar days and certain repurchase
agreements. The institutional class of shares of this Fund is not
within the Scudder Family of Funds.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder Global Bond Fund seeks to provide total return with an emphasis
on current income by investing primarily in high-grade bonds
denominated in foreign currencies and the U.S. dollar. As a secondary
objective, the Fund will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder High Yield Bond Fund seeks to provide a high level of current
income and, secondarily, capital appreciation through investment
primarily in below investment grade domestic debt securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
24
<PAGE>
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal
income tax by reason of federal law as is consistent with its
investment policies and with preservation of capital and liquidity. The
institutional class of shares of this Fund is not within the Scudder
Family of Funds.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in municipal
securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
high-grade, long-term municipal securities.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
- ------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
25
<PAGE>
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Classic Growth Fund seeks long-term growth of capital with
reduced share price volatility compared to other growth mutual funds.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and
foreign issuers. Income is an incidental consideration.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
- ------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
26
<PAGE>
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in equity securities of large U.S.
growth companies.
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a broad and flexible investment program
emphasizing common stocks.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-cap stocks.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in securities of emerging growth companies poised
to be leaders in the 21st century.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio will, under normal market conditions, invest
substantially in a select mix of Scudder bond mutual funds, but will
have some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks a balance of growth
and income by investing in a select mix of Scudder money market, bond
and equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors
with long-term growth of capital. In pursuing this objective, the
Portfolio will, under normal market conditions, invest predominantly in
a select mix of Scudder equity mutual funds designed to provide
long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total
return. Total return consists of any capital appreciation plus dividend
income and interest. To achieve this objective, the Portfolio invests
in a select mix of international and global Scudder Funds.
27
<PAGE>
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
28
<PAGE>
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
29
<PAGE>
which day they want the automatic withdrawal to be processed. The check amounts
may be based on the redemption of a fixed dollar amount, fixed share amount,
percent of account value or declining balance. The Plan provides for income
dividends and capital gains distributions, if any, to be reinvested in
additional shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s) as
described under "Transaction information--Redeeming shares--Signature
guarantees" in the Fund's prospectus. Any such requests must be received by the
Fund's transfer agent ten days prior to the date of the first automatic
withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the
shareholder, the Corporation or its agent on written notice, and will be
terminated when all shares of the Fund under the Plan have been liquidated or
upon receipt by the Corporation of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Corporation and its agents reserve the right to establish a
maintenance charge in the future depending on the services required by the
investor.
The Corporation reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Corporation reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
30
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Fund's prospectus.)
The Corporation intends to follow the practice of distributing
substantially all of the Fund's net investment income, including any excess of
net realized short-term capital gains over net realized long-term capital
losses. The Corporation intends to follow the practice of distributing the
entire excess of the Fund's net realized long-term capital gains over net
realized short-term capital losses. However, if it appears to be in the best
interest of the Fund and its shareholders, the Fund may retain all or part of
such gain for reinvestment after paying the related federal income taxes on
behalf of the shareholders.
The Corporation intends to distribute the Fund's net investment income
and any net realized short-term and long-term capital gains resulting from Fund
investment activity in December to prevent application of a federal excise tax.
Both types of distributions will be made in shares of the Fund and confirmations
will be mailed to each shareholder unless a shareholder has elected to receive
cash, in which case a check will be sent. Distributions are taxable, whether
made in shares or cash (see "TAXES"). Any distributions declared in October,
November or December with a record date in such a month and paid during the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance
information" in the Fund's prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures may be calculated in the following manner:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for the periods of one year, five years and the life of the Fund, ended
on the date of the most recent balance sheet. Average annual total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by
computing the average annual compound rates of return of a hypothetical
investment over such periods, according to the following formula (average annual
total return is then expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
T = Average Annual Total Return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of
the periods of one year or the life of the
Fund (or fractional portion thereof).
31
<PAGE>
Average Annual Total Return for periods ended June 30, 1997*
One Year Five Years Life of the Fund
-17.72% 11.20% 3.13%
(1) For the period September 2, 1988 (commencement of operations)
to June 30, 1997.
* If the Adviser had not absorbed a portion of Fund expenses and
had imposed a full management fee, the average annual total
return for the one year and five year periods ended June 30,
1997, and the life of the Fund would have been lower.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for the Fund will vary based on changes in market conditions and
the level of the Fund's expenses.
In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to other unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by computing
the cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return for periods ended June 30, 1997*
One Year Five Years Life of the Fund
-17.72% 69.99% 31.24%
(1) For the period September 2, 1988 (commencement of operations)
to June 30, 1997.
* If the Adviser had not absorbed a portion of Fund expenses and
had imposed a full management fee, the cumulative total return
for the life of the Fund would have been approximately 25%.
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
32
<PAGE>
The Fund's performance is affected by changes in the prices of gold and
other precious metals, the level of stock prices generally, by the Adviser's
selection of securities for the portfolio, by the Fund's expense ratio and other
factors.
Because some of the Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future performance.
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the Nasdaq OTC Composite Index, the Nasdaq
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.
Because some or all of the Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance for any
of the countries in which the Fund invests, including, but not limited to, the
following: population growth, gross domestic product, inflation rate, average
stock market price-earnings ratios and the total value of stock markets. Sources
for such statistics may include official publications of various foreign
governments and exchanges.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations. In addition, the Fund's performance may also be
compared to the performance of broad groups of comparable mutual funds.
Unmanaged indices with which the Fund's performance may be compared include, but
are not limited to, the following:
The Europe/Australia/Far East (EAFE) Index
International Finance Corporation's Latin America Investable
Total Return Index
Morgan Stanley Capital International World Index
J.P. Morgan Global Traded Bond Index
Salomon Brothers World Government Bond Index
33
<PAGE>
Nasdaq Composite Index
Wilshire 5000 Stock Index
From time to time, in marketing and other Fund literature, Directors
and officers of the Fund, the Fund's portfolio manager, or members of the
portfolio management team may be depicted and quoted to give prospective and
current shareholders a better sense of the outlook and approach of those who
manage the Fund. In addition, the amount of assets that the Adviser has under
management in various geographical areas may be quoted in advertising and
marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources for Fund performance information and articles
about the Fund include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
34
<PAGE>
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Handy and Harman, a major New York-based gold fabricator and metal refiner that
issues public quotes on gold prices daily.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government Money
Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
35
<PAGE>
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SmartMoney, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
Taking a Global Approach
Many U.S. investors limit their holdings to U.S. securities because
they assume that international or global investing is too risky. While there are
risks connected with investing overseas, it's important to remember that no
investment -- even in blue-chip domestic securities -- is entirely risk free.
Looking outside U.S. borders, an investor today can find opportunities that
mirror domestic investments -- everything from large, stable multinational
companies to start-ups in emerging markets. To determine the level of risk with
which you are comfortable, and the potential for reward you're seeking over the
long term, you need to review the type of investment, the world markets, and
your time horizon.
36
<PAGE>
The U.S. is unusual in that it has a very broad economy that is well
represented in the stock market. However, many countries around the world are
not only undergoing a revolution in how their economies operate, but also in
terms of the role their stock markets play in financing activities. There is
vibrant change throughout the global economy and all of this represents
potential investment opportunity.
Investing beyond the United States can open this world of opportunity,
due partly to the dramatic shift in the balance of world markets. In 1970, the
United States alone accounted for two-thirds of the value of the world's stock
markets. Now, the situation is reversed -- only 35% of global stock market
capitalization resides here. There are companies in Southeast Asia that are
starting to dominate regional activity; there are companies in Europe that are
expanding outside of their traditional markets and taking advantage of faster
growth in Asia and Latin America; other companies throughout the world are
getting out from under state control and restructuring; developing countries
continue to open their doors to foreign investment.
Stocks in many foreign markets can be attractively priced. The global
stock markets do not move in lock step. When the valuations in one market rise,
there are other markets that are less expensive. There is also volatility within
markets in that some sectors may be more expensive while others are depressed in
valuation. A wider set of opportunities can help make it possible to find the
best values available.
International or global investing offers diversification because the
investment is not limited to a single country or economy. In fact, many experts
agree that investment strategies that include both U.S. and non-U.S. investments
strike the best balance between risk and reward.
Scudder's 30% Solution
The 30 Percent Solution -- A Global Guide for Investors Seeking Better
Performance With Reduced Portfolio Risk is a booklet, created by Scudder, to
convey its vision about the new global investment dynamic. This dynamic is a
result of the profound and ongoing changes in the global economy and the
financial markets. The booklet explains how Scudder believes an equity
investment portfolio with up to 30% in international holdings and 70% in
domestic holdings can improve long-term performance while simultaneously helping
to reduce overall risk.
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Corporation is a Maryland corporation organized in March 1988. The
Corporation currently offers shares of common stock of one investment fund which
represents interests in the Fund. The authorized capital stock of the
Corporation consists of 100 million shares of a par value of $0.01 each. Shares
are divided into series, one of which represents interests in the one investment
fund currently offered by the Corporation. Shares of each class have equal
rights as to voting, redemption, dividends and liquidation. Shareholders have
one vote for each share held. All shares issued and outstanding are fully paid
and nonassessable, transferable, and redeemable at net asset value of the
relevant fund at the option of the shareholder. Shares have no preemptive or
conversion rights.
The shares of the Corporation have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors. Shareholders of the Corporation generally vote by class,
rather than in the aggregate, except with respect to the election of directors
and the selection of independent accountants.
The Articles of Incorporation provide that the Directors of the
Corporation shall not be liable for any action taken by them in good faith. The
By-Laws provide that the Corporation will indemnify Directors and officers of
the Corporation against liabilities and expenses actually incurred in connection
with litigation in which they may be involved because of their positions with
the Corporation. However, nothing in the Articles of Incorporation or the
By-Laws protects or indemnifies a Director or officer against any liability to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
37
<PAGE>
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Fund's prospectus.)
Scudder has entered into an agreement with Zurich Insurance Company
("Zurich"), an international insurance and financial services organization,
pursuant to which Scudder will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc., and change
its name to Scudder Kemper Investments, Inc. After the transaction is completed,
Zurich will own approximately 70% of the new organization with the balance owned
by the new organization's officers and employees.
Consummation of the transaction is subject to a number of
contingencies, including regulatory approvals. The transaction is expected to
close in the fourth quarter of 1997. Upon consummation of the transaction the
investment management agreement with Scudder, Stevens & Clark, Inc., will
terminate. The Trustees have approved an investment management agreement with
Scudder Kemper Investments, Inc. which is substantially identical to the current
investment management agreement to become effective upon the termination of the
current investment management agreement.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
Equity Trust, Scudder Fund, Inc., Scudder Funds Trust, Scudder Global Fund,
Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder Institutional Fund,
Inc., Scudder International Fund, Inc., Scudder Investment Trust, Scudder
Municipal Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc.,
Scudder New Europe Fund, Inc., Scudder Pathway Series, Scudder Securities Trust,
Scudder State Tax Free Trust, Scudder Tax Free Money Fund, Scudder Tax Free
Trust, Scudder U.S. Treasury Money Fund, Scudder Variable Life Investment Fund,
Scudder World Income Opportunities Fund, Inc., The Argentina Fund, Inc., The
Brazil Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc., The Latin America
Dollar Income Fund, Inc. and Scudder Spain and Portugal Fund, Inc. Some of the
foregoing companies or trusts have two or more series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $13 billion and includes the
AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed
Investment Portfolios Trust and AARP Cash Investment Funds.
Pursuant to an Agreement between Scudder, Stevens & Clark, Inc. and
AMA Solutions, Inc., a subsidiary of the American Medical Association (the
"AMA"), dated May 9, 1997, Scudder has agreed, subject to applicable state
regulations, to pay AMA Solutions, Inc. royalties in an amount equal to 5% of
the management fee received by Scudder with respect to assets invested by AMA
members in Scudder funds in connection with the AMA InvestmentLinkSM Program.
Scudder will also pay AMA Solutions, Inc. a general monthly fee, currently in
the amount of $833. The AMA and AMA Solutions, Inc. are not engaged in the
business of providing investment advice and neither is registered as an
investment adviser or broker/dealer under federal securities laws. Any person
who participates in the AMA InvestmentLinkSM Program will be a customer of
Scudder (or of a subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLinkSM is a service mark of AMA Solutions, Inc.
The Adviser maintains a large research department, which conducts
continual studies of the factors that affect the position of various industries,
companies and individual securities. In this work, the Adviser utilizes certain
reports and statistics from a variety of sources, including brokers and dealers
who may execute portfolio transactions for the Fund and other clients of the
Adviser, but conclusions are based primarily on investigations and critical
analyses by the Adviser's own research specialists. However, the Adviser regards
this information and material as an adjunct to its own research activities. In
selecting the securities in which the Fund may invest, the conclusions and
investment decisions of the Adviser with respect to the Fund are based primarily
on the analyses of its own research department.
38
<PAGE>
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same date. In
such event, such transactions will be allocated among the clients in a manner
believed by the Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by the Fund. Purchase and sale orders for the Fund may be combined with
those of other clients of the Adviser in the interest of most favorable net
results to the Fund.
The Investment Management Agreement with the Adviser (the "Agreement")
was last approved by the Directors on September 10, 1997 and by the shareholders
of the Fund on September 4, 1996. The Agreement is dated September 5, 1996, and
will continue in effect until the earlier of the approval of a new Investment
Management Agreement and the consummation of Scudder's change in control, or
September 30, 1998. The Agreement may be terminated at any time without payment
of penalty by either party on 60 days' written notice, and automatically
terminates in the event of its assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objective and policies and determines what securities shall be
purchased for the portfolio of the Fund, what portfolio securities shall be held
or sold by the Fund, and what portion of the Fund's assets shall be held
uninvested, subject to the provisions of the Corporation's Articles of
Incorporation and By-Laws and of the 1940 Act and to the Fund's investment
objective, policies and restrictions, and subject, further, to such policies and
instructions as the Directors of the Corporation may from time to time
establish. The Adviser also advises and assists the officers of the Corporation
in taking such steps as are necessary or appropriate to carry out the decisions
of its Directors and the appropriate committees of such Directors regarding the
conduct of the business of the Fund.
The Adviser also renders significant administrative services (not
otherwise provided by third parties) necessary for the Fund's operations as an
open-end investment company including, but not limited to, preparing reports and
notices to the Directors and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants
and others); preparing and making filings with the SEC and other regulatory
agencies; assisting in the preparation and filing of the Fund's federal, state
and local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value; monitoring the
registration of shares of the Fund under applicable federal and state securities
laws; maintaining the Fund's books and records to the extent not otherwise
maintained by a third party; assisting in establishing accounting policies of
the Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring the Fund's operating budget; processing the payment
of the Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Directors.
The Adviser pays the compensation and expenses (except those for
attending Board and Committee meetings outside New York, New York and Boston,
Massachusetts) of all officers and executive employees of the Corporation
affiliated with the Adviser and makes available, without expense to the
Corporation or the Fund, the services of such affiliated persons as may duly be
elected officers or Directors of the Corporation, subject to their individual
consent to serve and to any limitations imposed by law, and provides the Fund
with portfolio management services and administrative services (which include
provision of office facilities). For these services the Fund pays the Adviser in
monthly installments an annual fee equal to approximately 1.0% of the average
daily net assets of the Fund on an annual basis.
The net investment advisory fees for the fiscal years ended June 30,
1997, 1996 and 1995 were $1,948,814, $1,545,158 and $1,281,161, respectively.
Under the Agreement, the Fund is responsible for all of the other
expenses relating to its operations including clerical salaries; fees and
expenses incurred in connection with membership in investment company
organizations; broker's commissions; legal, auditing and accounting expenses;
39
<PAGE>
taxes and governmental fees; the fees and expenses of the transfer agent; the
cost of preparing share certificates and any other expenses, including clerical
expenses of issuance, redemption or repurchase of shares; the expenses of and
the fees for registering or qualifying securities for sale; the fees and
expenses of the Directors of the Corporation who are not affiliated with the
Adviser; and the fees and disbursements of custodians. The Fund may arrange to
have third parties assume all or part of the expenses of sale, underwriting and
distribution of shares of the Fund. The Fund is also responsible for its
expenses incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify its officers and Directors with
respect thereto. Expenses incurred on a Corporation-wide basis will be allocated
pro rata among all investment funds of the Corporation, including the Fund, on
the basis of their relative net assets. In addition, the Fund is obligated to
pay fees and expenses under the terms of its agreements with Scudder Service
Corporation, Scudder Fund Accounting Corporation and Scudder Trust Company, as
described below under Additional Information.
The Agreement expressly provides that the Adviser shall not be required
to pay a pricing agent for portfolio pricing services relating to the Fund, if
any.
The Agreement also provides that the Fund is granted a nonexclusive
right and sublicense to use the "Scudder" name and mark as part of the
Corporation's name, and the Scudder Marks in connection with the Corporation's
investment products and services.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Directors of the Corporation who are not
"interested persons" of the Fund have been represented by independent counsel at
the Fund's expense. Willkie Farr & Gallagher serves as counsel for the Fund and
also for Scudder Investor Services, Inc.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates provided that nothing in
the agreement shall be deemed to protect or purport to protect against any
liability to the Corporation, the Fund or its shareholders to which it would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties, or by reason of the reckless
disregard of the obligations and duties hereunder.
Any person, even though also employed by Scudder, who may be or become
an employee of and paid by the Fund shall be deemed, when acting within the
scope of his or her employment by the Fund, to be acting in such employment
solely for the Fund and not as an employee or agent of Scudder.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Corporation's custodian bank. It
is the Adviser's opinion that the terms and conditions of those transactions
which have occurred were not influenced by existing or potential custodial or
other Corporation or Fund relationships.
None of the officers or Directors of the Corporation may have dealings
with the Corporation as principals in the purchase or sale of securities, except
as individual subscribers or holders of shares of the Corporation.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
40
<PAGE>
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with
Position with Principal Underwriter, Scudder
Name, Age and Address Corporation Occupation* Investor Services, Inc.
- --------------------- ----------- ----------- -----------------------
<S> <C> <C> <C>
Daniel Pierce*@# (63) President and Director Chairman of the Board Vice President,
and Managing Director Director and Assistant
of Scudder, Stevens & Treasurer
Clark, Inc.
Paul Bancroft III (67) Director Trustee, Venture --
Capitalist and
Consultant; Retired
President, Chief
Executive Officer and
Director, Bessemer
Securities Corporation
Sheryle J. Bolton (51) Director Chief Executive --
Officer, Scientific
Learning Corporation
William T. Burgin (54) Director General Partner, --
83 Walnut Street Bessemer Ventures
Wellesley, MA 02181-2101
Thomas J. Devine (70) Director Consultant --
450 Park Avenue
New York, NY 10022
Keith R. Fox (43) Director Private Equity --
10 East 53rd Street Investor, Exeter
New York, NY 10022 Capital Management
Corporation
William H. Luers (68) Director President, The --
The Metropolitan Museum of Art Metropolitan Museum of
1000 Fifth Avenue Art; Director of IDEX
New York, NY 10028 Corporation (liquid
handling equipment
manufacturer) and
Wickes Lumber Company
(building materials for
contractors)
Kathryn L. Quirk+* (44) Director, Vice President Managing Director of Vice President,
and Assistant Secretary Scudder, Stevens & Assistant Secretary and
Clark, Inc. Director
41
<PAGE>
Position with
Position with Principal Underwriter, Scudder
Name, Age and Address Corporation Occupation* Investor Services, Inc.
- --------------------- ----------- ----------- -----------------------
Robert G. Stone, Jr. (74) Honorary Director Chairman of the Board --
405 Lexington Avenue and Director, Kirby
39th Floor Corporation (marine
New York, NY 10174 transportation, diesel
repair and property and
casualty insurance in
Puerto Rico)
Jerard K. Hartman+ (64) Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Clay L. Hoes+ (41) Vice President Vice President of
Scudder, Stevens &
Clark, Inc.
Thomas W. Joseph@ (58) Vice President Principal of Scudder, Vice President,
Stevens & Clark, Inc. Director, Treasurer and
Assistant Clerk
Thomas F. McDonough@ (50) Vice President and Principal of Scudder, Clerk
Secretary Stevens & Clark, Inc.
</TABLE>
* Persons considered by the Fund and its counsel to be Directors who are
"interested persons" of the Adviser or of the Fund, within the meaning
of the 1940 Act, as amended.
** Unless otherwise stated, all the Directors and officers have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
+ Address: 345 Park Avenue, New York, New York 10154
@ Address: Two International Place, Boston, Massachusetts 02110
# Mr. Pierce is the sole member of the Executive Committee, which may
exercise all of the powers of the Directors when they are not in
session.
As of September 30, 1997 all Directors and officers of the Corporation
as a group owned beneficially (as the term is defined in Section 13(d) under the
Securities Exchange Act of 1934) less than 1% of the Fund.
As of September 30, 1997, __________ shares in the aggregate, _____% of
the outstanding shares of the Fund, were held in the name of Charles Schwab &
Company, 101 Montgomery Street, San Francisco, CA 94104-4122, who may be deemed
to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
To the knowledge of the Trust, as of September 30, 1997, no person
owned beneficially more than 5% of the Fund's outstanding shares except as
stated above.
Responsibilities of the Board--Board and Committee Meetings
The Board of Directors is responsible for the general oversight of the
Fund's business. At least 75% of the Board's members are not affiliated with the
Adviser. These "Independent Directors" have primary responsibility for assuring
that the Fund is managed in the best interests of its shareholders.
The Board of Directors meets at least quarterly to review the
investment performance of the Fund and other operational matters, including
policies and procedures designated to assure compliance with various regulatory
requirements. At least annually, the Independent Directors review the fees paid
to the Adviser and its affiliates for investment advisory services and other
42
<PAGE>
administrative and shareholder services. In this regard, they evaluate, among
other things, the Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Adviser and its
affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the Independent
Directors.
All of the Independent Directors serve on the Committee on Independent
Directors, which nominates Independent Directors and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Directors from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
The Independent Directors met 16 times during 1996, including Board and
Committee meetings and meetings to review the Fund's contractual arrangements as
described above.
Compensation of Officers and Directors
The Independent Directors receive the following compensation from the
Fund: as of July 1, 1997 an annual director's fee of $4,000; a fee of $400 for
attendance at each Board meeting, audit committee meeting, or other meeting held
for the purposes of considering arrangements between the Fund and the Adviser or
any affiliate of the Adviser; $150 for any other committee meeting (although in
some cases the Independent Directors have waived committee meeting fees); and
reimbursement of expenses incurred for travel to and from Board Meetings. No
additional compensation is paid to any Independent Director for travel time to
meetings, attendance at directors' educational seminars or conferences, service
on industry or association committees, participation as speakers at directors'
conferences, service on special director task forces or subcommittees or service
as lead or liaison director. Independent Directors do not receive any employee
benefits such as pension, retirement or health insurance. For the year ended
June 30, 1997, such fees aggregated $28,814.
The Independent Directors also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Director fee schedules. The
following table shows the aggregate compensation received by each Independent
Director during 1996 from the Corporation and from all of Scudder funds as a
group.
<TABLE>
<CAPTION>
Scudder Mutual
Name Funds, Inc.* All Scudder Funds
---- ----------- -----------------
<S> <C> <C> <C> <C>
Paul Bancroft III** __________ $143,358 (16 Funds)
Sheryle J. Bolton** __________ $71,200 (9 Funds)
William T. Burgin** __________ __________ ________
Thomas J. Devine $8,700.00 $156,058 (18 Funds)
Keith R. Fox $8,550.00 $87,508 (10 Funds)
William H. Luers** __________ $100,486 (11 Funds)
Dr. Gordon Shillinglaw $9,250.00 $119,918 (19 Funds)
Robert G. Stone $0 $12,272 (2 Funds)
</TABLE>
* Scudder Mutual Funds, Inc. consists of one mutual fund: Scudder Gold Fund.
** Elected as Directors to Scudder Mutual Funds, Inc. in October 1997.
Members of the Board of Directors who are employees of Scudder or its
affiliates receive no direct compensation from the Corporation, although they
are compensated as employees of Scudder, or its affiliates, as a result of which
they may be deemed to participate in fees paid by each Fund.
DISTRIBUTOR
The Fund has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
Scudder, Stevens & Clark, Inc., a Delaware corporation. The Fund's underwriting
43
<PAGE>
agreement dated September 2, 1988 will remain in effect from year to year
thereafter only if its continuance is approved annually by a majority of the
members of the Directors who are not parties to such agreement or interested
persons of any such party and either by vote of a majority of the Board of
Directors or a majority of the outstanding voting securities of the Corporation.
The underwriting agreement was most recently approved by the Directors on
September 10, 1997, until the earlier of the approval of a new Underwriting
Agreement and the consummation of Scudder's change in control, or September 30,
1998.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of the registration statement and prospectus and any amendments and
supplements thereto relating to the Fund, the registration and qualification of
Fund shares for sale in the various states, including registering the Fund as a
broker/dealer in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications (including newsletters) to shareholders of the Fund; the
cost of printing and mailing confirmations of purchases of Fund shares and the
prospectuses accompanying such confirmations; any issuance taxes or any initial
transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of shareholder service representatives, the cost of wiring funds for
share purchases and redemptions (unless paid by the shareholder who initiates
the transaction); the cost of printing and postage of business reply envelopes;
and a portion of the cost of computer terminals used by both the Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the shares of
the Fund to the public and preparing, printing and mailing any other literature
or advertising in connection with the offering of shares of the Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
shareholder service representatives, a portion of the cost of computer
terminals, and of any activity which is primarily intended to result in the sale
of shares of the Fund issued by the Corporation.
Note: Although the Fund currently has no 12b-1 Plan and shareholder approval
would be required in order to adopt one, the underwriting agreement provides
that the Fund will also pay those fees and expenses permitted to be paid or
assumed by the Fund pursuant to a 12b-1 Plan, if any, adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement, and the Fund or a third party will pay those fees and expenses not
specifically allocated to the Distributor in the underwriting agreement.
As agent, the Distributor will offer the Fund's shares on a continuous
basis to investors in all states. The underwriting agreement provides that the
Distributor accepts orders for Fund shares at net asset value as no sales
commission or load is charged the investor. The Distributor has made no firm
commitment to acquire shares of the Fund.
TAXES
(See "Distribution and performance information--Dividends and capital
gains distributions" and "Transaction information--Tax information,
Tax identification number" in the Fund's prospectus.)
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), or a predecessor statute and has qualified as such since its inception.
It intends to continue to qualify for such treatment. Such qualification does
not involve governmental supervision or management of investment practices or
policy.
As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90 percent
of its investment company taxable income (including net short-term capital gain)
and generally is not subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code.
44
<PAGE>
Investment company taxable income generally is made of dividends,
interest, and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net capital gains (the excess of net long-term capital
gain over net short-term capital loss) are computed by taking into account any
capital loss carryforward of the Fund.
In addition, no more than 10% of the Fund's gross income may be from
nonqualifying sources, including income from investments in precious metals and
precious metals futures and options transactions. The Fund may therefore need to
limit the extent to which it makes such investments in order to qualify as a
regulated investment company.
The Fund is subject to a 4% nondeductible excise tax calculated as a
percentage of certain undistributed amounts of taxable income and capital gain.
The Fund has established distribution policies which should minimize or
eliminate the application of this tax.
Distributions of taxable net investment income and the excess of net
short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. The Fund will designate the amount of each
distribution that will qualify for the 20% capital gains rate or the 28% capital
gains rate. Such distributions are not eligible for the dividends-received
deduction. Any loss realized upon the redemption of shares held at the time of
redemption for six months or less will be treated as a long-term capital loss to
the extent of any amounts treated as distributions of long-term capital gain
during such six-month period.
Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether received in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of taxable net investment income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month and paid during
the following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
Redemptions of shares, including exchanges for shares of another Scudder Fund,
may result in the recognition of gain or loss by the shareholder.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
The Fund may qualify for and make an election which would allow
shareholders to claim a credit or deduction on their federal income tax returns
for foreign taxes paid by the Fund. Should the Fund elect to do so, shareholders
would be required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid by the Fund to foreign countries. The Fund
will be qualified to make the election if more than 50% of the value of the
total assets of the Fund at the close of its taxable year consists of securities
in foreign corporations. The foreign tax credit available to shareholders is
subject to certain limitations imposed by Section 904 of the Code. No deduction
for foreign taxes may be claimed by shareholders who do not itemize deductions
on their federal income tax returns, although any such shareholder may claim a
credit for foreign taxes and in any event will be treated as having taxable
income in respect to the shareholder's pro rata share of foreign taxes paid by
the Fund. For any year for which such an election is made, the Fund will report
to shareholders (no later than 60 days after the close of its fiscal year) the
amount per share of such foreign taxes that must be included in the
shareholder's gross income and will be available as a deduction or credit.
45
<PAGE>
No gain or loss is recognized by the Fund upon payment of a premium in
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option and, in the case of an exercise of the put option purchased by the Fund,
on the Fund's holding period for the underlying stock it sells pursuant to the
put option. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock in the Fund's portfolio. If the Fund writes a put or call
option, no gain or loss is recognized upon its receipt of a premium. If the
option lapses or is closed out, any gain or loss is treated as a short-term
capital gain or loss. If a purchaser exercises a call option written by the Fund
and such call option is exercised, the character of the gain or loss recognized
by the Fund will depend on the Fund's holding period for the underlying stock
sold pursuant to such exercise. The exercise of an equity put option written by
the Fund is not a taxable transaction for the Fund.
Many futures contracts (including foreign currency futures contracts)
entered into by the Fund, certain forward currency contracts, and all listed
nonequity options written or purchased by the Fund (including options on debt
securities, options on futures contracts, options on securities indexes and
options on broad-based stock indexes) will be considered "Section 1256"
contracts under the Code. Absent an election to the contrary, gain or loss
attributable to the lapse, exercise or closing out of any such position will be
treated as 60% long-term and 40% short-term. Under present law, it does not
appear that any long term capital gains attributable to Section 1256 contracts
will be eligible for the 20% capital gains vote. Moreover, on the last trading
day of the Fund's fiscal year, all outstanding Section 1256 positions will be
marked to market (i.e. treated as if such positions were closed out at their
closing price on such day), with any resulting gain or loss recognized. Under
certain circumstances, entry into a futures contract to sell a security held by
the Fund may constitute a short sale of that security for federal income tax
purposes, causing an adjustment in the Fund's holding period for that security.
The Fund's short sales against the box, if any, will be subject to
special provisions or the code that may affect the character of gains and losses
realized by the Fund and the holding periods of securities held by the Fund, and
may accelerate the recognition of income to the Fund.
Under Section 988 of the Code, discussed below, foreign currency gains
or loss from foreign currency related forward contracts, certain futures and
similar financial instruments entered into or acquired by a Fund will be treated
as ordinary income or loss.
The Fund intends to invest up to 25% of its assets in a foreign
subsidiary of the Corporation which invests in gold, silver, platinum and
palladium bullion and in gold and silver coins. The Corporation intends that the
subsidiary be structured so that it will not be subject to tax in the U.S.
However, the Fund (or its shareholders) may be subject to tax on the income of
the subsidiary, regardless of whether the income is distributed to the Fund.
The Fund may invest in shares of certain foreign corporations which may
be classified under the Code as passive foreign investment companies ("PFICs").
If the Fund receives a so-called "excess distribution" with respect to PFIC
stock, the Fund itself may be subject to a tax on a portion of the excess
distribution. Certain distributions from a PFIC as well as gains from the sale
of the PFIC shares are treated as "excess distributions." In general, under the
PFIC rules, an excess distribution is treated as having been realized ratably
over the period during which the Fund held the PFIC shares. The Fund will be
subject to tax on the portion, if any, of an excess distribution that is
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
Recently legislation was enacted which would allow the Fund to make an
election to mark to market its shares of these foreign investment companies that
would result in the Fund being treated as if it had sold and repurchased all of
its PFIC stock at the end of each year. This election is effective for taxable
years beginning after December 31, 1997. At the end of each taxable year to
which the election applies, the Fund would report as ordinary income the amount
by which the fair market value of the foreign company's stock exceeds the Fund's
adjusted basis in these shares. Ordinary mark to market losses may be recognized
to the extent of previously recognized mark-to-market gains. The effect of the
election would be to treat excess distributions and gain on dispositions as
ordinary income which is not subject to a fund level tax when distributed to
shareholders as a dividend. This election, once made, would be effective for all
46
<PAGE>
subsequent taxable years of the Fund, unless revoked with the consent of the
IRS. Alternatively, the Fund may elect to include as income and gain its share
of the ordinary earnings and net capital gain of certain foreign investment
companies in lieu of being taxed in the manner described above. Under present
law, long-term capital gains included in income by the Fund pursuant to the
election described in the preceding sentence will not be eligible for the 20%
capital gains rate.
Backup withholding may be required if the Fund is notified by the IRS
or a broker that the taxpayer identification number furnished by the shareholder
is incorrect or that the shareholder has previously failed to report interest or
dividend income.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions
made for the previous year.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisors about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible, the Adviser places orders for portfolio
transactions for the Fund through the Distributor which in turn places orders on
behalf of the Fund with other brokers/dealers. The Distributor receives no
commission, fees or other remuneration from the Fund for this service.
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of assets for the Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission where applicable
(which is negotiable in the case of U.S. national securities exchange
transactions but which is generally fixed in the case of foreign exchange
transactions), size of order, difficulty of execution and skill required of the
executing broker/dealer. The Adviser seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to reported
commissions paid by others. The Adviser reviews on a routine basis commission
rates, execution and settlement services performed, making internal and external
comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers/dealers who supply research, market and statistical information to the
Corporation, the Fund or the Adviser. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities; the availability of securities
or purchasers or sellers of securities; and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for the Fund to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might charge for executing the same transaction solely on account of the receipt
of research, market or statistical information. The Adviser does not place
orders with brokers/dealers on the basis that the broker/dealer has or has not
sold shares of the Corporation. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
47
<PAGE>
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
Although certain research, market and statistical information from
brokers/dealers may be useful to the Corporation, the Fund and to the Adviser,
it is the opinion of the Adviser that such information is only supplementary to
the Adviser's own research effort, since the information must still be analyzed,
weighed, and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Corporation and the
Fund, and not all such information is used by the Adviser in connection with the
Fund of the Corporation. Conversely, such information provided to the Adviser by
brokers/dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to the
Corporation and the Fund.
In the fiscal years ended June 30, 1997, 1996 and 1995 the Fund paid
brokerage commissions of 455,167, $128,087 and $341,830, respectively. For the
fiscal year ended June 30, 1997, 451, 823 (99%) of the total brokerage
commissions paid (455,167) by the Fund resulted from orders placed, consistent
with the policy of obtaining the most favorable net results, with
brokers/dealers who provided supplementary research, market and statistical
information to the Fund or the Adviser. The amount of such transactions
aggregated $158,838,062 (22%) of all brokerage transactions. Such brokerage was
not allocated to any particular brokers or dealers or with any regard to the
provision of market quotations for purposes of valuing the Fund's portfolio or
to any other special factors.
The Directors intend to review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable.
Portfolio Turnover
The Fund's portfolio turnover rates (defined by the SEC as the ratio of
the lesser of sales or purchases of securities to the monthly average value of
the portfolio, excluding all securities with remaining maturities of less than
one year) for the two fiscal years ended June 30, 1996 and 1997, were 29.7% and
38.9%, respectively.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value per
share is determined by dividing the value of the total assets of the Fund, less
all liabilities, by the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on The Nasdaq
Stock Market ("Nasdaq") is valued at its most recent sale price. Lacking any
sales, the security is valued at the most recent bid quotation. The value of an
equity security not quoted on the Nasdaq system, but traded in another
over-the-counter market, is its most recent sale price. Lacking any sales, the
security is valued at the Calculated Mean. Lacking a Calculated Mean, the
security is valued at the most recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities
purchased with remaining maturities of sixty days or less shall be valued by the
amortized cost method, which the Board believes approximates market value. If it
is not possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
48
<PAGE>
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
Gold, silver, platinum and palladium bullion shall be valued based on
the London Fixing or, if there is no London Fixing available, the value of gold
and silver bullion shall be based on the last spot settlement as reported by the
Comex, a division of the New York Mercantile Exchange ("NYMEX"), and the value
of platinum and palladium bullion shall be based on the last spot settlement on
NYMEX, as supplied by a recognized precious metals dealer as of the time of
valuation; coins and precious metals other than gold, silver, platinum and
palladium bullion shall be valued at the calculated mean based on market
quotations or, if there are no such bid and ask quotations available
simultaneously, at the most recent bid quotation provided by a bona fide market
maker as of the time of valuation.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of the Fund included in the Prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
Other Information
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the Fund's objectives and policies,
and other factors, such as its other portfolio holdings and tax considerations
and should not be construed as recommendations for similar action by other
investors.
The Corporation sends to each shareholder of the Fund audited
semiannual and annual reports, each of which includes a list of the investment
securities held by the Fund. Shareholders may seek information regarding the
Corporation, including the current performance of the Fund from their Scudder
service representative. The CUSIP number of the Fund is 810904-10-2.
The Corporation employs State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02101 as custodian for the Fund. State
Street Bank and Trust Company has entered into agreements with foreign
subcustodians approved by the Directors of the Corporation pursuant to Rule
17f-5 of the 1940 Act.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer
and dividend paying agent for the Fund. Service Corporation also serves as
shareholder service agent and provides subaccounting and recordkeeping services
49
<PAGE>
for shareholder accounts in certain retirement and employee benefit plans. The
Fund pays Service Corporation an annual fee of $26 for each retail account and
$29 for each retirement account maintained for a participant. For the fiscal
year end June 30, 1997 Service Corporation charged the Fund aggregate fees of
$483,408, of which $42,330 was unpaid at June 30, 1997.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The Fund pays SFAC an annual fee equal to 0.025% of
the first $150 million of average daily net assets, 0.0075% of such assets on
the next $850 million, 0.0045% of such assets in excess of $1 billion, plus
holding and transaction charges for this service. For the period ended June 30,
1997, the amount charged to the Fund by SFAC aggregated $59,281, of which $5,183
was unpaid at June 30, 1997.
Scudder Trust Company, an affiliate of the Adviser, provides
subaccounting and recordkeeping services for shareholder accounts in certain
retirement and employee benefit plans. Annual service fees are paid by the Fund
to Scudder Trust Company, Two International Place, Boston, Massachusetts
02110-4103, an affiliate of the Adviser, for such accounts. The Fund pays
Scudder Trust Company an annual fee of $29 per shareholder account. The Fund
incurred fees of $19,318 during the fiscal year ended June 30, 1997, of which
$1,908 is unpaid at June 30, 1997.
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement of the Corporation
relating to the Fund that has been filed with the SEC under the Securities Act
of 1933 and reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby. This
Registration Statement is available for inspection by the public at the SEC in
Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of
Scudder Gold Fund, which are included on pages 9 through 18, inclusive, in the
Annual Report to the Shareholders of the Fund dated June 30, 1997, together with
the Report of Independent Accountants, and Supplementary Information, are
incorporated by reference and attached hereto, and are hereby deemed to be a
part of this Statement of Additional Information.
50
<PAGE>
DESCRIPTION OF S&P AND MOODY'S RATINGS
Description of S&P preferred stock and corporate bond ratings:
AAA--Preferred stock and bonds rated AAA have the highest rating
assigned by S&P to a preferred stock issue or debt obligation. Capacity to pay
the preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, is extremely strong.
AA--Preferred stock and bonds rated AA have a very strong capacity to
pay the preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, and differ from the highest
rated issues only in small degree.
A--Preferred stock and bonds rated A have a strong capacity to pay the
preferred stock obligations, in the case of preferred stocks, and to pay
interest and repay principal, in the case of bonds, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than preferred stocks or bonds in higher rated categories.
BBB--Preferred stock and bonds rated BBB are regarded as having an
adequate capacity to pay the preferred stock obligations, in the case of
preferred stocks, and to pay interest and repay principal, in the case of bonds.
Whereas they normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay preferred stock obligations or to pay interest and repay
principal for bonds in this category than for preferred stocks or bonds in
higher rated categories.
Description of Moody's preferred stock ratings:
aaa--An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa--An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a--An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa--An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
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 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.
51
<PAGE>
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.
52
<PAGE>
Scudder
Gold
Fund
Annual Report
June 30, 1997
Pure No-Load(TM) Funds
A convenient and cost-effective way to broaden a portfolio of stocks, bonds, and
money market investments. Offers potential for maximum return from a portfolio
of gold and gold-related investments in exchange for above-average risk.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER [LOGO]
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
24 Tax Information
24 Officers and Directors
25 Investment Products and Services
26 Scudder Solutions
In Brief
o Gold and gold stocks endured a difficult period during Scudder Gold Fund's
most recent fiscal year ended June 30, 1997. Large central bank gold reserve
sales and the Bre-X scandal drove down prices of gold and gold stocks.
Reflecting these events, Scudder Gold Fund's total return for the 12-month
period was -17.72%.
o Relative to its peers, the Fund's performance placed it in the top quintile of
46 similar funds tracked by Lipper Analytical Services, Inc., given their
average return of -24.36%.
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE: Total Returns for Gold and Gold Funds
Periods ended June 30, 1997
BAR CHART DATA:
Six months Twelve months
---------- -------------
Gold bullion, London p.m fix -9.40 -12.42
Platinum, free market price 16.37 9.69
Toronto Stock Exchange Gold Index -26.51 -24.89
Johannesburg (South Africa)
Stock Exchange Gold Index -35.93 -43.95
Lipper Average for Gold-Oriented Funds -19.20 -24.36
Scudder Gold Fund -17.19 -17.72
2 - SCUDDER GOLD FUND
<PAGE>
Letter From the Fund's President
Dear Shareholders,
The market for gold stocks and gold bullion weathered difficult times
during Scudder Gold Fund's most recent fiscal year. Typical drivers of the gold
marketplace were swept aside as the events surrounding the demise of Indonesia's
Bre-X stock unfolded and central banks from several nations sold huge stores of
gold bullion into a market already glutted with supply.
Despite these difficulties, we remain upbeat concerning the prospects for
Scudder Gold Fund's long-term performance for several reasons: First, we believe
that Scudder's portfolio management team and research analysts are well equipped
to evaluate the gold market in all its complexities. Second, despite recent
events in Indonesia, exciting, substantial gold finds still exist in several
regions of the world awaiting discovery and exploration by both large and small
companies. Third, gold reserve sales related to the European Monetary Union,
which have unsettled the market for gold bullion for the past 12 months, could
conclude by the end of 1997. Lastly, we believe Scudder Gold Fund is positioned
well relative to similar funds given its substantial outperformance over the
fiscal year. For further details, please see the Portfolio Management Discussion
beginning on page 6.
If you have any questions regarding Scudder Gold Fund or any other Scudder
fund, please do not hesitate to call Investor Relations at 1-800-225-2470. Or
visit Scudder's Website at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Gold Fund
3 - SCUDDER GOLD FUND
<PAGE>
PERFORMANCE UPDATE as of June 30, 1997
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
6/30/97 $10,000 Cumulative Annual
- --------------------------------------------
SCUDDER GOLD FUND
- --------------------------------------------
1 Year $ 8,228 -17.72% -17.72%
5 Year $ 16,999 69.99% 11.20%
Life of Fund $ 13,124 31.24% 3.13%
- --------------------------------------------
S & P INDEX
- --------------------------------------------
1 Year $ 13,472 34.72% 34.72%
5 Year $ 24,657 146.57% 19.77%
Life of Fund $ 42,026 320.26% 17.82%
- --------------------------------------------
*The Fund commenced operations on September 2, 1988.
Index comparisons begin September 30, 1998.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
SCUDDER GOLD FUND
Year Amount
- ----------------------
9/88* $10,000
'89 $ 9,256
'90 $ 9,005
'91 $ 8,705
'92 $ 8,106
'93 $10,699
'94 $11,378
'95 $12,231
'96 $16,746
'97 $13,779
S & P 500 INDEX
Year Amount
- ----------------------
9/88* $10,000
'89 $12,012
'90 $13,994
'91 $15,026
'92 $17,044
'93 $19,369
'94 $19,642
'95 $24,760
'96 $31,196
'97 $42,026
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange, and Over-The-Counter market. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods Ended June 30
<TABLE>
<CAPTION>
1989* 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.58 $ 10.21 $ 9.87 $ 9.19 $ 12.13 $ 12.64 $ 12.86 $ 15.34 $ 10.49
INCOME DIVIDENDS.. $ - $ .01 $ - $ - $ - $ .24 $ .25 $ 1.08 $ 2.39
CAPITAL GAINS
& OTHER
DISTRIBUTIONS..... $ - $ .09 $ - $ - $ - $ - $ .47 $ .63 $ .26
FUND TOTAL
RETURN (%)........ -11.83 -2.71 -3.33 -6.89 31.99 6.35 7.50 36.91 -17.72
INDEX TOTAL
RETURN (%)........ 20.11 16.45 7.37 13.39 13.61 1.40 26.07 26.00 34.72
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased. If the Adviser had not maintained the
Fund's expenses, the average annual and cumulative total returns for the life of
Fund period would have been lower.
4 - SCUDDER GOLD FUND
PORTFOLIO SUMMARY as of June 30, 1997
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Equity Holdings 79%
Cash Equivalents, net 14%
Precious Metals 7%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
During a difficult period for gold
and gold stocks, the Fund
profited from our purchases of
platinum stocks as they tracked
platinum's steep rise.
- --------------------------------------------------------------------------
QUALITY DISTRIBUTION
- --------------------------------------------------------------------------
Tier breakdown of the Fund's common stocks
Tier I
Premier gold producing companies 30%
Tier II
Major established gold producers 14%
Tier III
Junior gold producers with
medium cost production 19%
Tier IV
Companies with some gold
production on stream or in startup 10%
Tier V
Primarily exploration companies
with or without mineral reserves 27%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
As Tier V stocks were set back by
the demise of Bre-X, we shifted
our usual Tier V focus and
purchased several Tier IV stocks.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(28% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. NEWMONT MINING CORP.
International gold exploration and mining company
2. ASHANTI GOLDFIELDS CO., LTD.
Leading gold producer in Ghana
3. STILLWATER MINING CO.
Exploration and development of mines in Montana
producing platinum, palladium and associated
metals
4. FREEPORT MCMORAN COPPER & GOLD, INC.
U.S. Company mining in Indonesia
5. HOMESTAKE MINING CO.
Major international gold producer
6. CRYSTALLEX INTERNATIONAL CORP.
Junior company developing gold property in Venezuala
7. NORMANDY MINING LTD.
Invests in mining and oil enterprises in Australia
8. PLACER DOME INC.
International gold, silver and copper mining company
9. BATTLE MOUNTAIN CANADA
International gold and silver mining
10. ETRUSCAN ENTERPRISES LTD.
Exploration and development of gold prospects in Nigeria
The Fund benefitted from the
superior performance of
Crystallex, its sixth largest
holding, during the most recent
fiscal year.
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - SCUDDER GOLD FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
From an absolute standpoint, Scudder Gold Fund was a disappointing investment
for the past year, but compared with other gold funds it performed relatively
well. The 12 months ended June 30, 1997, witnessed a major -- although temporary
- -- collapse in the prices of Tier V stocks stemming from the Bre-X scandal, as
well as huge sales of gold reserves that drove gold bullion's price to lows not
seen since March 1985.
Scudder Gold Fund's total return during the period was -17.72%, compared with
the -24.36% average of similar funds as tracked by Lipper. Scudder Gold Fund
posted average annual total returns in the top quintile of similar gold-oriented
funds over one-, three-, and five-year periods, as shown in the table below.
Investment returns for periods ended June 30, 1997
Rank/
Scudder Lipper Number Percentile
Period Gold Fund Average of Funds Rank
------------------------------------------------------
1 year -17.72% -24.36% 9/46 Top 20%
3 years* 6.59% -4.62% 2/33 Top 6%
5 years* 11.20% 4.15% 4/27 Top 15%
* Average annual total returns
Performance statistics compiled by Lipper Analytical Services, Inc.
Past performance does not guarantee future results.
Bre-X and EMU
Gold stocks and gold bullion faced major obstacles during Scudder Gold Fund's
most recent fiscal year. Although Scudder Gold Fund greatly profited from its
ownership of Bre-X's stock by having sold most of its shares in 1996, the
company's downfall inflicted major, though temporary, damage on Indonesian gold
stocks, Tier V stocks, and gold stocks in general. To review briefly the
unwinding of the stock, authorities believe that Bre-X's on-site geologist
perpetrated a $4.5 billion market capitalization fraud by falsifying tests for
gold ore. We are disappointed that sufficient due diligence was not performed
earlier by the parties responsible in order to thwart this fraud. We are also
confident that, over time, Indonesian and other Tier V gold exploration firms
will eventually win back the trust and confidence of the marketplace damaged by
the Bre-X affair.
Gold faced another challenge during the past 12 months in the form of large
sales of gold reserves by European central banks. As we mentioned in our last
report to you, these sales are designed to pay down debt and meet the 3%
debt-to-GDP ratio required at the close of 1997 for membership in the European
Monetary Union (EMU). When they sell, European central banks are collecting the
difference between gold's "reserve calculation price" as logged in their vaults
(as low as $90 per ounce) and the "spot price" of gold available in the
marketplace. Observers have deemed such sales politically necessary despite the
fact that on average they can only pay down approximately 10% of the amount
needed to meet strict EMU standards. Dramatic increases in the supply of gold
stemming from central bank sales -- and resulting price declines in the latter
6 - SCUDDER GOLD FUND
<PAGE>
part of 1996 -- were capped by the announcement of these sales in January 1997,
driving the price of gold bullion to as low as $318 from a 12-month high of $390
in July 1996. Adding substantially to oversupply during the period was the
Reserve Bank of Australia's decision to sell two thirds of its gold reserves --
5 to 10% of global annual production.
At the close of the Fund's fiscal year, gold began to advance from its lows as
short sellers of gold "covered" (buying back their short sales) and gold
producers bought back large forward sales. In "selling forward," gold producers
sell on the open market gold that will not be mined for between six months and
four years, similar to selling short in the stock market. As with short sales, a
forward sale can be canceled through a "buyback" transaction. Gold producers use
the forward markets to lock in profits for mining projects.
Our Strategy
In light of the events outlined above, we took several actions: We sold our
shares in Indonesian exploration stocks because of the toll taken by the Bre-X
scandal. To seek to profit from Tier I stocks' relative stability during this
period, we purchased shares of three stocks in this prime category: Freeport
McMoran, Newmont Mining, and Placer Dome. We also purchased several Tier IV
stocks -- exploration companies that have begun to mine gold -- as a temporary
alternative to our usual Tier V focus. Additionally, the Fund profited from our
purchase of platinum stocks during this period as these stocks tracked the
metal's steep rise. The Fund also benefited from the superior performance of
7 - SCUDDER GOLD FUND
<PAGE>
Crystallex (Venezuela), which has advanced from our purchase price of $1.50 per
share to over $5 per share.
A Wait-and-See Approach
We are optimistic concerning the long-term prospects for gold and gold stocks,
but continue to look for a divergence between the performance of these two asset
classes over the coming months. Gold bullion's near-term prospects depend on the
successful conclusion of EMU; whether debt standards are eased or not, we are
hopeful that a large number of European nations will enter the EMU next year
and, as a result, put an end to the market's concerns over continued large sales
of gold reserves.
Even if gold's recovery is delayed by holdups in the formation of the EMU, the
prospects for Tier IV and Tier V companies around the globe remain as attractive
as ever. Of course, excitement over new discoveries of gold will be tempered by
the hangover from the Bre-X affair, and such finds will need to be covered by
intensive due diligence. Even so, the Guyana Shield (stretching from South
America to West Africa), Indonesia, Russia, and the Commonwealth of Independent
States republics continue to draw our interest as potentially rich sites.
Looking ahead, we will continue to employ our expertise and considerable
resources to find companies that display exploration prowess in favorable
locations around the world. We believe Scudder Gold Fund remains an appropriate
investment for those seeking portfolio diversification, a hedge against
inflation, and participation in the world's gold and precious metals markets.
Thank you for investing with Scudder.
Sincerely,
Your Portfolio Management Team
/s/Clay L. Hoes /s/William J. Wallace
Clay L. Hoes William J. Wallace
Scudder Gold Fund:
A Team Approach to Investing
Scudder Gold Fund is managed by a team of Scudder investment professionals
who each play an important role in the Fund's management process. Team
members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large
staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Clay L. Hoes assumed responsibility for the Fund's
day-to-day management in 1997. Mr. Hoes, who joined Scudder in 1996, has
been involved in the investment industry since 1987 and has worked as a
portfolio manager since 1996. William J. Wallace, Portfolio Manager, has
been a member of Scudder Gold Fund's team since 1991 and also serves as a
Portfolio Manager for Scudder Value Fund. Mr. Wallace, who has over 16
years of investment experience, contributes expertise in quantitative
analysis.
8 - SCUDDER GOLD FUND
<PAGE>
Investment Portfolio as of June 30, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 11.8%
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 6/30/97 at 5.9%, to be
repurchased at $19,351,171 on 7/1/97, collateralized by a $19,467,000 U.S. Treasury -----------
Note, 4.75%, 8/31/98 (Cost $19,348,000) ............................................... 19,348,000 19,348,000
-----------
Convertible Bonds 2.3%
- -------------------------------------------------------------------------------------------------------------------------------
Chile 1.7%
Bema Gold Corp., 7.5%, 2/28/00 .......................................................... 500,000 1,465,000
Dayton Mining Corp., 7%, 2/28/02 ........................................................ 1,500,000 1,398,750
-----------
2,863,750
-----------
Canada 0.6%
Kinross Gold, 5.5%, 12/05/06 ............................................................ CAD 1,500,000 961,295
- -------------------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $3,101,120) 3,825,045
- -------------------------------------------------------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------------------------------------------------------------
Common Stocks 77.2%
- -------------------------------------------------------------------------------------------------------------------------------
Australia 7.4%
Acacia Resources, Ltd.* (Gold and mineral exploration and production company) ........... 600,000 788,690
Delta Gold NL* (Australian-based gold exploration and production company primarily in
Australia with important platinum property in Zimbabwe) ............................... 1,000,000 1,669,545
Great Central Mines, Ltd.* (Gold exploration and production company) .................... 800,000 1,524,196
Newcrest Mining, Ltd. (Australian-based gold production and global exploration company) . 700,000 1,934,935
Normandy Mining "New" (Newly merged Senior gold producer of Posgold Ltd. Gold Mines of
Kalgoorlie Ltd. and Normandy Ltd. with interests in Argentina) (k) .................... 3,000,000 3,376,862
Resolute Ltd. (Australian-based exploration and production of gold and other minerals) .. 850,000 1,515,433
Ross Mining NL (Australian-based exploration and production company in Soloman Islands) . 1,856,397 1,248,150
-----------
12,057,811
-----------
Bolivia 0.9%
Corriente Resources, Inc.* (Exploration and development company) ........................ 403,000 963,033
Jordex Resources, Inc.* (Operator of two mines producing zinc, lead and silver) ......... 700,000 511,966
-----------
1,474,999
-----------
Brazil 0.8%
Black Swan Gold Mines Ltd.* (Gold development projects in Brazil) ....................... 500,000 441,725
Black Swan Gold Mines Ltd., Purchase Warrants* (expire 8/20/98) (c) (i) ................. 100,000 5,069
Ourominas Minerals Inc.* (Exploration company operating solely in Brazil) ............... 1,080,000 797,712
Ourominas Minerals Inc., Purchase Warrants* (expire 8/14/97) (c) (i) .................... 250,000 0
-----------
1,244,506
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 -- SCUDDER GOLD FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Canada 6.2%
Agnico-Eagle Mines, Ltd.* (Silver and gold mining) ...................................... 150,000 1,439,227
Euro-Nevada Mining, Ltd.* (Large North American gold royalty company) ................... 100,000 3,077,591
Kinross Gold Corp.* (Gold mining company, with interest in Zimbabwe) .................... 100,000 445,346
Golden Knight Resources, Inc.* (Junior gold producer, with interest in Ghana) ........... 986,787 2,015,091
Redfern Resources Ltd.* (Exploration company in British Columbia) ....................... 300,000 304,138
Repadre Capital Corp.* (Junior gold royalty company) .................................... 502,700 2,930,399
-----------
10,211,792
-----------
Chile 1.3%
Bema Gold Corp.* (Partner in development of large Chilean gold deposit) ................. 141,500 855,588
Dayton Mining Corp.* (Junior company developing Chilean gold deposits) .................. 253,000 879,395
Minera Rayrock Inc. "A"* (Company developing a low cost property in Chile) .............. 550,000 143,380
Minera Rayrock Inc. "B"* ................................................................ 100,000 28,966
South American Gold and Copper* (Gold and copper exploration company in Chile
and Peru) ............................................................................. 400,000 202,759
-----------
2,110,088
-----------
China 0.2%
Zen International Resources Ltd. Units* (expire 11/30/98) (Exploration company
in China) (c) (d) ..................................................................... 110,000 287,556
-----------
Ecuador 0.2%
Ecuadorian Minerals Corp.* (Exploration company in Ecuador) ............................. 723,800 303,996
-----------
French Guiana 1.0%
Guyanor Resources S.A. "B"* (Company holding interests in mineral properties in
French Guiana) ........................................................................ 450,000 1,270,864
International Roraima Gold , Special Warrants* (expire 10/22/97) (c) (f) ................ 825,000 364,423
-----------
1,635,287
-----------
Ghana 7.1%
Ashanti Goldfields Co., Ltd. (GDR) (Leading gold producer) .............................. 542,332 6,338,505
Ashanti Goldfields (Preference shares)* (c) ............................................. 154,701 337,248
Pioneer Group Inc. (Fund management company owning major gold producer in Ghana) ........ 100,000 2,300,000
Ranger Minerals NL* (Gold producer and exploration company in Ghana) .................... 850,000 2,600,637
-----------
11,576,390
-----------
Indonesia 2.8%
Freeport McMoRan Copper & Gold, Inc. "A" (Mining company operating in Indonesia) ........ 150,000 4,387,500
Golden Bear Minerals, Inc.* (Gold exploration company) .................................. 500,000 119,483
Golden Bear Minerals, Inc., Special Warrants* (expire 8/16/98) (c) (g) .................. 300,000 65,172
South Pacific Resources* (Gold exploration company operating in Indonesia) .............. 75,000 32,043
-----------
4,604,198
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER GOLD FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kazakhstan 0.3%
Kazakhstan Minerals Corp.* (Joint venture in Kazakhstan) ................................ 150,000 202,500
Steppe Gold Resources Ltd.* (Exploration company in Kazakhstan) ......................... 910,000 256,997
Steppe Gold Resources Ltd., Purchase Warrants "A"* (expire 6/10/98) (c) (h) ............. 140,000 5,069
Steppe Gold Resources Ltd., Purchase Warrants "B"* (expire 6/10/98) (c) (i) ............. 385,000 5,576
-----------
470,142
-----------
Mexico 0.1%
Northern Crown Mines* (Junior gold and silver exploration company in Mexico) ............ 150,000 119,483
Northern Crown Mines, Purchase Warrants* (expire 12/31/97) (c) (i) ...................... 50,000 2,534
-----------
122,017
-----------
Namibia 0.8%
Namibian Minerals Corp.* (Diamond exploration and development company, offshore
Namibia) .............................................................................. 300,000 1,303,451
-----------
Nicaragua 0.3%
Triton Mining Corp.* (Exploration and development of mineral properties in Central and
South America) ........................................................................ 311,600 485,130
-----------
Niger 1.9%
Etruscan Enterprise Company* (Junior exploration company) ............................... 600,000 2,563,453
Etruscan Enterprise Company, Purchase Warrants* (expire 9/30/97) (c) (h) ................ 400,000 541,656
-----------
3,105,109
-----------
Peru 0.6%
Southwestern Gold Corp.* (Multiple gold and gold/copper exploration properties in Peru) . 150,000 1,021,036
-----------
Philippines 0.7%
Chase Resource Corp.* (Acquisition, exploration and development of resource mineral
properties) ........................................................................... 400,000 217,242
Climax Mining Ltd.* (Gold exploration company in Australia and the Philippines Islands) . 1,000,000 800,777
TVI Pacific, Inc. *(Gold exploration and mining in the Philippines) ..................... 620,000 152,649
-----------
1,170,668
-----------
Sarawak 0.4%
Menzies Gold NL* (Junior exploration company in Sarawak) ................................ 2,500,000 755,450
-----------
South Africa 3.6%
Potgietersrust Platinum Holdings, Ltd.* (Leading platinum producer) ..................... 302,664 2,284,823
Rustenburg Platinum Holdings Ltd. (Platinum mining company) ............................. 110,813 2,027,216
Vaal Reefs Exploration & Mining Co., Ltd. (ADR) (Mining and exploration for gold, uranium
oxide and sulfuric acid in South Africa) .............................................. 350,000 1,684,375
-----------
5,996,414
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER GOLD FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Spain 1.3%
Rio Narcea* (Junior exploration company in Northern Spain) .............................. 700,000 2,103,624
-----------
Tanzania 0.7%
Pangea Goldfields Inc.* (Junior exploration company operating in Tanzania) .............. 400,000 1,158,623
-----------
United States 10.2%
Crown Butte Resources Ltd.* (Small exploration company holding an important gold
deposit in Montana) ................................................................... 250,000 389,225
Crown Resources Corp.* (Gold, silver, and mineral exploration company) .................. 304,000 1,938,000
Emperor Gold Corp. Units* (expire 11/14/97) (Junior mining company in California)
(c) (d) ............................................................................... 200,000 154,966
Emperor Gold Corp.* ..................................................................... 38,200 33,194
Getchell Gold Corp.* (Expanding gold mining project in Nevada) .......................... 60,000 2,115,000
Piedmont Mining Co.* (Gold and mining development company in the Carolinas) (m) ......... 1,024,000 307,200
Piedmont Mining Co.* (c) (l) (m) ........................................................ 700,000 168,000
Star Resources Corp.* (Diamond exploration company in Arkansas and Russia) .............. 1,000,000 130,345
Stillwater Mining Co.* (Exploration and development of mines in Montana producing
platinum, palladium and associated metals) ............................................ 300,000 6,431,250
Viceroy Resources Corp.* (Gold producer in California) .................................. 550,000 1,792,244
Vista Gold Corp.* (Merged junior exploration and development company of DaCapo
Resources Ltd. and Granges Inc.) ...................................................... 2,800,000 2,514,211
Vista Gold Corp., Purchase Warrants* (expire 10/31/97)(c)(i) ............................ 200,000 1,448
X-Cal Resources (Junior exploration company in Nevada) (c) (l) .......................... 714,286 312,673
X-Cal Resources Units* (expire 9/30/97) (c) (d) ......................................... 1,000,000 434,484
-----------
16,722,240
-----------
Venezuela 3.8%
Bolivar Goldfields Ltd.* (Gold exploration company in Venezuela) ........................ 229,520 149,584
Bolivar Goldfields Ltd., Purchase Warrants* (expire 9/24/97) (c) (i) .................... 150,000 0
Crystallex International Corp.* (Junior company developing gold property in
Venezuela) ............................................................................ 750,000 3,801,731
El Callao Mining Corp.* (Gold exploration and development company with interests
in Venezuela) ......................................................................... 1,124,000 936,022
Tombstone Exploration Co., Ltd.* (Junior exploration company in Venezuela and
Honduras) (m) ......................................................................... 1,100,000 1,314,313
-----------
6,201,650
-----------
West Africa 3.5%
Birim Goldfields* (Junior exploration company in Ghana) ................................. 350,000 152,069
Birim Goldfields, Purchase Warrants* (expire 5/5/98) (c) (i) ............................ 75,000 6,517
High River Gold Mines Ltd.* (Gold exploration and development) .......................... 200,000 434,483
Leo Shields Exploration NL* (Gold exploration in West Africa) ........................... 2,342,734 725,626
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER GOLD FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nevsun Resources Ltd.* (Holder of interests in gold prospects, junior exploration
company in Ghana and Mali) ............................................................ 295,000 886,527
Nevsun Resources Ltd., Purchase Warrants* (expire 1/24/98) (c) (i) ...................... 35,000 1,521
Oliver Gold Corp.* (Exploration and development company with interests in gold and
gold-copper prospects in British Columbia) ............................................ 200,000 159,311
Pan African Resources Corp.* (Gold exploration in West Africa) .......................... 800,040 150,628
Panorama Resources NL* (Junior exploration company in Congo and Kenya) .................. 1,250,000 198,306
Randgold Resources Ltd.* (Gold mining and exploration) .................................. 100,000 1,643,750
Samax Gold Inc.* (Gold exploration in Ghana and Tanzania) ............................... 325,000 1,353,235
-----------
5,711,973
-----------
International 21.1%
Battle Mountain Canada* (Exploration and production development company in North and
South America, Australia and Indonesia) ............................................... 549,228 3,141,968
Cambior, Inc.* (Medium-sized gold producer with a major mine in Guyana) ................. 225,000 2,558,022
Canarc Resources Corp.* (Exploration and development company in Canada, South
American and Indonesia) ............................................................... 775,600 527,944
Golden Star Resources Ltd.* (Junior company, with permits in North and South
America and West Africa) .............................................................. 125,000 1,031,898
Homestake Mining Co. (Major international gold producer) ................................ 310,000 4,049,375
Meridian Gold Inc.* (Exploration and development company) ............................... 398,000 1,794,091
Meridian Gold Inc.* ..................................................................... 127,600 558,250
Minefinders Corp., Ltd.* (Precious metals exploration and development) .................. 40,000 89,214
Minorca Resources Ltd.* (Owner of varied mineral property claims) ....................... 150,000 93,414
Minorca Resources Ltd., Special Warrants* (expire 3/13/99) (c) (j) ...................... 100,000 133,966
Newmont Mining Corp. (International gold exploration and mining company) ................ 200,000 7,800,017
Orvana Minerals Corp.* (International exploration and development company) .............. 390,000 1,623,882
Placer Dome Inc. (International gold, silver and copper mining) ......................... 200,000 3,244,144
Queenstake Resources Ltd.* (Gold mining company) ........................................ 700,000 1,029,002
Rayrock Yellowknife Resources, Inc.* (Junior diversified mineral producer with
operations in Nevada, Canada and Latin America) ....................................... 300,000 1,433,796
Rea Gold Corp.* (Gold exploration and mining company) ................................... 800,000 457,656
Solitario Resources Corp.* (Precious and base metals exploration company primarily
in Argentina and Peru) (m) ............................................................ 700,000 2,281,038
TVX Gold, Inc.* (International gold and silver mining) .................................. 400,000 2,114,486
Williams Resources, Inc.* (Natural resource precious metals producing company) .......... 433,333 674,656
-----------
34,636,819
- -------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $138,846,363) 126,470,969
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER GOLD FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Investment Portfolio (Cost $161,295,483) (a) ...................................... 91.3 149,644,014
Scudder Precious Metals, Inc.:
Gold* (Cost $11,097,834)(b) ........................................................... 6.3 10,296,680
Platinum* (Cost $725,483)(b) .......................................................... 0.5 838,607
Other Assets and Liabilities, Net ....................................................... 1.9 3,153,510
------ ------------
Net Assets .............................................................................. 100.0 163,932,811
====== ============
</TABLE>
* Non-income producing security or commodity.
(a) The cost for federal income tax purposes was $171,787,209. At June 30,
1997, net unrealized depreciation for all investment securities based on
tax cost was $22,143,195. This consisted of aggregate gross unrealized
appreciation for all investments in which there was an excess of market
value over tax cost of $19,329,288 and aggregate gross unrealized
depreciation for all investment securities in which there was an excess of
tax cost over market value of $41,472,483.
(b) The cost of Gold for federal income tax purposes was $11,097,834. At June
30, 1997, gross and net unrealized depreciation based on tax cost was
$801,154. The cost of Platinum for federal income tax purposes was
$725,483. At June 30, 1997, gross and net unrealized appreciation based on
tax cost was $113,124.
(c) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $2,827,878 (1.7% of net assets). Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at June 30, 1997 aggregated $3,020,288. These securities
may also have certain restrictions as to resale.
(d) 1 Unit = 1 common share and 1 purchase warrant.
(e) 1 Special Warrant = 1 common share (not used).
(f) 1 Special Warrant = 1 common share and 1/2 purchase warrant.
(g) 1 Special Warrant = 1 common share and 1 purchase warrant.
(h) 1 Purchase Warrant = 1 common share.
(i) Two half Purchase Warrants = 1 common share.
(j) 1 Special Warrant = 2 common shares and 1/2 purchase warrant.
(k) New shares issued during 1996, eligible for a pro rata share of 1996
dividends.
(l) Restricted Securities -- securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at June 30, 1997 is as
follows:
Security Shares Acquisition Date Cost ($)
-------- --------------- ----------------- -----------------
Piedmont Mining Co. 700,000 12/20/96 280,000
X-Cal Resources 714,286 6/18/97 360,529
(m) Affiliated issuers (See Notes to Financial Statements).
Currency Abbreviations
----------------------------
CAD Canadian Dollars
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER GOLD FUND
<PAGE>
Financial Statements
Consolidated Statement of Assets and Liabilities
as of June 30, 1997
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market:
Unaffiliated issuers (identified cost $157,446,974) ................ $ 145,573,463
Affiliated issuers (identified cost $3,848,509) .................... 4,070,551
-------------
Total investments, at market (identified cost $161,295,483) .......... 149,644,014
Gold, at market, 30,777.702 oz. (identified cost $11,097,834) ......... 10,296,680
Platinum, at market 1,950.251 oz. (identified cost $725,483) .......... 838,607
Foreign currency holdings, at market (identified cost $119,417) ....... 119,619
Cash .................................................................. 83,849
Receivable for investments sold ....................................... 8,038,693
Receivable for Fund shares sold ....................................... 409,161
Dividends and interest receivable ..................................... 119,925
Other assets .......................................................... 5,988
-------------
Total assets .......................................................... 169,556,536
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Investments purchased ................................................. 3,702,143
Payable for Fund shares sold .......................................... 1,413,082
Accrued management fee ................................................ 147,387
Other payables and accrued expenses ................................... 361,113
-------------
Total liabilities ..................................................... 5,623,725
----------------------------------------------------------------------------------------
Net assets, at market value $ 163,932,811
----------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ....... (13,939,198)
Net unrealized appreciation (depreciation) on:
Investment securities .............................................. (11,651,469)
Gold ............................................................... (801,154)
Platinum ........................................................... 113,124
Foreign currency related transactions .............................. (9,345)
Accumulated net realized gain (loss) .................................. (5,433,894)
Paid-in capital ....................................................... 195,654,747
----------------------------------------------------------------------------------------
Net assets, at market value $ 163,932,811
----------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($163,932,811 / 15,622,172 shares of capital stock
outstanding, $.01 par value 100,000,000 shares -------------
of capital stock authorized) ....................................... $10.49
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER GOLD FUND
<PAGE>
Consolidated Statement of Operations
year ended June 30, 1997
<TABLE>
<CAPTION>
Investment Income
------------------------------------------------------------------------------------------------------------------------------
Income:
<S> <C>
Dividends (net of foreign taxes withheld of $63,735) .................. $ 976,437
Interest (net of foreign taxes withheld of $14,259) ................... 922,521
-------------
1,898,958
Expenses:
Management fee ........................................................ 1,948,814
Services to shareholders .............................................. 612,699
Custodian and accounting fees ......................................... 198,828
Directors' fees and expenses .......................................... 28,814
Auditing .............................................................. 74,384
Reports to shareholders ............................................... 113,031
Registration fees ..................................................... 78,789
Legal ................................................................. 17,781
Other ................................................................. 39,243
-------------
3,112,383
----------------------------------------------------------------------------------------
Net investment loss (1,213,425)
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments - Unaffiliated issuers .................................... 10,662,200
Investments - Affiliated issuers ...................................... 29,009
Gold .................................................................. (2,436,544)
Platinum .............................................................. 18,853
Foreign currency related transactions ................................. (1,242)
-------------
8,272,276
-------------
Net unrealized appreciation (depreciation) during the period on:
Investment securities ................................................. (46,923,326)
Gold .................................................................. (104,425)
Platinum .............................................................. 65,331
Foreign currency related transactions ................................. (9,155)
-------------
(46,971,575)
----------------------------------------------------------------------------------------
Net loss on investment transactions (38,699,299)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (39,912,724)
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER GOLD FUND
<PAGE>
Consolidated Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended June 30,
Increase (Decrease) in Net Assets 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss .......................................... $(1,213,425) $ (942,295)
Net realized gain from investment transactions ............... 8,272,276 24,235,298
Net unrealized appreciation (depreciation) on
investment transactions during the period .................... (46,971,575) 21,052,990
--------------- --------------
Net increase (decrease) in net assets resulting from
operations ................................................... (39,912,724) 44,345,993
--------------- --------------
Distributions to shareholders:
In excess of net investment income ........................... (32,213,271) (10,004,029)
--------------- --------------
From net realized gains from investment transactions ......... (3,509,513) (5,863,581)
--------------- --------------
Fund share transactions:
Proceeds from shares sold .................................... 449,808,600 245,536,569
Net asset value of shares issued to shareholders in
reinvestment of distributions ................................ 32,732,697 14,863,510
Cost of shares redeemed ...................................... (415,853,422) (242,408,708)
--------------- --------------
Net increase in net assets from Fund share transactions ...... 66,687,875 17,991,371
--------------- --------------
Increase (decrease) in net assets ............................ (8,947,633) 46,469,754
Net assets at beginning of period ............................ 172,880,444 126,410,690
Net assets at end of period (including accumulated
distributions in excess of net investment income of
$13,939,198 and undistributed net investment ---------------- ---------------
income of $4,078,347, respectively) ........................ $163,932,811 $172,880,444
---------------- ---------------
Other Information
-----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................... 11,273,441 9,826,603
--------------- --------------
Shares sold .................................................. 34,365,516 16,651,785
Shares issued to shareholders in reinvestment of ............. 2,401,703 1,267,675
distributions
Shares redeemed .............................................. (32,418,488) (16,472,622)
--------------- --------------
Net increase in Fund shares .................................. 4,348,731 1,446,838
---------------- ---------------
Shares outstanding at end of period .......................... 15,622,172 11,273,441
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- SCUDDER GOLD FUND
<PAGE>
Consolidated Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
September 2,
1988
(commencement
Years Ended June 30, of operations)
to June 30,
1997(a) 1996(a) 1995(a) 1994(a) 1993(a) 1992(a) 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------------
period ....................... $15.34 $12.86 $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58 $12.00
----------------------------------------------------------------------------------------------
Income from investment
operations: .................. (.08) (.09) (.08) (.10) (.08) (.12) (.04) .07 (.06)
Net investment income (loss)
Net realized and unrealized
gain (loss) on investment
transactions ................. (2.12) 4.28 1.02 .85 3.02 (.56) (.30) (.34) (1.36)
Total from investment ----------------------------------------------------------------------------------------------
operations ................... (2.20) 4.19 .94 .75 2.94 (.68) (.34) (.27) (1.42)
----------------------------------------------------------------------------------------------
Less distributions:
From net investment income ...... -- -- -- -- -- -- -- (.01) --
In excess of net investment
income ....................... (2.39) (1.08) (.25) (.24) -- -- -- -- --
From net realized gains on
investment transactions ...... (.26) (.63) (.47) -- -- -- -- (.03) --
From paid-in capital ............ -- -- -- -- -- -- -- (.06) --
----------------------------------------------------------------------------------------------
Total distributions ............. (2.65) (1.71) (.72) (.24) -- -- -- (.10) --
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net asset value, end of period .. $10.49 $15.34 $12.86 $12.64 $12.13 $ 9.19 $ 9.87 $10.21 $10.58
----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................ -17.72 36.91 7.50 6.35 31.99 (6.89)(c) (3.33)(c) (2.71)(c) (11.83)(c)**
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................. 164 173 126 130 90 31 33 17 9
Ratio of operating expenses to
average net assets (%) ....... 1.60 1.50 1.65 1.69 2.17 2.54 2.54 2.60 3.00*
Ratio of operating expenses
before expense reductions,
to average daily net
assets (%) ................... 1.60 1.50 1.65 1.69 2.17 2.57 2.82 3.74 6.59*
Ratio of net investment income
(loss) to average net
assets (%) ................... (.62) (.61) (.69) (.81) (.81) (1.34) (.59) .34 (1.06)*
Portfolio turnover rate (%) ..... 38.9 29.7 42.0 50.8 59.2 57.5 71.4 80.6 34.5*
Average commission rate
paid (b) ..................... $.0213 $.0309 $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after June 30, 1997.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized ** Not annualized
The accompanying notes are an integral part of the financial statements.
18 -- SCUDDER GOLD FUND
<PAGE>
Notes to Consolidated Financial Statements
A. Significant Accounting Policies
Scudder Gold Fund (the "Fund") is a non-diversified series of Scudder Mutual
Funds, Inc. (the "Corporation"). The Corporation is a Maryland corporation,
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Principles of Consolidation. The consolidated financial statements of the Fund
include the accounts of the Fund and Scudder Precious Metals, Inc., a
wholly-owned subsidiary of the Corporation, whose principal assets are precious
metals. All intercompany accounts and transactions have been eliminated.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the Nasdaq System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the Officers of the Fund, which prices
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Directors.
Restricted Securities. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to the
public without registration under the Securities Act of 1933 or the availability
of an exemption from registration, or which is subject to other legal or
contractual delays in or restrictions on resale), if, as a result thereof, more
than 10% of the value of the Fund's total assets would be invested in restricted
securities. The aggregate fair value of restricted securities at June 30, 1997
amounted to $480,673 which represents 0.3% of net assets.
Precious Metals Valuation. Gold bullion will be valued on quotations obtained
from U.S. dealers and on the London afternoon gold price. Precious metals other
than gold will be valued on current prices provided by market makers.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
19 -- SCUDDER GOLD FUND
<PAGE>
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders. The
Fund paid no federal income taxes and no federal income tax provision was
required. In addition, from November 1, 1996 through June 30, 1997, the Fund
incurred approximately $3,385,000 in net realized capital losses. As permitted
by tax regulations, the Fund intends to elect to defer these losses and treat
them as arising in the fiscal year ending June 30, 1998.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax. The Fund uses the
identified cost method for determining realized gain or loss on investments for
both financial and federal income tax reporting purposes.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to investments in Passive Foreign Investment
Companies. As a result, net investment income (loss) and net realized gain
(loss) on
20 -- SCUDDER GOLD FUND
<PAGE>
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
Other. Investment security and precious metals transactions are accounted for on
a trade date basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. All original issue discounts are accreted for both tax and financial
reporting purposes.
B. Purchases and Sales
For the year ended June 30, 1997, purchases and sales of investment securities
(excluding short-term investments) aggregated $78,738,702 and $60,557,361,
respectively. During the year ended June 30, 1997, purchases and sales of gold
and platinum aggregated $47,882,036 and $57,771,809.
C. Related Parties
Under the Fund's Investment Advisory Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the Adviser a
fee equal to an annual rate of 1% of the Fund's average net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. For the year ended June 30, 1997, the fee pursuant to the Agreement
amounted to $1,948,814.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent. For the year ended June
30, 1997, the amount charged to the Fund by SSC aggregated $483,408, of which
$42,330 is unpaid at June 30, 1997.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended June 30, 1997,
the amount charged to the Fund by STC aggregated $19,318, of which $1,908 is
unpaid at June 30, 1997.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
June 30, 1997, the amount charged to the Fund by SFAC aggregated $59,281, of
which $5,183 is unpaid at June 30, 1997.
The Fund pays each Director not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended June 30, 1997, Directors' fees and expenses aggregated $28,814.
21 -- SCUDDER GOLD FUND
<PAGE>
D. Lines of Credit
The Fund and several affiliated Funds ("the Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement. In addition, the
Fund also maintains an uncommitted line of credit.
E. Transactions in Securities of Affiliated Issuers
An affiliated issuer is a company in which the Fund has ownership of at least 5%
of the voting securities. A summary of the Fund's transactions with companies
which are or were affiliates for the year ended June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Affiliate Purchases Sales Dividend Market
Cost ($) Cost ($) Income ($) Value ($)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Piedmont Mining Co. 293,125 -- -- 475,200
Solitario Resources Corp. 241,572 45,635 -- 2,281,038
Tombstone Exploration 769,977 -- -- 1,314,313
-----------------------------------------------------------------------------
1,304,674 45,635 -- 4,070,551
=============================================================================
</TABLE>
22 -- SCUDDER GOLD FUND
<PAGE>
Report of Independent Accountants
To the Board of Directors of Scudder Mutual Funds, Inc. and the Shareholders of
Scudder Gold Fund:
We have audited the accompanying consolidated statement of assets and
liabilities of Scudder Gold Fund, including the investment portfolio, as of June
30, 1997, and the related consolidated statement of operations for the year then
ended, the consolidated statements of changes in net assets for each of the two
years in the period then ended, and the consolidated financial highlights for
each of the eight years in the period then ended and for the period September 2,
1988 (commencement of operations) to June 30, 1989. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities and precious
metals owned as of June 30, 1997, by correspondence with the custodians. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the consolidated financial
position of Scudder Gold Fund as of June 30, 1997, the consolidated results of
its operations for the year then ended, the consolidated changes in its net
assets for each of the two years in the period then ended and the consolidated
financial highlights for each of the eight years in the period then ended and
for the period September 2, 1988 (commencement of operations) to June 30, 1989
in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 20, 1997
23 -- SCUDDER GOLD FUND
<PAGE>
Tax Information
The Fund paid distributions of $.23 per share from long-term capital gains
during its year ended June 30, 1997. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $972,953 as capital gain dividends for its
fiscal year ended June 30, 1997.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investors Relations
Representative at 1-800-225-5163.
Officers and Directors
Daniel Pierce*
President and Director
William T. Burgin
Director; General Partner, Bessemer Venture Partners
Thomas J. Devine
Director; Consultant
Keith R. Fox
Director; President, Exeter Capital Management Corporation
Dr. Gordon Shillinglaw
Director; Professor Emeritus of Accounting,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Director; Chairman of the Board and Director, Kirby Corporation
Jerard K. Hartman*
Vice President
Clay Hoes*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Director and Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
*Scudder, Stevens & Clark, Inc.
24 - SCUDDER GOLD FUND
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
25 - SCUDDER GOLD FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - SCUDDER GOLD FUND
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
- ------------------------------------------------------------------------------------------------------------------------------
New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
27 - SCUDDER GOLD FUND
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
[LOGO]
<PAGE>
SCUDDER MUTUAL FUNDS, INC.
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
<S> <C>
a. Financial Statements
Included in Part A of this Registration Statement:
Financial Highlights for the period September 2, 1988
(commencement of operations) to June 30, 1989 and for
each of the eight years ended June 30, through 1997.
Included in Part B of this Registration Statement:
Investment Portfolio as of June 30, 1997
Consolidated Statement of Assets and Liabilities as of
June 30, 1997
Consolidated Statement of Operations for the year ended
June 30, 1997
Consolidated Statements of Changes in Net Assets for
each of the two years
ended June 30, 1996 and 1997
Supplementary Highlights for each of the eight years
ended June 30,
through 1997 and the period September 2, 1988
(commencement of operations)
to June 30, 1989
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.
b. Exhibits:
1. (a) Articles of Incorporation dated March 17, 1988 are filed herein.
(b) Articles of Amendment dated October 12, 1990 are filed herein.
2. (a) By-Laws dated March 18, 1988 are filed herein.
(b) Amendment to the By-Laws dated December 12, 1991 is filed herein.
(c) Amendment to By-Laws dated June 4, 1996.
(Incorporated by reference to Exhibit 2(c) to Post-Effective
Amendment No. 9 to this Registration Statement.)
(d) Amendment to By-Laws dated September 4, 1996.
(Incorporated by reference to Exhibit 2(d) to Post-Effective
Amendment No. 9 to this Registration Statement.)
3. Inapplicable.
4. Inapplicable
5. (a) Investment Advisory Agreement between the Registrant (on behalf of
Scudder Gold Fund) and Scudder, Stevens & Clark, Inc. dated
August 22, 1988 is filed herein.
Part C - Page 1
<PAGE>
(b) Investment Management Agreement between the Registrant (on behalf of
Scudder Gold Fund) and Scudder, Stevens & Clark, Inc. dated
September 5, 1996.
(Incorporated by reference to Exhibit 5(b) to Post-Effective
Amendment No. 9 to this Registration Statement.)
6. Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc. dated August 22, 1988 is filed herein.
7. Inapplicable.
8. (a)(1) Custodian Agreement between the Registrant and State Street Bank and
Trust Company is filed herein.
(a)(2) Fee schedule for Exhibit (8)(a)(1) is filed herein.
9. (a)(1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation dated October 2, 1989 is filed
herein.
(a)(2) Fee schedule for Exhibit (9)(a)(1) is filed herein.
(a)(3) Service Agreement between Copeland Associates, Inc. on behalf of
Scudder Mutual Funds, Inc. and Scudder Gold Fund dated June 8,
1995 is filed herein.
(a)(4) Form of fee schedule for Exhibit 9(a)(1) is filed herein.
(b)(1) COMPASS Service Agreement between the Registrant and Scudder Trust
Company dated January 1, 1990 is filed herein.
(b)(2) Fee schedule for Exhibit (9)(b)(1) is filed herein.
(b)(3) COMPASS Service Agreement between the Registrant and Scudder Trust
Company dated October 1, 1995.
(Incorporated by reference to Exhibit 9(b)(3) to Post-Effective
Amendment No. 9 to this Registration Statement.)
(c)(1) Fund Accounting Services Agreement between the Registrant and The
First National Bank of Boston dated August 22, 1988 is filed
herein.
(c)(2) Pricing Authorization Form (Exhibit B) for Exhibit 9(c)(1) dated
January 10, 1991 is filed herein.
(c)(3) Fund Accounting Services Agreement between the Registrant and
Scudder Fund Accounting Corporation dated March 28, 1995 is
filed herein.
10. Inapplicable.
11. Consent of Independent Accountants is filed herein.
12. Inapplicable.
Part C - Page 2
<PAGE>
13. Letter of Investment Intent Purchase Agreement (on behalf of Scudder
Mutual Funds, Inc.) is filed herein.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals
is filed herein.
(b) Scudder Individual Retirement Plan is filed herein.
(c) Scudder Funds 403(b) Plan is filed herein.
(d) Scudder Employer-Select 403(b) Plan is filed herein.
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k) is
filed herein
15. Inapplicable.
16. Schedule for Computation of Performance Quotation.
(Incorporated by reference to Exhibit 16 to Post-Effective Amendment
No. 2 to this Registration Statement.)
17. Financial Data Schedule is filed herein.
18. Inapplicable.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of September 26, 1997).
- -------- -----------------------------------------------------------
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Shareholders
-------------- ----------------------
<S> <C> <C>
Shares of common stock 14,777
($0.01 par value)
</TABLE>
Part C - Page 3
<PAGE>
Item 27. Indemnification.
- -------- ----------------
A policy of insurance covering Scudder, Stevens & Clark Inc.,
its subsidiaries including Scudder Investor Services, Inc.,
and all of the registered investment companies advised by
Scudder, Stevens & Clark Inc. insures the Registrant's
Directors and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
error or accidental omission in the scope of their duties.
Article Seven of Registrant's Articles of Incorporation state
as follows:
(1) To the fullest extent that limitation on the
liability of directors and officers is permitted by
the Maryland General Corporation Law, no director or
officer of the Registrant shall have any liability to
the Registrant or its stockholders for damages. This
limitation on liability applies to events occurring
at the time a person serves as a director or officer
of the Registrant whether or not such person is a
director or officer at the time of any proceeding in
which liability is asserted.
(2) The Registrant shall indemnify and advance expenses
to its currently acting and its former directors to
the fullest extent that indemnification of directors
is permitted by the Maryland General Corporation Law.
The Registrant shall indemnify and advance expenses
to its officers to the same extent as its directors
and to such further extent as is consistent with law.
The Board of Directors may by Bylaw, resolution or
agreement make further provision for indemnification
of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General
Corporation Law.
(3) References to the Maryland General Corporation Law in
this Article are to that law as from time to time
amended. No amendment to the charter of the
Registrant shall affect any right of any person under
this Article based on any event, omission or
proceeding prior to the amendment.
(4) No provision of the Articles of Incorporation of the
Registrant shall be effective to (i) require a waiver
of compliance with any provision of the Securities
Act of 1933, as amended, or the Investment Company
Act of 1940, as amended (the "1940 Act"), or of any
valid rule, regulation or order of the Securities and
Exchange Commission under those Acts or (ii) protect
or purport to protect any director of officer of the
Registrant against any liability to the Registrant or
its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Item 28. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Director, Vice President, Assistant Treasurer, Chief Operating Officer & Chief
Financial Officer, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company)+
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment company)*
Part C - Page 4
<PAGE>
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
President, The Japan Fund, Inc. (investment company)**
Director, Sovereign High Yield Investment Company (investment company)+
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (President on all series except Scudder
Global Fund) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporationoo
E. Michael Brown Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder U.S. Treasury Fund (investment company)*
Trustee, Scudder Tax Free Money Fund (investment company)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Director & President, Scudder Realty Holding Corporation (a real estate holding
company)*
Director & President, Scudder Trust Company (a trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Mark S. Casady Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Vice President, Scudder Service Corporation (in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
President & Trustee, AARP Cash Investment Funds (investment company)**
President & Trustee, AARP Growth Trust (investment company)**
President & Trustee, AARP Income Trust (investment company)**
President & Trustee, AARP Tax Free Income Trust (investment company)**
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)**
Vice President, Scudder Cash Investment Trust (investment company)*
Part C - Page 5
<PAGE>
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)**
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Variable Life Investment Fund (investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Scudder Global Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
Director, Scudder Mutual Funds, Inc. (investment company)**
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
President & Director, SFA, Inc. (advertising agency)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Trustee, Scudder Securities Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Equity Trust (investment company)**
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, Scudder California Tax Free Trust (investment company)*
President & Trustee, Scudder Equity Trust (investment company)**
Director, The First Iberian Fund, Inc. (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
Part C - Page 6
<PAGE>
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)**
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
President & Trustee, Scudder Investment Trust (investment company)*
Vice President & Trustee, Scudder Municipal Trust (investment company)*
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Securities Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
(investment company)o
Chairman, Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
President & Director, Scudder Precious Metals, Inc. xxx
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
Director, Vice President & Assistant Secretary, Scudder Realty Holdings Corporation (a
real estate holding company)*
Director, Scudder Latin America Investment Trust PLC (investment company)@
Incorporator, Scudder Trust Company (a trust company)+++
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Kathryn L. Quirk Director & Secretary, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder World Income Opportunities Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, The Korea Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Argentina Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Brazil Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder International Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Equity Trust (investment company)**
Vice President & Assistant Secretary, Scudder Securities Trust (investment company)*
Vice President & Assistant Secretary, Scudder Funds Trust (investment company)**
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Montgomery Street Income Securities, Inc.
(investment company)o
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
Part C - Page 7
<PAGE>
Vice President & Assistant Secretary, Scudder New Europe Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Variable Life Investment Fund (investment
company)*
Vice President & Assistant Secretary, The First Iberian Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, The Latin America Dollar Income Fund, Inc.
(investment company)**
Vice President & Secretary, AARP Growth Trust (investment company)**
Vice President & Secretary, AARP Income Trust (investment company)**
Vice President & Secretary, AARP Tax Free Income Trust (investment company)**
Vice President & Secretary, AARP Cash Investment Funds (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President & Secretary, The Japan Fund, Inc. (investment company)**
Director, Vice President & Secretary, Scudder Fund Accounting Corporation (in-house
fund accounting agent)*
Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation (a real
estate holding company)*
Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, AARP Cash Investment Funds (investment company)**
Vice President, AARP Growth Trust (investment company)**
Vice President, AARP Income Trust (investment company)**
Vice President, AARP Tax Free Income Trust (investment company)**
Edmond D. Villani Director, President & Chief Executive Officer, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Supervisory Director, Scudder Mortgage Fund (investment company) +
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporationoo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, IBJ Global Investment Management S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Wohler Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
Part C - Page 8
<PAGE>
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C.
Luxembourg B 34.564
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao,
Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter,
Devon
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
The Japan Fund, Inc.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<S> <C> <C> <C>
E. Michael Brown Assistant Treasurer None
Two International Place
Boston, MA 02110
Mark S. Casady Vice President and Director None
Two International Place
Boston, MA 02110
Part C - Page 9
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Linda Coughlin Director and Senior Vice President None
345 Park Avenue
New York, NY 10154
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Coleen Downs Dinneen Assistant Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Paul J. Elmlinger Vice President None
345 Park Avenue
New York, NY 10154
Cuyler W. Findlay Senior Vice President None
345 Park Avenue
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Vice President, Director, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
Dudley H. Ladd Senior Vice President and Director
Two International Place Director
Boston, MA 02110
David S. Lee President, Assistant Vice President
Two International Place Treasurer and Director
Boston, MA 02110
Thomas F. McDonough Clerk Vice President and
Two International Place Secretary
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer Vice President and
345 Park Avenue Assistant Treasurer
New York, NY 10154
Daniel Pierce Vice President, Director President and Director
Two International Place and Assistant Treasurer
Boston, MA 02110
Part C - Page 10
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Kathryn L. Quirk Vice President Vice President and
345 Park Avenue Assistant Secretary
New York, NY 10154
Edmund J. Thimme Vice President and Director None
345 Park Avenue
New York, NY 10154
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
</TABLE>
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, Inc., Two International Place, Boston, Massachusetts,
02110. Records relating to the duties of the Registrant's
custodian are maintained by State Street Bank and Trust
Company, Heritage Drive, North Quincy, Massachusetts. Records
relating to the duties of the Registrants' transfer agent are
maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts, 02110.
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Item 32. Undertaking.
- -------- ------------
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of such Fund's latest
annual report to shareholders upon request and without charge.
Part C - Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 10th day of October, 1997.
SCUDDER MUTUAL FUNDS, INC.
By /s/Thomas F. McDonough
----------------------------
Thomas F. McDonough,
Vice President & Secretary
Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed below
by the following persons in the capacities and on the date
indicated.
SIGNATURE TITLE DATE
/s/Daniel Pierce
- -------------------
Daniel Pierce* President (Principal October 10, 1997
Executive Officer)
and Director
/s/David S. Lee
- --------------------
David S. Lee* Director and Vice October 10, 1997
President
/s/William T. Burgin
- --------------------
William T. Burgin* Director October 10, 1997
/s/Thomas J. Devine
- --------------------
Thomas J. Devine* Director October 10, 1997
/s/Keith R. Fox
- --------------------
Keith R. Fox* Director October 10, 1997
/s/Gordon Shillinglaw
- --------------------
Gordon Shillinglaw* Director October 10, 1997
/s/Pamela A. McGrath
- --------------------
Pamela A. McGrath Vice President and
Treasurer (Principal
Financial and
Accounting Officer)
*By:/s/Thomas F. McDonough
-----------------------
Thomas F. McDonough
Attorney-in-fact pursuant to
powers of attorney for Daniel
Pierce, Thomas J. Devine and
Gordon Shillinglaw contained in
the signature page of
Post-Effective Amendment No.1
to the Registration Statement
filed February 22, 1989, and
for Keith R. Fox contained in
this post-effective amendment
to the Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 10th day of October, 1997.
SCUDDER MUTUAL FUNDS, INC.
By/s/Thomas F. McDonough
---------------------------
Thomas F. McDonough,
Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. By so signing, the undersigned in his
capacity as a director or officer, or both, as the case may be of the
Registrant, does hereby appoint Kathryn L. Quirk, Thomas F. McDonough and Burton
M. Leibert and each of them, severally, or if more than one acts, a majority of
them, his true and lawful attorney and agent to execute in his name, place and
stead (in such capacity) any and all amendments to the Registration Statement
and any post-effective amendments thereto and all instruments necessary or
desirable in connection therewith, to attest the seal of the Registrant thereon
and to file the same with the Securities and Exchange Commission. Each of said
attorneys and agents shall have power to act with or without the other and have
full power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, hereby ratifying and approving the
act of said attorneys and agents and each of them.
SIGNATURE TITLE DATE
/s/William T. Burgin
- ---------------------
William T. Burgin Director October 10, 1997
/s/David S. Lee
- ---------------------
David S. Lee Director October 10, 1997
<PAGE>
File No. 33-22059
File No. 811-5565
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 10
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 12
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER MUTUAL FUNDS, INC.
<PAGE>
SCUDDER MUTUAL FUNDS, INC.
Exhibit Index
Exhibit 1(a)
Exhibit 1(b)
Exhibit 2(a)
Exhibit 2(b)
Exhibit 5(a)
Exhibit 6
Exhibit 8(a)(1)
Exhibit 8(a)(2)
Exhibit 9 (a)(1)
Exhibit 9 (a)(2)
Exhibit 9 (a)(3)
Exhibit 9 (a)(4)
Exhibit 9 (b)(1)
Exhibit 9 (b)(2)
Exhibit 9 (c)(1)
Exhibit 9 (c)(2)
Exhibit 9 (c)(3)
Exhibit 11
Exhibit 13
Exhibit 14(a)
Exhibit 14(b)
Exhibit 14(c)
Exhibit 14(d)
Exhibit 14(e)
Exhibit 17
ARTICLES OF INCORPORATION
OF
SCUDDER MUTUAL FUNDS, INC.
--------------------
ARTICLE I
THE UNDERSIGNED, Shauna J. Sullivan, whose post office address is
c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022, being at least eighteen years of age, does hereby act as
an incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
The name of the Corporation is Scudder Mutual Funds, Inc.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(4) To redeem, purchase or acquire in any other manner, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote or consent
of the stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by law and by these Articles
of Incorporation.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
<PAGE>
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
of the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Company Incorporated, 32
South Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Company
Incorporated, a Maryland Corporation. The post office address of the resident
agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is three billion (3,000,000,000) shares, of the
par value of one tenth of one cent ($.00l) per share (the "Shares") and of the
aggregate par value of three million dollars ($3,000,000).
(2) The Board of Directors of the Corporation is authorized, from
time to time, to classify or to reclassify, as the case may be, any unissued
Shares of the Corporation, whether now or hereafter authorized, in separate
series ("Series"). The Shares of each Series of stock shall have such
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption as shall be fixed and
determined from time to time by the Board of Directors. The Board of Directors
is authorized to increase or decrease the number of Shares of any Series, but
the number of Shares of any series shall not be decreased by the Board of
Directors below the number of Shares thereof then outstanding.
-2-
<PAGE>
(3) There is hereby established and classified a Series comprised of
100,000,000 Shares to be known as the "Scudder Gold Fund". Without limiting the
authority of the Board of Directors set forth herein to establish and designate
any further Series, and to classify and reclassify any unissued Shares, Shares
of each Series, now authorized and hereafter authorized, shall be subject to the
following provisions:
(a) As more fully set forth hereafter, the assets and liabilities
and the income and expenses of each Series shall be determined separately
and, accordingly, the net asset value, the dividends payable to holders,
and the amounts distributable in the event of dissolution of the
Corporation to holders of Shares of the Corporation's stock may vary from
Series to Series. Except for these differences and certain other
differences hereafter set forth, each Series shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
and rights to require redemptions.
(b) All consideration received by the Corporation for the issue or
sale of Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including all proceeds derived from the
sale, exchange or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that Series for all purposes, subject only to
the rights of creditors and shall be referred to as "assets belonging to"
that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Corporation.
(c) The assets belonging to each particular Series shall be charged
with the liabilities of the Corporation with respect to that Series, all
expenses, costs, charges and reserves attributable to that Series and that
Series' share of the liabilities, expenses, costs, charges or reserves of
the Corporation not attributable to any particular Series, in the latter
case in the proportion that the net asset value of that Series (determined
without regard to such liabilities) bears to the net asset value of all
Series (determined without regard to such liabilities) as determined in
accordance with Article VIII of these Articles of Incorporation. The
determination of the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and reserves, and
assets to a particular Series or Series.
-3-
<PAGE>
(d) Each holder of Shares of the Corporation, upon request to the
Corporation (accompanied by surrender of the appropriate stock certificate
or certificates in proper form for transfer, if any certificates have been
issued to represent such shares) shall be entitled to require the
Corporation to redeem, to the extent that the Corporation may lawfully
effect such redemption under the laws of the State of Maryland, all or any
part of the Shares of capital stock of the Corporation standing in the
name of the holder on the books of the Corporation at a price per Share
equal to the net asset value per Share computed in accordance with Article
VIII hereof.
(e) Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the
right at any time to redeem the Shares owned by any holder of Shares of
the Corporation (i) if the redemption is, in the opinion of the Board of
Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the
meaning of the Internal Revenue Code of 1986, as from time to time
amended, or (ii) if the value of the Shares in the account maintained by
the Corporation or its transfer agent for any Series for the stockholder
is less than five hundred dollars ($500) and the stockholder has been
given at least sixty (60) days written notice of the redemption and has
failed to make additional purchases of shares in an amount sufficient to
bring the value in his account to five hundred dollars ($500) or more
before the redemption is effected by the Corporation.
(f) Payment by the Corporation for Shares surrendered to it for
redemption shall be made in cash by the Corporation within seven business
days after such surrender out of funds legally available therefor,
provided that the Corporation may suspend the right of redemption or
postpone the date of payment of the redemption price when permitted or
required to do so by applicable statutes or regulations and, with respect
to the postponement of the date of payment, until all checks used to
purchase the Shares being redeemed have been collected. Payment of the
aggregate price of Shares surrendered for redemption may be made in cash,
or, at the option of the Corporation, wholly or partly by securities or
other property included in the assets belonging or allocable to the Series
of the Shares redemption of which is being sought.
(g) The right of any holder of Shares redeemed by the Corporation as
provided in subsections (d) or (e) of this section (3) to receive
dividends thereon and all other rights of such holder with respect to such
Shares shall
-4-
<PAGE>
terminate at the time as of which the purchase or redemption price of such
Shares is determined, except the right of such holder to receive (i) the
redemption price of such Shares from the Corporation or its designated
agent and (ii) any dividend or distribution to which such holder has
previously become entitled as the record holder of such Shares on the
record date for such dividend or distribution. If Shares are redeemed by
the Corporation pursuant to subsection (e) of this section (3) and
certificates representing the redeemed shares have been issued, the
redemption price need not be paid by the Corporation until the
certificates have been received by the Corporation or its agent duly
endorsed for transfer.
(h) The Corporation shall be entitled to purchase Shares, to the
extent that the Corporation may lawfully effect such purchase under the
laws of the State of Maryland, upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable, by agreement
with the stockholder at a price not exceeding the net asset value per
Share computed in accordance with Article VIII hereof.
(i) In the absence of any specification as to the purpose for which
Shares of the Corporation are redeemed or purchased by it, all Shares so
redeemed or purchased shall be deemed to be retired in the sense
contemplated by the laws of the State of Maryland and the number of the
authorized Shares of the Corporation shall not be reduced by the number of
any shares redeemed or purchased by it. Until their classification is
changed in accordance with section (2) of this Article V, all Shares so
redeemed or purchased shall retain the same classification to which they
belonged at the time of their redemption or purchase.
(j) Shares of each Series shall be entitled to such dividends and
distributions, in Shares or in cash or both, as may be declared from time
to time by the Board of Directors, acting in its sole discretion, with
respect to such Series, provided that dividends and distributions shall be
paid on shares of a Series only out of lawfully available assets belonging
to that Series. Dividends may be declared daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such
frequency as the Board of Directors may determine. Any such dividend or
distribution paid in Shares will be paid at the current net asset value
thereof as defined in Article VIII.
-5-
<PAGE>
(k) The Board of Directors shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends (including
dividends designated in whole or in part as capital gain distributions) an
amount sufficient, in the opinion of the Board of Directors, to enable
each Series of the Corporation to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as from time to time
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability of each Series of the
Corporation for federal income and excise taxes in respect of that year.
However, nothing in the foregoing shall limit the authority of the Board
of Directors to make distributions greater than or less than the amount
necessary to qualify as a regulated investment company and to avoid
liability of any Series of the Corporation for such taxes.
(l) For the purpose of allowing the net asset value per Share of a
Series to remain constant, the Corporation shall be entitled to declare,
pay and credit as dividends daily the net income (which may include or
give effect to realized and unrealized gains and losses, as determined in
accordance with the Corporation's accounting and portfolio valuation
policies) of the Corporation allocated to that Series. If the amount so
determined for any day is negative, the Corporation shall be entitled,
without the payment of monetary compensation but in consideration of the
interest of the Corporation and its stockholders in maintaining a constant
net asset value per Share of the Series, to redeem pro rata from all the
stockholders of record of Shares of the Series at the time of such
redemption (in proportion to their respective holdings thereof) sufficient
outstanding shares of the Series, or fractions thereof, as shall permit
the net asset value per Share of the Series to remain constant.
(m) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a Series shall be entitled to receive, as
a class, out of the assets of the Corporation available for distribution
to stockholders, the assets belonging to that Series. The assets so
distributable to the stockholders of a Series shall be distributed among
such stockholders in proportion to the number of shares of that Series
held by them and recorded on the books of the Corporation. In the event
that there are any assets available for distribution that are not
attributable to any particular Series, such assets shall be allocated to
all Series in proportion to the net assets of the respective Series and
then distributed to the holders
-6-
<PAGE>
of stock of each Series in proportion to the number of Shares of that
Series held by the respective holders.
(n) On each matter submitted to a vote of the stockholders, each
holder of a Share shall be entitled to one vote for each such Share
standing in his name on the books of the Corporation; provided, however,
that when required by the Investment Company Act of 1940 or regulations
thereunder, as from time to time amended (the "1940 Act"). or the laws of
the State of Maryland or when the Board of Directors has determined that
the matter affects only the interests of one Series, matters may be
submitted to a vote of the stockholders of a particular Series, and each
holder of Shares thereof shall be entitled to one vote for each Share of
the Series standing in his name on the books of the Corporation.
(o) The presence in person or by proxy of the holders of one-third
of the Shares of capital stock of the Corporation outstanding and entitled
to vote thereat shall constitute a quorum for the transaction of business
at a stockholders meeting, except that where any provision of law or of
these Articles of Incorporation permit or require that holders of any
Series shall vote as a Series, then one-third of the aggregate number of
Shares of capital stock of that Series outstanding and entitled to vote
shall constitute a quorum for the transaction of business by that Series.
(p) The Corporation may issue Shares in fractional denominations to
the same extent as its whole Shares, and any fractional Share shall carry
proportionately the rights of a whole Share including, without limitation.
the right to vote, the right to receive dividends and distributions and
the right to participate upon liquidation of the Corporation. A fractional
Share shall not, however, have the right to receive a certificate
evidencing it.
(4) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase, subscribe for, or otherwise acquire any
Shares of the Corporation that the Corporation may issue or sell (whether out of
the number of Shares authorized by these Articles of Incorporation or out of any
Shares of the Corporation's capital stock that the Corporation may acquire)
other than a right that the Board of Directors in its discretion may determine
to grant.
(5) Notwithstanding any provision of the Maryland General
Corporation Law requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than
-7-
<PAGE>
a majority of the votes of all classes or of any class of stock of the
Corporation, such action shall be effective and valid if taken or authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon, except as otherwise provided in these Articles of Incorporation.
(6) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation
and the By-Laws of the Corporation, as from time to time amended.
ARTICLE VI
BOARD OF DIRECTORS
(1) The number of directors constituting the initial Board of
Directors shall be 2. This number may be changed pursuant to the By-Laws of the
Corporation, but shall at no time be less than the minimum number required under
the Maryland General Corporation Law. The names of the directors who shall act
until the first annual meeting of shareholders or until their successors are
duly chosen and qualified are:
Juris Padegs
Douglas M. Loudon
(2) In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws to the stockholders, and
except as otherwise required by the 1940 Act.
(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholders. No stockholder shall have
any right to inspect any account or book or document of the Corporation, except
as conferred by law or authorized by resolution of the Board of Directors or of
the stockholders.
(iii) Without the assent or vote of the stockholders, to
approve the issuance from time to time of Shares of any Series, whether now or
hereafter authorized, and securities convertible into Shares of the Corporation
of any Series, whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable.
-8-
<PAGE>
(iv) Notwithstanding anything in these Articles of
Incorporation to the contrary, to establish in its absolute discretion the basis
or method for determining the value of the assets belonging to any Series, the
amount of the liabilities belonging to any Series, and the net asset value of
each Share of any Series of the Corporation's stock for purposes of sales,
redemptions, repurchases of Shares or otherwise.
(v) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is authorized
to exercise all powers and do all acts that may be exercised or done by the
Corporation pursuant to the provisions of the laws of the State of Maryland,
these Articles of Incorporation and the By-Laws of the Corporation.
(3) Any determination made in good faith, by or pursuant to the
direction of the Board of Directors, with respect to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income of
the Corporation from dividends and interest for any period or amounts at any
time legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof., as to the time of or
purpose for. creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged or is then
or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, the determination of the net asset value of
Shares of any class of the Corporation's capital stock, or as to any other
matters relating to the issuance, sale, redemption or other acquisition or
disposition of securities or Shares of the Corporation, and any reasonable
determination made in good faith by the Board of Directors whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and future, and
Shares of the of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of Shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of these Articles of Incorporation of the
Corporation shall be effective to (i) require a waiver of compliance with any
provision of the Securities Act of 1933, as amended, or the 1940 Act, as
amended, or of any valid rule, regulation or order
-9-
<PAGE>
of the Securities and Exchange Commission under those Acts or (ii) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE VII
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Board of Directors may by Bylaw, resolution or agreement make further
provision for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation Law.
(3) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No amendment to the
charter of the Corporation shall affect any right of any person under this
article based on any event, omission or proceeding prior to the amendment.
(4) No provision of these Articles of Incorporation of the
Corporation shall be effective to (i) require a waiver of compliance with any
provision of the Securities Act of 1933, as amended, or the 1940 Act, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission under those Acts or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad
-10-
<PAGE>
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VIII
NET ASSET VALUE
The net asset value of each Share of each Series as at the time of a
particular determination shall be the quotient obtained by dividing the amount
at such time of the net assets of the Series (being the amount of the assets
belonging to the Series less its actual and accrued liabilities exclusive of
capital stock and surplus) by the total number of Shares of the Series
outstanding at that time. The Board of Directors shall have the power and duty
to determine from time to time the net asset value per Share at such times and
by such methods as it shall determine subject to any restrictions or
requirements under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the Securities and Exchange Commission or
insofar as permitted by any order of the Securities and Exchange Commission
applicable to the Corporation. The Board of Directors may delegate such power
and duty to any one or more of the directors and officers of the Corporation, to
the Corporation's investment manager, to the investment adviser(s) of particular
series, to the custodian or depository of the Corporation's assets, to the
Corporation's transfer agent, or to another agent of the Corporation.
ARTICLE IX
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to these Articles of Incorporation, now or hereafter authorized by
law, including any amendment that alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding stock.
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
Dated the 17th day of March, 1988.
/s/ Shauna J. Sullivan
------------------------------
Incorporator
-11-
<PAGE>
SCUDDER MUTUAL FUNDS, INC.
ARTICLES OF AMENDMENT
Scudder Mutual Funds, Inc. (the "Corporation"), a Maryland
corporation having its principal office in the State of Maryland in Baltimore
City, Maryland 21202, hereby certifies that:
FIRST: The charter of the Corporation is amended by striking Article
V, Section 1, and substituting the following.
"(1) The Corporation shall have the authority to issue three
billion (3,000,000,000) shares of capital stock of the par value of
one cent ($.0l) per share (the "Shares") and having an aggregate
value of thirty million dollars ($30,000,000)."
SECOND: Prior to the effectiveness of these Articles of Amendment,
the authorized par value of the Corporation was three billion (3,000,000,000)
shares, of the par value of one tenth of one cent (.001) per share and of the
aggregate par value of three million dollars ($3,000,000). Upon effectiveness of
these Articles of Amendment, the authorized capital is three billion
(3,000,000,000) shares, of the par value of one cent (.01) per share and of the
aggregate par value of thirty million dollars ($30,000,000). The effect of these
Articles of Amendment is to increase the aggregate par value of the Corporation.
THIRD: The amendment to the Articles of Incorporation as set forth
has been approved by a majority of the entire Board of Directors when no stock
of the Corporation was outstanding or subscribed for.
<PAGE>
IN WITNESS WHEREOF, SCUDDER MUTUAL FUNDS, INC. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Assistant Secretary on this 29th day of April, 1988, and its
President acknowledges that these Articles of Amendment are the act and deed of
SCUDDER MUTUAL FUNDS, INC. and, under the penalties of perjury, states that the
matters and facts set forth herein with respect to authorization and approval
are true in all material respects to the best of his knowledge, information and
belief.
SCUDDER MUTUAL FUNDS, INC.
By: /s/ Daniel Pierce
------------------------
Daniel Pierce
President
ATTEST:
/s/ Kathryn L. Quirk
- -------------------------
Kathryn L. Quirk
Assistant Secretary
Exhibit 1(b)
90 OCT 17 PM 1 28
STATEMENT OF
ASSESSMENTS & TAXATION
SCUDDER MUTUAL FUNDS
ARTICLES OF AMENDMENT
Scudder Mutual Funds, Inc., a Maryland Corporation having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended so that Article V,
Section 3(b) and 3(e) of the Articles of Incorporation will now read as follows:
ARTICLE V, SECTION 3
CAPITAL STOCK
(b) All consideration received by the Corporation for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including all proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors and shall be
referred to as "assets belonging to" that Series. The assets belonging to a
particular Series shall be so recorded upon the books of the Corporation.
Anything in these Articles notwithstanding, the shares of any subsidiary
purchased with the assets of a particular Series shall be deemed to be an asset
belonging to that Series and all income, earnings, profits and proceeds of such
subsidiaries, including all proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to such
Series for all purposes, subject only to the rights of creditors.
(e) Without limiting the generality of the foregoing, the Corporation
shall, to the extent permitted by applicable law, have the right at any time to
redeem the Shares owned by any holder of Shares of the Corporation (i) if the
redemption is, in the opinion of the Board of Directors of the Corporation,
desirable in order to prevent the Corporation from being deemed a "personal
holding company" within the meaning of the Internal Revenue Code of 1986, as
from time to time amended, or (ii) if the value of the Shares in the account
maintained by the Corporation or its transfer agent for any Series for the
stockholder is less than one thousand dollars
<PAGE>
($1,000) and the stockholder has been given at least sixty (60) days' written
notice of the redemption and has failed to make additional purchases of shares
in an amount sufficient to bring the value in his account to one thousand
dollars ($1,000) or more before the redemption is effected by the Corporation.
SECOND: The foregoing amendment was duly advised by the Board of Directors
and approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, Scudder Mutual Funds, Inc. has caused these Articles of
Amendment to be signed in its name and on its behalf by its president and
attested by its Secretary, on October 12, 1990. The president acknowledges these
Articles of Amendment to be the corporate act of the Corporation and states that
to the best of his knowledge, information and belief, the matters and facts set
forth in these Articles with respect to authorization and approval of this
amendment of the Corporation's Charter are true in all material respects and
that this statement is made under penalties of perjury.
Scudder Mutual Funds, Inc.
By: /s/ Daniel Pierce
-------------------------------------
Daniel Pierce
President
Attest:
/s/ Thomas F. McDonough
- ----------------------------
Thomas F. McDonough
Secretary
Exhibit 2(a)
BY-LAWS
OF
SCUDDER MUTUAL FUNDS, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. If a meeting of the required stockholders of
the Corporation is required by the Investment Company Act of 1940, as amended,
to take action on (1) the election of directors, (2) approval of the investment
advisory agreement, (3) ratification of the selection of independent public
accountants, or (4) approval of a distribution agreement, then there shall be
submitted to the stockholders at such meeting the question of the election of
directors, and a special meeting called for any of the foregoing purposes may be
deemed the annual meeting of stockholders for that year. In other years in which
no action by stockholders is required for any of the foregoing purposes, no
annual meeting need be held.
SECTION 2. Special Meetings. Special meetings of the stockholders of a
Portfolio for any purpose or purposes, unless otherwise prescribed by statute or
by the Corporation's Articles of Incorporation, may be held at any place within
the United States, and may be called at any time by the Board of Directors or by
the President, and shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors or at the request in writing
of stockholders entitled to cast at least 25 (twenty-five) percent (at least 10
(ten) percent for the purpose of removing a director) of the votes entitled to
be cast at the meeting upon payment by such stockholders to the Corporation of
the reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders of a Portfolio entitled to cast a majority of the votes entitled to
be cast at the meeting, a special meeting of such stockholders need not be
called at the request of stockholders to consider any matter which is
substantially the same as a matter voted on at any special meeting of the
stockholders of the Portfolio held during the preceding 12 (twelve) months. A
written request shall state the purpose or purposes of the proposed meeting.
<PAGE>
SECTION 3. Notice of Meetings. Written or printed notice of the purpose or
purposes and of the time and place of every meeting of the stockholders of the
Corporation or a Portfolio shall be given by the Secretary of the Corporation to
each stockholder of record entitled to vote at the meeting, by placing the
notice in the mail at least 10 (ten) days, but not more than 90 (ninety) days,
prior to the date designated for the meeting addressed to each stockholder
entitled to vote at his address appearing on the books of the Corporation or
supplied by the stockholder to the Corporation for the purpose of notice. The
notice of any meeting of stockholders may be accompanied by a form of proxy
approved by the Board of Directors in favor of the actions or persons as the
Board of Directors may select. Notice of any meeting of stockholders of the
Corporation or a Portfolio shall be deemed waived by any stockholder of the
Corporation or the Portfolio who attends the meeting in person or by proxy, or
who before or after the meeting submits a signed waiver of notice that is filed
with the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by statute or by the
Corporation's Articles of Incorporation, the presence in person or by proxy of
stockholders of the Corporation or the Portfolio, as the case maybe, entitled to
cast at least one third of the votes entitled to be cast shall constitute a
quorum at each meeting of such stockholders and all questions shall be decided
by majority vote of the shares so represented in person or by proxy at the
meeting and entitled to vote. In the absence of a quorum, the stockholders
entitled to vote present in person or by proxy, by majority vote and without
notice other than by announcement, may adjourn the meeting from time to time as
provided in Section 5 of this Article I until a quorum shall attend. The
stockholders entitled to vote present at any duly organized meeting may continue
to do business for which the particular meeting was called until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. The absence from any meeting in person or by proxy of holders of the
number of shares of stock of the Corporation or a Portfolio, as the case may be,
required for action upon any given matter shall not prevent action at the
meeting on any other matter or matters that may properly come before the
meeting, so long as there are present, in person or by proxy, holders of the
number of shares of stock of the Corporation or the Portfolio, as the case may
be, required for action upon the other matter or matters.
SECTION 5. Adjournment. Any meeting of the stockholders may be adjourned
from time to time, without notice other than by announcement at the meeting at
which the adjournment is taken. At any adjourned meeting at which a quorum shall
be present any action may be taken that cou1d have
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<PAGE>
been taken at the meeting originally called. A meeting of the stockholders may
not be adjourned to a date more than 120 (one hundred twenty) days after the
original record date.
SECTION 6. Organization. At every meeting of the stockholders, the Chairman
of the Board, or in his absence or inability to act, the President, or in his
absence or inability to act, a Vice President, or in the absence or inability to
act of the Chairman of the Board, the President and all the Vice Presidents, a
chairman chosen by the stockholders, shall act as Chairman of the meeting. The
Secretary, or in his absence or inability to act, a person appointed by the
chairman of the meeting, shall act as secretary of the meeting and keep the
minutes of the meeting.
SECTION 7. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Articles of Incorporation, each holder of record of shares of
stock of a Portfolio having voting power shall be entitled to one vote for every
full share of stock standing in his name on the records of the Corporation as of
the record date determined pursuant to Section 9 of this Article I and
proportionate1 fractional votes for fractional shares held. All shares of each
Portfolio shall vote as a separate class except as to voting for directors of
the Corporation and as otherwise required by the Investment Company Act of 1940,
as amended. As to any matter that does not affect the interest of a particular
Portfolio, only the holders of shares of the one or more affected Portfolios
shall be entitled to vote.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by the
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases in which the proxy states that it is
irrevocable and in which an irrevocable proxy is permitted by law.
SECTION 9. Fixing of Record Date. The Board of Directors may set a record
date for the purpose of determining stockholders entitled to vote at any meeting
of the stockholders. The record date for a particular meeting shall be not more
than 90 (ninety) nor fewer than 10 (ten) days before the date of the meeting.
All persons who were holders of record of shares of the Portfolio or Portfolios
to which the meeting
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<PAGE>
relates as of the record date of a meeting, and no others, shall be entitled to
vote at such meeting and any adjournment thereof.
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting or
at any adjournment of the meeting. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any stockholder entitled to vote at the meeting shall,
appoint inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath to execute faithfully the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
inspector of an election of directors. Inspectors need not be stockholders of
the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as otherwise
provided by statute or the Corporation's Articles of Incorporation, any action
required to be taken at any meeting of stockholders, or any action that may be
taken at any meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of stockholders' meetings: (i) a unanimous written consent that sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote at the
meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Articles of incorporation, the business and affairs of the
Corporation shall be managed under
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<PAGE>
the direction of the Board of Directors. All powers of the Corporation may be
exercised by or under authority of the Board of Directors except as conferred on
or reserved to the stockholders by law, by the Corporation's Articles of
Incorporation or by these By-Laws.
SECTION 2. Number of Directors. The number of directors may be changed from
time to time by resolution of the Board of Directors adopted by a majority of
the Directors then in office; provided, however, that the number of directors
shall in no event be fewer than one nor more than fifteen. Any vacancy created
by an increase in Directors may be filled in accordance with Section 6 of this
Article II. No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his term unless the
director is specifically removed pursuant to Section 5 of this Article II at the
time of the decrease. A director need not be a stockholder of the Corporation,
a citizen of the United States or a resident of the State of Maryland.
SECTION 3. Election and Term of Directors. The term of office of each
director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these
By-laws, or as otherwise provided by statute or the Corporation's Articles of
Incorporation.
SECTION 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be necessary
to make it effective unless the resignation states otherwise.
SECTION 5. Removal of Directors. Any director of the Corporation may be
removed by the stockholders with or without cause at any time by a vote of a
majority of the votes entitled to be cast for the election of directors.
SECTION 6. Vacancies. Subject to the provisions of the Investment Company
Act of 1940, as amended, any vacancies in the Board of Directors, whether
arising from death, resignation, removal or any other cause except an increase
in the number of directors, shall be filled by a vote of the majority of the
remaining directors even though that majority is less than a quorum, provided
that no vacancy or vacancies shall be filed by
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<PAGE>
action of the remaining directors if, after the filling of the vacancy or
vacancies, fewer than two-thirds of the directors then holding office shall have
been elected by the stockholders of the Corporation. A majority of the entire
Board may fill a vacancy which results from an increase in the number of
directors. In the event that at any time a vacancy exists in any office of a
director that may not be filled by the remaining directors, a special meeting of
the stockholders shall be held as promptly as possible and in any event within
60 (sixty) days, for the purpose of filling the vacancy or vacancies. Any
director elected or appointed to fill a vacancy shall hold office until a
successor has been chosen and qualifies or until his earlier resignation or
removal.
SECTION 7. Place of Meetings. Meetings of the Board may be held at any
place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 8. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at the time and place determined by the Board of
Directors.
SECTION 9. Special Meetings. Special meetings of the Board of Directors may
be called by two or more directors of the Corporation or by the Chairman of the
Board or the President.
SECTION 10. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Each notice shall state the time and place of the meeting and shall be delivered
to each director, either personally or by telephone or other standard form of
telecommunication, at least 24 (twenty-four) hours before the time at which the
meeting is to be held, or by first-class mail, postage prepaid, addressed to the
director at his residence or usual place of business, and mailed at least 3
(three) days before the day on which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice that is filed with the records of the meeting or
who shall attend the meeting.
SECTION 12. Quorum and Voting. One-third (but not fewer than 2 (two)) of
the members of the entire Board of Directors shall be present in person at any
meeting of the Board in order to constitute a quorum for the transaction of
business at the meeting, and except as otherwise expressly required by statute,
the Corporation's Articles of Incorporation, these
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<PAGE>
By-Laws, the Investment Company Act of 1940, as amended, or any other applicable
statute, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board. In the absence of a quorum at
any meeting of the Board, a majority of the directors present may adjourn the
meeting to another time and place until a quorum shall be present. Notice of the
time and place of any adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place were
announced at the meeting at which the adjournment was taken, to the other
directors. At any adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted at the meeting as originally
called.
SECTION 13. Organization. The Board of Directors may designate a Chairman
of the Board, who shall preside at each meeting of the Board and who shall have
such other duties as the Board of Directors shall determine. In the absence or
inability of the Chairman of the Board to act another director chosen by a
majority of the directors present, shall act as chairman of the meeting and
preside at the meeting. The Secretary, or, in his absence or inability to act,
any person appointed by the chairman, shall act as secretary of the meeting and
keep the minutes thereof.
SECTION 14. Committees. The Board of Directors may designate one or more
committees of the Board of Directors, each consisting of 2 (two) or more
directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers that. may
require it. Any committee or committees shall have the name or names determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting. Subject to
the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee of the Board may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the Board
or committee.
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<PAGE>
SECTION 16. Telephone Conference. Members of the Board of Directors or any
committee of the Board may participate in any Board or committee meeting by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.
SECTION 17. Compensation. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the Corporation shall
be a President, a Secretary and a Treasurer, each of whom shall be elected by
the Board of Directors. The Board of Directors may elect or appoint one or more
Vice Presidents and may also appoint any other officers, agents and employees it
deems necessary or proper. Any two or more offices may be held by the same
person, except the offices of President and Vice President, but no officer
shall, in more than one capacity, execute, acknowledge or verify any instrument
required to be executed, acknowledged or verified by more than one officer.
Officers shall be elected by the Board of Directors in accordance with the
provisions of the Maryland. General Corporation Law and shall serve until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed, as provided in
these By-Laws. The Board of Directors may from time to time elect, or designate
to the President the power to appoint, such officers (including one or more
Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Any resignation shall
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<PAGE>
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. Acceptance of
a resignation shall not be necessary to make it effective unless the resignation
states otherwise.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the 3oard may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office whether arising from death,
resignation, removal or any other cause, may be filled in the manner prescribed
in these By-Laws for the regular election or appointment to the office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any officer,
agent or employee of the Corporation shall give a bond or other security. for
the faithful performance of his duties, in an amount and with any surety or
sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive officer of
the Corporation. In the absence or inability of the Chairman of the Board (or if
there is none) to act, the President shall preside at all meetings of the
stockholders and, if also a director, of the Board of Directors. The President
shall have, subject to the control of the Board of Directors, general charge of
the business and affairs of the Corporation, and may employ and discharge
employees and agents of the Corporation. except those elected or appointed by
the Board, and he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall have the powers and
perform the duties that the Board of Directors or the President may from time to
time prescribe.
SECTION 9. Treasurer. Subject to the provisions of any contract that may be
entered into with any custodian pursuant to authority granted by the Board of
Directors, the
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<PAGE>
Treasurer shall have charge of all receipts and disbursements of the Corporation
and shall have or provide for the custody of the Corporation's funds and
securities; he shall have full authority to receive and give receipts for all
money due and payable to the Corporation, and to endorse checks, drafts and
warrants, in its name and on its behalf and to give full discharge for the same;
he shall deposit all funds of the Corporation, except those that may be required
for current use, in such banks or other places of deposit as the Board of
Directors may from time to time designate; and, in general, he shall perform all
duties incident to the office of Treasurer and such other duties as may from
time to time be assigned to him by the Board of Directors or the President.
SECTION 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the purpose,
the minutes of all meetings of the Board of Directors, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal,
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
of Directors or the President.
SECTION 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any director.
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<PAGE>
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon specific written request to such person as may be
designated by the Corporation to have a certificate or certificates, in a form
approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the certificate may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in office at the date of issue.
SECTION 2. Books of Account and Record of Stockholders. There shall be kept
at the principal executive office of the Corporation correct and complete books
and records of account of all the business and transactions of the Corporation.
There shall be made available upon request of any stockholder of a Portfolio, in
accordance with Maryland law, a record containing the number of shares of stock
of the Portfolio issued during a specified period not to exceed 12 (twelve)
months and the consideration received by the Corporation for each such share.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to
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recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person.
SECTION 4. Regulations. The Board of Directors may make any additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates. The holder of
any certificate representing shares of stock of a Portfolio shall immediately
notify the Corporation of its theft, loss, destruction or mutilation and the
Corporation may issue a new certificate of stock of the Portfolio in the place
of any certificate issued by it that has been alleged to have been stolen, lost
or destroyed or that shall have been mutilated. The Board may, in its
discretion, require the owner (or his legal representative) of a stolen, lost,
destroyed or mutilated certificate: to give to the Corporation a bond in a sum,
limited or unlimited, and in a form and with any surety or sureties, as the
Board in its absolute discretion shall determine, to indemnify the Corporation
against any claim that may be made against it on account of the alleged theft,
loss or destruction of any such certificate, or issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board of Directors, in its
absolute discretion, may refuse to issue any such new certificate, except
pursuant to legal proceedings under the laws of the State of Maryland.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc. The
Board may fix, in advance, a date not more than 90 (ninety) days preceding the
date fixed for the payment of any dividend or the making of any distribution
with respect to, or the allotment of rights to subscribe for securities of, a
Portfolio, or for the delivery of evidences of rights or evidences of interests
in the Portfolio arising out of any change, conversion or exchange of common
stock or other securities, as the record date for the determination of the
stockholders of the Portfolio entitled to receive any such dividend,
distribution, allotment, rights or interests, and in such case only the
stockholders of record of the Portfolio at the time so fixed shall be entitled
to receive such dividend, distribution, allotment, rights or interests.
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<PAGE>
SECTION 7. Information to Stockholders and Others. Any stockholder of the
Corporation or his agent may inspect and copy during the Corporation's usual
business hours the Corporation's By-Laws, minutes of the proceedings of its
stockholders meeting, annual statements of the affairs of the Portfolio or
Portfolios of which he is a holder and voting trust agreements with respect to
such Portfolio or Portfolios on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person who was or
is a party or is threatened to be made a party in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is a current or former
director or officer of the Corporation, or is or was serving while a director or
officer of the Corporation at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the fullest extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, except that such indemnity shall not protect any
such person against any liability to the Corporation or any stockholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct").
SECTION 2 Advances. Any current or former director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the fullest extent permissible under the Maryland General
Corporation Law, the Securities Act of 1933 and the Investment Company Act of
1940, as such statutes are now or hereafter in force; provided however, that the
person seeking indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has
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<PAGE>
been met and a written undertaking by or on behalf of the director to repay any
such advance if it is ultimately determined that he is not entitled to
indemnification, and provided further that at least one of the following
additional conditions is met: (1) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (2) the Corporation is insured against losses arising by reason of
the advance; or (3) a majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors") or independent legal counsel, in a written
opinion, shall determine, based on a review of facts readily available to the
Corporation at the time the advance is proposed to be made, that there is reason
to believe that the person seeking indemnification will ultimately be found to
be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former director or
officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act of 1933
and the Investment Company Act of 1940, as such statutes are now or hereafter in
force, whether the standards required by this Article V have been met: provided,
however, that indemnification shall be made only following: (1) a final decision
on the merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of disabling conduct
or (2) in the absence of such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (a) the vote of a majority of a quorum of
disinterested non-party directors or (b) an independent legal counsel in a
written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and agents
who are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, in accordance
with the procedures set forth in this Article V to the extent permissible under
the Investment Company Act of 1940, the Securities Act of 1933 and the Maryland
General Corporation Law, as such statutes are now or hereafter in force, and to
such further extent, consistent with the foregoing, as may be provided by action
of the Board of Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this Article V
shall not be deemed exclusive of any other
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<PAGE>
right, in respect of indemnification or otherwise, to which those seeking such
indemnification may be entitled under any insurance or other agreement, vote of
stockholders or disinterested directors or otherwise, both as to action by a
director or officer of the Corporation in his official capacity and as to action
by such person in another capacity while holding such office or position, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 6. Insurance. To the extent not otherwise prohibited by applicable
law, the Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or who, while a director, officer, employee or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, against
any liability asserted against and incurred by him in any such capacity, or
arising out of his status as such, provided that no insurance may be obtained by
the Corporation for liabilities against which it would not have the power to
indemnify him against liability under this Article V or applicable law.
SECTION 7. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a director,
officer, employee or agent of a constituent corporation or is or was serving at
the request of a constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this Article V with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear the
name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal
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<PAGE>
may be used by causing it or a facsimile to be impressed or affixed or in any
other manner reproduced, or by placing the word "(seal)" adjacent to the
signature of the authorized officer of the Corporation.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall be fixed by the Board of Directors.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the Board of Directors at any
regular or special meeting of the Board of Directors, subject to the
requirements of the Investment Company ACt of 1940, as amended
As adopted, March 18, 1988
Exhibit 2(b)
GOLD
- ----
RESOLVED, that pursuant to the provisions of Article VIII of the Fund's By-laws,
Section 7 of Article II of the Fund's By-laws is hereby amended to read in its
entirety as follows:
Place and Manner of Meetings. Meetings of the Board may be held at any place
that the Board of Directors may from time to time determine or that is specified
in the notice of the meeting. Meetings of the Board can be held in conjunction
with meetings of other investment companies having the same investment adviser
or an affiliated investment adviser.
Exhibit 5(a)
SCUDDER MUTUAL FUNDS, INC.
345 Park Avenue
New York, New York 10154
August 22, 1988
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Advisory Agreement
Dear Sirs:
Scudder Mutual Funds, Inc. (the "Company") has been organized under the
laws of Maryland to engage in the business of an investment company. The shares
of capital stock of the Company are of a single class; however, there has been
established a series of stock of the Company comprised of 100,000,000 shares
(the "Shares") known as the "Scudder Gold Fund" (the "Fund"), and shares may be
divided into additional series of the Company that may be established from time
to time by action of the Directors. The Company has selected you to act as the
sole investment adviser of the Fund and to provide certain other services, as
more fully set forth below, and you are willing to act as such investment
adviser and to perform such services under the terms and conditions hereinafter
set forth. Accordingly, the Company agrees with you as follows:
1. Delivery of Company Documents. The Company has furnished you with copies
properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company dated March 18, 1988, as
amended from time to time (the "Articles").
(b) By-Laws of the Company as in effect on the date hereof (the
"By-Laws").
<PAGE>
(c) Resolutions of the Directors selecting you as investment adviser and
approving the form of this Agreement.
The Company will furnish you from time to time with copies, properly certified
or authenticated, of all amendments of or supplements to the foregoing, if any.
2. Name of Company. The Company may use the name "Scudder Mutual Funds,
Inc." or "Scudder Gold Fund" or any name derived from the name "Scudder, Stevens
& Clark" for itself or for any of its series of shares only for so long as this
Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to your business as investment adviser. At such time as such an agreement shall
no longer be in effect, the Company will (to the extent that it lawfully can)
cease to use such names or any other name indicating that it, the Fund or any
other series of the Company's shares is advised by or otherwise connected with
you or any organization which shall have so succeeded to your business.
3. Advisory Services. You will regularly provide the Fund with investment
research, advice and supervision and will furnish continuously an investment
program for the Fund consistent with the investment objectives and policies of
the Fund. You will determine what securities and other investments shall be
purchased for the Fund, what securities and other investments shall be held or
sold by the Fund, and what portion of the Fund's assets shall be held
uninvested, subject always to the provisions of the Company's Articles and
By-Laws and of the Investment Company Act of 1940, as amended, and to the
investment objectives, policies and restrictions of the Fund, as each of the
same shall be from time to time in effect, and subject, further, to such
policies and instructions as the Board of Directors may from time to time
establish. You shall advise and assist the officers of the Company in taking
such steps as are necessary or appropriate to carry out the decisions of the
Board of Directors and the appropriate committees of the Board of Directors
regarding the conduct of the business of the Company.
4. Allocation of Charges and Expenses. You will pay the compensation and
expenses of all officers and executive employees of the Company and will make
available, without expense to the Company, the services of such of your
directors, officers and employees as may duly be elected officers or directors
of the Company, subject to their individual consent to serve and to any
limitations imposed by law. You will pay
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<PAGE>
the Company's office rent and will provide investment advisory, research and
statistical facilities and all clerical services relating to research,
statistical and investment work relating to the Fund. You will not be required
to pay any expenses of the Company other than those specifically allocated to
you in this paragraph 4. In particular, but without limiting the generality of
the foregoing, you will not be required to pay: organization expenses of the
Company; clerical salaries; fees and expenses incurred by the Company in
connection with membership in investment company organizations; brokers'
commissions; payment for portfolio pricing services to a pricing agent, if any;
legal, auditing or accounting expenses; taxes or governmental fees; the fees and
expenses of the transfer agent of the Company; the cost of preparing share
certificates or any other expenses, including clerical expenses of issue,
redemption or repurchase of shares of the Company; the expenses of and fees for
registering or qualifying securities for sale; the fees and expenses of
directors of the Company who are not affiliated with you; the cost of preparing
and distributing reports and notices to shareholders; or the fees or
disbursements of custodians of the Company's assets, including expenses incurred
in the performance of any obligations enumerated by the Articles or By-Laws of
the Company insofar as they govern agreements with any such custodian. You shall
not be required to pay expenses of activities which are primarily intended to
result in sales of shares of the Company if and to the extent that (i) such
expenses are required to be borne by a principal underwriter which acts as the
distributor of the Company's shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Company shall have adopted a plan in conformity with Rule 12b-l under the
Investment Company Act of 1940, as amended, providing that the Company (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing expenses relating to the Shares as are not required to
be paid by the principal underwriter of the Shares pursuant to the underwriting
agreement or are not permitted to be paid by the Company (or some other party)
pursuant to such a plan.
5. Compensation of the Adviser. For all services to be rendered and
payments made as provided in paragraphs 3 and 4 hereof, the Company will pay you
on the last day of each month a fee equal to the sum of 1/12 of 1.0% of the
average daily net assets of the Fund. The "average daily net assets" of the Fund
are defined as the average of the values placed on the net assets as of 4:00
p.m. (New York time), on each day on which the net asset value of the Fund's
portfolio is determined consistent with the provisions of Rule 22c-l under the
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<PAGE>
Investment Company Act of 1940, as amended, or, if the Fund lawfully determines
the value of the net assets of its portfolio as of some other time on each
business day, as of such time. The value of net assets of the Fund shall be
determined pursuant to the applicable provisions of the Prospectus and Statement
of Additional Information of the Company. If, pursuant to such provisions, the
determination of net asset value is suspended for any particular business day,
then for the purposes of this paragraph 5, the value of the net assets of the
Fund as last determined shall be deemed to be the value of the net assets as of
the close of the New York Stock Exchange, or as of such other time as the value
of the net assets of the Fund's portfolio may lawfully be determined, on that
day. If the determination of the net asset value of the Shares has been
suspended pursuant to the Prospectus and Statement of Additional Information of
the Company for a period including such month, your compensation payable at the
end of such month shall be computed on the basis of the value of the net assets
of the Fund as last determined (whether during or prior to such month). If the
Fund determines the value of the net assets of its portfolio more than once on
any day, the last such determination thereof on that day shall be deemed to be
the sole determination thereof on that day for the purposes of this paragraph 5.
You agree that your compensation for any fiscal year shall be reduced by the
amount, if any, by which the expenses of the Fund for such fiscal year exceed
the lowest applicable expense limitation established pursuant to the statutes or
regulations of any jurisdiction in which the Shares may be qualified for offer
and sale (the "State Expense Limit"). You shall refund to the Company the amount
of any reduction of your compensation pursuant to this paragraph 5 as promptly
as practicable after the end of such fiscal year, provided that you will not be
required to pay the Company an amount greater than the fee paid to you in
respect of such year pursuant to this Agreement. As used in this paragraph 5,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Company; provided, however, that
nothing in this Agreement shall require you to reduce your fees if not required
by an applicable statute or regulation referred to above in this paragraph 5.
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<PAGE>
6. Avoidance of Inconsistent Position. In connection with purchases or
sales of portfolio securities and investments for the account of the Fund,
neither you nor any of your directors, officers or employees will act as a
principal or agent or receive any commission. You or your agent shall arrange
for the placing of all orders for the purchase and sale of portfolio securities
for the Fund's account with brokers or dealers selected by you. In the selection
of such brokers or dealers and the placing of such orders, you are directed at
all times to seek for the Fund the most favorable execution and net price
available. If any occasion should arise in which you give any advice to clients
of yours concerning the Shares, you will act solely as investment counsel for
such clients and not in any way on behalf of the Fund. Your services to the
Company pursuant to this Agreement are not to be deemed to be exclusive and it
is understood that you may render investment advice, management and other
services to others.
7. Limitation of Liability of Adviser. You shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company, the
Fund or its shareholders in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on your part in the performance of your duties or from reckless
disregard by you of your obligations and duties under this Agreement. Any
person, even though also employed by you, who may be or become an employee of
and paid by the Company shall be deemed, when acting within the scope of his
employment by the Company, to be acting in such employment solely for the
Company and not as your employee or agent.
8. Duration and Termination of this Agreement, This Agreement shall remain
in force until August 22, 1990 and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by the vote
of a majority of the directors who are not interested persons of you or of the
Company cast in person at a meeting called for the purpose of voting on such
approval and by a vote of the Board of Directors or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder. This Agreement may, on 60
days' written notice, be terminated at any time without the payment of any
penalty, by the Board of Directors, by vote of a majority of the outstanding
voting securities of the Fund, or by you. This Agreement shall automatically
terminate in the event of its assignment. In interpreting the provisions of this
Agreement, the definitions contained in Section 2(a) of
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the Investment Company Act of 1940 (particularly the definitions of "interested
person, assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order.
9. Amendment of this Agreement. No Provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the outstanding
voting securities of the Fund and by the Board of Directors, including a
majority of the directors who are not interested persons of you or of the
Company, cast in person at a meeting called for the purpose of voting on such
approval.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Company, whereupon this letter shall become a binding
contract.
Yours very truly,
SCUDDER MUTUAL FUNDS, INC.
By /s/ Daniel Pierce
---------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By /s/ David S. Lee
---------------------------------
Managing Director
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Exhibit 6
SCUDDER MUTUAL FUNDS, INC.
345 Park Avenue
New York, New York 10154
August 22, 1988
Scudder Fund Distributors, Inc.
175 Federal Street
Boston, Massachusetts 02110
Underwriting Agreement
Dear Sirs:
Scudder Mutual Funds, Inc. (hereinafter called the "Company") is a
corporation organized under the laws of Maryland and is engaged in the business
of an investment company. The authorized capital of the Company consists of
3,000,000,000 shares of capital stock, with $.0l par value ("Shares"), currently
of one class; however, there has been established a series of stock of the
Company known as the "Scudder Gold Fund", and the Shares may be divided into
additional series of the Company that may be established from time to time by
action of the Directors. The Company has selected you to act as principal
underwriter (as such term is defined in Section 2(a)(29) of the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Shares and you are
willing to act as such principal underwriter and to perform the duties and
functions of underwriter in the manner and on the terms and conditions
hereinafter set forth. Accordingly, the Company hereby agrees with you as
follows:
1. Delivery of Documents. The Company has furnished you with copies
properly certified or authenticated of each of the following:
(a) Articles of Incorporation of the Company, dated March 17, 1988.
(b) By-Laws of the Company as in effect on the date hereof.
(c) Resolutions of the Board of Directors of the Company selecting you as
principal underwriter and approving the form of this Agreement.
The Company will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
<PAGE>
The Company will furnish you promptly with properly certified or
authenticated copies of any registration statement filed by it with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "1933 Act"), or the 1940 Act, together with any financial statements and
exhibits included therein, and all amendments of supplements thereto hereafter
filed.
2. Registration and Sale of Additional Shares. The Company will from time
to time use its best efforts to register under the 1933 Act such number of
Shares not already so registered as you may reasonably be expected to sell on
behalf of the Company. You and the Company will cooperate in taking such action
as may be necessary from time to time to qualify Shares so registered for sale
by you or the Company in any states mutually agreeable to you and the Company,
and to maintain such qualification. This Agreement relates to the issue and sale
of Shares that are duly authorized and registered and available for sale by the
Company, including redeemed or repurchased Shares if and to the extent that they
may be legally sold and if, but only if, the Company sees fit to sell them.
3. Sale of Shares. Subject to the provisions of paragraphs 5 and 7 hereof
and to such minimum purchase requirements as may from time to time be currently
indicated in the Company's prospectus or prospectuses or statement or statements
of additional information, you are authorized to sell as agent on behalf of the
Company Shares authorized for issue and registered under the 1933 Act. You may
also purchase as principal Shares for resale to the public. Such sales will be
made by you on behalf of the Company by accepting unconditional orders to
purchase Shares placed with you by investors and such purchases will be made by
you only after acceptance by you of such orders. The sales price to the public
of Shares shall be the public offering price as defined in paragraph 6 hereof.
4. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from investors unconditional
orders for Shares authorized for issue by the Company and registered under the
1933 Act, provided that you may in your discretion refuse to accept orders for
Shares from any particular applicant.
5. Sale of Shares by the Company. Unless you are otherwise notified by the
Company, any right granted to you to accept orders for Shares or to make sales
on behalf of the Company or to purchase Shares for resale will not apply to (i)
Shares issued in connection with the merger or consolidation of
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any other investment company with the Company or its acquisition, by purchase or
otherwise, of all or Substantially all of the assets of any investment company
or substantially all the outstanding shares of any such company, and (ii) to
Shares that may be offered by the Company to shareholders of the Company by
virtue of their being such shareholders.
6. Public Offering Price. All Shares sold to investors by you will be sold
at the public offering price. The public offering price for all accepted
subscriptions will be the net asset value per Share, determined, in the manner
provided in the Company's registration statement as from time to time in effect
under the 1933 Act and the 1940 Act, next after the order is accepted by you.
7. Suspension of Sales. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for Shares shall be accepted by you except unconditional orders placed with you
before you had knowledge of the suspension. In addition, the Company reserves
the right to suspend sales and your authority to accept orders for Shares on
behalf of the Company if, in the judgment of a majority of the Board of
Directors or a majority of the Executive Committee of such Board, if such body
exists, it is in the best interests of the Company to do so, such suspension to
continue for such period as may be determined by such majority; and in that
event, no Shares will be sold by you on behalf of the Company while such
suspension remains in effect except for Shares necessary to cover unconditional
orders accepted by you before you had knowledge of the suspension.
8. Portfolio Securities. Portfolio securities of the Company may be bought
or sold by or through you and you may participate directly or indirectly in
brokerage commissions or "spread" in respect of transactions in portfolio
securities of the Company; provided, however, that all sums of money received by
you as a result of such purchases and sales or as a result of such participation
must, after reimbursement of your actual expenses in connection with such
activity, be paid over by you to or for the benefit of the Company.
9. Expenses. (a) The Company will pay (or will enter into arrangements
providing that others than you will pay) all fees and expenses:
(1) in connection with the preparation, setting in type and filing of
any registration statement (including a prospectus or
prospectuses and statement or statements of
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<PAGE>
additional information) under the 1933 Act or the 1940 Act, or
both, and any amendments or supplements thereto that may be made
from time to time;
(2) in connection with the registration and qualification of Shares
for sale in the various jurisdictions in which the Company shall
determine it advisable to qualify such Shares for sale (including
registering the Company as a broker or dealer or any officer of
the Company or other person as agent or salesman of the Company
in any such jurisdictions);
(3) of preparing, setting in type, printing and mailing any notice,
proxy statement, report, prospectus, statement of additional
information or other communication to shareholders of the Company
in their capacity as such;
(4) of preparing, setting in type, printing and mailing prospectuses
annually, and any supplements thereto, to existing shareholders;
(5) in connection with the issue and transfer of Shares resulting
from the acceptance by you of orders to purchase Shares placed
with you by investors, including the expenses of printing and
mailing confirmations of such purchase orders and the expenses of
printing and mailing a prospectus included with the confirmation
of such orders;
(6) of any issue taxes or any initial transfer taxes;
(7) of WATS (or equivalent) telephone lines other than the portion
allocated to you in this paragraph 9;
(8) of wiring funds in payment of Share purchases or in satisfaction
of redemption or repurchase requests, unless such expenses are
paid for by the investor or shareholder who initiates the
transaction;
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(9) of the cost of printing and postage of business reply envelopes
sent to Company shareholders;
(10) of one or more CRT terminals connected with the computer
facilities of the Company's transfer agent other than the portion
allocated to you in this paragraph 9;
(11) permitted to be paid or assumed by the Company pursuant to a plan
("12b-1 Plan"), if any, adopted by the Company in conformity with
the requirements of Rule 12b-1 under the 1940 Act ("Rule 12b-l")
or any successor rule, notwithstanding any other provision to the
contrary herein;
(12) of setting in type, printing and postage of the periodic
newsletter to shareholders other than the portion allocated to
you in this paragraph 9; and
(13) of the salaries and overhead of persons employed by you as
shareholder representatives other than the portion allocated to
you in this paragraph 9.
(b) You shall pay or arrange for the payment of all fees and expenses:
(1) of printing and distributing any prospectuses, statements of
additional information or reports prepared for your use in
connection with the offering of Shares to the public;
(2) of preparing, setting in type, printing and mailing any other
literature used by you in connection with the offering of Shares
to the public;
(3) of advertising in connection with the offering of Shares to the
public;
(4) incurred in connection with your registration as a broker or
dealer or the registration or qualification of your officers,
directors, agents or representatives under Federal and state
laws;
-5-
<PAGE>
(5) of that portion of WATS (or equivalent) telephone lines,
allocated to you on the basis of use by investors (but not
shareholders) who request information, prospectuses or statements
of additional information;
(6) of that portion of the expense of setting in type, printing and
postage of the periodic newsletter to shareholders attributable
to promotional material included in such newsletter at your
request concerning investment companies other than the Company or
concerning the Company to the extent you are required to assume
the expense thereof pursuant to paragraph 9(b)(8), except such
material which is limited to information, such as listings of
other investment companies and their investment objectives, given
in connection with the exchange privilege as from time to time
described in the Company's prospectus or prospectuses;
(7) of that portion of the salaries and overhead of persons employed
by you as shareholder representatives attributable to the time
spent by such persons in responding to requests from investors,
but not shareholders, for information about the Company;
(8) of any activity which is primarily intended to result in the sale
of Shares, unless a 12b-l Plan shall be in effect which provides
that the Company shall bear some or all of such expenses, in
which case the Company shall bear such expenses in accordance
with such Plan; and
(9) of that portion of one or more CRT terminals connected with the
computer facilities of the Company's transfer agent attributable
to your use of such terminal(s) to gain access to such of the
transfer agent's records as also serve as your records.
Expenses which are to be allocated between you and the Company shall be
allocated pursuant to reasonable procedures or formulae mutually agreed upon
from time to time, which procedures or formulae shall to the extent practicable
reflect studies of relevant empirical data.
-6-
<PAGE>
10. Conformity with Law. You agree that in selling Shares you will duly
conform in all respects with the laws of the United States and any state in
which Shares may be offered for sale by you pursuant to this Agreement and to
the rules and regulations of the National Association of Securities Dealers,
Inc., of which you are a member.
11. Independent Contractor. You shall be an independent contractor and
neither you nor any of your officers or employees is or shall be an employee of
the Company in the performance of your duties hereunder. You shall be
responsible for your own conduct and the employment, control and conduct of your
agents and employees and for injury to such agents or employees or to others
through your agents or employees. You assume full responsibility for your agents
and employees under applicable statutes and agree to pay all employee taxes
thereunder.
12. Indemnification. You agree to indemnify and hold harmless the Company
and each of its Directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which the Company or such Directors, officers, or controlling
person may become subject under such Act, under any other statute, at common law
or otherwise, arising out of the acquisition of any Shares by any person which
(i) may be based upon any wrongful act by you or any of your employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement
(including a prospectus or statement of additional information) covering Shares
or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading if such statement or
omission was made in reliance upon information furnished to the Company by you,
or (iii) may be incurred or arise by reason of your acting as the Company's
agent instead of purchasing and reselling Shares as principal in distributing
the Shares to the public, provided, however, that in no case (i) is your
indemnity in favor of a Director or officer or any other person deemed to
protect such Director or officer or other person against any liability to which
any such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement or (ii) are
you to be liable under your indemnity agreement contained in this paragraph with
respect to any claim made against the Company or any person indemnified unless
the
-7-
<PAGE>
Company or such person, as the case may be, shall have notified you in writing
within a reasonable time after the summons or other first legal process giving
information on the nature of the claims shall have been served upon the Company
or upon such person (or after the Company or such person shall have received
notice of such service on any designated agent), but failure to notify you of
any such claim shall not relieve you from any liability which you may have to
the Company or any person against whom such action is brought otherwise than on
account of your indemnity agreement contained in this paragraph, You shall be
entitled to participate, at your own expense, in the defense, or, if you so
elect, to assume the defense of any suit brought to enforce any such liability,
but if you elect to assume the defense, such defense shall be conducted by
counsel chosen by you and satisfactory to the Company, to its officers and
Directors, or to any controlling person or persons, defendant or defendants in
the suit. In the event that you elect to assume the defense of any such suit and
retain such counsel, the Company, such officers and Directors or controlling
person or persons, defendant or defendants in the suit shall bear the fees and
expenses of any additional counsel retained by them, but, in case you do not
elect to assume the defense of any such suit, you will reimburse the Company,
such officers and Directors or controlling person or persons, defendant or
defendants in such suit for the reasonable fees and expenses of any counsel
retained by them. You agree promptly to notify the Company of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Shares.
The Company agrees to indemnify and hold harmless you and each of your
directors and officers and each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act, against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
you or such directors, officers or controlling person may become subject under
such Act, under any other statute, at common law or otherwise, arising out of
the acquisition of any Shares by any person which (i) may be based upon any
wrongful act by the Company or any of its employees or representatives, or (ii)
may be based upon any untrue statement or alleged untrue statement of a material
fact contained in a registration statement (including a prospectus or statement
of additional information) covering Shares or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to you by the Company; provided, however, that in no case
(i) is the Company's indemnity in favor of a director or
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<PAGE>
officer or any other person deemed to protect such director or officer or other
person against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties or by reason of his reckless disregard of obligations
and duties under this Agreement or (ii) is the Company to be liable under its
indemnity agreement contained in this paragraph with respect to any claims made
against you or any such director, officer or controlling person unless you or
such director, officer or controlling person, as the case may be, shall have
notified the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon you or upon such director officer or controlling person
(or after you or such director, officer or controlling person shall have
received notice of such service on any designated agent), but failure to notify
the Company of any such claim shall not relieve it from any liability which it
may have to the person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. The Company will
be entitled to participate at its own expense in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any such liability,
but if the Company elects to assume the defense, such defense shall be conducted
by counsel chosen by it and satisfactory to you, your directors, officers or
controlling person or persons, defendant or defendants in the suit. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, you, your directors, officers or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Company does not elect to
assume the defense of any such suit, it will reimburse you or such directors,
officers or controlling person or persons, defendant or defendants in the suit,
for the reasonable fees and expenses of any counsel retained by them. The
Company agrees promptly to notify you of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issuance or sale of any Shares.
13. Authorized Representations. The Company is not authorized to give any
information or to make any representations on behalf of you other than the
information and representations contained in a registration statement (including
a prospectus or statement of additional information) covering Shares, as such
registration statement and prospectus or prospectuses may be amended or
supplemented from time to time.
-9-
<PAGE>
You are not authorized to give any information or to make any
representations on behalf of the Company or in connection with the sale of
Shares other than the information and representat4ons contained in a
registration statement (including a prospectus or statement of additional
information) covering Shares, as such registration statement and prospectus or
prospectuses may be amended or supplemented from time to time. No person other
than you is authorized to act as principal underwriter (as such term is defined
in the 1940 Act) for the Company.
14. Duration and Termination of this Agreement. This Agreement shall become
effective upon the date first written above and will remain in effect until
August 22, 1990 and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Directors who are not interested persons of you or of the Company cast in
person at a meeting called for the purpose of voting on such approval, and by
vote of the Board of Directors or of a majority of the outstanding voting
securities of the relevant series of the Shares. This Agreement may, on 60 days'
written notice, be terminated, with respect to the Company or any series of the
Shares, as the case may be, at any time without the payment of any penalty, by
the Board of Directors of the Company, by a vote of a majority of the
outstanding voting securities of the relevant series or by you. This Agreement
will automatically terminate in the event of its assignment. This Agreement may
remain in effect with respect to a series of the Shares even if it has been
terminated in accordance with this paragraph with respect to one or more other
series of the Shares. In interpreting the provisions of this paragraph 14, the
definitions contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person", "assignment" and "majority of the
outstanding voting securities"), as modified by any applicable order of the
Securities and Exchange Commission, shall be applied.
15. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. If the Company should at any time deem it
necessary or advisable in the best interests of the Company that any amendment
of this Agreement be made in order to comply with the recommendations or
requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to assent to such amendment, the Company may terminate this
Agreement
-10-
<PAGE>
forthwith. If you should at any time request that a change be made in the
Company's Articles of Incorporation or By-laws or in its methods of doing
business, in order to comply with any requirements of federal law or regulations
of the Securities and Exchange Commission or of a national securities
association of which you are or may be a member relating to the sale of the
Shares, and the Company should not make such necessary change within a
reasonable time, you may terminate this Agreement forthwith.
16. Termination of Prior Agreements. This Agreement upon its effectiveness
terminates and supersedes all prior underwriting contracts between the parties,
if any.
17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Company, whereupon this letter shall become a binding
contract.
Very truly yours,
SCUDDER MUTUAL FUNDS, INC.
By /s/ Daniel Pierce
---------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER FUND DISTRIBUTORS, INC.
By /s/ David S. Lee
---------------------------------
President
-11-
Exhibit 8(a)(1)
CUSTODIAN AGREEMENT
THIS AGREEMENT made as of August 22, 1988 between Scudder Mutual Funds,
Inc., a corporation under the laws of Maryland with its principal place of
business at 175 Federal Street, Boston, Massachusetts (hereinafter called the
"Fund"), and The First National Bank of Boston, a national banking association
with its principal place of business in Boston, Massachusetts (hereinafter
called "Custodian").
WHEREAS, the Fund desires that the securities, precious metals or
negotiable receipts representing ownership of precious metals (hereinafter
"precious metals receipts") and cash (unless otherwise designated, hereinafter
referred to collectively as "Assets") of its one investment fund, Scudder Gold
Fund (the "Portfolio"), shall be hereafter held and administered by Custodian as
the Fund's agent pursuant to the terms of this Agreement; and
WHEREAS, the Custodian, directly and through its sub-custodian network,
provides services in the ordinary course of its business which will meet the
Fund's needs as provided for hereinafter;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund
and Custodian agree as follows:
Section 1. Definitions.
"Bank" shall mean a bank as defined in Section 2(a)5 of the Investment
Company Act of 1940, as amended (the "1940 Act").
"Security" shall mean security as defined in Section 2(1) of the Securities
Act of 1933, as amended, and, unless otherwise indicated herein, shall mean both
U.S. and "foreign securities", as the latter term is defined in Rule 17f-5 under
the 1940 Act.
"Proper Instructions" as used throughout this Agreement shall mean a
writing signed or initialed by one or more persons as the Board of Directors of
the Fund shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved, including a
specific statement of the purpose for which such action is requested. Oral
instructions will be considered "Proper Instructions" if the Custodian
reasonably believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed promptly in writing and in no event later than
one Business Day, which shall mean a day other than a Saturday or Sunday on
which the Custodian is open for custody business. If authorized by the Board of
Directors of the Fund, as evidenced by a certificate of the Secretary or an
Assistant Secretary
<PAGE>
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of the Fund and accompanied by a description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices. Such communications shall be
confirmed by the Fund in writing which may include a tested telex.
Section 2. Custodian as Agent.
The Custodian is authorized to act under the terms of this Agreement as the
Fund's agent and shall be representing the Fund whenever acting within the scope
of the Agreement. The Custodian is authorized further to appoint sub-custodians
from time to time to carry out some or all of the duties which the Custodian is
authorized to perform hereunder; provided, however, that the appointment of any
sub-custodian shall not relieve the Custodian of any of its responsibilities or
liabilities hereunder.
The Custodian acknowledges that additional portfolios of the Fund may be
established and that such portfolios, including the Portfolio, may be
terminated, from time to time by action of the Board of Directors of the Fund.
If the context requires and unless otherwise specifically provided herein, the
term "Fund" as used in this Agreement shall mean, in addition to the Portfolio,
each subsequently created separate portfolio as the Board of Directors of the
Fund shall designate at its discretion and as to which such Board shall have
appointed the Custodian as Custodian and as to which the Custodian shall have
accepted such appointment.
Section 3. Names, Titles and Signatures of Fund's Officers.
The Secretary or any Assistant Secretary of the Fund will certify to the
Custodian a list containing the names, titles, and signatures of those persons
authorized to sign or give Proper Instructions ("Authorized Persons"). Said
Secretary or Assistant Secretary, or his or her successor, will provide the
Custodian promptly with any changes to such list which may occur from time to
time.
The Custodian is authorized to rely and act upon Proper Instructions from
any person or persons (if more than one, so indicated) who are Authorized
Persons. The Fund will provide the Custodian with a list of authenticated
specimen signatures of Authorized Persons and will promptly incorporate any
changes to such list as may occur from time to time. Should the Fund fail to
inform the Custodian that an Authorized Person has ceased to be an Authorized
Person, the Custodian shall be entitled to rely upon the signature of that
person as if such person were still an Authorized Person, until notified to the
contrary by the Fund.
The Custodian is further authorized to rely upon any instructions received
by any other means and identified as having been given or authorized by any
Authorized Person, regardless of whether such instructions shall in fact have
been authorized or given by any of
<PAGE>
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such persons; provided, that, (a) the Custodian and the Fund shall have
previously agreed in writing upon the means of transmission and the method of
identification for such instructions; (b) the Custodian has not been notified by
the Fund to cease to recognize such means and methods, and (c) such means and
methods have in fact been used.
If the Fund should so choose to have dial-up or other means of direct
access to the Custodian's accounting system for securities in custodial
accounts, the Custodian is also authorized to rely and act upon any instructions
received by the Custodian through the terminal device, regardless of whether
such instructions shall in fact have been given or authorized by the Fund
provided that such instructions are accompanied by passwords which have been
mutually agreed to in writing by the Custodian and the Fund and the Custodian
has not been notified by the Fund to cease to recognize such passwords.
Where dial-up or other direct means of access to the Custodian's accounting
system for cash or securities is utilized, the Fund agrees to indemnify the
Custodian and hold it harmless from and against any and all liabilities, losses,
damages, costs, reasonable counsel fees, and other reasonable expenses of every
nature suffered or incurred by the Custodian by reason of or in connection with
the improper use, unauthorized use and misuse by the Fund or its employees of
any terminal device with access to the Custodian's Accounting System for
Securities in Custodial Accounts, unless such losses, damages, costs and
expenses, result from the negligence of the Custodian, its employees,
sub-custodians, or agents.
Section 4. Receipt and Disbursement of Money.
A. The Custodian shall open and maintain a separate account or accounts in
the name of the Fund (the "Account"), subject to debit only by a draft or order
by Custodian acting pursuant to the terms of this Agreement. The Custodian shall
hold in such Account, subject to the provisions hereof, all cash received by it
from or for the account of the Fund.
1. The Custodian shall debit or credit the Account, as the case may
be, only (a) for the purchase of securities for the Portfolio upon the delivery
(which term shall include "transfer" as that term is used with respect to
"book-entry" securities) of such securities to the Custodian, registered in the
name of the Fund or of the nominee of the Custodian referred to in Section 8,
below (it being understood and agreed that, in any and every case when payment
for the purchase of securities for the account of the Portfolio (or any other
portfolio which is part of the Fund) is made by the Custodian in advance of
delivery to it of the securities purchased, in the absence of Proper
Instructions to so pay in advance, the Custodian shall be absolutely liable for
such securities to the same extent as if the securities had been actually
delivered to the Custodian, provided, however, that in connection with any
repurchase agreement transaction in which the selected securities are to be
delivered in "book-entry" form to the
<PAGE>
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account of the Custodian at the Federal Reserve Bank of Boston (the "Fed"), the
Custodian conclusively may rely on any communication from the Fed that such
securities have been so delivered); (b) for the purchase of precious metals or
precious metals receipts upon delivery of such precious metals or precious
metals receipts to the Custodian or a sub-custodian; (c) for the purchase or
redemption of shares of the capital stock of the Fund, (d) for payments in
connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Fund held by or to be delivered to the Custodian; (e) for
the payment of interest, dividends, taxes, management or supervisory fees or
operating expenses (including without limitation thereto, fees for legal,
accounting and auditing services); (f) for payments in connection with the
return of the cash collateral received in connection with securities lent by the
Fund; or (g) for other proper Fund purposes.
2. The Custodian conclusively may rely upon receipt of a written or
oral request from an Authorized Person requesting such payment and stating that
it is for a purpose permitted under the terms of this subsection A. Any oral
request shall be confirmed in writing (which may include a tested telex) within
one business day. Any discrepancy between such oral request and written
confirmation shall be resolved in favor of the oral request upon which the
Custodian relied.
3. In respect of item 1(g), the Custodian shall receive, in addition
to Proper Instructions, a certified copy of a resolution of the Board of
Directors or, if applicable, of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom such payment is to be made. The
Custodian may rely on an oral request from an Authorized Person and his or her
representation that such payment is for an authorized corporate purpose and that
the documents provided for herein will be forthcoming within twenty-four (24)
hours of such oral request. Receipt of Proper Instructions or written or oral
notice from an Authorized Person shall be deemed to establish that payment of
cash pursuant to such order is for a valid corporate purpose. In the event that
a payment which the Fund has declared to be for a valid corporate purpose,
pursuant to the above, is not in fact for a valid corporate purpose, the Fund
will indemnify and hold the Custodian harmless from any and all taxes, charges,
expenses, assessments, claims and liabilities which the Custodian may incur in
conjunction with such payment.
B. The Custodian is hereby authorized to (a) collect on a timely basis all
income and other payments with respect to securities held hereunder to which the
Fund shall be entitled either by law or pursuant to custom in the securities
business, and to credit such income to the Fund's custodian account. Without
limiting the
<PAGE>
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generality of the foregoing, the Custodian is hereby authorized to (a) detach
and present for payment all coupons and other income items requiring
presentation as and when they become due, (b) collect interest when due on
securities held hereunder and (c) endorse and collect all checks, drafts or
other orders for the payment of money received by the Custodian for the account
of the Fund.
Section 5. Receipt of Assets
The Custodian shall hold in a separate account, and physically segregated
at all times from those of any other persons, firms or corporations, pursuant to
the provisions hereof, all Assets received by it from or for the account of the
Fund. All such Assets are to be held or disposed of by the Custodian for, and
subject at all times to the instructions of, the Fund pursuant to the terms of
this Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such Assets, except pursuant to
the directive of the Fund and only for the account of the Fund as set forth in
Section 7 of this Agreement.
The Custodian may make arrangements with Depository Trust Company ("DTC")
and other depositories, including the Federal Reserve Bank and qualifying
foreign sub-custodians as provided for in Section 6 hereof, for the central
handling of securities, whereby certain securities of the Fund may be deposited
for the purpose of allowing transactions to be made by bookkeeping entry without
physical delivery of such securities, subject to such restrictions as may be
agreed upon by the Custodian and the Fund. The securities held by the Custodian
shall be held with the same degree of care exercised by the Custodian with
respect to its own securities. The Custodian shall immediately commence
procedures to replace securities lost due to robbery, burglary or theft while
such securities are within its control or that of its agents or employees upon
discovery of such loss.
Section 6. Foreign Sub-Custodians.
(a) In the event the Custodian places Assets pursuant to this Agreement and
pursuant to approval by the Board of Directors of the Fund in accordance with
Section 17(f) of the 1940 Act and Rule 17f-5 thereunder, with any foreign
sub-custodian, the Custodian agrees that it shall place the Assets only with
those foreign sub-custodians which either satisfy the requirements of "eligible
foreign custodian" under Rule 17f-5, or with respect to which exemptive relief
or a no-action determination has been granted by the U.S. Securities and
Exchange Commission from the requirements of Section 17(f). The Custodian agrees
further that in placing Assets with and in entering into sub-custodian
agreements with such foreign sub-custodians, the sub-custodial agreement shall
provide, either directly to the Fund or indirectly to the Fund through the
Custodian, that: (i) the Fund will be adequately indemnified and the Assets so
placed adequately insured in the event of loss, as provided in part (b) of this
section, (ii) the Assets will not be subject to any right, charge security
<PAGE>
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interest, lien or claim of any kind in favor of the foreign sub-custodian or its
creditors except a claim for payment for their safe custody or administration,
(iii) beneficial ownership of the Assets will be freely transferable without
payment of money or value other than for safe custody or administration, (iv)
adequate records will be maintained identifying the Assets as belonging to the
Fund, (v) the Fund's independent public accountants will either be given access
to those records or the confirmation of the contents of those records; and (vi)
the Fund will receive periodic reports with respect to the safekeeping of the
Assets, including but not necessarily limited to, notification of any transfer
to or from the Fund's Account.
(b) With respect to any Assets to be placed with foreign sub-custodians
pursuant to this section, the Custodian commits that it shall obtain Bankers
Blanket Bond or similar insurance for losses incurred as a result of such
sub-custodial arrangements. Within the normal course of business, the Custodian
shall also seek to ensure that all such sub-custodians carry comparable Bankers
Blanket Bond or similar insurance.
(c) The Fund authorizes the Custodian to release any and all information
regarding Assets placed with foreign sub-custodians hereunder as may be required
by court order of a court within the United States.
Section 7. Transfer, Exchange, Redelivery of Securities.
The Custodian or sub-custodian or any agent thereof shall have sole power
to release or deliver any Assets of the Fund held by it pursuant to this
Agreement. The Custodian agrees to transfer, exchange or deliver Assets held by
it hereunder only (a) for sales of securities for the account of the Fund in
accordance with "New York Street Practice", (b) when securities are called,
redeemed or retired or otherwise become payable, (c) for examination by any
broker selling any securities in accordance with "street delivery" custom, (d)
in exchange for or upon conversion into other securities and cash whether
pursuant to any plan of merger, consolidation, reorganization, recapitalization
or readjustment, or otherwise, (e) upon conversion of such securities pursuant
to their terms into other securities, (f) upon exercise of subscription,
purchase or other similar rights represented by such securities, pursuant to
their terms; (g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities, (h) for the purpose of redeeming in kind
shares of capital stock of the Fund upon delivery thereof to Custodian or the
Transfer Agent of the Fund; (i) for the purpose of tendering shares; (j) for the
purpose of delivering securities lent by the Fund, or (k) for sales of precious
metals and precious metals receipts, or (1) for other proper Fund purposes. As
to any deliveries made by Custodian pursuant to items (b), (d), (e), (f), (g),
(h) and (i), securities or cash receivables in exchange therefor shall be
deliverable to the Custodian. The Custodian may rely upon Proper Instructions
relating thereto as provided for in Sections 3 and 4 above.
<PAGE>
-7-
Section 8. The Custodian's Acts without Instructions.
Unless and until the Custodian receives instructions to the contrary, the
Custodian shall:
(a) present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
cash received by it upon such payment for the Account; (b) collect interest and
cash dividends received, provide notice to the Fund of receipts, and deposit to
the Account; (c) hold for the account of the Fund all stock dividends, rights
and similar securities issued with respect to any securities held by the
Custodian under the terms of this Agreement; and (d) execute as agent on behalf
of the Fund all necessary ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the United States Treasury
Department, the laws of any State or territory of the United States, or, in the
case of securities held by foreign sub-custodians, the laws of the jurisdiction
in which such securities are held, now or hereafter in effect, inserting the
Fund's name on such certificates as the owner of the securities covered thereby,
to the extent it may lawfully do so.
Section 9 Options and Futures Transactions
a. Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter
1. The Custodian shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by the Fund regarding escrow or
other arrangements (i) in accordance with the provisions of any agreement
between the Custodian, any broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. and, if necessary, the Fund relating to the compliance with the
rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, or (ii)
alternatively, in accordance with Section 10 as to covered call options written
by the Fund.
2. The Custodian shall be under no duty or obligation to see that the
Fund has deposited or is maintaining adequate margin, if required, with any
broker in connection with any option to the broker for exercise unless it
receives Proper Instructions from the Fund. The Custodian shall have no
responsibility for the legality of any put or call purchased or sold on behalf
of the Fund, the propriety of any such purchase or sale, or the adequacy of any
collateral delivered to a broker in connection with an option or deposited to or
withdrawn from a Segregated Account as described in sub-paragraph c of this
Section 9. The Custodian specifically, but not by way of limitation, shall not
be under any duty or obligation to: (i) periodically check or notify the Fund
that the amount of such collateral held by a broker or held in a Segregated
Account as described in sub-paragraph c of
<PAGE>
-8-
this Section 9 is sufficient to protect such broker of the Fund against any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has expired or is about to expire.
Such duties or obligations shall be the sole responsibility of the Fund.
b. Puts, Calls and Futures Traded on Commodities Exchanges
1. The Custodian shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement among the Fund. the Custodian and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund.
2. The responsibilities and liabilities of the Custodian as to
Futures, puts and calls traded on commodities exchanges, any Futures Commission
Merchant account and the Segregated Account shall be limited as set forth in
sub-paragraph (a) (2) of this Section 9 as if such sub-paragraph referred to
Futures Commission Merchants rather than brokers, and Futures, puts and calls
traded on commodities exchanges instead of options.
c. Segregated Account
The Custodian shall upon receipt of Proper Instructions establish and
maintain a Segregated Account or Accounts for and on behalf of the Fund, into
which Account or Accounts may be transferred cash and/or securities including
securities maintained in an Account by the Custodian pursuant to Section 4
hereof, (i) in accordance with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the Exchange Act and a member
of the NASD or any Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the Options Clearing
Corporation and of any registered National Securities Exchange or the Commodity
Futures Trading Commission or any registered Contract Market, or of any similar
organization or organizations regarding escrow or other arrangements in
connection with transactions by the Fund, and (ii) for the purpose of
segregating cash or securities in connection with options purchased or written
by the Fund or commodity futures purchased or written by the Fund, and (iii) for
the purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the maintenance of
Segregated Accounts by registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the Board
of Directors of the Fund, or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such Segregated Account and declaring such purposes
to be proper corporate purposes.
<PAGE>
-9-
Section 10. Escrow Receipts and Deposit Forms
Upon receipt of instructions from an Authorized Person to do so, Custodian
will execute, or cause a sub-custodian or depository to execute, an escrow
receipt relating to a call option written by the Fund and will deliver such
escrow receipt against receipt of payment of the premium therefor or, in the
case of call option contracts issued by the Options Clearing Corporation
("OCC"), an escrow deposit form of OCC pursuant to the Escrow Deposit Agreement
in effect from time to time between the Custodian and OCC. Such aforesaid
instruction shall contain all information necessary for the issuance of such
receipt or deposit form and will authorize the deposit of the securities
specified therein into an escrow account which will be held by Custodian or a
depository subject to the terms of such escrow receipt or deposit form. However,
Custodian agrees that it will not deliver or cause a depository to deliver any
securities deposited in an escrow account pursuant to an exercise notice unless
Custodian has received Proper Instruction to do so or (i) Custodian has duly
requested the issuance of such instruction; (ii) at least two business days have
elapsed since the receipt of such request by the Fund; and (iii) the Fund has
not advised Custodian that it has purchased securities that are to be delivered
pursuant to the exercise notice. The Fund agrees that it will not issue an
instruction which shall conflict with the terms of any escrow receipt executed
by Custodian or any depository in relation to the Fund which is then in effect.
Custodian need not maintain any written evidence of any call written by the Fund
as part of its duties under this Agreement. The Fund may write calls on
securities ("underlying securities") which are not owned by the Fund and issue
an instruction to Custodian to execute or cause a depository to execute, an
escrow receipt or deposit form on securities ("convertible securities") which
are, or are to be, owned by the Fund and are convertible into the underlying
securities.
In such event, any instruction as to the execution of the escrow receipt or
deposit form will relate only to such convertible securities but any instruction
as to the delivery of such securities may direct Custodian to convert the same.
Section 11. Registration of Assets
Except as otherwise directed by Proper Instructions, the Custodian shall
register all Assets, except such as are in bearer form, in the name of the Fund
or a registered nominee of the Fund or a registered nominee of the Custodian or
sub-custodian. Securities deposited with DTC may be registered in the nominee
name of DTC. The Custodian shall execute and deliver all such certificates in
connection therewith as may be required by the applicable provisions of the
Internal Revenue Code, the laws of any State or territory of the United States,
or, in the case of securities placed with foreign sub-custodians, the laws of
the jurisdiction in which such securities are held. The Custodian shall use its
best efforts to the end that the specific Assets held by it hereunder shall be
at all times identifiable in its records.
<PAGE>
-10-
The Fund shall from time to time furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any securities
which it may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
Section 12. Voting and Other Action.
Neither the Custodian nor any nominee of the Custodian or of DTC shall vote
any of the securities held hereunder by or for the account of the Fund except in
accordance with the instructions contained in an Officers' Certificate.
The Custodian shall deliver or have delivered to the Fund all notices,
proxies and proxy soliciting materials with relation to such securities, such
proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
With respect to securities deposited with DTC or any other depository,
including a foreign sub-custodian, as provided for in section 6 hereof, where
such securities may be registered in the nominee name of DTC, or other such
depository, the Custodian shall request that the nominee shall not vote any of
such deposited securities or execute any proxy to vote thereon or give any
consent or take any other action with respect thereto unless instructed to do so
by the Custodian following receipt by the Custodian of Proper Instructions.
Section 13. Transfer Tax and Other Disbursements.
The Fund shall pay or reimburse the Custodian from time to time for any
transfer taxes payable upon transfers of Assets made hereunder and for all other
necessary and proper disbursements and expenses made or incurred by the
Custodian in the performance of this Agreement, as required by U.S. law or the
laws of the jurisdiction in which the Assets are held, as the case may be.
The Custodian shall execute and deliver such certificates in connection
with Assets delivered to it or by it under this Agreement as may be required
under the laws of any jurisdiction to exempt from taxation any exemptible
transfers and/or deliveries of any such Assets.
Section 14. Compensation and the Custodian's Expenses.
The Custodian shall be compensated for its services hereunder according to
the Fee Schedule set forth in Exhibit A hereof.
The Fund agrees to indemnify and hold harmless the Custodian and its
employees, sub-custodians, agents and nominees from all taxes, charges,
expenses, assessments, claims and liabilities (including
<PAGE>
-11-
attorneys' fees) incurred or assessed against them in connection with the
performance of the Agreement, except such as may arise from their own
negligence. Without limiting the generality of the foregoing, the Custodian
shall be liable to the Fund with respect to Assets held by a sub-custodian, if
and only to the extent that such sub-custodian is liable to the Custodian. In
the event of any advance of cash for any purpose made by the Custodian resulting
from orders or instructions of the Fund, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own negligence,
any property at any time held for the account of the Fund shall be security
therefor.
The foregoing notwithstanding, the Custodian will in no event be liable for
any loss resulting from the acts, omissions, lack of financial responsibility,
or failure to perform its obligation of any person or organization designated by
the Fund to be an authorized agent of the Fund as a party to any transaction.
Within a reasonable time after receipt by an indemnified party of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party, notify in writing
the indemnifying party of the commencement thereof; and the omission so to
notify the indemnifying party will not relieve it from any liability hereunder
as to the particular item for Which indemnification is then being sought, unless
such omission is a result of the failure to exercise reasonable care on the part
of the indemnified party.
In case any such action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to assume the defense thereof
with counsel who shall be to the reasonable satisfaction of such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. Any such indemnifying party shall not be
liable to any such indemnified party on account of any settlement of any claim
or action effected without the consent of such indemnifying party. The foregoing
notwithstanding, the Custodian will in no event be liable for any loss resulting
from the acts, omissions, lack of financial responsibility, or failure to
perform its obligations of any person or organization designated by the Fund to
be the authorized agent of the Fund as a party to any transaction.
<PAGE>
-12-
Section 15. Reports by the Custodian.
a) The Custodian shall furnish the Fund daily with a statement of all
transactions and entries for the Account of the Fund. The Custodian shall
furnish the Fund with such reports covering Assets held by it or under its
control as may be agreed upon from time to time. The Custodian shall create and
maintain records relating to its activities under this Agreement in such manner
as will permit the Fund to meet the usual and ordinary obligations of an
investment company with respect to such activities under the Investment Company
Act of 1940, as amended, including under Section 31 thereof and Rules 31a-l and
31a-2 thereunder, and under such federal and state tax laws and other laws or
administrative rules or procedures which may be applicable to a fund generally,
which have been specifically identified to the Custodian in writing by the Fund
from time to time and which would be usual and appropriate for a custodian
performing custodial services for an investment company established under and
regulated pursuant to the aforesaid Act. The books and records of the Custodian
pertaining to its actions under this Agreement shall be open to inspection and
audit at reasonable times and upon reasonable notice to the Custodian, by duly
authorized officers, employees or agents of and auditors employed by the Fund.
All such books and records shall be the property of the Fund (and such other
persons as the Fund may designate from time to time) and the Custodian shall
forthwith upon the Fund's request, turn over to the Fund and cease to retain in
its files, records and documents created and maintained by the Custodian
pursuant to this Agreement, which are no longer needed by the Custodian in the
performance of its services; provided, however, the Custodian in its discretion
may make and retain copies of any and all such records and documents which it
determines appropriate or for its protection.
b) The Custodian shall take, as the Fund may from time to time reasonably
request, such reasonable actions, to permit the Fund to obtain from the Fund's
independent accountants unqualified opinions with respect to the Custodian1s
activities hereunder, in connection With the preparation of the Fund's Form
N-1A, Form N-SAR or other reports to the Securities and Exchange Commission.
C) The Custodian during the course of this Agreement shall provide the
Fund, at such times as the Fund from time to time may reasonably request, with
reports which may have been prepared by the Custodian's independent public
accountants in the ordinary course of business on the accounting system,
internal accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a securities system, relating to the services provided by
the Custodian under this Agreement and which include a description of any
material inadequacies disclosed by such examination.
<PAGE>
-13-
Section 16. Termination of Assignment.
This Agreement may be terminated by the Fund, or by the Custodian, on
ninety (90) days' notice, given in writing and sent by registered mail to the
Custodian or the Fund as the case may be. Any termination date is to be no
earlier than six months from the date of this Agreement. Upon termination of
this Agreement, pending appointment of a successor to the Custodian, the
Custodian shall not deliver Assets of the Fund to the Fund; however, the
Custodian may, but shall not be obligated to, deliver to any Bank doing business
in Boston, Massachusetts, of its own selection, having aggregate capital,
surplus and undivided profits, as shown by such bank's last published report, of
not less than twenty-five million dollars ($25,000,000), as the Custodian for
the Fund, all securities, funds and other properties of the Fund then held by
the Custodian under this Agreement to be held under terms similar to those of
this Agreement. The Custodian shall not be required to make any delivery of Fund
Assets until full payment shall have been made by the Fund of all liabilities
constituting a charge on or against the properties then held by the Custodian or
on or against the Custodian, and until full payment shall have been made to the
Custodian of all its fees, compensation, costs and expenses, subject to the
provisions of Section 14 of this Agreement.
This Agreement may not be assigned by the Custodian without the consent of
the Fund, authorized or approved by a resolution of the Fund's Board of
Directors.
Section 17. Miscellaneous.
The Custodian shall not be liable or accountable for any loss or damage
resulting from war, civil war, insurrection, military or usurped powers,
earthquake, storm or other disturbance of nature, or from any execution,
attachment, restraint, or other process, or from the payment of any taxes or
imposts asserted by any governmental authority. The Custodian shall be entitled
to receive and act upon advice of counsel (which may be counsel for the Fund)
and shall be without liability for any action taken or thing done in good faith
in reliance upon such advice.
Custodian has not ascertained and is not responsible or liable for the
authenticity or correctness of markings on, or the weight contents or fineness
of precious metals or precious metals receipts held for the account of the Fund
hereunder.
Nothing in this Agreement shall give or be construed to give any
stockholder of the Fund any rights against the Custodian.
The Custodian may at any time at its discretion appoint (and may at any
time remove) any other bank, including First National Boston Clearance
Corporation, or any sub-custodian, as provided hereunder, as its agent to carry
out such of the provisions of this Agreement, as the Custodian may from time to
time direct; provided, however, that
<PAGE>
-14-
any such agent shall be approved in writing by the Board of Director's of the
Fund and that such approval shall not exempt the Custodian from using reasonable
care and diligence in selecting, monitoring, and or retaining such agent or
relieve the Custodian of its responsibilities or liabilities hereunder.
In connection with the operation of this Agreement, the Fund and the
Custodian may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by both parties and annexed hereto, but
no such provision shall be deemed to be an amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
This Agreement may be executed in several counterparts, each of which is an
original.
SCUDDER MUTUAL FUNDS, INC.
By /s/ Daniel Pierce
----------------------------------
Name: Daniel Pierce
Title: President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ S.J. Mac[Illegible]
----------------------------------
Name: S.J. Mac[Illegible]
Title: Director Client Administration
Exhibit 8(a)(2)
[Logo] State Street
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
SCUDDER COMPLEX OF FUNDS
(As listed in Schedule A)
- --------------------------------------------------------------------------------
I. ADMINISTRATION
--------------
CUSTODY SERVICE
---------------
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions in local and base currency.
Withhold foreign taxes. File foreign tax reclaims. Monitor corporate
actions. Report portfolio positions.
A. DOMESTIC ASSETS
---------------
First $10 Billion .60 Basis Points
Second $10 Billion .55 Basis Points
Third $10 Billion .50 Basis Points
Fourth $10 Billion .40 Basis Points
Over $40 Billion .30 Basis Points
A minimum charge of $6,000 annually will be applied to new funds which do
not reach $l00mm within one year from inception. This minimum charge would
begin in the 13th month.
B. GLOBAL ASSETS
-------------
Country Grouping
----------------
Group A Group B Group C Group D Group E Group F Group G
------- ------- ------- ------- ------- ------- -------
Euroclear Austria Australia Denmark Portugal Indonesia Argentina
Japan Canada Belgium Finland Spain Malaysia Bangladesh
Germany Hong Kong France Philippines Brazil
Netherlands Ireland South Korea Chile
New Zealand Italy Sri Lanka China
Singapore Luxembourg Sweden Columbia
Switzerland Mexico Taiwan Cypress
Norway Greece
Thailand Hungary
U.K. India
Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
Holding Charges in Basis Points (Annual Fee)
--------------------------------------------
Group A Group B Group C Group D Group E Group F Group G
-------------------------------------------------------------------------
3.5 5.0 6.0 8.0 20.0 25.0 40.0
-------------------------------------------------------------------------
<PAGE>
[LOGO] State Street
II. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
-----------------------------------------------
State Street Bank Repos $7.00
DTC or Fed Book Entry $12.00
New York Physical Settlements $25.00
PTC Purchase, Sale Deposit or Withdrawal $16.00
Global Trades
Group A & B Group C Group D Group E & F Group G
-----------------------------------------------------------------
$25 $40 $50 $70 $150
III. OPTIONS
-------
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
IV. SPECIAL SERVICES
----------------
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation of
special reports will be subject to negotiation. Fees for tax
accounting/recordkeeping for options, financial futures, and other special
items will be negotiated separately.
V. EARNINGS CREDIT
---------------
A balance credit equal to 75% of the 90 day CD rate in effect the last
business day of each month will be applied to the Custodian Demand Deposit
Account balance of each fund, net of check redemption service overdrafts,
on a pro-rated basis against the fund's custodian fee, excluding
out-of-pocket expenses. The balance credit will be cumulative and carried
forward each month. Any excess credit remaining at year-end (December 31)
will not be carried forward.
<PAGE>
[LOGO] State Street
VI. OUT-OF-POCKET EXPENSES
----------------------
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are
not limited to the following:
Telephone
Wire Charges ($5.00 per wire in and $5.25 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer-$8.00 each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25 each
GNMA Transfer - $15.00 each
Stamp Duties
Registration Fees
Scudder Complex of Funds
(as listed in Schedule A) STATE STREET BANK & TRUST COMPANY
- ----------------------------------- ---------------------------------
By /s/ Pamela A. McGrath By: /s/ Michael L. Williams
--------------------------------- ------------------------------
Title: Treasurer and Vice President Title: Vice President
----------------------------- ---------------------------
Date: August 1, 1994 Date: July 27, 1994
------------------------------ ----------------------------
<PAGE>
Scudder Complex of Funds
Schedule A
Fund Estimated Effective Date
---- ------------------------
Scudder California Tax Free 8/1/94
Scudder Cash Investment Trust 8/1/94
Scudder U.S. Treasury Money 8/1/94
Scudder Limited Term Tax Free 8/1/94
Scudder Mass Limited Term Tax Free 8/1/94
SFI Managed Cash 8/1/94
SFI Managed Federal Securities 8/1/94
SFI Managed Government Securities 8/1/94
SIFI Cash 8/1/94
SIFI Federal 8/1/94
SIFI Government 8/1/94
Scudder Variable Life Balanced 8/1/94
Scudder Variable Life Growth & Income 8/1/94
Scudder Variable Life Capital Growth 8/1/94
Scudder Variable Life International 8/1/94
Scudder Variable Life Bond 8/1/94
Scudder Variable Life Money Market 8/1/94
SIFI Managed Tax Free 8/15/94
SIFI Tax Free 8/15/94
Scudder California Tax Free Money 9/15/94
Scudder Growth & Income 9/15/94
SFI Managed Intermediate Government 9/15/94
Scudder Tax Free Money Fund 9/15/94
Scudder New York Tax Free Money 9/15/94
Scudder Ohio Tax Free 10/1/94
Scudder Pennsylvania Tax Free 10/1/94
Scudder GNMA 10/1/94
Scudder Massachusetts Tax Free 10/1/94
Scudder New York Tax Free 10/1/94
Scudder Capital Growth 10/1/94
Scudder Value 10/1/94
Scudder Quality Growth 10/1/94
Scudder Medium Term Tax Free 10/1/94
Scudder Zero Coupon 2000 10/1/94
Scudder High Yield Tax Free 10/15/94
Scudder Managed Municipal Bond 10/15/94
Scudder Balanced 11/1/94
Scudder Income 11/1/94
Scudder Global Fund 1/1/95
Scudder Gold 1/1/95
Short Term Bond 1/1/95
AARP Balanced Stock & Bond 3/1/95
AARP Capital Growth 3/1/95
AARP GNMA 3/1/95
AARP Growth & Income 3/1/95
AARP High Quality Bond 3/1/95
AARP High Quality Money 3/1/95
AARP HQ Tax Free Money 3/1/95
AARP Ins TF General Bond 3/1/95
First Iberian 4/1/95
Exhibit 9(a)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
SCUDDER MUTUAL FUNDS, INC.
and
SCUDDER SERVICE CORPORATION
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of October 2, 1989, by and between SCUDDER MUTUAL FUNDS,
INC., a Maryland Corporation, having its principal office and place of business
at 345 Park Avenue, New York, NY 10154 (the "Company") and SCUDDER SERVICE
CORPORATION, a Massachusetts corporation, having its principal office and place
of business at 160 Federal Street, Boston, Massachusetts 02110 (the "Agent").
WHEREAS, the Company desires to appoint the Agent as a transfer agent,
dividend disbursing agent and agent in connection with certain other activities
and the Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. Terms of Appointment: Duties of the Agent.
1.01. Subject to the terms and conditions set forth in this Agreement, the
Company hereby employs the Agent to act as, and the Agent agrees to act as,
transfer agent for the authorized and issued shares of common stock $.0l par
value ("Shares"), dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Company ("Shareholders") and set out in a currently effective prospectus
("Prospectus") or currently effective statement of additional information
("Statement of Additional Information") of the Company, including without
limitation any periodic investment plan or periodic withdrawal program. If the
Company offers two or more series of Shares as of the date hereof, the term
"Company" shall be deemed to apply to each series of Shares, unless the context
otherwise requires.
1.02. The Agent agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Company and the Agent, the Agent shall:
(i) Receive for acceptance orders for the purchase of Shares
and promptly deliver payment and appropriate documentation
thereof to the duly authorized custodian of the Company
(the "Custodian");
(ii) Pursuant to orders for the purchase of Shares, record the
purchase of the appropriate number of Shares in the
Shareholder's account and, if requested by the Shareholder,
and if the Board of Directors of the Company has authorized
the issuance of stock certificates, issue a certificate for
the appropriate number of Shares;
<PAGE>
(iii) pursuant to instructions provided by Shareholders, reinvest
income dividends and capital gain distributions;
(iv) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(v) Provide an appropriate response to Shareholders with
respect to all correspondence and rejected trades;
(vi) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholders;
(vii) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(viii) Prepare and transmit payments for dividends and
distributions declared by the Company;
(ix) Report abandoned property to the various states as
authorized by the Company in accordance with policies and
principles agreed upon by the Company and Agent;
(x) Maintain records of account for and advise the Company and
its Shareholders as to the foregoing;
(xi) Record the issuance of Shares of the Company and maintain
an accurate control book with respect to Shares pursuant to
SEC Rule 17Ad-l0(e) under the Securities Exchange Act of
1934. The Agent shall also provide the Company on a regular
basis with the total number of Shares which are issued and
outstanding and shall have no obligation, when recording
the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the
sole responsibility of the Company;
(xii) Respond to all telephone inquiries from shareholders or
their authorized representatives regarding the status of
Shareholder accounts;
(xiii) Respond to correspondence from Shareholders or their
authorized representatives regarding the status of
Shareholder accounts or information related to Shareholder
accounts; and
-2-
<PAGE>
(xiv) Perform all Shareholder account maintenance updates.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Agent shall: (i) perform the
customary services of a transfer agent, dividend disbursing agent and, as
relevant, agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program). The detailed definition, frequency, limitations and
associated costs if any) set out in the attached fee schedule, include but are
not limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxy statements and proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses to current Shareholders,
and withholding all applicable taxes (including but not limited to all
withholding taxes imposed under the U.S. Internal Revenue Code and Treasury
regulations promulgated thereunder, and applicable state and local laws to the
extent consistent with good industry practice), preparing and filing U.S.
Treasury Department Forms 1099, Form 941 when applicable and other appropriate
forms required with respect to dividends, distributions and taxes withheld on
Shareholder accounts by federal authorities for all registered Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information, (ii) provide
daily and monthly a written report and access to information which will enable
the Company to monitor the total number of shares sold and the aggregate public
offering price thereof in each State by the Company, added by sales in each
State of the registered Shareholder or dealer branch office, as defined by the
and (iii) if directed by the Company, (A) each confirmation of the purchase
which establishes a new account will be accompanied by a Prospectus and any
amendment or supplement thereto, and (B) a Prospectus, and any amendment or
supplement thereto, will be mailed to each Shareholder at the time a
confirmation of the first purchase by such Shareholder, pursuant to the
effective date of a Prospectus or any amendment or supplement thereto, is mailed
to such Shareholders.
(c) In addition, the Company shall (i) identify to the Agent in
writing those transactions and assets to be treated as exempt from blue sky
reporting to the Company for each state and (ii) approve those transactions to
be included for each state on the blue sky system prior to activation and
thereafter monitor the daily activity for each state. The responsibility of the
Agent for the Company's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky compliance by the
Company and the reporting of such transactions as provided above.
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<PAGE>
(d) The Agent shall utilize a system to identify all share
transactions which involve purchase and redemption orders that are processed at
a time other than the time of the computation of net asset value per share next
computed after receipt of such orders, shall constitute the net effect upon the
Company of such transactions so identified on a daily and cumulative basis.
(e) The Agent shall supply to the Company from time to time, as
mutually agreed upon, reports summarizing the transactions identified pursuant
to paragraph (d) above, and the daily and cumulative net effects of such
transactions, and shall advise the Company at the end of each month of the net
cumulative effect at such time. The Agent shall promptly advise the Company if
at any time the cumulative net effect exceeds a dollar amount equivalent to 1/2
of 1 cent per outstanding Share.
(f) The Agent shall make appropriate amounts with banking institutions
in connection with effecting timely redemptions of shares by the Write-a-Check
redemption feature described in the Company's Prospectus and Statement of
Additional Information.
1.03. The Agent's offices, personnel and computer and other equipment shall
be adequate to perform the services contemplated by this Agreement for the
Company and for other investment companies advised by Scudder, Stevens & Clark,
Inc. and its affiliates. The Agent shall notify the Company in the event that it
proposes to provide such services for any investment companies or other entities
other than those managed by Scudder, Stevens & Clark, Inc. and its affiliates.
Article 2. Fees and Expenses
2.01. For the performance by the Agent pursuant to this Agreement, the
Company agrees to pay the Agent an annual maintenance fee for each Shareholder
account as set out in a fee schedule agreed to by both parties in writing. Such
fees and out-of-pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Company and the Agent, as approved by a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Company.
2.02. In addition to the fee paid under Section 2.01 above, the Company
agrees to reimburse the Agent for out-of-pocket expenses or advances incurred by
the Agent for the items set out in the fee schedule agreed to by both parties in
writing. In addition, any other expenses incurred by the Agent at the request or
with the consent of the Company will be reimbursed by the Company.
2.03. The Company agrees to pay all fees and reimbursable expenses
promptly, the terms, method and procedures for which are detailed on the fee
schedule agreed to by both parties in writing. Postage for mailing of dividends,
proxy statements, Company reports and other mailings to all Shareholders
accounts shall be advanced to
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<PAGE>
the Agent by the Company at least two (2) days prior to the mailing date of such
materials.
2.04. The Company may engage accounting firms or other consultants to
evaluate the fees paid by the Company and quality of services rendered by the
Servicing Company hereunder, and such firms or other consultants shall be
provided access by the Servicing Company to such information as may be
reasonably required in connection with such engagement. The Servicing Company
will give due consideration and regard to the recommendations to the Company in
connection with such engagement, but shall not be bound thereby.
Article 3. Representations and Warranties of the Agent.
The Agent represents and warrants to the Company that:
3.01. It is a corporation duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.02. It has the legal power and authority to carry on its business in The
Commonwealth of Massachusetts.
3.03. It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
3.04. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement.
3.05. It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended.
3.06. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4. Representations and Warranties of the Company.
The Company represents and warrants to the Agent that:
4.01. It is a corporation duly organized and existing and in good standing
under the laws of Maryland.
4.02. It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
4.03. All proceedings required by said Articles of Incorporation and
By-laws have been taken to authorize it to enter into and perform this
Agreement.
4.04. It is an investment company registered under the Investment Company
Act of 1940, as amended.
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<PAGE>
4.05. A registration statement under the Securities Act of 1933 is
currently effective (or will be effective prior to commencement by the Agent of
performance of services hereunder) and will remain effective, and appropriate
state securities law filings have been made and/or will continue to be made,
with respect to all Shares of the Company being offered for sale.
Article 5. Indemnification
5.01. To the extent that the Agent acts in good faith and without
negligence or willful misconduct the Agent shall not be responsible for, and the
Company shall indemnify and hold the Agent harmless from and against, any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of the Agent or its agents or subcontractors required
to be taken and correctly executed pursuant to this Agreement.
(b) The Company's lack of good faith, negligence or willful misconduct
or which arise out of the breach of any representation or warranty of the
Company hereunder.
(c) The reasonable reliance on or use by the Agent or its agents or
subcontractors of information, records and documents or services which are
received or relied upon by the Agent or its agents or subcontractors and
furnished to it or performed by or on behalf of the Company.
(d) The reasonable reliance on, or the carrying out by the Agent or
its agents or subcontractors of, any written instructions or requests of the
Company.
(e) The offer or sale of shares in violation of any requirement under
the federal securities laws or regulations, or the securities laws or
regulations of any state that such Shares be registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state, unless such violation is the result of the Agent's negligent or willful
failure to comply with the provisions of Section 1.02(b) of this Agreement.
5.02. The Agent shall indemnify and hold the Company harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to the Agent's refusal
or failure to comply with the terms of this Agreement (whether as a result of
the acts or omissions of the Agent or of its agents or Subcontractors) or
arising out of the lack of good faith, negligence or willful misconduct of the
Agent, or its agents or subcontractors, or arising out of the breach of any
representation or warranty of the Agent hereunder.
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<PAGE>
5.03. At any time the Agent may apply to any officer of the Company for
instructions, and may consult with outside legal counsel with respect to any
matter arising in connection with the services to be performed by the Agent
under this Agreement and the Agent and its agents or subcontractors shall not be
liable and shall be indemnified by the Company for any action reasonably taken
or omitted by it in reliance upon such instructions or upon the opinion of such
counsel. The Agent, its agents and subcontractors shall be protected and
indemnified in acting on any paper or document furnished by or on behalf of the
Company, reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided to the Agent or its agents or subcontractors by
machine-readable input, telex, CRT data entry or other similar means authorized
by the Company, and shall not be held to have notice of any change of authority
of any person, until receipt by the Agent of written notice thereof from the
Company. The Agent, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Company,
and the proper countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
5.04. In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable to the other for
any damages resulting from such failure to perform or otherwise from such
causes.
5.05. Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement, but each shall
be liable for general damages resulting from breach of this Agreement. For the
purposes of this Agreement, the term "general damages" shall include but shall
not be limited to:
(a) All costs of correcting errors made by the Agent or its agents or
subcontractors in Company shareholder accounts, including the
expense of computer time, computer programming and personnel;
(b) Amounts which the Company is liable to pay to a person (or his
representative) who has purchased or redeemed, or caused to be
repurchased, Shares at a price which is higher, in the case of a
purchase, or lower, in the case of a redemption or repurchase,
than correct net asset value per Share, but only to the extent
that the price at which such Shares were purchased, redeemed or
repurchased was incorrect as a result of either (i) one or more
errors caused by the Agent or its agents or subcontractors in
processing shareholder accounts of the Company or (ii) the
posting by the Agent of the purchase, redemption or repurchase of
Shares subsequent to the time such purchase, redemption or
repurchase
-7-
<PAGE>
should have been posted pursuant to laws and regulations
applicable to open-end investment companies, if the delay is
caused by the Agent, its agents or subcontractors;
(c) The value of dividends and distributions which were not credited
on Shares because of the failure of the Agent or its agents or
subcontractors to timely post the purchase of such Shares;
(d) The value of dividends and distributions which were incorrectly
credited on Shares because of the failure of the Agent or its
agents or subcontractors to timely post the redemption or
repurchase of such Shares;
(e) The value of dividends and distributions, some portion of which
was incorrectly credited, or was not credited, on Shares because
of the application by the Agent or its agents or subcontractor of
an incorrect dividend or distribution factor or otherwise;
(f) Penalties and interest which the Company is required to pay
because of the failure of the Agent or its agents or
subcontractors to comply with the information and withholding
(including backup withholding) requirements of the Internal
Revenue Code of 1986, as amended, and applicable Treasury
regulations thereunder, applicable to Company Shareholder
accounts; and
(g) Interest in accordance with the laws of The Commonwealth of
Massachusetts on any damages from the date of the breach of this
Agreement.
5.06. In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim or loss for which either
party my be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion or loss, and shall keep
the other party advised with respect to all developments concerning such claim.
The party who may be required to indemnify shall have the option to participate
at its expense with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
5.07. Losses incurred by the Company arising from the Agent effecting a
share transaction at a trade (pricing) date prior to the processing date shall
be governed by a separate agreement between the Agent and the Company.
The obligations of the parties hereto under this Article 5 shall survive
the termination of this Agreement.
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<PAGE>
Article 6. Covenants of the Company and the Agent.
6.01. The Company shall promptly furnish to the Agent the following:
(a) A certified copy of the resolution of the Board of Directors of
the Company authorizing the appointment of the Agent and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-laws of the Company
and all amendments thereto.
6.02. The Agent hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account, of such certificates,
forms and devices.
6.03. The Agent shall at all times maintain insurance coverage which is
reasonable and customary in light of its duties hereunder and its other
obligations and activities.
6.04. The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, (the
"Act") and the Rules thereunder, the Agent agrees that all such records prepared
or maintained by the Agent relating to the services to be performed by the Agent
hereunder and those records that the Company and the Agent agree from time to
time to be the records of the Company are the property of the Company and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Company on and in accordance with
its request. Records surrendered hereunder shall be in machine readable form,
except to the extent that the Agent has maintained such a record only in paper
form.
6.05. The Agent and the Company agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.06. In case of any requests or demands for the inspection of the
Shareholders records of the Company, the Agent will endeavor to notify the
Company and to secure instructions from an authorized officer of the Company as
to such inspection. The Agent reserves the right, however, to exhibit the
Shareholders records to any person whenever it is reasonably advised by its
counsel that it may be held liable for the failure to exhibit the Shareholders
records to such person.
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<PAGE>
6.07. The Agent agrees to maintain or provide for redundant facilities or a
compatible configuration and to maintain or provide for backup of the Company's
master and input files and to store such files in a secure off-premises location
so that in the event of a power failure or interruption of whatever cause at the
location of such files the Company's records are maintained intact and
transactions can be processed at another location.
6.08. The Agent acknowledges that the Company, as a registered investment
company under the Act, is subject to the provisions of the Act and the rules and
regulations thereunder, and that the offer and sale of the Company's Shares are
subject to the provisions of federal and state laws and regulations applicable
to the offer and sale of securities. The Company acknowledges that the Agent is
not responsible for the Company's compliance with such laws and regulations. If
the Company advises the Agent that a procedure of the Agent related to the
discharge of its obligations hereunder has or may have the effect of causing the
Company to violate any of such laws or regulations, the Agent shall use its best
efforts to develop a mutually agreeable alternate procedure which does not have
such effect.
Article 7. Termination of Agreement.
7.01. This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02. Should the Company exercise its right to terminate, all reasonable
out-of-pocket expenses of the Agent associated with the movement of the records
and materials required by this Agreement will be borne by the Company.
Additionally, the Agent reserves the right to charge for any other reasonable
expenses associated with such termination.
Article 8. Additional Series.
8.01. In the event that the Company establishes one or more series of
Shares with respect to which it desires to have the Agent render services as
transfer agent under the terms hereof, it shall so notify the Agent in writing,
and unless the Agent objects in writing to providing such services, the term
"Company" hereunder, unless the context otherwise requires, shall be deemed to
include each such series of Shares. All recordkeeping and reporting shall be
done separately for each series. Unless the Company and the Agent agree to an
amended fee schedule, the fee schedule attached hereto shall apply to each
series separately.
Article 9. Assignment.
9.01. Except as provided in Section 9.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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<PAGE>
9.02. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.03. The Agent may, with notice to and consent on the part of the Company,
which consent shall not be unreasonably withheld, subcontract for the
performance of certain services under this Agreement to qualified service
providers, which shall be registered as transfer agents under Section 17A of the
Securities Exchange Act of 1934 if such registration is required; provided,
however, that the Agent shall be as fully responsible to the Company for the
acts and omissions of any subcontractor as it is for its own acts and omissions.
Article 10. Amendment.
10.01. This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of each party.
Article 11. Massachusetts Law to Apply.
11.01. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 12. Form N-SAR.
12.01. The Agent shall maintain such records as shall enable the Company to
fulfill the requirements of Form N-SAR or any successor report which must be
filed with the Securities and Exchange Commission.
Article 13. Merger of Agreement.
13.01. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
Article 14. Counterparts.
14.01. This Agreement may be executed by the parties hereto in any number
of counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: SCUDDER MUTUAL FUNDS
/s/ Marilyn J. Hayes BY: /s/ David S. Lee
- ------------------------------- ---------------------------------
Title: President
ATTEST: SCUDDER SERVICE CORPORATION
/s/ Marilyn J. Hayes BY: /s/ Daniel Pierce
- ------------------------------- ---------------------------------
Title: Vice President
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Exhibit 9(a)(2)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Family of Funds
Annual maintenance fee for each account
- ---------------------------------------
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any account which at any time during the month had a share
balance in the fund. The minimum monthly charge to any portfolio is $1,000.
Money Market Funds* $ 28.90
Monthly Income Funds 25.00
Quarterly Distribution Funds 20.40
Annual Distribution Funds 17.55
Other fees
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New Account Set Up $ 3.15 each
Disaster Recovery 0.25 per year
Closed Accounts 1.20 per year
TIN Certificates 0.15 each
TIN Maintenance 0.25 each
Check Writing:
Set Up 5.00 per account
Retail Check Clearance 0.96 per check
Corporate Check Clearance 0.46 per check
Payroll Deduction Processing System (PDPS):
Annual Base Fee 240,000.00
Annual Maintenance:
IRA 6.00 per account
403B 7.00 per account
401K 8.00 per account
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits
Lease and maintenance of S.A.I.L. and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
- -------
The above will be billed within the first five (5) business days of each month
and will be paid by wire within five (5) business days of receipt.
On behalf of the Funds listed in Attachment A: Scudder Service Corporation:
By /s/ David S. Lee By /s/ Daniel Pierce
-------------------------------- -------------------------
Date: October 2, 1989 Date: October 2, 1989
----------------------------- ----------------------
* SCIT per account change is $25.78
Exhibit 9(a)(3)
SERVICE AGREEMENT
AGREEMENT made as of the 8th day of June, 1995, by and among COPELAND
ASSOCIATES, INC., a Delaware corporation with its principal office at Two Tower
Center, East Brunswick, New Jersey 08816 ("Service Provider"), SCUDDER SERVICE
CORPORATION, a Massachusetts corporation with its principal office at Two
International Place, Boston, Massachusetts 02110 ("Transfer Agent"), and each of
those registered investment companies listed on Schedule A hereto (the "Scudder
Funds").
WHEREAS the Transfer Agent serves as transfer agent, dividend disbursing
agent and agent in connection with certain other matters for each Scudder Fund
listed on Schedule A hereto, as such Schedule A may be amended from time to time
with the mutual consent of the parties hereto, each of which is an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS Service Provider provides certain administrative and recordkeeping
services to or for the benefit of retirement plans (individually a "Plan" and
collectively the "Plans") that include or propose to include as investment
alternatives certain Scudder Funds through Code Section 403(b)(7) arrangements
("Custodial Accounts") and The Copeland Companies Retirement Trust Account (the
"Group Trust"), and Service Provider is a transfer agent registered under the
Securities Exchange Act of 1934, as amended;
WHEREAS the services to be provided by Service Provider hereunder will
benefit the Scudder Funds by relieving them of the expense they would incur if
such services were to be provided by the Transfer Agent or its affiliates; and
WHEREAS the Transfer Agent desires to appoint Service Provider as agent for
the Scudder Funds solely with respect to the Group Trust and Custodial Accounts
(the Group Trust and each such Custodial Account), and Service Provider desires
to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Terms of Appointment; Duties of the Parties
1.01. Agent for Order Processing. Subject to the terms and conditions set
forth in this Agreement, the Transfer Agent hereby appoints Service Provider to
act as, and Service Provider agrees to act as, agent for the sole purpose of
receiving requests for the purchase and redemption, and communicating to the
Transfer Agent requests for the purchase and redemption, of the authorized and
issued shares of beneficial interest of any Scudder Fund (the "Shares")
purchased, held or redeemed by a Plan. If a Scudder Fund offers two or more
series of Shares, each such series shall be deemed at such time to be a Scudder
Fund, unless otherwise indicated herein.
<PAGE>
1.02. Service Provider. Except as provided specifically herein, Service
Provider shall not be, and shall not hold itself out as, an agent of the
Transfer Agent or any Scudder Fund. Service Provider shall perform the following
functions on behalf of the Plans in accordance with procedures established from
time to time by agreement of the Transfer Agent and Service Provider, and
subject to terms and conditions set forth in each Scudder Fund's current
prospectus.
(a) Receive from the Plans, Plan participants, Plan sponsors, authorized
Plan committees or Plan trustees, according to Service Provider's agreement with
each Plan, by the close of regular trading on the New York Stock Exchange (the
"Close of Trading") each business day that the New York Stock Exchange is open
for business ("Business Day") instructions for the purchase and redemption of
Shares (together, "Instructions");
(b) Based on Instructions received each Business Day, compute net purchase
requests or net redemption requests for Shares for each Scudder Fund for each
Plan (together, "Orders");
(c) Maintain adequate records related to, and advise the Transfer Agent as
to, the foregoing, as instructed by the Transfer Agent. To the extent required
under the 1940 Act and rules thereunder, Service Provider agrees that such
records maintained by it hereunder will be preserved, maintained and made
available in accordance with the provisions of the 1940 Act and rules
thereunder, and copies or, if required, originals will be surrendered promptly
to the Transfer Agent on and in accordance with its request. Records surrendered
hereunder shall be in machine readable form, except to the extent that Service
Provider has maintained such records only in paper form. This provision shall
survive the termination of this Agreement.
1.03. Equipment. Service Provider shall maintain adequate offices,
personnel and computer and other equipment to perform the services contemplated
by this Agreement. Service Provider shall notify the Transfer Agent promptly in
the event that it becomes unable for any reason to perform the services
contemplated by, or any other of its obligations under, this Agreement.
1.04. Insurance. Service Provider shall maintain at all times general
liability and other insurance coverage, including errors and omissions coverage,
that is reasonable and customary in light of its duties hereunder, with limits
of not less than $2 million. Such insurance coverage shall be issued by a
qualified insurance carrier with a Best's rating of at least "A" or with the
highest rating of a nationally recognized statistical rating organization.
Notwithstanding any provision to the contrary herein, no provision of this
Agreement shall relieve an insurer of any obligation to pay to any Scudder Fund,
the Transfer Agent or any affiliate of the Transfer Agent, Service Provider, or
any other insured party any claim that would be a covered claim in the absence
of any provision hereof.
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<PAGE>
1.05. Disclosure to Plans. Service Provider shall take all steps necessary
to ensure that the arrangements provided for in this Agreement are properly
disclosed to the Plans.
1.06. Transmission of Information to Service Provider. In accordance with
procedures established from time to time by agreement of the Transfer Agent and
Service Provider, the Transfer Agent shall transmit to Service Provider, which
will act on behalf of the Plans, the following information for each Scudder
Fund, as received by the Transfer Agent from third parties:
(a) Net asset value information as of the Close of Trading each
Business Day, when such information is used to process trades;
(b) Dividend and capital gains distribution information, as it arises,
when such information is used for crediting accounts; and
(c) Daily accrual for interest rate factor (mil rate) information with
respect to Scudder Funds which declare dividends daily, when such information is
used for crediting accounts.
1.07. Transmission of Information to Transfer Agent. Service Provider shall
perform the following services in accordance with procedures established from
time to time by agreement of the Transfer Agent and Service Provider, and
subject to terms and conditions set forth in each Scudder Fund's current
prospectus:
(a) Immediately prior to the Close of Trading each Business Day,
Service Provider shall communicate to itself, as agent of each Scudder Fund to
the extent such Instructions refer to such Scudder Fund, all Instructions
received by acting on behalf of the Plans since the Close of Trading the
preceding Business Day.
(b) Communicate Orders to the Transfer Agent, for acceptance by the
Scudder Funds or their agents, in the manner specified herein, and promptly
deliver, or instruct the Plans (or the Plans' trustees as the case may be) to
deliver, appropriate documentation and in the case of purchase requests, payment
therefor to the Transfer Agent.
(c) Employ its best efforts to communicate Orders to the Transfer
Agent in a prompt and timely manner, so that the Transfer Agent receives Orders
no later than 9:00 PM Boston time each Business Day that the Instructions on
which such Orders are based are received by Service Provider from a Plan before
the Close of Trading. If, however, despite its best efforts, Service Provider is
unable to communicate Orders to the Transfer Agent by such time on any Business
Day, Service Provider in any case shall communicate such Orders to the Transfer
Agent by no later than 9:00 AM Boston time the following Business Day. Orders
shall be based solely on Instructions received by Service Provider from the
Plans, Plan participants, Plan sponsors, authorized Plan committees or Plan
trustees, according to Service
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<PAGE>
Provider's agreement with each Plan, by the Close of Trading each Business Day.
Instructions received by Service Provider after the Close of Trading on any
Business Day shall be treated as received on the next Business Day. Provided
that Service Provider complies with the foregoing terms and conditions, Service
Provider will be deemed to be agent of each Scudder Fund to the extent such
Instructions refer to such Scudder Fund for the sole purpose of receiving
Instructions immediately prior to the Close of Trading each Business Day and
communicating Orders based on such Instructions to the Transfer Agent, all as
specified herein, and the Business Day on which Instructions are received by
Service Provider immediately prior to the Close of Trading will be the Business
Day as of which Orders will be deemed received by the Transfer Agent as a result
of such Instructions.
1.08. Representations Regarding Shares. Any representation made by Service
Provider regarding any Shares or Scudder Fund shall be in its capacity as agent
to the Plans and not in its capacity as Service Provider. Service Provider shall
make no representation in any capacity regarding any Shares or Scudder Fund
except as set forth in such Scudder Fund's current prospectus or current sales
literature furnished by such Scudder Fund or by the Transfer Agent.
1.09. Confidentiality of Information. The parties hereto agree that all
books, records, information and data pertaining to the business of any other
party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall be kept confidential and shall not be
voluntarily disclosed to any other person other than to the custodian or group
trustee or plan trustee of the relevant Plan or Plans and except as may be
required by law. This provision shall survive the termination of this Agreement.
1.10. Redundancy. Service Provider shall maintain or provide for redundant
facilities and shall maintain or provide for backup files of its records
maintained hereunder and shall store such back-up files in a secure off-premises
location; so that, in the event of a power failure or other interruption of
whatever cause at the location of its records, Service Provider's records are
maintained intact and transactions can be processed at another location.
1.11. Compliance with Law. Service Provider shall comply with all federal
and state securities laws and regulations thereunder in connection with its
responsibilities under this Agreement.
1.12. Administrative Services. Service Provider shall perform the
administrative and recordkeeping services (the "Administrative Services")
described in Schedule B hereto, as such Schedule B may be amended from time to
time with the mutual consent of the parties hereto, with respect to Shares
purchased, held or redeemed by a Plan. Except as provided specifically in
Section 1.07 hereof, Service Provider shall perform the Administrative Services
as an independent contractor and not as an employee or agent of the Transfer
Agent or any Scudder Fund. Service Provider shall perform the Administrative
Services in accordance with procedures established from time to time by
agreement of the Transfer Agent and Service
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<PAGE>
Provider, and subject to terms and conditions set forth in each Scudder Fund's
current prospectus.
1.13. No Impairment of Scudder's Authority. No provision of this Agreement
shall limit in any way the authority of any Scudder Fund or of the distributor
of any Scudder Fund to take such action as it deems appropriate in connection
with matters relating to the operation of such Scudder Fund and the sale of its
shares.
1.14 Authority of Service Provider. Service Provider acknowledges that it
is not authorized by any Scudder Fund to register the transfer of any Scudder
Fund's Shares or to transfer record ownership of any Scudder Fund's Shares, and
that only the Transfer Agent is authorized to perform such activities.
2. Compensation
2.01. Service Provider's Expenses. Service Provider shall bear all expenses
arising out of the performance of the Administrative Services and of the
performance of functions on behalf of the Plans as agent of the Plans. Service
Provider shall not receive from the Transfer Agent (or from any affiliate of the
Transfer Agent) or from any Scudder Fund any monetary compensation or
reimbursement for such expenses; however, under the terms of the Group Trust or
any Custodial Account, the trustee or custodian thereof may redeem Scudder Fund
shares to pay fees or expenses authorized thereunder or authorized by a proper
instruction, including a continuing instruction.
2.02. Transfer Agent's Expenses. The Transfer Agent shall bear all expenses
of its own hereunder and shall not receive from Service Provider any monetary
compensation or reimbursement for such expenses.
2.03. Fund Expenses. Each Scudder Fund shall bear all expenses of its own
hereunder, including without limitation the cost of registration of its shares
and the cost of preparing its prospectus, proxy materials, periodic reports to
shareholders, and other materials prepared by such Scudder Fund, and shall not
receive from Service Provider any monetary compensation or reimbursement for
such expenses.
2.04. Administrative Fees. In consideration of Service Provider's
performance of the Administrative Services, each Scudder Fund shall pay to
Service Provider the fees (the "Administrative Fees") described in Schedule C
hereto, as such Schedule C may be amended from time to time with the mutual
consent of Service Provider and the applicable Scudder Fund.
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<PAGE>
2.05. Calculation and Payment of Fees. The Administrative Fees shall be due
each calendar month from each Scudder Fund for which the Service Provider
performs Administrative Services pursuant to this Agreement. Each Scudder Fund
making a payment for such Administrative Fees for such calendar month shall make
payment within thirty (30) days after the last day of such month. Service
Provider shall have sixty (60) days following receipt of the payment to verify
the amount of the payment and after such time the amount will be considered
final.
3. Representations and Warranties
3.01 Service Provider's Representations. Service Provider represents and
warrants to the Transfer Agent and each Scudder Fund that:
(a) It is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware;
(b) It has full power and authority under applicable law to carry on
its business, and is registered or licensed as required, in each jurisdiction
where it conducts its business;
(c) It has full power and authority under applicable law, and has
taken all actions necessary, to enter into and to perform this Agreement;
(d) It is duly registered as a transfer agent under section 17A of the
Securities Exchange Act of 1934, as amended ("1934 Act");
(e) It is duly registered as a broker-dealer under section is of the
1934 Act; or, if it not so registered, it is not required to be so registered in
order to perform this Agreement, and it undertakes to comply with any
determination by a governmental agency or court of competent jurisdiction that
activities substantially similar to those of the Service Provider hereunder are
such as to require registration as a broker-dealer under the 1934 Act;
(f) It maintains and knows of no reason why it cannot or will not
during the term hereof maintain adequate offices, personnel and computer and
other equipment to perform the services contemplated by this Agreement;
(g) To the best of its knowledge, it will not be a "fiduciary" of any
Plan as such term is defined in section 3(21) of the Employment Retirement
Income Security Act of 1974, as amended ("ERISA"), and section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
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<PAGE>
(h) To the best of its knowledge, the receipt for the Administrative
Fees by Service Provider will not constitute a "prohibited transaction" as such
term is defined in section 406 of ERISA and section 4975 of the Code.
3.02. Transfer Agent's Representations. The Transfer Agent represents and
warrants to Service Provider that:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts;
(b) It has full power and authority to carry on its business in The
Commonwealth of Massachusetts;
(c) It has full power and authority under applicable law, and has
taken all actions necessary, to enter into and to perform this Agreement;
(d) It is authorized to appoint Service Provider as agent for the
Scudder Funds for the limited purpose set forth herein; and
(e) It is duly registered as a transfer agent under section 17A of the
1934 Act.
3.03. Fund Representations. Each Scudder Fund represents and warrants to
Service Provider that:
(a) It has full power and authority under applicable law, and has
taken all actions necessary, to enter into and to perform this Agreement; and
(b) It is duly registered as an investment company under the 1940 Act.
4. Indemnification
4.01. By Transfer Agent. The Transfer Agent shall indemnify and hold
Service Provider, each Scudder Fund, and their directors, trustees, officers and
employees harmless from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to:
(a) the Transfer Agent's refusal or failure to comply with the
provisions of this Agreement, or
(b) the lack of good faith, negligence or willful misconduct of the
Transfer Agent, or
-7-
<PAGE>
(c) the breach of any representation or warranty of the Transfer Agent
hereunder.
4.02. By Funds. Each Scudder Fund shall indemnify and hold the Transfer
Agent, each affiliate of the Transfer Agent, Service Provider, and their
directors, officers and employees harmless from and against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to:
(a) such Scudder Fund's refusal or failure to comply with the
provisions of this Agreement, or
(b) the lack of good faith, negligence or willful misconduct of such
Scudder Fund, or
(c) the breach of any representation or warranty of such Scudder Fund
hereunder.
4.03. By Service Provider. Service Provider shall indemnify and hold the
Transfer Agent, each affiliate of the Transfer Agent, each Scudder Fund, and
their directors, trustees, officers and employees harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) Service Provider's refusal or failure to comply with the
provisions of this Agreement or with instructions properly given hereunder
(whether as a result of the acts or omissions of Service Provider or of its
agents or subcontractors), whether it is performing functions on behalf of the
Plans, as Plan Agent, or providing Administrative Services as Service Provider,
or
(b) Service Provider's performance of the Administrative Services, or
(c) the lack of good faith, negligence or willful misconduct of
Service Provider (or its agents or subcontractors), whether it is performing
functions on behalf of the Plans, as Plan Agent, or providing Administrative
Services as Service Provider, or
(d) the breach of any representation or warranty of Service Provider
hereunder.
4.04. Acts of God. In the event that any party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable to
any other party for any damages resulting from such failure to perform or
otherwise from such causes.
-8-
<PAGE>
4.05. No Consequential Damages. No party to this Agreement shall be liable
to any other party for consequential damages under any provision of this
Agreement.
4.06. Claim Procedure. In order that the indemnification provisions
contained herein shall apply, upon the assertion of a claim or loss for which
any party (the "Indemnitor") may be required to indemnify another party (the
"Indemnitee"), the Indemnitee shall promptly notify the Indemnitor of such
assertion or loss, and shall keep the Indemnitor advised with respect to all
developments concerning any such claim. The Indemnitor shall have the option to
participate at its expense with the Indemnitee in the defense of any such claim.
In the event that there is more than one indemnitor with respect to any such
claim, the Indemnitors shall agree as to their exercise of this option. The
Indemnitee shall in no case confess any claim or make any compromise in any case
in which the Indemnitor may be required to indemnify it except with the
Indemnitor's prior written consent. The obligations of the Transfer Agent, the
Scudder Funds and Service Provider under this Section 4 shall survive the
termination of this Agreement.
5. Acknowledgements
5.01. Fees Solely for Administrative Services. The parties hereto
acknowledge that the Administrative Fees are for administrative and
recordkeeping services only and do not constitute payment in any manner for
investment advisory or distribution services. The parties acknowledge that
Service Provider also has been providing and will continue to provide certain
services to the Plans as agent of the Plans, which may involve, among other
things, preparing informational or promotional materials that may refer to the
Scudder Funds and responding to telephone inquires from Plan participants. The
parties acknowledge that the provision of such services and any other actions of
Service Provider related to the Scudder Funds and not specifically authorized
herein are outside the scope of this Agreement and will be taken in the capacity
of agent of the Plans.
5.02. Service Provider Acting as Plan Agent. The parties acknowledge that
Service Provider has been selected as agent to the Plans and as a provider of
administrative and recordkeeping services by the Plans, and not by the Transfer
Agent or any Scudder Fund, and that, except as provided specifically in Section
1.07 hereof, Service Provider will perform the Administrative Services hereunder
as an independent contractor and not as an employee or agent of the Transfer
Agent or any Scudder Fund. The parties acknowledge, further, that neither the
Transfer Agent nor any Scudder Fund undertakes to supervise Service Provider in
the performance of the Administrative Services; that neither the Transfer Agent
nor any Scudder Fund shall be responsible for Service Provider's performance of
the Administrative Services; that neither the Transfer Agent nor any Scudder
Fund shall be responsible for the accuracy of the records maintained by Service
Provider for the Plans; and that neither the Transfer Agent nor any Scudder Fund
shall be responsible for Service Provider's performance of other functions for
the Plans.
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<PAGE>
5.03. No Investment Advice. The parties hereto acknowledge that Service
Provider has no duty or obligation under this Agreement to recommend or promote
investment in any of the Scudder Funds, and that none of the services Service
Provider is to provide under this Agreement should be viewed as constituting
investment advice with respect to any Plan's selection of any Scudder Fund as an
investment. The parties hereto further acknowledge that there is nothing in this
Agreement or the services to be provided hereunder that is intended to create
any authority or responsibility that would render any of the parties a
"fiduciary" (within the meaning of Section 3(21) of the ERISA) with respect to
the Group Trust or any Custodial Account.
5.04. Laws Applicable to Funds. Service Provider acknowledges that each
Scudder Fund, as a registered investment company under the 1940 Act, is subject
to the provisions of the 1940 Act and regulations thereunder, and that the offer
and sale of its shares are subject to the provisions of federal and state laws
and regulations applicable to the offer and sale of securities. The Transfer
Agent and each Scudder Fund acknowledges that Service Provider is not
responsible for such Scudder Fund's compliance with such laws and regulations.
If the Transfer Agent or any Scudder Fund advises Service Provider that a
procedure of Service Provider related to the discharge of its obligations
hereunder has or may have the effect of causing the Transfer Agent or any
Scudder Fund to violate any of such laws or regulations, Service Provider shall
develop a mutually agreeable alternative procedure which does not have such
effect.
6. Termination of Agreement
6.01. By Written Notice. This Agreement may be terminated by any party upon
sixty (60) days written notice to each other party.
6.02. By Transfer Agent or Fund. This Agreement may be terminated by the
Transfer Agent or any Scudder Fund immediately upon notice to each other party
in the event that (a) Service Provider becomes unable for any reason to perform
the services contemplated by this Agreement, (b) the performance by Service
Provider of the services contemplated by this Agreement becomes in the Transfer
Agent's reasonable judgment unlawful or ceases to satisfy the Transfer Agent's
reasonable standards and so becomes unacceptable to the Transfer Agent, (c) the
Transfer Agent ceases to be the transfer agent for all the Scudder Funds, (d)
all the Scudder Funds cease to be investment alternatives under all the Plans,
(e) all the Scudder Funds decline to accept any additional purchase or
redemption requests for Shares, the Securities and Exchange Commission issues
any stop order suspending the effectiveness of the registration statements or
prospectuses of all the Scudder Funds, or current prospectuses for all the
Scudder Funds are not on file with the Securities and Exchange Commission as
required by section 10 of the Securities Act of 1933, as amended. To the extent
that any of the events enumerated above occurs with respect to one or more
Scudder Funds, but not with respect to all the Scudder Funds, or that one or
more Scudder Funds, but not all the Scudder Funds, terminates this Agreement, in
lieu of termination of this Agreement the Transfer Agent shall
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<PAGE>
amend Schedule A hereto with notice to the other parties to remove the affected
Scudder Funds from such Schedule A. To the extent that any of the events
enumerated above occurs with respect to one or more Plans, but not with respect
to all the Plans, in lieu of termination of this Agreement the Transfer Agent
shall amend Schedule B hereto with notice to the other parties to remove the
affected Plans from such Schedule B.
6.03. By Service Provider. This Agreement may be terminated by Service
Provider immediately upon notice to the other parties in the event that (a) the
Transfer Agent ceases to be the transfer agent for all the Scudder Funds or (b)
all the Scudder Funds cease to be investment alternatives under the Plans.
6.04. Termination Procedures. Upon termination of this Agreement, each
party shall return to each other party all copies of confidential or proprietary
materials or information received from such other party hereunder, other than
materials or information required to be retained by such party under applicable
laws or regulations. This provision shall survive the termination of this
Agreement.
7. Assignment
7.01. Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned or delegated by any party without the written consent
of the other parties.
7.02. Successors. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
8. Notices
Notices hereunder shall be in writing, shall be delivered personally, sent
by certified mail (return receipt requested), or sent by facsimile machine in
accordance with procedures established by agreement of the Transfer Agent and
Service Provider, and shall be addressed to a party either at its address below
or at a changed address specified by it in a notice to the other parties hereto:
Transfer Agent: SCUDDER SERVICE CORPORATION
Two International Place
Boston, Massachusetts 02110
Attention: Steven J. Towle
Vice President
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<PAGE>
Any Scudder Fund: [Name of Scudder Fund]
c/o Scudder Service Corporation
Two International Place
Boston, Massachusetts 02110
Attention: Thomas F. McDonough
Secretary
Service Provider: COPELAND ASSOCIATES, INC.
Two Tower Center
East Brunswick, NJ 08816
Attention: Paul S. Feinberg, Esq.
General Counsel
9. Amendment
Except as otherwise provided herein, this Agreement may be amended or
modified only by a written agreement executed by all the parties; provided that
an amendment solely to add or remove any Scudder Fund as a party to this
Agreement may be made, and shall be valid and binding, by the addition or
removal of the relevant Fund's listing on Schedule A and its signature below
without requiring the other parties' signatures and shall be effective as of the
date of execution, unless any other party objects in writing within thirty (30)
days after receiving notice of such amendment.
10. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts,
without regard to conflicts of laws principles.
11. Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written. Nothing contained in this Agreement is intended to
convey rights to any third parties, such as Plans, Plan Trustees or Plan
participants.
12. Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be an original document and all of which together shall be deemed one and
the same instrument.
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<PAGE>
13. Limitation of Liability of the Scudder Funds, Trustees and Shareholders
It is understood and expressly stipulated that none of the trustees,
officers, agents, or shareholders of any Scudder Fund shall be personally liable
hereunder. It is understood and acknowledged that all persons dealing with any
Scudder Fund must look solely to the property of such Scudder Fund for the
enforcement of any claims against such Scudder Fund as neither the trustees,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of any Scudder Fund. No Scudder Fund shall be liable for
the obligations or liabilities of any other Scudder Fund. No series of any
Scudder Fund, if any, shall be liable for the obligations of any other series.
14. Headings
The headings contained in this Agreement are for purposes of convenience
only and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SCUDDER SERVICE CORPORATION
By: /s/ Steven J. Towle
------------------------------
Name: Steven J. Towle
Title: Vice President
COPELAND ASSOCIATES, INC.
By: /s/ Paul S. Feinberg
------------------------------
Name: Paul S. Feinberg
---------------------------
Title: Senior Vice President
---------------------------
* SIGNATURES OF SCUDDER FUNDS
ON THE FOLLOWING PAGE
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above or below written.
SCUDDER DEVELOPMENT FUND
SCUDDER EQUITY TRUST, on behalf of
Scudder Capital Growth Fund
Scudder Value Fund
SCUDDER GLOBAL FUND, INC., on behalf of
Scudder Global Fund
Scudder Global Small Company Fund
SCUDDER INTERNATIONAL FUND, INC., on behalf of
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder International Fund
SCUDDER INVESTMENT TRUST, on behalf of
Scudder Growth and Income Fund
Scudder Quality Growth Fund
SCUDDER MUTUAL FUNDS, INC., on behalf of
Scudder Gold Fund
SCUDDER PORTFOLIO TRUST, on behalf of
Scudder Balanced Fund
By: /s/ Thomas F. McDonough
--------------------------------
Name: Thomas F. McDonough
Title: Secretary
Date: 5/24/96
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<PAGE>
Schedule A
LIST OF SCUDDER FUNDS
SCUDDER CAPITAL GROWTH FUND
SCUDDER DEVELOPMENT FUND
SCUDDER GLOBAL FUND
SCUDDER GLOBAL SMALL COMPANY FUND
SCUDDER GOLD FUND
SCUDDER GREATER EUROPE GROWTH FUND*
SCUDDER INTERNATIONAL FUND
SCUDDER PACIFIC OPPORTUNITIES FUND
SCUDDER QUALITY GROWTH FUND
SCUDDER VALUE FUND
SCUDDER GROWTH AND INCOME FUND
SCUDDER BALANCED FUND
On behalf of the Funds
listed on Schedule A:
By: /s/ Thomas F. McDonough
--------------------------------
Thomas F. McDonough
Date: 5/24/96
------------------------------
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* Service Provider will not receive Administrative Fees for providing
Administrative Services until further notice.
<PAGE>
Schedule B
The Administrative Services
1. Maintain separate adequate records for each Plan reflecting Shares
purchased and redeemed, including dates and prices for all transactions, and
Share balances. To the extent required under the 1940 Act and rules thereunder,
such records shall be preserved, maintained and made available in accordance
with the provisions of such Act and such rules, and copies or, if required,
originals shall be surrendered promptly to the Transfer Agent on and in
accordance with its request. Records surrendered hereunder shall be in machine
readable form, except to the extent that such records have been maintained only
in paper form.
2. Disburse or credit to the Group Trust or Custodial Accounts, and
maintain records of, all proceeds of Share redemptions and distributions not
reinvested in Shares.
3. Ensure and oversee the timely transfer of funds in connection with Plan
accounts with the Scudder Funds.
4. Prepare and deliver to the Group Trust periodic account statements
showing for each Plan the total number of Shares held as of the statement
closing date, purchases and redemptions of Shares during the statement period,
and dividends and other distributions paid during the statement period (whether
paid in case or reinvested in Shares), including dates and prices for all
transactions.
5. On behalf of and as required by the Group Trust or Custodial Accounts,
deliver to Plan participants (or deliver to the Plans for distribution to Plan
participants) prospectuses, proxy materials, periodic reports to shareholders,
and other materials provided by the Transfer Agent or the Scudder Funds.
6. Receive Instructions from Plan Agent and communicate Orders to the
Transfer Agent as specified in this Agreement.
7. Transmit confirmations of Orders to the Plans.
8. Maintain daily and monthly purchase summaries (expressed in both Share
and dollar amounts) for each Plan.
9. Settle Orders in accordance with the terms of each Scudder Fund's
prospectus.
<PAGE>
10. Transmit to the Transfer Agent, or to any Scudder Fund designated by
the Transfer Agent, such occasional and periodic reports as the Transfer Agent
shall reasonably request from time to time to enable it or such Scudder Fund to
comply with applicable laws and regulations.
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<PAGE>
Schedule C
The Administrative Fees
The Scudder Funds listed on Schedule A will pay the Service Provider a
monthly fee at an annualized rate of .25 of 1% (25 basis points) of the average
daily account balance during the month for each account registered with Transfer
Agent for which Service Provider performs Administrative Services. If Service
Provider begins or ceases performing Administrative Services during the month,
such fee shall be prorated according to the proportion which such portion of the
month bears to the full month.
Exhibit 9(a)(4)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Family of Funds
Annual maintenance fee for each account
- ---------------------------------------
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any account which at any time during the month had a share
balance in the fund. The minimum monthly charge to any portfolio is $1,000.
Money Market Funds $28.90
Monthly Income Funds 25.00
Quarterly Distribution Funds 20.40
Annual Distribution Funds 17.55
Other fees
- ----------
New Account Set Up $ 5.00 each
Disaster Recovery 0.25 per year
Closed Accounts 1.20 per year
TIN Certificates 0.15 each
TIN Maintenance 0.25 each
Check Writing:
Set Up 5.00 per account
Retail Check Clearance 0.96 per check
Corporate Check Clearance 0.46 percheck
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits
Lease and maintenance of S.A.I.L. and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
- -------
The above will be billed within the first five (5) business days of each month
and will be paid by wire within five (5) business days of receipt
On behalf of the Funds listed on Scudder Service Company
Attachment A:
By:_____________________________ By:_________________________________
David S. Lee Daniel Pierce
Vice President President
Date: October 1, 1995 Date: October 1, 1995
<PAGE>
ATTACHMENT A
TRANSFER AGENCY AND SERVICE AGREEMENT
Money Market Accounts
Scudder California Tax Free Money Fund
Scudder Cash Investment Trust
Scudder New York Tax Free Money Fund
Scudder Tax Free Money Fund
Scudder U.S. Treasury Money Fund
Monthly Income Funds
Scudder California Tax Free Fund
Scudder GNMA Fund
Scudder High Yield Tax Free Fund
Scudder International Bond Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Massachusetts Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Quarterly Distribution Funds
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder Emerging Markets Income Fund
Scudder Income Fund
Annual Distribution Funds
Scudder Capital Growth Fund Scudder Latin America Fund
Scudder Development Fund Scudder Pacific Opportunities Fund
Scudder Global Fund Scudder Quality Growth Fund
Scudder Global Small Company Fund Scudder Small Company Value Fund
Scudder Gold Fund Scudder Value Fund
Scudder Greater Europe Growth Fund Scudder Zero Coupon 2000 Fund
Scudder International Fund
dated as of October 6, 1995
COMPASS SERVICE AGREEMENT
THIS AGREEMENT made as of this 1st day of January, 1990, by and between
SCUDDER TRUST COMPANY, a New Hampshire banking corporation ("Trust Company") and
SCUDDER MUTUAL FUNDS, INC, a Maryland corporation ("the Fund").
WITNESSETH:
WHEREAS, Trust Company is engaged in the business of providing certain
recordkeeping and other services; and
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company act of 1940, as amended; and
WHEREAS, Trust Company is willing to provide to the Fund certain
recordkeeping and other services in connection with certain omnibus accounts
maintained with the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual convenants and agreements of
the parties hereto as herein set forth, the parties covenants and agree as
follows:
Article 1. Terms of Appointment: Duties of the Service.
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints Trust Company to act as, and Trust Company
agrees to act as, recordkeeping agent with respect to the authorized and issued
shares of beneficial interest of the Fund ("shares") or units representing such
Shares ("units") which are held in plan-level omnibus accounts (individually an
"account" or collectively the "accounts") in connection with certain retirement
and employee benefit plans established under the Internal Revenue code of 1986
including but not limited to defined contribution plans, section 403(b) plans,
individual retirement accounts and deferred compensation plans (each a "Plan" or
collectively the "Plans"), utilizing the comprehensive Participant Accounting
Services "("COMPASS"), and established by plan administrators, employers,
trustees, custodians and other persons (each individually an "administrator" or
collectively the "Administrators") on behalf of employers (each individually an
"employer" or collectively the "employers') and individuals for certain
participants in such Plans (each individually a "participant" or collectively
the "Participants").
1.02 Trust Company agrees that it will perform the following services in
accordance with procedures established from time to time by agreement between
the Fund and Trust Company. Subject to instructions form the administrators,
Trust Company shall:
(i) receive from Administrators instructions for the purchase of
shares of the fund, confirm compliance with such instructions and, as agent of
the respective Administrators, deliver
<PAGE>
within a reasonable time such instructions and any appropriate documentation
therefore to the transfer agent of the fund duly appointed by the Directors of
the fund (the "Transfer Agent");
(ii) record the purchase by Plans of the appropriate number of Shares
or Units and within a reasonable time allocate such Shares or Unites among the
Participants' Accounts;
(iii) record dividends and capital gains distributions on behalf of
Participants;
(iv) receive from Administrators instructions for redemption and
repurchase requests and directions, confirm compliance with such instructions
and as agent of the respective administrators deliver within a reasonable time
such instructions and any appropriate documentation therefor to the Transfer
Agent;
(v) record the redemption or repurchase by Plans of the appropriate
number of shares or Unites and within a reasonable time make the appropriate
adjustments among the Participants'
(vi) certify to the Fund no less frequently than annually the number
of participants accounts for which records are maintained hereunder;
(vii) maintain records of account for and advise the fund and
Administrators and Participants, when appropriate, as the foregoing;
(viii) maintain all Plan and Participant accounts other than accounts
maintained by the Transfer agent; and
(ix) maintain and mail administrative reports and participant
statements.
Procedures applicable to certain of these services may be established from
time to time by agreement between the fund and Trust Company.
Article 2. Fees and Expenses.
2.01 For performance by Trust Company of services pursuant to this
Agreement, the fund agrees to pay trust company an annual maintenance fee for
each participant account as set out in the fee schedule, as amended from time to
time. Such fee schedule and out-of-pocket expenses and advances identified under
section 2.02 below may be changed from time to time by mutual agreement between
the Fund and Trust Company.
2
<PAGE>
2.02 In additional to the fee paid under section 2.01 above, the Fund
agrees to reimburse Trust Company for out-of-pocket expenses or advances
incurred by Trust Company for the items set out in the fee schedule. In
addition, any other expenses incurred by Trust Company, at the request or with
the consent of the fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses promptly.
Postage and the cost of materials for mailing of administrative reports,
participant statements and other mailings to all Employer accounts or
Participants shall be advanced to Trust Company by the Fund at least two (2)
days prior to the mailing date of such materials or paid within two (2) days of
the receipt by the Fund of a bill therefor.
Article 3. Representations and Warranties of Trust Company.
Trust Company represents and warrants to the Fund that:
3.01 It is a banking corporation duly organized and existing and in good
standing under the laws of The State of New Hampshire.
3.02 It has the legal power and authority to carry on its business in any
jurisdiction where it does business.
3.03 It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4. Representations and Warranties of the Fund.
The Fund represents and warrants to Trust Company that:
4.01 It is a corporation duly organized and existing and in good standing
under the laws of Maryland.
4.02 It is empowered under applicable laws and by its articles of
Incorporation and By-Laws to enter into and perform this Agreement.
3
<PAGE>
4.03 All proceedings required by said Articles of Incorporation and By-Laws
have been take to authorize it to enter into and perform this Agreement.
4.04 It is an investment company registered under the Investment company
Act of 1940, as amended (the "Act").
4.05 It makes available its shares in connection with certain Plans.
4.06 A Majority of the directors of the Fund who are not interested persons
have made findings to the effect that:
(a) the agreement is in the best interest of the Fund and its
shareholders;
(b) the services to be performed pursuant to the Agreement are
services required for the operation of the Fund;
(c) Trust Company can provide services the nature and quality of which
are at least equal to those provided by others offering the same or similar
services; and
(d) the fees charged by Trust Company for such services are fair and
reasonable in the light of the usual and customary charges made by others for
services of the same nature and quality.
4.07 A registration statement under the Securities Act of 1933, as amended,
has been filed and has become effective, and appropriate sate securities law
filings have been made with respect to all shares of the fund being offered for
sale. The Fund shall notify Trust Company (i) if such registration statement or
any state securities registration or qualification has been terminated or a stop
order has been entered with respect to the Shares or (ii) if such registration
statement shall have been amended to cover shares of any additional Series (as
hereinafter defined in section 8.01).
Article 5. Indemnification.
5.01 Trust Company shall not be responsible for, and the Fund shall
indemnify and hold Trust Company harmless from and against, any and all losses,
damages, costs, charges, counsel fees payments, expenses and liabilities arising
out of or attributable to:
(a) All actions of Trust Company or its agents required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
4
<PAGE>
(c) the reliance on or use by Trust Company or its agents of
information, records and documents which (i) are received by Trust Company or
its agents and furnished to it by or on behalf of the Fund, and (ii) have been
prepared and/or maintained by the Fund or any other person or firm (except Trust
Company) on behalf of the Fund.
(d) The reliance on or the carrying out by Trust Company or its agents
of any written instructions or requests of the Fund or any person acting on
behalf of the Fund.
(e) The offer or sale of shares in violation of any requirement under
the federal securities laws or regulations, or the securities laws or
regulations of any state that such Shares by registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such shares in such
state.
5.02 Trust Company shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to Trust company's
refusal or failure to comply with the terms of the Agreement, or which arise out
of Trust Company's lack of good faith, negligence or willful misconduct or which
arise out of the breach of any representation or warranty of Trust Company
hereunder.
5.03 At any time Trust Company may apply to any officer of the Fund for
instructions, and may consult with legal counsel (which may also be legal
counsel for the Fund) with respect to any matter arising in connection with the
services to be performed by Trust Company under this Agreement, and Trust
Company shall not be liable and shall be indemnified by the Fund for any action
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. Trust Company and its agents shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided Trust Company or its agents by telephone, in person, machine-readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund.
5.04 Trust Company may at any time or times in its discretion appoint (and
may at any time remove) another individual, corporation, partnership, trust or
company as its agent to carry out such of the provisions of this Agreement as
Trust Company shall from time to time direct.
5.05 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably
5
<PAGE>
beyond its control, or other causes reasonably beyond its control, such party
shall not be liable to the other for any damages resulting from such failure to
perform or otherwise from such causes.
5.06 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
Article 6. Covenants of the Fund and Trust Company.
6.01 Trust Company hereby agrees to establish and maintain facilities and
procedures reasonable acceptable to the Fund for safekeeping of records and for
the preparation or use, and for keeping account of, such records.
6.02 Trust Company shall at all times maintain insurance coverage which is
reasonable and customary in light of its duties hereunder and its other
obligations and activities, and shall notify the Fund of any changes in its
insurance coverage unless the fund is covered by the same policy and such change
is also applicable to the Fund.
6.03 Trust Company shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
6.04 Trust Company and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the records
relating to Plan Accounts and participant accounts with the Fund, Trust Company
will endeavor to notify the Fund and to secure instructions from an authorized
officer of the fund as to such inspection. Trust Company reserves the right,
however, to exhibit such records to any person whenever it is reasonably advised
by counsel to the fund that it may be held liable for the failure to exhibit
such records to such person.
6.06 Trust Company acknowledges that the Fund, as a registered investment
company under the Act, is subject to the provisions of the act and the rules and
regulations thereunder, and
6
<PAGE>
that the offer and sale of the Fund's shares are subject to the provisions of
federal and sate laws and regulations applicable to the offer and sale of
securities. The Fund acknowledges that Trust Company is not responsible for the
Fund's compliance with such laws, rules and regulations. If the fund advises
Trust Company that a procedure of Trust company related to the discharge of its
obligations hereunder has or may have the effect of causing the Fund to violate
any of such laws or regulations, Trust Company shall use its best efforts to
develop an alternative procedure which does not have such effect.
6.07 Trust Company acknowledges to the Fund that, as the offeror of
COMPASS, Trust Company does not act as a plan administrator or as a fiduciary
under the Employee Retirement Income Security Act of 1974, as amended from time
to time, with respect to any Plan. Trust Company shall not be responsible for
determining whether the terms of a particular Plan or the Shares of the Fund are
appropriate for the Plan or Participant and does not guarantee the performance
of the Fund.
Article 7. Termination of Agreement.
7.01 This Agreement may be terminated by either party on the last day of
the month next commencing after thirty (30) days written notice to the other
party.
7.02 Upon termination of this Agreement, the Fund shall pay to Trust
Company such fees and expenses as may be due as of the date of such termination.
7.03 Should the fund exercise its right to terminate this Agreement, Trust
Company reserves the right to charge for any other reasonable expenses
associated with such termination.
Article 8. Additional Series of the Fund.
8.01 Shares of the Fund are of a single class; however, shares may be
divided into additional series ("series") that may be established from time to
time by action of the directors of the Fund. If the context requires and unless
otherwise specifically provided herein, the term "Fund" as used in the agreement
shall mean in additional each separate Series currently existing or subsequently
created, and the term "Shares" shall mean all shares of beneficial interest of
the fund, whether of a single class or divided into separate Series of the Fund
currently existing or hereinafter created.
8.02 In the event that the Fund established one or more or additional
Series of Shares in addition to the original series with respect to which it
desires to have Trust Company render services as recordkeeping agent under the
terms hereof, it shall so notify Trust
7
<PAGE>
Company in writing, and upon the effectiveness of a registration statement under
the Securities Act of 1933, as amended, relating to such Series of Shares and
unless Trust Company objects in writing to providing such services, such Series
shall be subject to this Agreement.
8.03. In the event that the Fund suspends the offering of Shares of any one
or more series, it shall so notify Trust Company in writing to such effect.
Article 9. Assignment.
9.01 Neither this agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
Article 10. Amendment.
10.01.This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 11. Massachusetts Law to Apply.
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 12. Entire Agreement.
12.01 This Agreement constitutes the entire agreement between the parties
hereto.
Article 13. Correspondence.
13.01 Trust Company will answer correspondence from Administrators relating
to Accounts and such other correspondence as may from time to time be mutually
agreed upon and notify the Fund of any correspondence which may require and
answer from the Fund.
Article 14. Further Actions.
14.01 Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
8
<PAGE>
Article 15. Interpretive Provisions.
15.01 In connection with the operation of this Agreement, Trust Company and
the Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by the parties and annexed hereto, but no
such provisions shall contravene any applicable federal or state law or
regulation and no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
SCUDDER TRUST COMPANY
BY: /s/Dennis M. [ILLEGIBLE]
------------------------------
Title: Vice President/Treasury
SCUDDER MUTUAL FUNDS, INC.
BY: /s/David S. Lee
-----------------------------
Title: Vice President
Exhibit 9(b)(2)
SCUDDER TRUST COMPANY
FEE INFORMATION FOR SERVICES PROVIDED UNDER
COMPASS SERVICE AGREEMENT
Annual maintenance fee for each participant in a retirement and employee benefit
plan:
First Each
Participant Additional
Account Account
----------- ----------
Money Market Funds $28.90 $14.45
Monthly Income Funds 25.00 12.50
Quarterly Distribution Funds 20.40 10.20
Annual Distribution Funds 17.55 8.78
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any participant who at any time during the month had a share
of unit account balance in the fund.
Out of pocket expenses shall be reimbursed by the fund to Scudder Trust Company.
Such expenses include but are not limited to the following:
Supplies:
Paper and envelopes in connection with participant statements and
administrative reports
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Microfilm
Microfiche
On behalf of the Funds listed in
Attachment A: Scudder Trust Company:
By /s/ David S. Lee By /s/ [illegible]
-------------------------------- --------------------------------
Date January 1, 1990 Date January 1, 1990
------------------------------ ------------------------------
Exhibit 9(c)(1)
[LOGO of The First National Bank of Boston]
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT made as of August 22, 1988, between Scudder Mutual Funds, Inc., a
corporation under the laws of Maryland with its principal place of business at
345 Park Avenue, New York, New York (hereinafter called the "Fund"), and the
First National Bank of Boston, a national banking association with its principal
place of business in Boston, Massachusetts (hereinafter called the "Bank").
WHEREAS, pursuant to an agreement dated as of August 22, 1988, the cash and
securities for the Fund's Scudder Gold Fund portfolio are held and administered
by the Bank as custodian;
WHEREAS, the Fund has need for certain accounting and pricing services which the
Bank is willing and able to provide in conjunction with the services as
Custodian as aforesaid;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
the Bank agree as follows:
Section 1. Duties of Bank - General
The Bank is authorized to act under the terms of this Agreement as the
Fund's agent, and as such the Bank will:
a. Maintain and preserve accounts, books, records and other documents as
are required of the Fund under Section 31 of the Investment company
Act of 1940 and Rules 31a-1 and 31a-2 thereunder;
b. Record the current day's trading activity and such other proper
bookkeeping entries as are necessary for determining that day's net
asset value;
c. Render such statements or copies of records as are listed in Exhibit
A hereto as from time to time are reasonably requested by the Fund;
and such other information as the Fund may reasonably request and that
the Bank is in a position to reasonably provide.
d. Facilitate audits of accounts by the Fund's auditors or by any other
auditors employed or engaged by the Fund or by any regulatory body
with jurisdiction over the Fund;
e. Compute the Fund's net asset value per share on each day the New
York Stock Exchange is open for trading and, if applicable, its public
offering price and/or its rates and yields, and notify the Fund and
such other persons as the Fund may reasonably request of the net asset
value per share, the public offering price and/or the yield.
<PAGE>
The Bank acknowledges that additional portfolios of the Fund may be
established and that such portfolios, including the Portfolio, may be
terminated, from time to time by action of the Board of Directors of the
Fund. If the context requires and unless otherwise specifically provided
herein, the term "fund" as used in this Agreement shall mean, in addition
to the Portfolio, each subsequently created separate portfolio, as the
Board of Directors of the Fund shall designate at its discretion and as to
which such Board shall have appointed the Bank as custodian and as to which
the Bank shall have accepted such appointment. To the extent the Fund shall
include portfolios other than the Portfolio, such other portfolios also
shall be subject to this Agreement.
Section 2. Valuation of Securities
Securities will be valued in accordance with the specific provisions of the
Fund's Registration Statement on Form N-lA, as amended from time to time
(the "Fund's Registration Statement, such term also to include, if
applicable each separate portfolio's registration statement").
Quotations will be taken from the exchange where the security is primarily
traded. Over-the-counter securities for which market quotations are readily
available will be valued at the mean between the current bid and asked
prices. Securities for which market quotations are not readily available
will be valued at fair market value as determined by the Fund which will
immediately notify the Bank of such value. The Bank will use one or more
external pricing services as selected and authorized by the Fund on the
Pricing Authorization Form attached hereto as Exhibit B. The Bank shall not
be liable for any loss, cost, damage, claim or other matter incurred by or
asseted against the Fund regardless of how characterized, based on or
resulting from the inaccuracy or other deficiency in any information or
data provided to the Bank by such vendor and used by the Bank in the
performance of its services hereunder so long as the Bank will use
reasonable efforts to assess the accuracy of such information or data by
using the tests set out on such Pricing Authorization Form.
Section 3. Computation of Net Asset Value, Public Offering Price Performance
Information
The Bank will compute the Fund's net asset value in a manner consistent
with the specific provisions of the Fund's Registration Statement. In
general, such computation will be made by dividing the value of the Fund's
portfolio securities, cash and any other assets, less its liabilities, by
the number of shares of the Fund outstanding. Such computation will be made
as of the close of business on the New York Stock Exchange each day, Monday
through Friday, exclusive of national business holidays and other days on
which the New York Stock Exchange is not open for business. If applicable,
the Bank will also compute the public offering price by dividing the net
asset value per share by the appropriate factor as provided by the Fund.
The Bank will compute the Fund's rate and yield, if applicable, in
accordance with the methodology set forth in the Fund's Prospectus and
Statement of Additional Information.
<PAGE>
Section 4. Bank's Reliance on Instructions and Advice
In maintaining the Fund's books of account and making the necessary
computations, the Bank shall be entitled to receive, and may rely upon,
information furnished it by any person certified to the Bank as being
authorized by the Board of Directors of the Fund relating to:
a. The manner and amount of accrual of expenses other than management
fees to be recorded on the books of the Fund;
b. The source of quotations to be used for such securities as may not be
available through the Bank's normal pricing services;
c. The value to be assigned to any asset for which no price quotations
are readily available;
d. If applicable, the manner of computation of the public offering price
and such other computations as may be necessary;
e. Notification of transactions in portfolio securities.
The Bank shall be entitled to rely upon any certificate, letter or other
instrument or telephone call reasonably believed by the Bank to be genuine
and to have been properly made or signed by an officer or other authorized
agent of the Fund, and shall be entitled to received as conclusive proof of
any fact or matter required to be ascertained by it hereunder a certificate
signed by an officer of the Fund or any other person authorized by the
Fund's Board of Directors.
The Bank shall be entitled to receive and act upon advice of Counsel (which
may be Counsel for the Fund) and shall be without liability for any action
taken or thing done in good faith in reliance upon such advice.
The Fund agrees promptly to furnish the Bank with a copy of the Fund's
Registration Statement in effect from time to time. The Bank may
conclusively rely on the most recently delivered Fund's Registration
Statement (including relevant amendments) for all purposes under this
Agreement and shall not be liable to the Fund in acting in reliance
thereon.
Section 5. Indemnification
The Fund agrees to indemnify and hold harmless the Bank and its employees,
agents and nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including attorney's fees) incurred or assessed against
them in connection with the performance of this Agreement, except such as
may arise from their own negligent action, negligent failure to act or
willful misconduct. The foregoing notwithstanding, the Bank will in no
event be liable for any loss resulting from the acts, omissions, lack of
financial responsibility, or failure to perform the obligations of any
person or organization designated by the Fund to be the authorized agent of
the Fund as a party to any transaction.
The Bank's responsibility - for damage or loss arising from military power,
war, insurrection, or nuclear fission, fusion or radioactivity shall be
limited to the use of the Bank's best efforts to recover the Fund's records
determined to be lost, missing or destroyed.
<PAGE>
Section 6. Compensation and Bank's Expenses
The Bank shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. The Bank shall be entitled to recover its
telephone, delivery and all other out-of-pocket expenses as incurred,
including without limitation reasonable attorney's fees.
Section 7. Termination
Either the Bank or the Fund may terminate this Agreement by giving 90 days'
written notice in advance to the other. Any termination date is to be no
earlier than four months from the effective date hereof. Upon termination
the Bank will turn over to me Fund and cease to retain in the Bank's files,
records of the calculations of net asset value and all other records
pertaining to its services hereunder; provided, however, the Bank in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 8. Miscellaneous
This Agreement may not be assigned by the Bank without the consent of the
Fund as authorized or approved by resolution of its Board of Directors.
In connection with the operation of this Agreement, the Fund and the Bank
may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as in their joint opinions may
be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions are to be signed by both parties and
annexed hereto.
Nothing in this Agreement shall give or be construed to give any
shareholder of the Fund any rights against the Bank.
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the
date first written above.
Executed in several counterparts, each of which is an original,
SCUDDER MUTUAL FUNDS, INC.
By: /s/ Daniel Pierce
----------------------------------
Name: Daniel Pierce
Title: President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Janice Charbonnier
----------------------------------
Name: Janice Charbonnier
Title: Senior Manager
<PAGE>
EXHIBIT A to
Fund Accounting Services Agreement
Standard Reports and Availability
- ---------------------------------
The following reports will be provided to the Fund on a regular basis with
availability as indicated:
A. Daily
1. Printed Trial Balance
2. Net Asset Value Worksheet
3. Cash Forecast
4. Rate/Yield Computation, if applicable
B. Weekly - Tax Lot Ledgers
C. Monthly
1. Tax Lot Ledgers as of month-end
2. Working Appraisal as of month-end
3. Purchase and Sale Journal for the month
4. Summary of Gains and Losses on Securities for the month
5. Dividend Ledger for the month (Receivable as of month-end and
earned)
6. Interest Income Analysis for the month (receivable as of month-end
and earned)
7. Trial Balance as of month-end
8. Net Asset Value Worksheet as of month-end
9. Open Trades (payable and receivables for unsettled securities
transactions)
D. Annually
1. Purchase and Sale Journal for the year
2. Summary of Gains and Losses on Securities for the year
3. Broker Allocation Report for the year
Availability of Reports
1. Daily reports should be available for facsimile transmission, if
desired, by 9:00 a.m. Boston time; messenger delivery to local
clients may be expected by 10:00 a.m.
2. Monthly and annual reports, except for Interest Income Analysis
should be sent by overnight delivery (remote clients) or by messenger
(local clients) by the tenth day of the following month; the Interest
Income Analysis should be sent in the same manner by the fifteenth
business of the following month.
Exhibit 9(c)(2)
EXHIBIT B
Pricing Authorization Form
Scudder Mutual Funds, Inc. hereby requests and authorizes The First National
Bank of Boston ("Bank") to use the following price sources, market indices and
tolerance ranges for performing fund pricing and evaluating the reasonability
of security prices for Scudder Gold Fund.
<TABLE>
<CAPTION>
Security Source/ Tolerance Back-Up for General
Type Type of Quote Level Tolerance Fails Back-Up
- -------- ------------- --------- --------------- -------
<S> <C> <C> <C> <C>
Foreign Equity IDC Last Sale/Mean 5.0% Bridge = Canada Scudder = Canada
Scudder = all others
Foreign Bond IDC Last Sale 2.0% Scudder Scudder
Listed Equity IDC Last Sale/Mean 5.0% Bridge Scudder
(NYSE/AMEX)
OTC Equity IDC Last Sale/High 5.0% Bridge
(NASDAQ) or Inside Bid
Exchange Rates FX Department 1.5% Scudder Scudder
Options IDC Last Sale/Mean 10.0% Bridge Scudder
Futures IDC Last Sale/Mean same as Bridge Scudder
underlying
holding
</TABLE>
This pricing authorization form is subject to change at any time with respect to
the source or type of quote, tolerance level or back-up source. Any items valued
by the Valuation Committee may deviate from this pricing authorization form.
We understand that the Bank does not assume responsibility for and shall not be
liable for the accuracy of or any other matter relating to the quotations
provided by any of the sources noted above, so long as the Bank uses reasonable
efforts to assess their accuracy by performing reasonability tests using the
tolerance ranges and indices noted above.
Scudder Mutual Funds, Inc. The First National Bank of Boston
/s/ Daniel Pierce /s/ [Illegible]
-------------------------- ---------------------------------
Title: President Title: Senior Manager
January 2, 1991 January 10, 1991
Date Date
Exhibit 9(c)(3)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 28th day of March, 1995 between Scudder Mutual
Funds, Inc. (the "Fund"), on behalf of Scudder Gold Fund (hereinafter called the
"Portfolio"), a registered open-end management investment company with its
principal place of business in New York, New York and Scudder Fund Accounting
Corporation, with its principal place of business in Boston, Massachusetts
(hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need for certain accounting services which FUND
ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement as
the Portfolio's fund accounting agent, and as such FUND ACCOUNTING shall:
a. Maintain and preserve all accounts, books, financial records and
other documents as are required of the Fund under Section 31 of the
Investment Company Act of 1940 (the "1940 Act") and Rules 3la-1,
3la-2 and 3la-3 thereunder, applicable federal and state laws and
any other law or administrative rules or procedures which may be
applicable to the Fund on behalf of the Portfolio, other than those
accounts, books and financial records required to be maintained by
the Fund's custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the Fund to
conduct its business as a registered open-end management investment
company. All such books and records shall be the property of the
Fund and shall at all times during regular business hours be open
for inspection by, and shall be surrendered promptly upon request
of, duly authorized officers of the Fund. All such books and records
shall at all times during regular business hours be open for
inspection, upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission.
b. Record the current day's trading activity and such other proper
bookkeeping entries as are necessary for determining that day's net
asset value and net income.
c. Render statements or copies of records as from time to time are
reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by the Fund
or by any regulatory body with jurisdiction over the Fund.
e. Compute the Portfolio's net asset value per share, and, if
applicable, its public offering price and/or its daily dividend
rates and money market yields, in accordance with Section 3 of the
Agreement and notify the Fund and such other persons as the Fund may
reasonably request of the net asset value per share, the public
offering price and/or its daily dividend rates and money market
yields.
<PAGE>
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's Registration
Statement, as amended or supplemented from time to time (hereinafter
referred to as the "Registration Statement"); (b) the resolutions of the
Board of Directors of the Fund at the time in force and applicable, as
they may from time to time be delivered to FUND ACCOUNTING, and (c) Proper
Instructions from such officers of the Fund or other persons as are from
time to time authorized by the Board of Directors of the Fund to give
instructions with respect to computation and determination of the net
asset value. FUND ACCOUNTING may use one or more external pricing
services, including broker-dealers, provided that an appropriate officer
of the Fund shall have approved such use in advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value, including
net income, in a manner consistent with the specific provisions of the
Registration Statement. Such computation shall be made as of the time or
times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in the
Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the necessary
computations FUND ACCOUNTING shall be entitled to receive, and may rely
upon, information furnished it by means of Proper Instructions, including
but not limited to:
a. The manner and amount of accrual of expenses to be recorded on the
books of the Portfolio;
b. The source of quotations to be used for such securities as may not
be available through FUND ACCOUNTING's normal pricing services;
c. The value to be assigned to any asset for which no price quotations
are readily available;
d. If applicable, the manner of computation of the public offering
price and such other computations as may be necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person authorized
by the Fund's Board of Directors.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel (which may be Counsel for the Fund) at the reasonable expense of
the Portfolio and shall be
2
<PAGE>
without liability for any action taken or thing done in good faith in
reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND ACCOUNTING
to be genuine and to have been properly made or signed by any authorized
officer of the Fund or person certified to FUND ACCOUNTING as being
authorized by the Board of Directors. The Fund, on behalf of the
Portfolio, shall cause oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices as from time to time agreed to by
an authorized officer of the Fund and FUND ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the appropriate
person(s) within FUND ACCOUNTING a copy of the Registration Statement as
in effect from time to time. FUND ACCOUNTING may conclusively rely on the
Fund's most recently delivered Registration Statement for all purposes
under this Agreement and shall not be liable to the Portfolio or the Fund
in acting in reliance thereon.
Section 6. Standard of Care and Indemnification
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND ACCOUNTING
shall not be liable under this Agreement for any error of judgment or
mistake of law made in good faith and consistent with the foregoing
standard of care, provided that nothing in this Agreement shall be deemed
to protect or purport to protect FUND ACCOUNTING against any liability to
the Fund, the Portfolio or its shareholders to which FUND ACCOUNTING would
otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties hereunder.
The Fund agrees, on behalf of the Portfolio, to indemnify and hold
harmless FUND ACCOUNTING and its employees, agents and nominees from all
taxes, charges, expenses, assessments, claims and liabilities (including
reasonable attorneys' fees) incurred or assessed against them in
connection with the performance of this Agreement, except such as may
arise from their own negligent action, negligent failure to act or willful
misconduct. The foregoing notwithstanding, FUND ACCOUNTING will in no
event be liable for any loss resulting from the acts, omissions, lack of
financial responsibility, or failure to perform the obligations of any
person or organization designated by the Fund to be the authorized agent
of the Portfolio as a party to any transactions.
FUND ACCOUNTING's responsibility for damage or loss with respect to the
Portfolio's
3
<PAGE>
records arising from fire, flood, Acts of God, military power, war,
insurrection or nuclear fission, fusion or radioactivity shall be limited
to the use of FUND ACCOUNTING's best efforts to recover the Portfolio's
records determined to be lost, missing or destroyed.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon
in writing by the two parties. FUND ACCOUNTING shall be entitled to
recover its reasonable telephone, courier or delivery service, and all
other reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until terminated as
hereinafter provided, may be amended at any time by mutual agreement of
the parties hereto and may be terminated by an instrument in writing
delivered or mailed to the other party. Such termination shall take effect
not sooner than ninety (90) days after the date of delivery or mailing of
such notice of termination. Any termination date is to be no earlier than
four months from the effective date hereof. Upon termination, FUND
ACCOUNTING will turn over to the Fund or its designee and cease to retain
in FUND ACCOUNTING files, records of the calculations of net asset value
and all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies of
any and all such records and documents which it determines appropriate or
for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be deemed
to be exclusive, and it is understood that FUND ACCOUNTING may perform
fund accounting services for others. In acting under this Agreement, FUND
ACCOUNTING shall be an independent contractor and not an agent of the Fund
or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such other
person or at such other address as such party may from time to time
specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
4
<PAGE>
If to the Fund - Portfolio: Scudder Mutual Funds, Inc. -
Scudder Gold Fund
345 Park Avenue
New York, NY 10154
Attn: President, Secretary or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the consent
of the Fund as authorized or approved by resolution of its Board of
Directors.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive of
or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive or
additional provisions shall be in writing, signed by both parties and
annexed hereto, but no such provisions shall be deemed to be an amendment
of this Agreement.
This Agreement shall be governed and construed in accordance with the laws
of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized and its seal to be
hereunder affixed as of the date first written above.
[SEAL] SCUDDER MUTUAL FUNDS, INC., on behalf of
Scudder Gold Fund
By: /s/ Daniel Pierce
-------------------------------
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By: /s/ Pamela A McGrath
-------------------------------
Vice President
5
Coopers Coopers & Lybrand L.L.P.
& Lybrand
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Scudder Mutual Funds, Inc. and
the Shareholders of Scudder Gold Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 10
to the Registration Statement of Scudder Gold Fund on Form N-1A, of our report
dated August 20, 1997 on our audit of the financial statements and financial
highlights of the Scudder Gold Fund, which report is included in the Annual
Report to Shareholders for the year ended June 30, 1997, which is incorporated
by reference in the Registration Statement.
We also consent to the reference to our Firm under the caption,
"Experts."
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts Coopers & Lybrand L.L.P.
September 30, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a limited liability association incorporated in Switzerland
PURCHASE AGREEMENT
Scudder Mutual Funds, Inc. (the "Company"), a corporation organized
under the laws of the State of Maryland, and Scudder, Stevens & Clark, Inc.
("Scudder") hereby agree as follows:
1. The Company offers and Scudder hereby purchases 8,334 shares of the
Company's investment fund, Scudder Gold Fund, having a par value of $.0l per
share (the "Shares") at a price of $12.00 per Share. Scudder hereby acknowledges
receipt of one certificate representing the 8,334 Shares and the Company hereby
acknowledges receipt from Scudder of $100,008 in full payment for the Shares.
2. Scudder represents and warrants to the Company that the Shares are
being acquired for investment purposes and not for the purpose of distributing
them.
3. Scudder agrees that if it redeems any Shares before five years
after the date of this agreement, it will pay to the Company an amount equal to
the number resulting from multiplying the Company's total unamortized
organizational expenses by a fraction, the numerator of which is equal to the
number of Shares redeemed and the denominator of which is equal to the aggregate
number of Shares outstanding at the time of such redemption.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 18th day of August, 1988.
SCUDDER MUTUAL FUNDS, INC.
By: /s/ Juris Padegs
--------------------------------
ATTEST:
/s/ Kathryn L. Quirk
- --------------------------
SCUDDER, STEVENS & CLARK, INC.
By: [illegible]
--------------------------------
ATTEST:
/s/ David S. Lee
- --------------------------
Exhibit 14(a)
A GUIDE TO
SCUDDER FLEXI-PLAN
================================================================================
>General Information
>Questions and Answers
>Plan Agreement
- -------------------------=======================================================
Scudder Flexi-Plan is a tax-qualified
retirement plan consisting of a profit
sharing plan and a money purchase
pension plan.
Flexi-Plan is for self-employed
individuals (sole proprietors or
partnerships) and corporations.
It is a significant improvement on
Keoghs.
SCUDDER
SERVING INVESTORS SINCE 1919
- -------------------------=======================================================
<PAGE>
- ------------
INTRODUCTION
============
Scudder Flexi-Plan is a tax-qualified retirement program designed to meet the
needs of self-employed individuals, sole proprietors, partnerships and
corporations. If you're self-employed, it's an important advancement in Keogh
plans, allowing you to reduce your current tax bill while providing for the
future of everyone who participates in your plan.
Here are some of the important advantages offered by Scudder-Flexi-Plan:
o Significantly enhanced benefits for the self-employed. Flexi-Plan is part of a
new generation of Keogh plans offering self-employed individuals the same
benefits previously available only through corporations, including higher
tax-deductible contribution limits.
o Two plans to choose from. Our Flexi-Plan encompasses a profit sharing plan and
a money purchase pension plan: These plans can be used together to maximize your
flexibility and your tax-deductible contributions.
o The Scudder funds. Flexi-Plan investments are made in the Scudder family of
mutual funds. With the Scudder funds you can design an investment strategy to
suit your objectives, now and in the future. Invest for growth, income,
stability, or any combination. You get a full range of investment choices, with
the flexibility to exchange among the funds with a simple, toll-free call. And
because all Scudder funds are no load, 100% of your investment can go to work
for your retirement.
o The Scudder distinction. Scudder is one of the nation's largest and most
experienced investment counsel firms. We manage billions of dollars for astute
investors around the world. We pioneered the first no-load mutual fund in 1928,
and we have over 30 years of experience and commitment to retirement planning.
- --------------------------------------------------------------------------------
A Scudder Retirement Plan Specialist can answer any questions you have about
Flexi-Plan and help you complete our enrollment forms. Just call 1-800-323-6105.
- --------------------------------------------------------------------------------
<PAGE>
- ----------------------
HOW YOU BENEFIT FROM A
SCUDDER FLEXI-PLAN
======================
- --------------------------------------------------------------------------------
An immediate
tax break
Your contributions are tax-deductible. This can significantly reduce your tax
bill. If you're in the 28% tax bracket, a $12,000 contribution to a Flexi-Plan
will save you $3,360 that you would otherwise pay in current taxes.
- --------------------------------------------------------------------------------
Tax-deferred
compounding
Your contributions can grow free from state and federal taxes until
withdrawn--usually at retirement. This means all of your earnings are reinvested
tax-deferred, so they in turn earn more for you. Tax-deferred compounding is one
of the keys to real growth.
- --------------------------------------------------------------------------------
Favorable tax
treatment for
distributions
A lump sum distribution from your Flexi-Plan may be eligible for special tax
treatment called "5-year forward averaging." By taxing your distribution as if
it were your only income, and as if you received 1/5 of it each year for 5
years, 5-year forward averaging can significantly reduce your tax bill. For
Flexi-Plan investors it's an important advantage which is not available with
IRAs and SEPs.
THE PRINTED DOCUMENT CONTAINS A MOUNTAIN CHART HERE
MOUNTAIN CHART TITLE:
The Advantages of Tax Deferred Investing
MOUNTAIN CHART DATA:
This chart illustrates the advantage of deferring taxes while saving for your
retirement. If you invest $12,000 in your plan each year for 25 years, and earn
an 8% return on your investment each year, then at the end of this period you'll
have $947,453 in your account. If you invest the same amount each year in a
taxable account, and you're in the 28% tax bracket, paying taxes on your
investment income directly from this account, you'll have only $484,712 at the
end of the same 25 years. Of course, your actual return and tax bracket will
vary, and retirement plan balances become taxable at distribution. Your results
will differ from those in this example.
<PAGE>
- -------------------------
IMPORTANT FEATURES OF THE
SCUDDER FLEXI-PLAN
=========================
- --------------------------------------------------------------------------------
A wide range
of no load
investments
Scudder offers a family of commission-free mutual funds including money market
funds, income funds and growth funds. You can tailor your Flexi-Plan investments
to meet your needs by selecting one or more funds with an objective similar to
your own. The blue booklet, "How to select the right Scudder funds for you,"
will help you make the right choice.
- --------------------------------------------------------------------------------
Complete
flexibility
With Scudder, you always have the freedom to exchange among our funds as your
needs or market conditions change. All it takes is a simple toll-free call.
- --------------------------------------------------------------------------------
No fees or
charges
There's no set-up fee for Scudder Flexi-Plan, no annual maintenance fee, and no
fee if you should close your account. And all of the Scudder funds are no-load
so every dollar you invest goes to work for your future. Complete this to any
other retirement programs you might consider.
- --------------------------------------------------------------------------------
Friendly,
professional
service
As a Flexi-Plan investor, you'll receive regular fund reports and a quarterly
newsletter covering topics of interest and concern to investors. And you'll have
toll-free access to experienced Service Representatives who are ready to assist
you with instant updates on your account and speedy answers to your questions.
- --------------------------------------------------------------------------------
Convenient
recordkeeping
We will send you and your employees detailed account statements, and State
Street Bank, as the trustee for your Flexi-Plan, will send you the information
you or your accountant will need to file 5500 forms.
If yours is a larger plan, ask about alternative arrangements, including more
complete plan administration. You also have the option of naming trustees other
than State Street. Call our Retirement Plan Specialists for details.
- --------------------------------------------------------------------------------
Retirement Plan
Specialists
If you have any questions about Scudder Flexi-Plan, you can call our Retirement
Plan Specialists toll-free at 1-800-323-6105. They can explain how to calculate
the right contribution and assist you in completing our enrollment forms. And
our Service Representatives are always available to help you match a fund to
your objectives. Just call 1-800-225-2470.
<PAGE>
- ---------------------
QUESTIONS AND ANSWERS
=====================
- --------------------------------------------------------------------------------
Flexi-Plan
Q. What is Scudder
Flexi-Plan?
A. Flexi-Plan is a complete retirement program consisting of a profit sharing
plan and a money purchase pension plan. They can be used separately or together.
- --------------------------------------------------------------------------------
Q. Who is eligible for the
Scudder Flexi-Plan?
A. Self-employed individuals (including sole proprietors and partnerships) and
corporations (including Subchapter corporations) are eligible, so you're
eligible if you are any of the following:
o a member of a corporate Board of Directors;
o an owner of a small business;
o a freelancer providing services for a fee;
o a person with self-employment income from a part-time job--even if you
are also employed by a company with a qualified retirement plan.
Q. Can I start a Flexi-Plan
if I already have a Keogh or other
qualified retirement plan?
A. You can, so long as your total contributions to all of your retirement
plans do not exceed the maximum allowed by law. (IRA contributions are not
counted towards this limit.)
Q. Can I have a Flexi-Plan
and an IRA?
A. Yes, anyone covered by a Flexi-Plan is also entitled to make a
tax-deductible IRA contribution of up to $2,000 for the 1986 tax year.
For 1987, you'll still be able to invest as much as $2,000 in an IRA, but if
you're covered by a Flexi-Pan and your adjusted gross income exceeds $40,000
(for joint filers) or $25,000 (for single filers) part or all of your IRA
contribution will be nondeductible.
- --------------------------------------------------------------------------------
Q. What fees are involved?
A. There are no fees at all for either you or your employees. You pay no sales
charge when you buy or sell fund shares. There are no separate charges for
opening, maintaining or closing an account.
Q. What is the minimum
contribution necessary to start a
Flexi-Plan?
A. If you are the only person participating in your plan, then your minimum
contribution to open either the profit sharing or pension plan alone is just
$500. You can invest in more than one fund as long as you place at least $500 in
each fund. If you adopt the second plan, your minimum contribution for the
second plan is $300 per fund.
If your Flexi-Plan covers more than one person, then the minimum initial
contribution to either the profit sharing or pension plan alone equals $300
multiplied by your number of participants. Your contribution can be allocated
among your participants in any amounts.
For example, if your plan covers three people your initial contribution should
be at least $1500 (3 x $500). You might contribute $700 for participant A, $500
for participant B, and $300 for participant C. If you adopt the second plan,
your minimum initial investment in the second plan equals $300 multiplied by
your number of participants.
Once you establish a plan, your contributions to existing accounts may be
[ILLEGIBLE]
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
- --------------------------------------------------------------------------------
Q. When should I start my
Flexi-Plan?
A. You must establish your plan by the end of your fiscal year to obtain a tax
deduction for that year. If you are a calendar year taxpayer (a self-employed
professional, for instance, whose taxes are due on April 15th) then you have
until December 31st to start a plan the current year.
Q. What is the deadline for
making contributions?
A. You have until the day your tax return is due (inducting any extensions) to
make your full contributions. Of course, the sooner you make your contributions
the sooner your retirement dollars begin compounding tax-deferred, so it pays to
start as early as possible in each new year.
Q. How much can I contrib-
ute to the Flexi-pension and
profit sharing plans together?
A. If you are incorporated, you can contribute as much as 25% of earned
income--up to $30,000 for each person covered by your plan.
If you are self-employed, the same limits apply, but earned income is defined
differently for you. Your earned income equals your net profits less retirement
plan contributions made on your behalf. The result is that 25% of your earned
income will equal 20% of your net profits. If you are a sole proprietor, your
net profits will appear on your Schedule C.
Your employees are still eligible to receive a contribution of up to 25% of
their wages.
Example: Assume you are self-employed, have net profits of $100,000 and no
employees. You'd like to contribute the maximum allowable.
You can contribute $20,000. This would be 20% of your net profits (20% x
$100,000) which is the same as 25% of your earned income [25% x
($100,000-$20,000)]. The difference between earned income and net profits is the
retirement plan contribution.
The specific contribution limits for each plan are explained later.
Q. What are the advantages
of using Flexi-Plan's profit shar-
ing plan?
A. The profit sharing plan provides you with the greatest flexibility. You can
change the percentage of compensation you contribute each year. You can also
skip a year and make no contribution, if you like.
You can contribute as much as 15% of earned income (again, up to $30,000 per
participant) to a profit sharing plan. If you don't intend to contribute any
more than 15%, then the profit sharing plan is your best option. If you'd like
to contribute more than 15%, then you should consider the money purchase pension
plan in conjunction with the profit sharing plan, or the pension plan alone.
Q. What are the advantages
of using Flexi-Plan's money
purchase pension plan?
A. The pension plan allows you to contribute the maximum amount. You can
contribute as much as 25% of compensation, up to $30,000 for each participant,
to a pension account. The pension plan, however, limits your flexibility. You
must contribute a fixed percentage of each participant's compensation to the
pension plan each year--even if you have no earnings or profits. You cannot
change the percentage you contribute for any year unless you amend your plan.
Q. If I'm self-employed, am I
required to contribute to the
money purchase pension plan for
the year if I have no earnings?
A. No, you are not required to make any contributions for yourself, since
contributions are calculated as a fixed percentage of earnings. However, if you
have employees you may need to contribute for them.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
- --------------------------------------------------------------------------------
Q. Should I adopt both the
profit sharing plan and the
pension plan?
A. If you're interested in contributing more than 15% you can adopt the profit
sharing plan and the pension plan together. This will provide you with the
maximum tax-break plus the flexibility to change the percentage of compensation
you contribute each year--by as much as 15% by altering your contributions to
the profit sharing plan.
Here's how you would divide your contributions if you want to contribute the
full 25%:
o To insure maximum flexibility, you would contribute 15% to the profit
sharing plan.
o To bring your contributions to 25%, you would contribute an additional
10% to the pension plan.
Remember, with the pension plan you would be committed to contributing a fixed
10% each year, but you could vary the level of your contributions to the profit
sharing plan from 0% to 15%.
Q. How much can I contrib-
ute to each plan if I'm self-
employed?
A. You'll recall that self-employed people can make contributions of up to 25%
of earned income, which equals 20% of net profits.
If you're contributing 15% to the profit sharing plan alone you would multiply
your net profits by 13.043%. The result will equal 15% of your earned income.
If you're adopting both plans and contributing the maximum, 13.043% for the
profit sharing plan does not apply, because you must consider both plans
together. As a self-employed individual you would contribute 12% to the profit
sharing plan and 8% to the pension plan. These contributions are based on net
profits.
Contributions for any employees are based on each individual's compensation as
shown on their W-2 forms.
Calculating Your Contribution Limits
(multiply this percentage by net profits if you are self-employed)
total
maximum profit pension contribution
deduction for sharing plan plan limit
- --------------------------------------------------------------------------------
Adopting only Self-employed 13.043% -- 13.043%
profit sharing Employees 15 -- 15
plan
- --------------------------------------------------------------------------------
Adopting only Self-employed -- 20 20
pension plan Employees -- 25 25
- --------------------------------------------------------------------------------
Adopting Self-employed 12 8 20
both plans Employees 15 10 25
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
- --------------------------------------------------------------------------------
Q. Can I make voluntary
contributions to Flexi-Plan?
A. Yes, if you choose to, you and your plan's participants can each make
nondeductible voluntary contributions totaling 10% of your cumulative wages
during the time you or they are covered by the plan. This is above and beyond
the regular contributions you make as the employer.
If you're self-employed, your nondeductible voluntary contributions can
be up to 10% of net profits after your deductible retirement plan contributions.
In a year when you make the maximum tax-deductible contribution, full voluntary
contributions may not be made.
Q. What are the benefits of
making voluntary contributions?
A. All the earnings on these contributions are tax-deferred until withdrawn.
They allow you to accumulate even greater retirement savings.
Q. Is there a deadline for
making voluntary contributions?
A. No, voluntary contributions can be made at any time.
Q. Can I place a distribution
from another qualified retirement
plan in my Flexi-Plan account?
A. Yes, you can roll over lump sum distributions from other qualified
retirement plans. This allows you to continue deferring taxes and retain any
right you have to use special forward averaging on subsequent lump sum
distributions.
(Note: Generally, if you owned more than 5% of a business, a distribution from a
plan sponsored by that business may not be rolled over to another qualified
plan.)
Q. Can I transfer an existing
corporate retirement plan or
Keogh to Scudder?
A. Yes, and we'll do all the paperwork. Simply use the Transfer Form included
in this kit. There are no tax penalties involved.
- --------------------------------------------------------------------------------
Q. When can distributions
begin?
A. Generally, a participant in Flexi-Plan can start distributions either at
retirement or at normal retirement age, whichever is later. Your plan
administrator can, in many cases, approve earlier distributions. However,
stating in 1987, distributions before age 59-1/2 may be subject to a 10% penalty
tax unless rolled over or distributed in a certain manner. In addition,
owners of more than 5% of the business:
o must begin distributions by April 1st of the year following the year
they turn age 70-1/2, even if they continue to work and to make contributions.
other plan participants:
o may receive distributions when they terminate employment, or when the
plan terminates.
o prior to 1989, need not begin distributions until retirement, even if
over age 70-1/2.
Voluntary contributions may be withdrawn at any time.
Q. How can I take out my
money?
A. There are three ways to withdraw your money, depending on your plan(s) and
your particular situation:
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
- --------------------------------------------------------------------------------
1. A lump sum payment allows you to withdraw your entire investment at once.
2. Periodic installments allow you to receive your money over a period of time.
3. Annuity payments ensure that you receive payments as long as you or your
spouse live.
Please review the Plan Document carefully to decide which options are available
for your situation.
Q. How are Flexi-Plan distri-
butions taxed?
A. If you take periodic distributions from your account, they will be taxed as
ordinary income.
If you ask to receive a lump sum, then your distribution may be eligible for
special forward averaging, a tax treatment which can significantly reduce your
tax bill. Lump sum distributions can also be placed in an IRA rollover, where
they can continue to tax-deferred.
Q. How does the Tax Reform
Act of 1986 change the rules for
Flexi-Plan investors?
A. This law makes several changes to the rules governing Keoughs, pensions,
and profit sharing plans. You should note that the major benefits of investing
in a Flexi-Plan--a large annual tax-deduction and tax-deferred compounding of
investment returns--remain intact, and more important than ever.
New rules for the 1987 tax year
o Nondeductible voluntary contributions will count toward the 25% or
$30,000 ceiling on annual contributions starting with the 1987 tax year.
o Withdrawals made before age 59-1/2 will generally be subject to a 10%
IRS penalty, unless rolled over to another plan or distributed in a certain
manner.
o Plan participants whose adjusted gross income exceeds $50,000 (for
joint filers) or $35,000 (for single filers) will be able to make only
nondeductible IRA contributions.
o Lump sum distributions will be eligible for five-year forward averaging
(formerly 10-year) under restricted conditions. 10-year averaging may apply
for individuals who reached age 50 before 1/1/86.
New rules effective with the 1989 tax year
o Contributions can be based on only the first $200,000 of compensation
for any one person, even if the retirement plan is not top heavy. (A
self-employed person can base contributions on as much as $230,000 if making a
$30,000 contribution.)
o Employees cannot be required to complete more than two years of service
before becoming eligible to participate in a retirement plan.
o Vesting schedule will be tightened resulting in more rapid vesting for
plan participants.
o All participants will be required to begin distributions by April 1 of
the year following the year they turn 70-1/2, even if they continue to work
and receive contributions at the same time.
o There will be a 50% IRS penalty on distributions which were required
but not received by plan participants over age 70-1/2.
A more detailed explanation of the tax reform changes, titled "Scudder
Flexi-Plan
[ILLEGIBLE]
<PAGE>
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For Those Plans Covering Employees
Q. If I have employees,
should they be covered by this
Plan?
A. Yes. You must include full-time employees and certain part-time employees,
if they meet specific conditions. You can require your employees to complete a
waiting period before becoming eligible to participate, or you can offer them
immediate participation. Prior to 1989 the most stringent eligibility
requirements allowed are 3 years of service and 21 years of age.
Q. How much should I con-
tribute for each of my employees?
A. Contributions for any employees are based on each individual's compensation
as shown on their W-2 forms. You contribute the same percentage of compensation
for each employee that you contribute for yourself. For example, you might
contribute 5% of compensation for each eligible participant. Maximum
contribution limits for employees are shown in the chart on page 7.
Q. Does Flexi-Plan allow for
Social Security integration?
A. Yes. As an employer you already contribute toward retirement for each of
your employees by making payments to Social Security. Your Social Security
contributions are based on each employee's wages; however, wages in excess of
the Social Security wage base are not taken into account.
Integration allows you to allocate a portion of your total retirement plan
contribution to employees whose wages exceed the Social Security wage base (or a
lower amount which you can select). In effect, integration allows you to
consider your Social Security contributions together with your retirement plan
contributions for the purpose of allocation. (A top heavy plan will still have
to make minimum contributions.)
Q. How are contributions
vested?
A. You can select full and immediate vesting, 6-year graduated vesting, or
something in between. (If you choose a waiting period of more than one year for
eligibility, vesting must be full and immediate.)
Q. Can participants make
their own investment decisions?
A. Each participant's account will be self-directed within the Scudder family
of funds, unless you decide to have your plan administrator make the investment
decisions. Generally, the employer is the plan administrator.
Q. Does Flexi-Plan permit
loans?
A. You have the option of allowing participants to borrow from your plan.
Loans must be available to all plan participants on an equal basis.
Plan loans can be an important source of funds for participants in times of
hardship. A reasonable rate of interest is required on plan loans.
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Q. What is a "top heavy"
plan?
A. A top heavy plan is one in which more than 60% of the benefits go to key
employees. This is frequently the case in small businesses where there are few
employees.
<PAGE>
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Q. Who are key employees?
A. A key employee is an employee who at any time during the plan years or any
of the preceding four plan years, is one of the following:
o an individual owning more than 5% of a business;
o an individual owning more than 1% of a business and earning more
than $150,000;
o an officer of a business earning more than $45,000;
o one of the 10 employees earning more than $30,000 and owning the
largest interests in the employer.
Q. Are there special require-
ments for top heavy plans?
A. Top heavy plans must allocate a contribution of at least 3% to non-key
employees (or the percentage equal to the highest contribution rate used for key
employees). Top heavy plans must also provide that vesting for eligible
participants reach 100% after 6 years. This rule is incorporated in the
Flexi-Plan.
Q. Does the Flexi-Plan
satisfy TEFRA's top heavy rules?
A. Yes, the Flexi-Plan automatically includes provisions that satisfy these
rules regarding top heavy plans.
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Q. What kind of reports will I
need to file?
A. You should file a Summary Plan Description with the U.S. Department of
Labor within 120 days of starting your Flexi-Plan. We'll send one to you with
instructions as soon as you sign up.
You may also have to file the IRS Form 5500 Series Report for your plan each
year. It's due by the final day of the seventh month following the end of your
plan year. This will be July 31 for those plans on a calendar year. State Street
Bank and Trust Co., if trustee, will send you the information you need to
complete the form.
Q. What kind of notification
should I give to my employees?
A. You must post a Notice to Interested Parties. You should also make a copy
of the Summary Plan Description available to each of your participants. The
Notice to Interested Parties is included in the enrollment book.
Q. Will I need to apply to the
IRS for a determination letter?
A. If you use the Adoption Agreements enclosed in this kit (which appoint
State Street Bank as Trustee), you can rely on Scudder's IRS opinion letter,
unless you maintain or have maintained at any time another qualified plan (other
than a plan amended into a Flexi-Plan appointing State Street Bank as trustee or
another Flexi-Plan appointing State Street Bank as trustee). If you have
maintained another plan, you'll have to file for a determination letter from the
IRS for assurance that both your plans will be qualified.
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How to Start Your Flexi-Plan
Q. What should I do to start
a Flexi-Plan?
A. Everything you need is right in this package. After reading all of the
enclosed material, including the prospectus for the fund or funds you've
selected, turn to the booklet of enrollment forms and follow the instructions
there. (If you need a new prospectus, please give us a call.)
<PAGE>
SCUDDER
PROTOTYPE PLAN
Basic Plan Document 01
SECTION 1.
INTRODUCTION
The Employer has established this Plan (the "Plan") consisting of the
Adoption Agreement and the following provisions (the "Prototype Plan") for the
exclusive benefit of its Employees and their Beneficiaries.
SECTION 2.
DEFINITIONS
Where the following words and phrases appear in this Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates
a contrary meaning. The singular herein shall include the plural, and vice
versa, and the masculine gender shall include the feminine gender, and vice
versa, where the context requires.
2.01 "Account" shall mean the Trust assets held by the Trustee for the
benefit of a Participant, which shall be the sum of the Participant's Employer
Contribution Account, Nondeductible Voluntary Contribution Account, Deductible
Voluntary Contribution Account, Rollover Account, and any transfer account
established pursuant to Section 4.04 hereof with respect to funds transferred on
the Participant's behalf.
2.02 "Act" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
2.03 "Administrator" shall mean the person or persons specified in Section
12.01 hereof.
2.04 "Adoption Agreement" shall mean the agreement by which the Employer
has most recently adopted or amended the Plan.
2.05 "Beneficiary" shall mean any person or legal representative
effectively designated by the Participant as a person entitled to receive
benefits on or after the death of a Participant within the meaning of Code
Section 401(a)(9)(E) and any regulations promulgated thereunder by the Secretary
of the Treasury.
2.06 "Code" shall mean the Internal Revenue Code of 1954, as amended.
Reference to a section of the Code shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.07 "Compensation" shall mean the amount paid during the Plan Year by the
Employer to the Employee for services rendered while a Participant, as
reportable to the Federal Government for the purpose of withholding Federal
income taxes, but not including, so long as the Plan is not integrated with
Social Security, amounts attributable to any category specified in the Adoption
Agreement. If so specified in the Adoption Agreement, Compensation shall also
mean amounts paid to the Employee for services rendered for the entire Plan Year
in which an Employee became a Participant whether or not such an Employee was a
Participant for the entire Plan Year. In the case of a Self-Employed Individual,
the above determination of Compensation shall be made on the basis of the Self-
Employed Individual's Earned Income. Notwithstanding the previous sentence, for
the purposes of the limitations imposed by Section 401(a)(i)(C)(II) below,
Compensation of a Self-Employed Individual shall be determined in accordance
with the rules provided in Code Section 404(a)(8)(D).
2.08 "Current Accumulated Earnings and Profits" of an Employer other than a
sole-proprietorship or partnership shall mean the Employer's current or
accumulated earnings and profits, as determined on the basis of the Employer's
books of account in accordance with generally accepted accounting practices,
without any deductions for Employer Contributions under the Plan (or any other
qualified plan) for the current Year or for income taxes for the current Year,
and without regard to the Employer's election to be taxed as a small business
corporation, if it has so elected. If the Employer is a sole-proprietorship or
partnership, "Current or Accumulated Earnings and Profits" shall mean the net
income of such Employer before deduction for income taxes and contributions made
hereunder.
2.09 "Deductible Voluntary Contribution Account" shall mean the separate
account maintained pursuant to Section 6.03(c) hereof for the Deductible
Voluntary Contributions made by the Participant and the income, expenses, gains
and losses attributable thereto.
2.10 "Deductible Voluntary Contributions" shall mean the contributions made
by Participants in accordance with Section 4.02 hereof, which respective
contributing Participants designate as "Deductible Voluntary Contributions" at
the time of contribution, and which comply with the requirements of Code Section
219.
2.11 "Designated Investment Company" shall mean a regulated investment
company for which Scudder, Stevens & Clark, its successor or any of its
affiliates, acts as investment adviser and which is designed by Scudder Fund
Distributors, Inc. or its successors, as eligible for investment under the Plan.
2.12 "Designation of Beneficiary" or "Designation" shall mean the document
executed by a Participant under Section 15.
2.13 "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expect to result in death or last for a continuous period
of 12 months or more, as certified by a licensed physician selected by the
Participant and approved by the Employer.
2.14 "Distributee" shall mean the Beneficiary or other person entitled to
receive the undistributed portion of the Participant's Account under Section 8
because of death or under Section 14 because of incompetency or inability to
ascertain or locate such individual.
2.15 "Distributor" shall mean Scudder Fund Distributors, Inc. or its
successor.
2.16 "Earned Income" shall mean the net earnings from self employment in
the trade or business with respect to which the Plan is established, for which
personal services of the Owner-Employee or Self-Employed Individual are a
material income-producing factor. Net earnings will be determined without regard
to items not included in gross income and the deductions allocable to such
items. Net earnings are reduced by contributions by the Employer to a qualified
plan, including this Plan, to the extent deductible under Code Section 404.
2.17 "Effective Date" shall mean the date specified by the Employer in the
Adoption Agreement.
2.18 "Election Period" shall mean the period which begins of the first day
of the Plan Year in which the Participant attains age 35 and which ends on the
date of the Participant's death. If a Participant separates from service prior
to the first day of the Plan Year in which he or she attains age 35 the Election
Period with respect to his or her vested Account balance (as of his or her date
of separation) shall begin on his or her date of separation.
2.19 "Employee" shall mean an individual who performs services in the
business of the Employer in any capacity (including any individual deemed to be
an employee of the Employer under Code Section 414(n)).
2.20 "Employer" shall mean the organization or other entity named as such
in the Adoption Agreement and any successor organization or entity which adopts
the Plan.
Any two or more organizations or entities which are members of (a) a
controlled group of corporations (as defined under Code Section 414(b)), (b) a
group of trades or businesses (whether or not incorporated) which are under
common control (as defined under Code Section 414(c)), or (c) an affiliated
service group (as defined under Code Section 414(m)), will be considered to be
the Employer for the purposes of the Plan, unless the Plan is adopted as a
nonstandardized plan, the adopting Employer makes a written election to the
contrary and such written election is attached to the Adoption Agreement. Any
such attached, written election shall become part of the Adoption Agreement.
2.21 "Employer Contribution Account" shall mean the separate account
maintained pursuant to Section 6.03(a) hereof for the Employer Contributions
allocated to a Participant and the income, expenses, gains and losses
attributable thereto.
2.22 "Employer Contributions" shall mean the contributions made by the
Employer in accordance with Section 4.01 hereof.
2.23 "Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be credited to
the Employee for the computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including Disability), layoff,
jury duty, military duty or leave of absence. No more than 501 Hours of Service
shall be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period). Hours under this
subsection shall be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor Relations which are incorporated herein by reference;
(c) Solely for the purpose of determining whether a One-Year Break in
Service has occurred, each hour which normally would have been credited to an
Employee (or in any case in which such house cannot be determined, eight hours
per day of such absence) but for an absence from work during a Plan Year
beginning after December 31, 1984 because of such individual's pregnancy, birth
of a child of the individual, placement of an adopted child with the individual,
or caring for an adopted or a natural child following placement or birth. Hours
of Service under this paragraph shall be credited in the Plan Year in which the
absence begins if the individual would otherwise have suffered a One-Year Break
in Service, and in all other cases, in the immediately following Plan Year. No
more than 501 Hours of Service shall be credited under this paragraph by reason
of any one placement or pregnancy. Notwithstanding any implication of this
subsection (c) to the contrary, no credit shall be give under this subsection
(c), unless the Employee makes a timely, written filing with the Administrator
which establishes valid reasons for the absence and enumerates the days for
which there was such an absence;
(d) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under subsection (a), (b) or (c), as the case
may be, and under this subsection (d). These hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made.
Where the Employer maintains the plan of a predecessor employer, service
for such predecessor employer shall be treated as Service of the Employer. Where
the Employer does not maintain the plan of a predecessor employer, employment by
a predecessor employer, upon the written election of the Employer made in a
uniform and non-discriminatory manner, shall be treated as Service for the
Employer, provided that the Employer may only make such an election if he has
adopted this Plan as a nonstandardized plan.
If the Employer is a member of (a) a controlled group of corporations (as
defined under Code Section 414(b)), (b) a group of trades or businesses (whether
or not incorporated) which are under common control (as defined under Code
Section 414(c)), or (c) an affiliated service group (as defined under Code
Section 414(m)), all service of an Employee for any member of such a group shall
be treated as if it were Service for the Employer for purposes of this Section
2.23.
In addition, all service for any individual who is considered a leased
employee of the Employer under Code Section 414(n) shall be treated as if it
were Service for the Employer for purposes of this Section 2.23. However,
qualified plan contributions or benefits provided by the leasing organization
which are attributable to Services performed for the Employer shall be treated
as provided by the Employer. The provisions of this paragraph shall not apply to
any leased employee if such employee is covered by a money purchase pension plan
maintained by the leasing organization providing: (a) a nonintegrated employer
contribution rate of at least 7-12% of compensation, (b) immediate
participation, and (c) full and immediate vesting. For purposes of this Section
2.23, the term "leased employee" means any person who is not an Employee and
who, pursuant to an agreement
<PAGE>
between the recipient and any other person, has performed services for the
Employer (or for the Employer and related persons determined in accordance
with Code Section 414(n)(6)) on a substantially full-time basis for a
period of at least one year and such services are of a type historically
performed by employees in the business field of the Employer.
2.24 "Integration Level" for a Plan Year shall mean the lesser of the
Social Security Wage Base or the dollar amount specified in the Adoption
Agreement.
2.25 "Integration Rate" for a Plan Year shall mean the lesser of the OASDI
Rate (as in effect on the first day of the Plan Year) or the rate specified in
the Adoption Agreement.
2.26 "Loan Trustee" shall mean the Trustee or, if the Employer has
specified otherwise in the Adoption Agreement, the individual or individuals so
appointed to act as trustees solely for the purpose of administering the
provisions of Section 10 and holding the Trust assets to the extent that they
are invested in loans pursuant to such Section.
2.27 "Nondeductible Voluntary Contributions Account" shall mean the
separate account maintained pursuant to the Section 6.03(b) hereof for
Nondeductible Voluntary Contributions made by the Participant and the income,
expenses, gains and losses attributable thereto.
2.28 "Nondeductible Voluntary Contributions" shall mean all contributions
by Participants which are not Deductible Voluntary Contributions, Rollover
Contributions, or contributions of accumulated deductible employee contributions
made pursuant to Section 4.02(b)(vi) hereof.
2.29 "Normal Retirement Date" or "Normal Retirement Age" shall mean the
earlier of (a) the date selected by the Employer in the Adoption Agreement or,
(b) if the Employer enforces a mandatory retirement age, the first day of the
month in which the Participant reaches that age.
2.30 "OASDI Rate" for a Plan Year shall mean the tax rate applicable, on
the first day of the Plan Year, to employer contributions for old age,
survivors, and disability insurance under the Social Security Act.
2.31 "One-Year Break in Service" shall mean a 12-consecutive-month period
in which an Employee does not complete more than 500 Hours of Service unless the
number of Hours of Service specified in the Adoption Agreement for purposes of
determining a Year of Service is less than 501, in which case a
12-consecutive-month period in which an Employee has fewer than that number of
Hours of Service shall be a One-Year Break in Service. The computation period
over which One-Year Breaks in Service shall be measured shall be the same
computation period over which Years of Service are measured.
2.32 "Owner-Employee" shall mean an Employee who is a sole proprietor
adopting this Plan as the Employer, or who is a partner owning more than 10% of
either the capital or profits interest of a partnership adopting this Plan as
the Employer. Solely for the purposes of Section 10 hereof, Owner-Employee shall
also mean an Employee or officer who owns (or is considered as owning within the
meaning of Code Section 318(a)(1)) on any day during the Year, more than 5% of
the Employer if the Employer is an electing small business corporation.
2.33 "Participant" shall mean an Employee who is eligible to participate in
the Plan under Section 3 (other than, if this Plan is adopted as a
non-standardized plan, a Self-Employed Individual who elects not to be a
Participant in the Plan) and who has not, since becoming a Participant, died,
retired, otherwise terminated employment with the Employer or transferred from
an eligible class to a class of Employees ineligible to participate in the Plan.
2.34 "Plan" shall mean the Prototype Plan and Adoption Agreement.
2.35 "Plan Year" shall mean the fiscal year of the Employer or a different
12-consecutive-month period as specified in the Adoption Agreement.
2.36 "Prototype Plan" shall mean these Sections 1.24.
2.37 "Qualified Election" shall mean a valid waiver of a Qualified Joint
and Survivor Annuity or Qualified Preretirement Survivor Annuity, as the case
may be. To be valid, the waiver must be in writing and Participant's Spouse must
consent to it in writing. The Spouse's consent to the waiver must be witnessed
by a Plan representative or notary public and must be a limited consent to the
provision of a benefit or benefits to a specific alternate person or persons.
Notwithstanding the foregoing consent requirement, 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, a waiver will nonetheless be deemed a Qualified Election. Any consent
necessary for a Qualified Election will be valid only with respect to the Spouse
who signs the consent, or in the event of a deemed Qualified Election, the
Spouse whose consent could not be obtained or who could not be located.
Additionally, a revocation of a prior waiver may be made by a Participant
without the consent of the Spouse at any time before the commencement of
distributions or benefits. The number of revocations shall be unlimited, but
each such revocation shall once again make the Qualified Joint and Survivor
Annuity or Qualified Preretirement Survivor Annuity applicable, as the case may
be, and the spouse must consent to any subsequent waiver in accordance with the
requirements of this Section 2.37.
2.38 "Qualified Joint and Survivor Annuity" shall mean, in the case of a
married Participant, an annuity which can be purchased with the Participant's
vested Account balance for the life of the Participant with a survivor annuity
for the life of the Spouse equal to 50% of the amount of the annuity which is
payable during the joint lives of the participant and the Spouse. In the case of
an unmarried Participant, Qualified Joint and Survivor Annuity shall mean an
annuity which can be purchased with a Participant's vested Account balance for
the life of the Participant.
2.39 "Rollover Account" shall mean the separate account maintained pursuant
to Section 6.03(d) hereof for any Rollover Contributions (as described in
Section 4.03 hereof) made by the Participant and the income, expenses, gains and
losses attributable thereto.
2.40 "Rollover Contributions" shall mean contributions made to the Trust by
Participants in accordance with Section 4.03 hereof.
2.41 "Self-Employed Individual" shall mean an Employee who has Earned
Income for the taxable year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income but for the fact
that the trade or business had no Current or Accumulated Earnings and Profits
for the taxable year.
2.42 "Service" shall mean employment by the Employer and, if the Employer
is maintaining the plan of a predecessor employer, or if the Employer is not
maintaining the plan of a predecessor employer but has so elected in the manner
described in Section 2.23 above, employment by such predecessor employer.
2.43 "Social Security Wage Base" for a Plan Year means the maximum amount
of annual earnings which may be considered wages under Code Section 3121(a)(1)
as in effect on the first day of such Plan Year.
2.44 "Sponsor" shall mean any of the organizations (a) which have requested
a favorable opinion letter from the National Office of the Internal Revenue
Service for this Plan or (b) to which a favorable opinion letter for this Plan
has been issued by the National Office of the Internal Revenue Service.
2.45 "Spouse" shall mean the spouse or surviving spouse of the Participant,
provided that a former spouse will be treated as the spouse or surviving spouse
to the extent provided under a Qualified Domestic Relations Order (as described
in Section 16.02 hereinafter).
2.46 "Trust" shall mean the trust established under Section 11 of this Plan
for investment of Trust assets.
2.47 "Trust Fund" shall mean the contributions to the Trust and any assets
into which such contributions shall be invested or reinvested in accordance with
Sections 11.01 and 11.03 of this Plan.
2.48 "Trustee" shall mean the person or persons including any successor or
successors thereto, named in the Adoption Agreement to act as trustee of the
Trust and hold the Trust assets in accordance with Section 11 hereof.
2.49 "Valuation Date" shall mean the last day of each Plan Year.
2.50 "Vesting Years" shall be measured on the 12-consecutive-month period
specified in the Adoption Agreement. A Participant will have a Vesting Year
during such computation period only if the Participant completes the number of
Hours of Service selected in the Adoption Agreement for purposes of computing a
Year of Service. However, notwithstanding the preceding sentence, if the
Employer has so specified in the Adoption Agreement, a Participant who does not
receive credit for a Vesting Year under the preceding sentence will still have a
Vesting Year for each Plan Year for which the Participant shares in the
allocation of Employer contributions for the Plan Year. However, when
determining Vesting Years, unless the Employer has otherwise specified in the
Adoption Agreement, there shall be excluded: (a) if this Plan is a continuation
of an earlier plan which would have disregarded such service, Service before the
first Plan Year to which the Act is applicable; (b) Service after five
consecutive One-Year Breaks in Service (but this exclusion shall apply only for
the purpose of computing the vested percentage of Employer Contributions made
before such five-year period); (c) Service before a period of five One-Year
Breaks in Service, if the Participant has no vested interest in his Employer
Contribution Account at the time of such break and the number of consecutive
One-Year Breaks in Service equals or exceeds the number of Vesting Years
excluded by such break without counting Vesting Years excluded by an earlier
application of this provision; (d) Service before the first Plan Year in which
the Participant attained age 18; (e) Service before the Employer maintained this
Plan or a predecessor plan; and (f) Service before January 1, 1971, unless the
Participant has completed at least three Vesting Years after December 31, 1970.
For the purposes of subsection (a), service disregarded under a prior plan
includes service credits lost because of separation or failure to complete a
required period of service within a specified period of time; such lost service
credits may have resulted in the loss of prior vesting or benefit accruals, or
the denial of eligibility to participate.
2.51 "Year" shall mean the fiscal year of the Employer.
2.52 "Year of Service" shall mean a 12-consecutive-month period, beginning
on an Employee's initial date of employment or an anniversary thereof during
which the Employee completes the number of Hours of Service specified in the
Adoption Agreement. The initial date of employment is the first day on which the
Employee performs an Hour of Service.
SECTION 3.
ELIGIBILITY
3.01 Entry. Each Employee of the Employer, who on the Effective Date of
this Plan meets the conditions specified in the Adoption Agreement, shall become
eligible to participate in the Plan commending with Effective Date. Each other
Employee of the Employer, including future Employees, shall become eligible to
participate in the Plan when the eligibility requirements specified in the
Adoption Agreement are met. For the purposes of this Plan's eligibility
requirements, the exclusion concerning Employees who are covered by collective
bargaining agreements applies to individuals who are covered by a collective
bargaining contract between the Employer and Employee Representatives if
contract negotiations considered retirement benefits in good faith and unless
such contract specifically provides for participation in the Plan. For the
purposes of this Section 3.01, "Employee Representatives" shall mean the
representatives of an employee organization which engages in collective
bargaining negotiations with the Employer, provided that owners, officers and
executives of the Employer do not comprise more than 50% of the employee
organization's membership.
3.02 Interrupted Service. All Years of Service with the Employer are
counted towards eligibility except the following:
(a) If the Employer has specified in the Adoption Agreement that more
than one Year of Service is required before becoming a Participant, and if the
individual has a One-Year Break in Service before satisfying the Plan's
eligibility requirements. Service before such break will not be taken into
account.
(b) For Plan Years beginning before January 1, 1985, in the case of a
Participant who does not
<PAGE>
have any nonforfeitable right to his or her Employer Contributions, Years
of Service before a One-Year Break in Service will not be taken into
account in computing Years of Service for purposes of eligibility if the
number of consecutive One-Year Breaks in Service equals or exceeds the
aggregate number of such Years of Service before such break. Such
aggregate number of Years of Service before such break will not include any
Years of Service disregarded under this subsection (b) by reason of a prior
break in service.
(c) For Plan Years beginning after December 31, 1984, in the case of a
Participant who does not have any nonforfeitable right to his or her Employer
Contributions, Years of Service before a period of consecutive One-Year Breaks
in Service will not be taken into account in computing Years of Service for
purposes of eligibility, if the number of consecutive One-Year Breaks in Service
in such period equals or exceeds the greater of five or the Employee's aggregate
number of such Years of Service before such break. Such aggregate number of
Years of Service before such period will not include any Years of Service
disregarded under this subsection (c) by reason of a prior period of consecutive
One-Year Breaks in Service.
3.03 Reentry. If a former Participant either (a) had a nonforfeitable right
to all or a portion of his or her Employer Contribution Account at the time of
termination from Service or (b) did not have any nonforfeitable right to his or
her Employer Contribution Account but does not have Service prior to the break
in Service disregarded by operation of Section 3.02(b) or (e) hereof, such
former Participant shall become a Participant immediately upon return to the
employ of the Employer as a member of an eligible class of Employees.
3.04 Transfer to Eligible Class. In the event an Employee is not a member
of an eligible class of Employees becomes a member of an eligible class, such
Employee shall participate immediately if such Employee has satisfied the
minimum age and Service requirements and would have previously become a
Participant had he or she been a member of an eligible class through the period
of employ with the Employer.
3.05 Determination by Administrator. Eligibility shall be determined by the
Administrator and the Administrator shall notify each Employee upon his or her
admission as a Participant in the Plan.
SECTION 4.
CONTRIBUTIONS
4.01 Employer Contributions and Allocation
(a) Profit Sharing Plan. If the Employer has adopted this Plan as a
profit sharing plan, the following provisions shall apply:
(i) Contribution.
(A) Subject to Requirements of subparagraphs (B) and (C)
below, beginning in the Plan Year in which the Plan is adopted, and for each
Plan Year thereafter, the Employer will contribute the amount determined by it,
in its discretion, for the Plan Year in question.
(B) Subject to the requirements of subparagraph (C) below,
during any Plan Year in which the Employer has elected to provide Employer
thrift matching contributions in the Adoption Agreement, the Employer shall
contribute at least the aggregate amount specified in the Adoption Agreement.
(C) During a Plan Year, the aggregate Employer Contributions
made pursuant to this Section 4.01(a)(i) may not exceed the lesser of (I) the
Employer's Current or Accumulated Earnings and Profits for the Plan Year or (II)
15% (or such larger percentage as may be permitted by the Code as a current
deduction to the Employer with respect to any Plan Year) of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid to, or accrued by the Employer for,
Participants for that Plan Year plus any unused credit carryovers from previous
Plan Years. For this purpose, a "credit carryover" is the amount by which
Employer Contributions for a previous Plan Year were less than 15% of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid or accrued by the Employer to
Participants for such Plan Year, but such unused credit carryover shall in no
event permit the Employer Contributions for a Plan Year to exceed 25% (or such
larger percentage as may be permitted by the Code as a deduction to the
Employer) of the total Compensation (disregarding any exclusions from
Compensation specified by the Employer in the Adoption Agreement) paid to, or
accrued for, Participants by the Employer for the Plan Year in question.
(ii) Allocation Under Non-Integrated, Profit Sharing Plan. If the
Employer has adopted this Plan as a profit sharing plan under which allocations
shall be made on a non-integrated basis, Employer Contributions, plus any
forfeitures under Section 7.02, for a Plan Year shall be allocated according to
the provisions of this subsection (ii) as of the Valuation Date for such Plan
Year.
(A) Subject to the terms of subparagraph (B) below, unless
the Employer has specified otherwise in the Adoption Agreement, such amount
shall be allocated among the Employer Contribution Accounts of all Participants
and former Participants who were employed by the Employer during the Plan Year.
If the Employer has specified in the Adoption Agreement that a minimum number of
Hours of Service are necessary to share in the allocation of Employer
Contributions and forfeitures for a Plan Year in which the Plan is not Top
Heavy. Participants and former Participants, as the case may be, who fail to
complete the required number of Hours of Service during such a Plan Year shall
not share in the allocation. If the Employer has so specified in the Adoption
Agreement, Employer Contributions and forfeitures shall be allocated only among
otherwise entitled Participants who are employed by the Employer on such
Valuation Date. Employer Contributions and forfeitures shall be allocated to
Participants entitled to share in the allocation of Employer Contributions and
forfeitures for that Plan Year in proportion to their Compensation for such Plan
Year.
(B) Notwithstanding the provisions of subparagraph (A) above
but nonetheless subject to the provisions of Section 21.03 below, during any
Plan Year in which the Employer has elected to provide Employer thrift matching
contributions in the Adoption Agreement and the Plan is not a Top-Heavy Plan.
Employer Contributions and forfeitures shall be allocated in proportion to the
percentage of Participants' Nondeductible Voluntary Contributions as specified
in the Adoption Agreement.
(iii) Allocation Under Integrated, Profit Sharing Plan. If the
Employer has adopted this Plan as a profit sharing plan under which allocations
shall be made on an integrated basis. Employer Contributions, plus any
forfeitures under Section 7.02, for a Plan Year shall be allocated according to
the provisions of this subsection (iii) as of the Valuation Date for such Plan
Year. Unless the Employer has specified otherwise in the Adoption Agreement,
such amount shall be allocated among all Participants and former Participants
who were employed by the Employer during the Plan Year. If the Employer has
specified in the Adoption Agreement that a minimum number of Hours of Service
are necessary to share in the allocation of Employer Contributions and
forfeitures for a Plan Year in which the Plan is not Top Heavy, Participants and
former Participants, as the case may be, who fail to complete the required
number of Hours of Service during such a Plan Year shall not share in the
allocation. If the Employer has so specified in the Adoption Agreement, Employer
Contributions and forfeitures shall be allocated only among otherwise entitled
Participants who are employed by the Employer on such Valuation Date. Employer
Contributions and forfeitures shall be allocated to Participants entitled to
share in the allocation of Employer Contributions and forfeitures for that Plan
Year as follows:
(A) First, Employer Contributions and forfeitures will be
allocated to the Employer Contribution Account of each Participant entitled to
share in the allocation of such amounts in the ratio that each such
Participant's Compensation for the Plan Year in excess of the Integration Level
bears to the Compensation in excess of the Integration Level for all such
Participants, provided that the amount so credited to any such Participant's
Employer Contribution Account for the Plan Year shall not exceed the product of
the Integration Rate times the Participant's Compensation in excess of the
Integration Level.
(B) Next, any remaining Employer Contributions or
forfeitures will be allocated to the Employer Contribution Accounts of all
Participants entitled to share in the allocation of the Employer Contributions
for the Plan Year in the ratio that each such Participant's Compensation for the
Plan Year bears to all such Participants' Compensation for that Plan Year.
(b) Money Purchase Pension Plan. If the Employer has adopted this Plan
as a money purchase pension plan, the Employer will, beginning for the Plan Year
in which the Plan is adopted, and for each Plan Year thereafter, contribute, for
allocation to the Employer Contribution Account of each Participant entitled to
share in the allocation of Employer Contributions, the amount specified in the
Adoption Agreement reduced by any forfeitures arising during the preceding Plan
Year pursuant to Section 7.02 hereafter.
(i) Unless the Employer has specified otherwise in the Adoption
Agreement, the amount of the Employer Contribution shall be calculated on the
basis of the Compensation of all Participants and former Participants who were
employed by the Employer during the Plan Year. If the Employer has specified in
the Adoption Agreement that a minimum number of Hours of Service are necessary
to receive an Employer Contribution in a Plan Year in which the Plan is not Top
Heavy, Participants and former Participants, as the case may be, who fail to
complete the required number of Hours of Service during such a Plan Year shall
not be considered when calculating the amount of the Employer Contribution. If
the Employer has so specified in the Adoption Agreement, only Participants who
are employed by the Employer on such Valuation Date and who are otherwise
entitled to receive an allocation shall be considered when calculating the
amount of the Employer Contribution. Employer Contributions shall be allocated
to the Employer Contribution Accounts of only those Participants who were
included in the calculation of the amount of the Employer Contribution.
(ii) To the extent that the Employer Contribution for a Plan Year
is reduced by forfeitures, such forfeitures shall be added to such Employer
Contribution and allocated as a part thereof.
(iii) Any excess forfeitures not allocated pursuant to this
Section 4.01(b) shall be carried over to future Plan Years.
4.02 Participant Contributions. If, in the Adoption Agreement, the Employer
has specified that Participants may make either Deductible Voluntary
Contributions or Nondeductible Voluntary Contributions, or both, a Participant
may make such permitted contributions to his or her Account; provided, however,
that a Participant's right to make such contribution(s) shall be subject to the
conditions and limitations specified below.
(a) The following conditions and limitations shall apply if the
Employer has specified that Participants may make Nondeductible Voluntary
Contributions:
(i) The aggregate amount of a Participant's Nondeductible
Voluntary Contributions, plus any nondeductible voluntary contributions he or
she makes under any other qualified retirement plan maintained by the Employer,
shall not exceed 10% of his or her Compensation (disregarding any exclusions
from Compensation specified by the Employer in the Adoption Agreement) for the
period in which he or she has been a Participant in the Plan.
(ii) The aggregate amount of a Participant's Nondeductible
Voluntary Contributions shall not cause the Annual Addition (as defined in
Section 5.05(a) hereof) to his or her Account to exceed the limitations set
forth in Section 5.
(iii) A Participant's Nondeductible Voluntary Contributions shall
be allocated to his or her Nondeductible Voluntary Contribution Account under
Section 6.03 hereof.
(iv) A Participant's Nondeductible Voluntary Contribution Account
shall be nonforfeitable and the Participant may withdraw all or a portion of his
or her Nondeductible Voluntary Contribution Account upon 30 days' written notice
to the Administrator.
(b) The following conditions and limitations shall apply if the
Employer has specified that the Participants may made Deductible Voluntary
Contributions:
(i) The aggregate amount of a Participant's Deductible Voluntary
Contributions in any calendar year may not exceed the lesser of (1) $2,000 or
(2) the Participant's compensation for calendar year for which the contribution
is made. Compensation for this purpose means all wages, salaries, earned income
and other amounts received or derived from
<PAGE>
personal services actually rendered and includible in gross income, but does not
include amounts derived from or received as earnings or profits from property or
amounts received as a pension or annuity or as deferred compensation. This
limitation applies to all the Participant's Deductible Voluntary Contributions
made for the calendar year to all qualified retirement plans maintained by the
Employer. The Administrator shall not accept any contributions in excess of this
limitation.
(ii) A Participant may not make Deductible Voluntary
Contributions for the calendar year in which he or she attains age 70-1/2 or any
calendar year thereafter.
(iii) A Deductible Voluntary Contribution will be considered
contributed for the calendar year in which it is actually made. However, if a
Participant makes a Deductible Voluntary Contribution on or before April 15, he
or she may notify the Administrator at the time the Deductible Voluntary
Contribution is made that it is made for the preceding calendar year. A
Deductible Voluntary Contribution may only be made for a calendar year in which
the Employee was a Participant, and in no event may a Deductible Voluntary
Contribution be made by an Employee after he or she has ceased to be a
Participant.
(iv) All Participant Contributions will be considered to be
Deductible Voluntary Contributions, unless the Employer has elected in the
Adoption Agreement to allow Nondeductible Voluntary Contributions and the
Participant designates before April 15 of the calendar year following the
calendar year in which the contribution was made that the contribution was a
Nondeductible Voluntary Contribution. In such a case, the contribution will be
considered to have been a Nondeductible Voluntary Contribution made during the
calendar year in which it was contributed.
(v) A Participant's Deductible Voluntary Contributions must be in
cash and shall be allocated to his or her Deductible Voluntary Contribution
Account under Section 6.03 hereof.
(vi) A Participant's right to his or her Deductible Voluntary
Contribution Account shall be nonforfeitable and the Participant may withdraw
all or a portion of his or her Deductible Voluntary Contribution Account upon
written application to the Administrator. However, if at the time the
Participant receives the withdrawal, he or she has not attained age 59-1/2 and
is not disabled, the Participant will be subject to a federal income tax penalty
unless, within 60 days of the date he or she receives it, he or she rolls over
the amount withdrawn to an individual retirement plan or, if the Participant can
satisfy the requirement contained in section 4.03(b) below, a qualified
retirement plan.
(vii) The Administrator may, in its discretion, accept
accumulated deductible employee contributions (as defined in Code Section
72(o)(5)) that were distributed from a qualified retirement plan and rolled over
pursuant to Code Sections 402(a)(5), 402(a)(7), 403(a)(4), or 408(d)(3). The
rolled over amount will be added to the Participant's Deductible Voluntary
Contribution Account, but will not be taken into account in applying the
restrictions specified in Section 4.02(b)(i) and (ii) above. In no case may the
Administrator authorize the Plan to accept rollovers of accumulated deductible
employee contributions from a qualified plan to which a contribution was made
for the Participant while the plan was a Top-Heavy Plan (as defined in Section
21.02(b) hereof and applied to such other plan) and the Participant was a Key
Employee (as defined in Section 21.02(a) hereof and applied to such other
employer).
4.03 Rollover Contributions. The Administrator may, in its discretion,
direct the Trustee to accept a Rollover Contribution upon the express request of
the Participant wishing to make such Rollover Contribution, the same to be held,
administered and distributed by the Trustee in accordance with the terms of this
Plan, provided that the Trustee consents if the contribution includes property
other than cash. A Rollover Contribution shall only be a contribution, comprised
of money and/or property, which is a "rollover amount" within the meaning of
Code Section 402(a)(5) or a "rollover contribution" within the meaning of Code
Section 408(d)(3)(A)(ii) (as modified by Code Section 408(d)(3)(C)) with respect
to which both of the following conditions are met:
(a) The transfer of such amount is being made within 60 days of its
receipt by the Participant and
(b) No part of such amount is attributable to contributions made on
behalf of the Participant while he or she was a Key Employee (as defined in
Section 21.02(a) and applied to such other employer) in a Top-Heavy Plan (as
defined in Section 21.02(b) and applied to such other plan).
All Rollover Contributions made under this Section 4.03 must be accepted by
the Trustee within the 60-day period referred to in paragraph (a) above. A
Participant's Rollover Contribution shall at no time be included in the
computation of the maximum allocation to a Participant's Account as set forth in
Section 5 hereof. Each Rollover Contribution made by a Participant shall be
allocated to his or her Rollover Account pursuant to Section 6.03(d) hereof.
Such Rollover Account shall be invested by the Trustee as part of the Trust
Fund, pursuant to Section 11 hereafter, except as it may be held in kind as
permitted above. A Participant may withdraw all or a portion of his or her
Rollover Account upon 30 days' written notice to the Administrator. However, if
the Participant is, or has been, a 5-percent owner (as defined in Code Section
416(i)(1)(B)(i)) and at the time of the withdrawal, he or she has not attained
age 59-1/2 and is not disabled, the Participant will be subject to a federal
income tax penalty unless, within 60 days of the date he or she receives it, he
or she rolls the amount withdrawn to an individual retirement plan or, if the
Participant can satisfy the requirement contained in subsection (b) above, a
qualified retirement plan.
4.04 Transfers from other Qualified Plans. The Administrator may, in its
discretion, direct the Trustee to accept the transfer of any assets held for the
Participant's benefit under a qualified retirement plan of a former employer of
such Participant. Such a transfer shall be made directly between the trustee or
custodian of the former employer's plan and the Trustee in the form of cash or
its equivalent, and shall be accompanied by written instruction showing
separately the portion of the transfer attributable to contributions by the
former employer and by the Participant respectively. Separate written
instructions delivered to the Administrator shall identify the portion of the
transferred funds, if any, attributable to any period during which the
Participant participated in a defined benefit plan, money purchase pension plan
(including a target benefit plan), stock bonus plan or profit sharing plan which
would otherwise have provided a life annuity form of payment to the Participant.
The Administrator shall be entitled to rely on all inclusions and commissions in
such written instructions with respect to character of the transferred funds. To
the extent that the amount transferred is attributable to contributions by the
former employer, it shall be maintained in a separate transfer account. To the
extent that the amount transferred is attributable to contributions by the
Participant, it shall be maintained in the Participant's Nondeductible Voluntary
Contribution Account or Deductible Voluntary Contribution Account as is
appropriate.
SECTION 5.
CODE SECTION 415
LIMITATIONS ON ALLOCATIONS
5.01 Employers Maintaining No Other Plan.
(a) If a Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund (as defined in
Code Section 419(e)) maintaned by the Employer, the amount of the Annual
Addition which may be credited to the Participant's Account for any Limitation
Year shall not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in the Plan.
(b) If the Employer Contribution that would otherwide be allocated to
a Participant's Account would cause the Annual Addition for the Limitation Year
to exceed the Maximum Permissible Amount, the amount allocated will be reduced
so that any Excess Amount shall be eliminated and, consequently, the Annual
Addition for the Limitation Year will equal the Maximum Permissible Amount.
(i) Prior to determining the Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant on the basis of a reasonable estimation of the
Participant's Compensation for the Limitation Year, uniformly determined for all
Participants similarly situated.
(ii) As soon as is administratively feasible after the end of
each Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of Participants' actual Compensation for the
Limitation Year.
(c) Any Excess Amount shall be eliminated pursuant to the following
procedure:
(i) The portion of the Excess Amount consisting of Nondeductible
Voluntary Contributions which are a part of the Annual Addition (as defined in
Section 5.05(a)) shall be returned to the Participant as soon as
administratively feasible;
(ii) If after the application of subparagraph (i) an Excess
Amount still exists and the Participant is covered by the Plan at the end of the
Limitation Year, the Excess Amount in the Participant's Account will be used to
reduce Employer Contributions (including any allocation of forfeitures) for such
Participant in the next Limitation Year, and each succeeding Limitation Year if
necessary.
(iii) If after the application of subparagraph (i) an Excess
Amount still exists and the Participant is not covered by the Plan at the end of
the Limitation Year, the Excess Amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce proportionally future
Employer Contributions (including any allocation of forfeitures) for all
remaining Participants in the next Limitation Year, and each succeeding
Limitation Year, if necessary. If a suspense account is in existence at any time
during the Limitation Year pursuant to this subparagraph, it will not
participate in the allocation of the Trust's investment gains and losses. In the
event of termination of the Plan, the suspense account shall revert to the
Employer to the extent it may not then be allocated to any Participant's
Account.
(d) Notwithstanding any other provision in subsections (a) through
(c), the Employer shall not contribute any amount that would cause an allocation
to the suspense account as of the date the contribution is allocated.
5.02 Employers Maintaining Other Master or Prototype Defined Contribution
Plans
(a) This Section 5.02 applies if, in addition to this Plan, a
Participant is covered under another qualified Master or Prototype defined
contribution plan or a welfare benefit fund (as defined in Code Section 419(e))
maintained by the Employer during any Limitation Year. The Annual Addition which
may be allocated to any Participant's Account for any such Limitation Year shall
not exceed the Maximum Permissible Amount, reduced by the sum of any portion of
the Annual Addition credited to the Participant's account under such other plans
and welfare benefit funds for the same Limitation Year.
(b) If the Annual Addition with respect to a Participant under other
defined contribution plans and welfare benefit funds maintained by the Employer
of what would be portions of the Annual Addition (if the allocations were made
under the Plan) 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 Addition for the
Limitation Year to exceed this limitation, the amount contributed or allocated
will be reduced so that the Annual Addition under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount.
(c) If the Annual Addition with respect to the Participant under such
other defined contribution plans and welfare benefit funds in the aggregate are
equal to or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for the
Limitation Year.
(d) If an Excess Amount was allocated to a Participant under this Plan
on a date which coincides with the date an allocation was made under another
plan, the Excess Amount attributed to this Plan will be the product of,
(i) The total Excess Amount allocated as of such date, multiplied
by
(ii) the quotient obtained by dividing
(A) the portion of the Annual Addition allocated to the
Participant for the Limitation Year as of such date by
(B) the total Annual Addition allocations to the Participant
for the Limitation Year as of such date under this and all other qualified
Master or Prototype defined contribution plans maintained by the Employer.
(e) Any Excess Amount attributed to the Plan will be disposed in the
manner described in Section 5.01.
<PAGE>
5.03 Employers Maintaining Other Defined Contribution Plans. If a
Participant is covered under another qualified defined contribution plan which
is not a Master or Prototype plan, the Annual Addition credited to the
Participant's Account under this Plan for any Limitation Year will be limited in
accordance with the provisions of Section 5.02 as though the plan were a Master
or Prototype Plan, unless the Employer provides other limitations pursuant to
the Adoption Agreement.
5.04 Employers Maintaining Defined Benefit Plans. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan covering
any Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Addition which may be credited to the Participant's
Account under this Plan for any Limitation Year will be limited in accordance
with the provisions of Section 5.02, unless the Employer provides other
limitations pursuant to the Adoption Agreement.
5.05 Definitions. For purposes of this Section 5, the following terms shall
be defined as follows:
(a) Annual Addition. With respect to any Participant, the "Annual
Addition" shall be the sum of the following amounts credited to a Participant's
Account for the Limitation Year:
(i) Employer Contributions;
(ii) forfeitures; and
(iii) the lesser of
(A) one-half (1/2) the allocated Nondeductible Voluntary
Contributions or
(B) the amount of allocated Nondeductible Voluntary
Contributions in excess of 6% of the Participant's Compensation for the
Limitation Year.
Any Excess Amount applied under Section 5.01(c)(ii) or (iii) or Section
5.02(e) in a Limitation Year to reduce Employer Contributions will be considered
part of the Annual Addition for such Limitation Year. Amounts allocated, after
March 31, 1984, to an individual medical account (as defined in Code Section
415(l)(1)) which is part of a defined benefit plan maintained by the Employer,
are treated as part of the Annual Addition. Also, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee (as defined in Section
21.02(a) hereof) under a welfare benefit fund (as defined in Code Section
419(e)) maintained by the Employer, are treated as part of the Annual Addition.
(b) Compensation. For the purposes of this Section 5, a Participant's
"Compensation" shall include any earned income, wages, salaries, and fees for
professional services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the Plan
(including, but not limited to commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation
which are not includible in the Participant's gross income for the taxable year
in which contributed, or Employer contributions under a simplified employee
pension plan to the extent such contributions are deductible by the Participant,
or any distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified stock
option, or when restricted 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 received special tax benefits, or
contributions made by the Employer (whether or not under a salary-reduction
agreement) towards the purchase of an annuity described in Code Section 403(b)
(whether or not the amounts are actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this Section 5, Compensation
for a Limitation Year is the Compensation actually paid or includible in gross
income during such year.
Notwithstanding the preceding sentence, Compensation for a Participant in a
profit sharing plan who is permanently and totally disabled (as defined in Code
Section 22(e)(3)) is the Compensation such Participant would have received for
the Limitation Year if the Participant was paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account only if the
Participant is not an officer, an owner, or highly compensated, and
contributions made on behalf of such a Participant are nonforfeitable when made.
(c) Defined Benefit Fraction. The "Defined Benefit Fraction" shall be
a fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125%
of the dollar limitation in effect for the Limitation Year under Code Section
415(b)(1)(A) or 140% of the Participant's Highest Average Compensation.
Notwithstanding the above, if the Participant was a participant in one or
more defined benefit plans maintained by the Employer which were in existence on
July 11, 1982, the denominator of this fraction will not be less than 125% of
the sum of the annual benefits under such plans which the Participant had
accrued as of the later of the end of the last Limitation Year beginning before
January 1, 1983. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the requirements of Code
Section 415 as in effect at the end of the 1982 Limitation Year. For purposes of
this paragraph, a Master or Prototype plan with an opinion letter issued before
January 1, 1983, which was adopted by the Employer on or before June 30, 1983,
is treated as a plan in existence on July 1, 1982.
(d) Defined Contribution Fraction. The "Defined Contribution Fraction"
shall be a fraction, the numerator of which is the sum of the Annual Additions
to the Participant's account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
Limitation Years, (including the Annual Additions attributable to the
Participant's nondeductible employee contributions to all defined benefit plans,
whether or not terminated, maintained by the Employer, and the Annual Additions
attributable to all welfare benefit funds (as defined in Code Section 419(e))),
and the denominator of which is the sum of the Maximum Aggregate Amounts for the
current and all prior Limitation Years of service with the Employer (regardless
of whether a defined contribution plan was maintained by the Employer). The
Maximum Aggregate Amount in any Limitation Year is the lesser of 125% of the
dollar limitation in effect under Code Section 415(c)(1)(A) or 35% of the
Participant's Compensation for such year.
If a Participant was a participant in one or more defined contribution
plans maintained by the Employer which were in existence on July 1, 1982, the
numerator of this fraction will be adjusted if the sum of this Defined
Contribution Fraction and the Defined Benefit Fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment, an amount equal to the
product of
(i) The excess of the sum of the fractions over 1.0, multiplied
by
(ii) the denominator of this Defined Contribution Fraction.
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the later of the end of the last Limitation Year beginning before
January 1, 1983 or September 30, 1983. This adjustment also will be made
if at the end of the last Limitation Year beginning before January 1, 1984,
the sum of the fractions exceeds 1.0 because of the accruals or additions
that were made before the limitations of this Section 5 became effective to
any plans of the Employer in existence on July 1, 1982. For purposes of
this paragraph, a Master or Prototype plan with an opinion letter issued
before January 1, 1983, which is adopted by the Employer on or before
September 30, 1983, is treated as a plan in existence on July 1, 1982.
(e) Employer. "Employer" means the Employer that adopts this Plan and
all members of (i) a controlled group of corporations (as defined in Code
Section 414(b) as modified by Code Section 415(h)), (ii) commonly controlled
trades or businesses (whether or not incorporated) (as defined in Code Section
414(c) as modified by Code Section 415(h)), or (iii) affiliated service groups
(as defined in Code Section 414(m)) or which the Employer is a part.
(f) Excess Amount. The "Excess Amount" is the excess of what would
otherwise by a Participant's Annual Addition for the Limitation Year over the
Maximum Permissible Amount. If at the end of a Limitation Year when the Maximum
Permissible Amount is determined on the basis of the Participant's actual
Compensation for the year, an Excess Amount results, the Excess Amount will be
deemed to consist of the portion of the Annual Addition last allocated, except
that the portion of the Annual Addition attributable to a welfare benefit fund
will be deemed to have been allocated first regardless of the actual allocation
date.
(g) Highest Average Compensation. A Participant's "Highest Average
Compensation" is his or her average Compensation for the three consecutive Years
of Service with the Employer that produces the highest average. A Year of
Service with the Employer is the 12-consecutive-month period defined in Section
2.52 of the Plan.
(h) Limitation Year. A "Limitation Year" is the Plan Year or any other
12-consecutive-month period specified by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-consecutive-month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
(i) Master or Prototype Plan. A "Master or Prototype" plan is a plan
the form of which is the subject of a favorable opinion letter from the Internal
Revenue Service.
(j) Maximum Permissible Amount. For a Limitation Year, the "Maximum
Permissible Amount" with respect to any Participant shall be the lesser of
(i) $30,000 (or beginning January 1, 1988, such larger amount
determined by the Commissioner of Internal Revenue for the Limitation Year) or
(ii) 25% of the Participant's Compensation for the Limitation
Year.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive-month period, the Maximum
Permissible Amount will not exceed the quotient determined by first multiplying
$30,000 by the number of months in the short Limitation Year and then dividing
the product by 12.
(k) Projected Annual Benefit. The "Project Annual Benefit" is the
annual retirement benefit (adjusted to an actuarilly equivalent straight life
annuity if such benefit is expressed in a form other than a straight life
annuity or qualified joint and survivor annuity) to which the Participant would
be entitled under the terms of the plan assuming:
(i) the Participant will continue employment until normal
retirement date 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.
SECTION 6.
TIME AND MANNER OF MAKING
CONTRIBUTIONS
6.01 Manner. Unless otherwise agreed to by the Trustee, contributions to
said Trustee shall be made only in cash. All contributions may be made in one or
more installments.
6.02 Time. Employer Contributions and Participant Contributions with
respect to a Plan Year shall be made before the time limit, including extensions
thereof, for filing the Employer's federal income tax returns for the Year with
or within which the particular Plan Year ends (or such later time as is
permitted by regulations authorized by the Secretary of the Treasury or
delegate). Rollover Contributions may be made at any time acceptable to the
Administrator in accordance with Section 4.0 hereof. All contributions shall be
paid to the Administrator for transfer to the Trustee, as soon as possible, or,
if acceptable to the Administrator and the Trustee, such contributions may be
paid directly to the Trustee. The Administrator shall transfer such
contributions to the Trustee as soon as possible. The
<PAGE>
Administrator may establish a payroll deduction system or other procedure to
assist the making of Participant Contributions to the Trust, and the
Administrator may from time to time adopt rules or policies governing the manner
in which such contributions may be made so that the Plan may be conveniently
administered.
6.03. Separate Accounts. For each Participant, a separate account shall be
maintained for each of the following types of contributions and the income,
expenses, gains and losses attributable thereto:
(a) Employer Contributions;
(b) Nondeductible Voluntary Contributions, if selected in the Adoption
Agreement;
(c) Deductible Voluntary Contributions, if selected in the Adoption
Agreement;
(d) Rollover Contributions, if, pursuant to Section 4.03 hereof, the
Administrator directs the Trustee to accept such contributions; and
(e) funds directly or indirectly transferred from another qualified
retirement plan pursuant to Section 4.04 hereof, if the Administrator directs
the Trustee to accept such transfers.
In addition, pursuant to Section 7.02(d) and (f) hereof, separate accounts
will be maintained for the pre-break and postbreak Employer Contributions made
on behalf of a Participant who has Service excluded from the calculations of
Vesting Years pursuant to Section 2.50(b) or (c). Notwithstanding the above, if
a Participant's rights to Employer Contributions are immediately and fully
nonforfeitable, Employer Contributions allocated on behalf of such Participant
and his or her Nondeductible Voluntary Contributions may be maintained in a
single account.
SECTION 7.
VESTING
7.01 When Vested. A Participant shall always have a fully vested and
nonforfeitable interest in his or her Nondeductible Voluntary Contribution
Account, Deductible Voluntary Contribution Account and Rollover Account, and any
transfer account established pursuant to Section 4.04 hereof on his or her
behalf. A Participant's interest in his or her Employer Contribution Account
shall be vested and nonforfeitable at Normal Retirement Date, death, Disability,
upon termination (including a complete discontinuance of Employer Contributions)
or partial termination of the Plan and otherwise only to the extent specified in
the Adoption Agreement.
7.02 Forfeitures. If a Participant's employment with the Employer is
terminated before his or her Employer Contribution Account is fully vested in
accordance with Section 7.01 hereof, this Section 7.02 shall apply.
(a) If the Participant completes a period of five consecutive One-Year
Breaks in Service before returning to employment with the Employer, dying or
becoming disabled, the portion of the Participant's Employer Contribution
Account which was not vested at the time of his or her termination shall be
forfeited and
(i) if this Plan is adopted as a profit sharing plan, allocated
exclusively as of the next Valuation Date in the same manner, and to the same
Participants' Employer Contribution Accounts as the Employer Contribution for
that Plan Year is allocated pursuant to Section 4.01 hereof, or
(ii) if this Plan is adopted as a money purchase pension plan,
applied exclusively to reduce the Employer Contributions for the next Plan Year.
(b) No forfeitures shall occur solely as a result of withdrawal of
Deductible Voluntary Contributions, Nondeductible Voluntary Contributions,
Rollover Contributions or amounts held in a transfer account.
(c) Following a forfeiture, the Participant shall be fully vested in
all funds which remain in his or her Employer Contribution Account immediately
after the forfeiture and in all Trust earnings subsequently attributed to such
funds.
(d) If the Participant is reemployed by the Employer after he or she
completes five consecutive One-Year Breaks in Service, an additional Employer
Contribution Account shall be maintained on the Participant's behalf; provided
that, at a subsequent time, the Trustee shall have the discretionary authority
to combine any number of Employer Contribution Accounts maintained for a
Participant, so long as the Participant is 100% vested in each combined account.
All subsequent Employer Contributions made on the Participant's behalf shall be
credited to the Employer Contribution Account which was established at the time
of his or her return to employment with the Employer. The extent to which the
Participant is vested in any additional Employer Contribution Accounts
established on his or her behalf shall be determined independently of any
determination of the extent to which the Participant is vested in any previously
established Employer Contribution Account(s); all such determinations shall be
made in accordance with the provisions in Section 2.50 above.
(e) If the Participant has received a distribution from his or her
Employer Contribution Account pursuant to Section 9 hereof and if the
Participant is reemployed by the Employer before he or she completes five
consecutive One-Year Breaks in Service, the portion of the Employer Contribution
Account which is then vested shall be determined by adding to the then value of
the Employer Contribution Account, the amount, if any, previously distributed
and not repaid to the Trust, applying the vesting percentage then applicable,
and then subtracting the amount previously distributed and not repaid to the
Trust.
(f) Each Employer Contribution Account established pursuant to
subsection (d) hereof (or such Employer Contribution Account into which the
Trustee has combined the accounts pursuant to all powers granted to it in
subsection (d) hereof) shall be credited with its proportionate share of Trust
earnings and losses. For the purposes of the remaining Sections of this Plan,
all Employer Contribution Accounts established in the name of a Participant
shall be treated as a single account.
SECTION 8.
DISTRIBUTION UPON DEATH
8.01 Qualified Preretirement Survivor Annuity. If this Plan is adopted as a
money purchase pension plan, unless an optional form of distribution has been
selected within the Election Period pursuant to a Qualified Election, if a
Participant's Service terminates because of death before distributions have
commenced, then the Trustee shall, upon the direction of the Administrator,
apply 50% of the Participant's vested Account balance toward the purchase of an
annuity contract for the life of the Spouse.
8.02 Other Distributions at Death. If the Participant dies after he or she
has begun to receive distributions pursuant to Section 9.01 or 9.03(b), this
Section 8.02 shall apply with respect to the Participant's entire Account. With
respect to any Account, or portion thereof, to which Section 8.01 did not apply,
if the Participant dies before he or she has begun to receive distributions
pursuant to Sections 9.01 and 9.03(b), this Section 8.02 shall apply with
respect to such Account, or portion thereof. With respect to a portion of the
Participant's Account to which Section 8.01 did apply, if the Participant made a
Qualified Election within the Election Period not to receive a Qualified
Preretirement Survivor Annuity at his or her death and the Participant's Service
terminates because of death before distributions have commenced, this Section
8.02 shall apply with respect to such portion of the Participant's Account.
(a) With respect to any Account of portion thereof to which this
Section 8.02 applies the Trustee shall, at the direction of the Administrator,
distribute the Participant's Account in accordance with the provisions of this
Section 8.02. The Administrator's direction shall include notification of the
Participant's or Beneficiary's death and the existence or non-existence of a
surviving spouse.
(b) If the Participant has validly named a Beneficiary or
Beneficiaries in the most recent Designation of Beneficiary form filed with
Trustee before the Participant's death in compliance with Section 15, his or her
Account shall be distributed to the Beneficiary or Beneficiaries so named. To
the extent that any portion of an Account of a deceased Participant is not
governed by an effective Designation of Beneficiary form which names at least
one living Beneficiary, that portion of the Account shall be distributed to the
deceased Participant's Spouse or if that is not possible, to the estate of the
deceased Participant.
(c) If the Participant has validly elected a manner of distribution
with respect to his or her Account, his or her Account shall be distributed in
accordance with such election. With respect to any portion of a deceased
Participant's Account for which the Participant has not validly elected a manner
of distribution, distribution shall be made in such manner as the Participant's
Beneficiary (or Beneficiaries) may elect, or in the absence of such an election,
in a lump sum.
(d) Distribution to the Participant's Beneficiary shall be made
according to the following provisions:
(i) If the Participant dies before benefits commence and during a
Plan Year which began after December 31, 1984, and if the Spouse is not the
Beneficiary, the Participant's entire Account balance must be distributed to the
Participant's Beneficiary either (A) within five years after the Participant's
death, or (B) in substantially equal annual or more frequent installments over a
period not exceeding the life expectancy of the Beneficiary (as determined as of
the date of the Participant's death by using the return multiples contained in
section 1.72-9 of the Treasury Regulations) provided that such distributions
commence within one year after the Participant's death.
(ii) If the Participant dies before benefits commence and during
a Plan Year which begins after December 31, 1984, and if the Spouse is the
Beneficiary, the Participant's entire Account balance must be distributed to the
Participant's Spouse either (A) within five years after the Participant's death,
or (B) in substantially annual or more frequent installments over a period not
longer than the Spouse's life expectancy (as determined as of the time
distribution is commenced and recalculated annually, by using the return
multiples contained in section 1.72-9 of the Treasury Regulations) provided that
such distribution is commenced on or before the later of the date on which the
Participant would have attained age 70-1/2 or one year after the Participant's
death.
(iii) If distributions have commenced to the Participant before
the Participant's death, distributions to the Participant's Spouse, Beneficiary
or estate shall continue over a period at least as rapid as the period selected
by the Participant.
(e) If a Participant's Beneficiary dies after the Participant and
before he or she receives full payment of the portion of the Participant's
Account balance to which he or she is entitled, the Trustee shall, upon
direction of the Administrator, distribute the funds to which the deceased
Beneficiary is entitled to the beneficiary or beneficiaries validly named on the
most recent designation of beneficiary form filed by the Beneficiary with the
Trustee before the Beneficiary's death. To the extent that any portion of the
funds to which the deceased Beneficiary was entitled are not governed by an
effective designation of beneficiary, the funds shall be distributed to the
deceased Beneficiary's surviving spouse, or if that is not possible, to the
estate of the deceased Beneficiary. The Administrator's direction shall include
notification of the Beneficiary's death and the existence or non-existence of a
surviving spouse.
(i) If distributions had commenced before the Participant's
death, distribution to the beneficiary of a deceased Beneficiary shall continue
over a period at least as rapid as the period selected by the Participant.
(ii) If the deceased Beneficiary was the surviving Spouse of the
Participant and the deceased Beneficiary had not begun to receive distributions
from the Participant's Account at the time of his or her death, the
Participant's Account shall be distributed to the deceased Beneficiary's
beneficiary according to the provisions of this Section 8.02 applied as if the
Beneficiary were the Participant. In addition, the surviving spouse's
beneficiaries shall be treated as Beneficiaries during any future application
of this Section 8.02.
(iii) If neither subparagraph (i) nor (ii) above apply, the
Participant's Account shall be distributed to the deceased Beneficiary's
beneficiary either (A) within five years after the Participant's death, or (B)
in substantially equal annual or more frequent installments over the remainder
of the life expectancy of the Beneficiary as that life expectancy was determined
at the Participant's death (by using the return multiples contained in section
1.72-9 of the Treasury Regulations) provided that distributions commence (or
commenced) within one year of the Participant's death.
(f) If a beneficiary of a Beneficiary (or a beneficiary) dies before
he or she has received full payment of the portion of the Participant's Account
balance to which he or she is entitled, the Trustee shall, after notification by
the Administrator of the beneficiary's death, distribute the funds to which the
deceased beneficiary is entitled to the beneficiary or beneficiaries validly
<PAGE>
named on the most recent designation of beneficiary form filed by the deceased
beneficiary with the Trustee before the beneficiary's death. To the extent that
any portion of the funds to which the deceased beneficiary was entitled are not
governed by an effective designation of beneficiary, the funds shall be
distributed to the deceased beneficiary's surviving spouse, or if that is not
possible, to the estate of the deceased beneficiary.
(i) If distributions had commenced before the Participant's
Death, distribution to the beneficiary of a deceased Beneficiary shall continue
over a period at least as rapid as that selected by the Participant.
(ii) In all other cases, the Participant's Account shall be
distributed to the deceased beneficiary's beneficiary either (A) within five
years after the Participant's death, or (B) in substantially equal annual or
more frequent installments over the remainder of the life expectancy of the
Beneficiary as that life expectancy was determined at the Participant's death
(by using the return multiples contained in section 1.72-9 of the Treasury
Regulations) provided that distributions commence (or commenced) within one year
of the Participant's death.
8.03 Children as Beneficiaries. For the purposes of Section 8.02, any
distribution paid to a Participant's child shall be treated as paid to the
Participant's surviving Spouse if such amount becomes payable to the surviving
Spouse when the child reaches the age of maturity.
SECTION 9
OTHER DISTRIBUTIONS
9.01 Distribution in Plan Years Beginning Before January 1, 1985. During
any Plan Year which begins before January 1, 1985, the Account of any
Participant to which Section 8 does not apply, to the extent it is vested
pursuant to Section 7.01 hereof, will be distributed in accordance with the
terms of this Section 9.01.
(a) A Participant's Account will normally be distributed in monthly
installments which must commence at or within 60 days after the end of the Plan
Year in which occurs his or her Normal Retirement Date or in which his or her
Service ceases, whichever is later, to continue over a period of 120 months;
provided, however, that in the case of a Participant who is an Owner-Employee,
monthly installments to such a Participant must commence no later than the last
day of the Participant's taxable year in which such Participant attains age 70-
1/2. The monthly amount shall normally be the vested balance of the
Participant's Account divided by the remaining number of months in such 120
months, all rounded to the nearest cent. However, the amount of each monthly
installment may be recomputed and adjusted from time to time no more frequently
than monthly as the Trustee may reasonably determine.
(b) All Participants may request and the Administrator shall have the
discretionary power to approve, subject to the requirements stated in this Plan,
any of the following variations from the normal pattern of distribution:
(i) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's attainment of age 59-1/2,
Disability, or separation from Service, if this Plan is adopted as a profit
sharing plan.
(ii) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's Disability or separation
from Service, if this Plan is adopted as a money purchase pension plan.
(iii) Distributions made or commencing after the normal time of
distribution described in Section 9.01(a); provided, however, that any such
deferred distribution must commence no later than the last day of the
Participant's taxable year in which the Participant attains age 70-1/2.
(iv) Distribution of the Participant's entire Account at one
time.
(v) Installment payments of a fixed amount, such payments to be
made until exhaustion of the Participant's Account.
(vi) Distribution in kind.
(vii) Any reasonable combination of the foregoing or any
reasonable time or manner of distribution within the above-stated limitations.
9.02 Timing of Annuity Payments and Normal Distributions in Plan Years
Beginning After December 31, 1984. Payment of benefits under the Qualified
Joint and Survivor Annuity or distributions pursuant to the normal form of
distribution discussed in Section 9.03(b), shall commence after the Participant
attains his or her Normal Retirement Date and on or before the earlier of 60
days after the close of the Plan Year, or the first April 1 after the calendar
year, in which occurs the Participant's Normal Retirement Date or in which his
or her employment ceases, whichever is later; provided, however, that in the
case of a Participant who is a 5-percent owner of the Employer (as defined in
Code Section 416(i)(1)(B)(i)), payment of benefits or monthly installments to
such a Participant must commence on or before the first April 1 after the
calendar year in which such Participant attains age 70-1/2. In the case of a
Participant who becomes a 5-percent owner of the Employer (as defined in Code
Section 416(i)(1)(B)(i)) after attaining age 70-1/2 but before termination of
employment, and during a Plan Year which began after December 31, 1984, payment
of benefits or monthly installments to such Participant must begin on or before
the first April 1 after the calendar year in which Participant becomes a 5-
percent owner.
9.03 Form of Distribution in Plan Years Beginning after December 31, 1984.
During any Plan Year which begins after December 31, 1984, the Account of a
Participant to which Section 8 does not apply, shall be distributed in a form
according to this Section 9.03.
(a) If this Plan is adopted as a money purchase pension plan, unless
the Participant elects an optional form of distribution pursuant to a Qualified
Election within 90 days before the date on which distributions under this
Section 9 would commence, a Participant's Account shall be paid in the form of a
Qualified Joint and Survivor Annuity.
(b) If the Participant was eligible to receive a Qualified Joint and
Survivor Annuity and he or she elects an optional form of distribution pursuant
to a Qualified Election within 90 days before the date on which distributions
under this Section 9 would commence or if this Plan is adopted as a profit
sharing plan and Section 9.03(a) does not apply to the Participant, a
Participant's Account will normally be distributed in monthly installments over
a period equal to the shorter of 120 months or the joint life and last survivor
expectancy of the Participant and his or her spouse (as calculated by using the
return multiples specified in Section 1.72-9 of the Treasury Regulations at the
time of the first distribution). The monthly account shall normally be the
balance of the Participant's Account divided by the remaining number of months
in such period, all rounded to the nearest cent. However, the amount of each
monthly installment may be recomputed and adjusted from time to time no more
frequently than monthly as the Trustee may reasonably determine.
(c) If this Plan is adopted as a money purchase pension plan and the
Participant elects an optional form of distribution pursuant to Qualified
Election within 90 days before the date on which distributions under this
Section 9 will commence and such optional form of distribution is not the normal
form of distribution discussed in subsection (b) or if this Plan is adopted as a
profit sharing plan and the Participant makes a written election to receive an
optional form of distribution, the Administrator shall have the discretion to
approve or disapprove such form of distribution. Pursuant to this Section
9.03(c), the Administrator shall have the discretion to approve of the following
variation from the normal pattern of distribution, provided that the
distribution shall otherwise comply with the requirements of this Plan:
(i) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's attainment of age 59-1/2,
Disability, or separation from Service, if this Plan is adopted as a profit
sharing plan.
(ii) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's Disability or separation
from Service, if this Plan is adopted as a money purchase pension plan.
(iii) Distributions made or commencing after the normal time of
distribution described in Section 9.02; provided, however, that any such
deferred distribution must commence no later than the first April 1 after the
calendar year in which the Participant attains age 70-1/2.
(iv) Distribution of the Participant's entire vested Account
balance at one time, provided that the Participant requests such distribution in
writing.
(v) Installment payments of a fixed amount, such payments to be
made until exhaustion of the Participant's Account.
(vi) Distribution in kind.
(vii) Any reasonable combination of the foregoing or any
reasonable time or manner of distribution within the above-stated limitations.
Notwithstanding the above, if this Plan is adopted as a money purchase
pension plan and a married Participant's vested Account Balance (exclusive of
the Participant's Rollover Account and Deductible Voluntary Contribution
Account) exceeds $3,500, no amount may be distributed to a participant unless
the Participant's Spouse consents in writing to such distribution.
9.04 Required Minimum Distributions. In the case of any Participant to
whom Section 9.01 applies, to whom Section 9.03(a) does not apply, or to whom
Section 9.03(a) applies and who elects an option form of distribution, the
annual distribution from his or her Account must equal or exceed the applicable
required minimum distribution. The minimum distribution to be made for each
calendar year beginning with the calendar year during which distribution is
required to commence pursuant to Section 9.01 or 9.03(b) or (c) shall be the
amount equal to the quotient obtained by dividing the Participant's Account
balance at the beginning of the year by the greater of the life expectancy of
the Participant or the joint life and last survivor expectancy of the
Participant and Beneficiary. For purposes of this minimum distribution rule,
life expectancy and joint life and last survivor expectancy shall be calculated
by using the return multiples specified in section 1.72-9 of the Treasury
Regulations either once, at the time of the first distribution, or in the case
of an expectancy involving only a spousal Beneficiary, annually in a consistent
manner. If the Participant's Spouse is not the Beneficiary, the method of
distribution used must ensure that at least 50% of Present Value (as defined in
Section 21.02(h) hereof) of the Participant's Account balance at the time
distributions commence is paid within the life expectancy of the Participant.
9.05 Nonconsensual Distributions. Notwithstanding any provision of this
Section 9 to the contrary, if a former Participant's vested Account balance
(exclusive of his or her Rollover Account and Deductible Voluntary Contribution
Account) equals $3,500 or less, the Administrator may direct that the entire
vested Account balance be distributed to the former Participant regardless or
whether the former Participant (or his or her Spouse, if applicable) requests or
otherwise consents to such distribution.
9.06 Special One-Time Distribution Election. Notwithstanding any Plan
provision to the contrary and subject to the requirements of Section 9.03(a)
above, distribution on behalf of any Employee, including a 5-percent owner (as
defined in Code Section 416(i)(1)(B)(i)), may be made in accordance with the
following requirements (regardless of when such distribution commences):
(a) The distribution is one which would not have disqualified the
Plan under Code Section 401(a)(9) as it was in effect prior to its amendment by
the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of distribution
designated by the Participant whose interest in the Plan is being distributed
or, if the Participant has died, by a beneficiary of such Participant.
(c) Such designation was in writing, was signed by the Participant or
the beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution designated by the Participant or the
beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant are listed in
order of priority.
(f) If the distribution is one to which the provisions of Section
9.03(a) hereof would otherwise have applied and the Participant is married, the
Participant's spouse consents to the election in a writing filed with the
Administrator.
A distribution upon death will not be covered by this section 9.06 unless
the information in the designation contains the required information
<PAGE>
described above with respect to the distributions to be made upon the death of
the Participant.
For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Participant, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirement in subsections (a) and (e) above.
If a designation is revoked, any subsequent distribution must satisfy the
requirements of Code Section 401(a)(9) as amended. Any changes in the
designation will be considered to be a revocation of the designation. However,
the mere substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a revocation of
the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, directly
or indirectly (for example, by altering the relevant measuring life).
SECTION 10.
LOANS
10.01 Availability of Loans. If, in the Adoption Agreement, the Employer
has specified that loans to Participants are permitted, the Loan Trustee shall,
upon the direction of the Administrator, make one or more loans, including any
renewal thereof, to a Participant (other than a Participant who is an Owner-
Employee). Any such loan shall be subject to such terms and conditions as the
Administrator shall determine pursuant to a uniform policy adopted by the
Administrator for this purpose, which policy shall be at least as restrictive as
required by this Section 10.
10.02 Spousal Consent Required. To obtain a loan, a Participant must
obtain the consent of his or her Spouse, if any, within the 90-day period before
the time his or her Account balance is used as security for the loan.
Furthermore, a new consent is required if an increase in the amount of the
security is necessary and any of the remaining balance of the Account is used.
A spousal consent to a loan must be in writing, witnessed by a Plan
representative or notary public, and acknowledge that as a result of a default
repayment of the loan the Spouse may be entitled to a lesser death benefit than
he or she would otherwise receive under the Plan. A Spouse shall be deemed to
consent to any loan which is outstanding at the time or his or her marriage to
the Participant.
10.03 Equivalent Basis. No such loan may be made to a disqualified person
within the meaning of Code Section 4975(e), unless such loans are available to
all Participants on a reasonably equivalent basis and are not made available to
officers, shareholders or highly paid Participants in an amount which, when
stated as a percentage of any such Participant's Account, is greater than is
available to any other Participants.
10.04 Limitation on Amount. The amount of any such loan, when added to
the outstanding balance of all other loans from the Plan (and any other
qualified retirement plans of the Employer's) to the Participant, shall not
exceed the following:
Participant's Vested Maximum Amount
Account Balance of Loan
$0 - $10,000 100% of vested Account balance
$10,000 - $20,000 $10,000
$20,000 - $100,000 50% of vested Account balance
over $100,000 $50,000
The value of the Participant's Account balance shall be as determined by
the Administrator; provided, however, that such determination shall in no event
take into account the portion of the Participant's Account attributable to the
Participant's Deductible Voluntary Contribution Account.
10.05 Maximum Term. The term of the any such loan shall not exceed 5
years; provided, however, that such limitation shall not apply to any loan used
to acquire, construct, reconstruct, or substantially rehabilitate any dwelling
unit which within a reasonable time is to be sued (determined at the time the
loan is made) as a principal residence of the Participant or a member of the
Participant's family (within the meaning of Code Section 267(c)(4)).
10.06 Promissory Note. Any such loan shall be evidenced by a promissory
note executed by the Participant and payable to the Loan Trustee, on the
earliest of (i) a fixed maturity date meeting the requirements of Section 10.05
above, but in no event later than the Participant's Normal Retirement Date, (ii)
the Participant's death, or (iii) when distribution hereunder is to be made to
the Participant (other than a withdrawal which will not reduce the value of his
or her Account to the extent that the aggregate amount owing could not be made
as a new loan within the limitation set forth in Section 10.04 above). Such
promissory note shall be secured by an assignment of the Participant's Account
to the Loan Trustee. Such promissory note shall evidence such terms as are
required by this Section 10.
10.07 Interest. Any such loan shall be subject to a reasonable rate of
interest.
10.08 Repayment. If a note is not paid when the Participant's benefits
hereunder are to be distributed, then any unpaid portion of such loan and unpaid
interest thereon shall be deducted by the Loan Trustee from the Participant's
Account before benefits are paid from or purchased out of the Account. Such
deduction shall, to the extent thereof, cancel the indebtedness of the
Participant. If a note is not paid when it otherwise becomes payable under
Section 10.05 hereof, or if at any time the Administrator determines that the
aggregate amounts owing by a Participant upon such notes exceed the vested value
of the Participant's Account, the Participant shall be promptly notified in
writing that unless such loan or excess is repaid within 30 days, action will be
taken to collect the same plus any cost of collections. Notwithstanding any
implication of the preceding sentence to the contrary, no attachment of the
Participant's Account shall occur until a distributable event occurs under
Sections 8 or 9 (or if it is otherwise applicable, Section 22) hereof.
10.09 Accounting. Loans shall be made only from the Account of the
Participant (exclusive of that portion of the account attributable to the
Participant's Deductible Voluntary Contribution Account) requesting the loan,
and shall be treated as an investment of such Account. All interest payments
made with respect to such loan shall be credited to the Participant's Account.
10.10 Precedence. This Section 10 overrides Section 16.01 below.
SECTION 11.
TRUST PROVISIONS
11.01 Manner of Investment. All contributions to the Account of a
Participant shall be held in trust by the Trustee designated in the Adoption
Agreement. Except to the extent that a Participant's Account is invested in a
loan pursuant to Section 10 hereof, the Account of a Participant may only be
invested and reinvested in shares of Designated Investment Companies, unless the
Distributor permits less than 100% of the Trust assets to be so invested. If
the Administrator or the Participant, as the case may be, has elected to have a
portion of an Account invested in other than shares of Designated Investment
Companies and the Distributor has authorized the investment of less than 100% of
Trust assets in such shares, the Trustee shall invest such amount in such
investments as it is empowered to invest in under Section 11.03 hereof. The
Designated Investment Companies available for investment may be limited by the
Employer. Investment in the shares of more than one Designated Investment
Company is not permitted unless the value of the Participant's Account and the
value of the investment in each additional Designated Investment Company exceed
amounts from time to time determined by the Distributor.
11.02 Investment Decision.
(a) The decision as to the investment of an Account shall be made by
the person designated in the Adoption Agreement, and the Trustee shall have no
responsibility for determining how an Account is to be invested or to see that
investment directions communicated to it comply with the terms of the Plan. If
the decision is made by the Participant, the Participant shall convey investment
instructions to the Administrator and the Administrator shall promptly transmit
those instructions to the Trustee. Further, if the decision is to be made by
the Participant, the right to make such a decision shall remain with the
Participant upon retirement and shall pass to the Distributee upon death.
(b) The person designated to make the decision as to the investment
of an Account may direct that the investment medium of an Account be changed
provided that no such change may be made from or to an investment other than a
Designated Investment Company except to the extent permitted under Section 11.10
above and by the terms of that other investment vehicle. If the Distributor
determines in its own judgment that there has been trading of shares of
Designated Investment Companies in the Accounts of the Participants, any
Designated Investment Company may refuse to sell its shares to such Accounts.
When an investment is being made or changed, the person designated to do so
shall specify the type of account to which the change refers.
(c) If any decision as to investments is to be made by the
Administrator, it shall be made on a uniform basis with respect to all
Participants.
(d) The Administrator and the Trustee may adopt procedures permitting
Participants to convey their investment instructions directly to the Trustee or
to the transfer agent for the Designated Investment Company or Companies or for
any other investment permitted by the Distributor.
(e) Whenever a Participant is the person designated to make the
decision as to the investment of an Account, the Administrator shall ascertain
that the Participant has received a copy of the current prospectus relating to
the shares of any Designated Investment Company in which such Account is to be
invested plus, where required by any state or federal law, the current
prospectus relating to any other investment in which the Account is to be
invested. With respect to contributions designated for investment by a
Participant, by remitting such a contribution to the Trustee, the Administrator
shall be deemed to warrant to the Trustee fro the benefit of the appropriate
Designated Investment Company or Companies and its or their principal
underwriter that the Participant has received all such prospectuses. By
remitting any other contribution to the Trustee, the Administrator shall be
deemed to warrant to the Trustee for the benefit of the appropriate Designated
Investment Company or Companies and its or their principal underwriter that the
Administrator has received a current prospectus of any Designated Investment
Company in which the contribution is to be invested, plus, where required by any
state or federal law, the current prospectus relating to any other investment in
which contributions are to be invested.
11.03 Investment Powers. To the extent that a portion of the Trust assets
are invested other than in shares of Designated Investment Companies pursuant to
Section 11.01 above, the Trustee is hereby granted full power and authority to
invest and reinvest the Trust assets in any property of any kind or nature
whatsoever (speculative or otherwise) or in any rights or interests therein, or
in any evidences or indicia thereof and whether real, personal or mixed or
whether tangible or intangible (including for illustration but not to be limited
to the following, or anything of a similar kind, character or class: common or
preferred stocks, evidences or ownership in so-called Massachusetts business
trusts, fees, beneficial interests, leaseholds, bonds, mortgages, leases, notes
or obligations, oil and gas payments, oil and gas contracts, other securities,
instruments or commodities, investments in property yielding little or no income
and shares of regulated investment companies) without regard to any rule of law
or statute of the state of the Trustee designation investments eligible for
trust funds, and without respect to any custom or practice either as to types of
investments or diversification of investments, and to hold cash uninvested at
any time and from time to time in such amounts and to such extent as the Trustee
in its own uncontrolled discretion and judgment deems advisable; provided,
however, that the Trustee is to act with the care, skill and diligence, under
the circumstances then prevailing, which would characterize the actions of a
prudent man who is acting as such a Trustee and who is familiar with the duties
of such a Trustee; further provided that the Trustee shall diversify the
investments of the Trust Fund so as to minimize the risk of large losses unless,
under the circumstances, such diversification would not be prudent; further
provided that the Trustee is not empowered to enter into any investment which
would be prohibited under the Act or otherwise by the provisions of this Plan.
Notwithstanding the above, the following restrictions on the investment of
a Participant's Account shall apply:
<PAGE>
(a) No part of a Participant's Deductible Voluntary Contribution
Account may be used to purchase life insurance.
(b) At most, less than one-half of the aggregate Employer
Contributions allocated to a Participant's Employer Contribution Account may be
used to pay premiums attributable to the purchase of ordinary life insurance
contracts (life insurance contracts with both nondecreasing death benefits and
nonincreasing premiums).
(c) No more than one-quarter of aggregate Employer Contributions
allocated to a Participant's Employer Contribution Account may be used to pay
premiums on term life insurance contracts, universal life insurance contracts,
and all other life insurance contracts which are not ordinary life insurance
contracts.
(d) One-half of the amount used to pay premiums on ordinary life
insurance contracts plus the amount used to pay premiums on all other life
insurance contracts may not exceed an amount equal to one-quarter of the
aggregate Employer Contributions allocated to a Participant's Employer
Contribution Account.
(e) No part of a Participant's Account shall be applied towards the
purchase of any insurance contract unless (i) the Trustee applies for and is the
owner of such contract, (ii) the contract provides that all contract proceeds
shall be paid to the Trustee, and (iii) the contract provides for distributions
to the Participant's Spouse, as necessary to ensure compliance with the
applicable requirements of Sections 8, 9, and 22.
If a Participant's Account is invested in one or more insurance contracts,
the Trustee is required to pay over all proceeds of the contract(s) to the
Participant's Beneficiary or Beneficiaries in accordance with the terms of this
Plan and under no circumstances shall the Trust retain any contract proceeds.
11.04 Appointment of Investment Manager. Subject to Sections 11.01 and
11.03 above, the Administrator may designate, and the Employer may contract
with, Scudder, Stevens & Clark, or its successor or any affiliate, to act as
investment manager (within the meaning of the Act), and may at any time revoke
such designation. If an investment manager is so designated, the Trustee shall
follow all investment directions given by the investment manager with respect to
the retention, investment and reinvestment of the Plan assets to the extent they
are under the control of such investment manager. If permitted by the Trustee,
the investment manager may issue orders for the purchase and sale of securities,
including orders through any affiliate of such investment manager. Such an
investment manager is specifically allowed to direct or make investments in
shares of any Designated Investment Company. The Trustee shall not be liable
for following any direction given by, or any actions of, an investment manager
so appointed.
11.05 Trustee: Number, Qualifications and Majority Action.
(a) The number of Trustees shall be one, two or three. Any natural
person and any corporation having the power under applicable law to act as a
trustee of a pension or profit sharing plan may be a Trustee. No person shall
be disqualified from being a Trustee by being employed by the Employer, by being
the Administrator, by being a trustee under any other qualified retirement plan
of the Employer or by being a Participant in this Plan or such other qualified
plan.
(b) A Trustee holding office as sole Trustee hereunder shall have all
the powers and duties herein given the Trustees. When the number of Trustees
hereunder is three, any two of them may act, but the third Trustee shall be
promptly informed of the action. There are two or three Trustees hereunder,
they may, by written instrument communicated to the Employer and the
Administrator, allocate among themselves the powers and duties herein given to
the Trustee hereunder. If such an allocation is made, to the extent permitted
by applicable law, no Trustee shall be liable either individually or as a
trustee for loss to the Plan from the acts or omissions of another Trustee with
respect to duties allocated to such other Trustee.
11.06 Change of Trustee
(a) Any Trustee may resign as Trustee upon notice in writing to the
Employer, and the Employer may remove any Trustee upon notice in writing to each
Trustee. The removal of a Trustee shall be effective immediately, except that a
corporation serving as a Trustee shall be entitled to 60 days' notice which it
may waive, and the resignation of a Trustee shall be effective immediately,
provided that, if the Trustee is the sole Trustee, neither a removal nor a
resignation of a Trustee shall be effective until a successor Trustee has been
appointed and has accepted the appointment. If within 60 days of the delivery
of the written resignation or removal of a sole Trustee another Trustee shall
not have been appointed and have accepted, the resigning or removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee or may terminate the Plan pursuant to Section 18 of the Prototype Plan.
The Trustee shall not be liable for the acts and omissions of any successor
trustee.
(b) At any time when the number of Trustees is one or two the
Employer may but need not appoint one or two additional Trustees, provided that
the number of Trustees shall not be more than three. Such an appointment and
the acceptance thereof shall be in writing, and shall take effect upon the
delivery of written notice thereof to all the Trustees and the Administrator and
such acceptance by the appointed Trustee, provided that if a corporation is a
Trustee then in the absence of its consent, such an appointment of an additional
or successor Trustee shall not become effective until 60 days after its receipt
of notice.
(c) Although any Employer adopting the Plan may choose any Trustee
who is willing to accept the Trust, the Distributor or its successor may make or
may have made tentative standard arrangements with any bank or trust company
with the expectation it will be used as the Trustee by a substantial group of
Employers. It is also contemplated that more favorable results can be obtained
with a substantial volume of business, and that it may become advisable to
remove such bank or trust company as the Trustee and substitute another Trustee.
Therefore, anything in the prior to subsections of this Section 11.06
notwithstanding, each Employer adopting this Plan hereby agrees that the
Distributor may, upon a date specified in a notice of at least 30 days to the
affect Employer and in the absence of written objection by the Employer received
by the Distributor before such date (i) remove any such Trustee and in that
case, or if such a Trustee has resigned as to a group of Employers, (ii) appoint
such a successor Trustee, provided such action is taken with respect to all
Employers similarly circumstanced of which the Distributor has knowledge, and
provided such notice is given in writing mailed postage prepaid to the Employer
at the latest address furnished to the Distributor directly or supplied to it by
such Trustee which is to be succeeded. If within 60 days after such Trustee's
resignation or removal, the Employer has not appointed a successor which has
accepted such appointment (unless the appointment of a successor Trustee is
waiting for action by the Distributor pursuant to the next preceding sentence
according to notice which has been given), the Trustee may petition an
appropriate court for the appointment of its successor. The Trustee shall not
be liable for the acts and omissions of such successor.
(d) Successor Trustees qualifying under this Section 11.06 shall have
all rights and powers and all the duties and obligations of original Trustees.
11.07 Valuation. Annually, on the Valuation Date, or more frequently in
the discretion of the Trustee, the assets of the Trust shall be revalued at fair
market value and the accounts of the Trust shall be proportionately adjusted to
reflect income, gains, losses or expenses, if the system of accounting does not
directly accomplish all such adjustments. Each account shall share in income
gains, loses, or expenses connected with an asset in which it is invested
according to the proportion which the account's investment in the asset bears to
the total amount of the Trust Fund invested in the asset. Any dividends or
credits earned on insurance contracts shall be allocated to the specific account
of the Participant from which the funds originated for investment in the
contract.
The Trust Fund shall be administered separately from, and shall not include
any assets being administered under, any other plan of an Employer. Interim
valuations, if any, shall be applied uniformly and in a non-discriminatory
manner for all Employees.
11.08 Registration. Any assets in the Trust Fund may be registered in the
name of the Trustee or any nominee designated by the Trustee.
11.09 Certifications and Instructions.
(a) Any pertinent vote or resolution of the Board of Directors of the
Employer (if it is a corporation) shall be certified to the Trustee over the
signature of the Secretary or an Assistant Secretary of the Employer and under
its corporate seal. The Employer shall promptly furnish to the Trustee
appropriate certification evidencing the appointment and termination of the
individual or individuals serving as Administrator under Section 12.01 of the
Plan.
(b) The Administrator shall furnish to the Trustee appropriate
certification of the individual or individuals authorized to give notice on
behalf of the Administrator and providing specimens of their signatures. All
requests, directions, requisitions for money and instructions by the
Administrator to the Trustee shall be in writing and signed. There may be
standing requests, directions, requisitions or instructions to the extent
acceptable to the Trustee.
11.10 Accounts and Approval
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder, and
all books and records relating thereto shall be open at all reasonable times to
inspection and audit by any person or persons designated by the Administrator or
by the Employer.
(b) Within 90 days following the close of each Plan Year the Trustee
may, and upon the request of the Employer or the Administrator shall, file with
the Administrator and the Employer a written report setting forth all securities
or other investments (including insurance contracts) purchased and sold, all
receipts, disbursements and other transactions effected by it during the period
since the date covered by the next proper report, and showing the securities and
other property held at the end of such period, and such other information about
the Trust Fund as the Administrator shall request. Unless the Employer or
Administrator, within 90 days from the date of mailing of such report, objects
to the contents of such report, the report shall be deemed approved. Any such
objections shall set forth the specific grounds on which they are based.
11.11 Taxes. The Trustee may assume that any taxes assessed on or in
respect of the Trust Fund are lawfully assessed unless the Administrator shall
in writing advise the Trustee that in the opinion of counsel fro the Employer
such taxes are not lawfully assessed. In the event that the Administrator shall
so advise the Trustee, the Trustee, if so requested by the Administrator and
suitable provision for their indemnity having made, shall contest the validity
of such taxes in any manner deemed appropriate by the Administrator or counsel
for the Employer. The word "taxes" in this Section 11 shall be deemed to
include any interest or penalties that may be levied or imposed in respect to
any taxes assessed. Any taxes, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the Trust Fund that may be
levied or assessed in respect to such assets shall, if allocable to the Accounts
of specific Participants, be charged to such Accounts, and if not so allocable,
they shall be equitably apportioned among all such Participant's Accounts.
11.12 Employment of Counsel. The Trustee may employ legal counsel (who
may be counsel for the Employer) and shall be fully protected in acting or
refraining from acting, upon such counsel's advice in respect to any legal
questions.
11.13 Compensation of Trustee. An individual Trustee who is an Employee
of the Employer shall not be compensated for services as Trustee. A
corporation, or an individual who is not an Employee of the Employer, serving as
a Trustee shall be entitled to reasonable compensation for services; such
compensation shall be paid in accordance with Section 13.
11.14 Limitation of Trustee's Liability.
(a) The Trustee shall have no duty to take any action other than as
herein specified, unless the Administrator shall furnish it with instructions in
proper form and such instructions shall have been specifically agreed to by it,
or to defend or engage in any suit unless it shall have first agreed in writing
to do so and shall have been fully indemnified to its satisfaction.
(b) The Trustee may conclusively rely upon and shall be protected in
acting in good faith upon any written representation or order from the
Administrator or any other notice, request, consent, certifi-
<PAGE>
cate or other instrument or paper believed by the Trustee to be genuine and
properly executed, or any instrument or paper if the Trustee believes the
signature thereon to be genuine.
(c) The Trustee shall not be liable for interest on any reasonable
cash balances maintained in the Trust.
(d) The Trustee shall not be obligated to, but may, in its
discretion, receive a contribution directly from a participant.
11.15 Successor Trustee. Any corporation into which a corporation acting
as a Trustee hereunder may be merged or with which it may be consolidated, or
any corporation resulting from any merger, reorganization or consolidation to
which such Trustee may be a party, shall be the successor of the Trustee
hereunder, without the necessity of any appointment or other action, provided
the Trustee does not resign and is not removed.
11.16 Enforcement of Provisions. To the extent permitted by applicable
law, the Employer and the Administrator shall have the exclusive right to
enforce any and all provisions of this Agreement on behalf of all Employees and
former Employees of the Employer or their Beneficiaries or other persons having
or claiming to have an interest in the Trust Fund or under the Plan. In any
action or proceeding affecting the Trust Fund or any property constituting a
part or all thereof, or the administration thereof or for instructions to the
Trustee, the Employer, the Administrator and the Trustee shall be the only
necessary parties and shall be solely entitled to any notice of process in
connection therewith; any judgment that may be entered in such action or
proceeding shall be binding and conclusive on all persons having or claiming to
have any interest in the Trust Fund or under the Plan.
11.17 Voting. The Trustee shall deliver, or cause to be executed and
delivered, to the Administrator all notices, prospectuses, financial statements,
proxies and proxy soliciting materials received by the Trustee relating to
securities held by the Trust. The Administrator shall deliver these to the
appropriate Participant or Beneficiary of a deceased Participant, but only if
the Employer has specified in the Adoption Agreement that investment decisions
shall be made by Participants pursuant to Section 11.02 hereof. The Trustee
shall vote securities held by the Trust in accordance with the written
instructions of the person or persons entitled to make investment decisions
pursuant to Section 11.02. If, however, the Trustee is not State Street Bank
and Trust Company and has not received instructions with respect to how to vote
given securities before five full business days prior to the meeting at which
such securities are to be voted, the Trustee may vote such securities. If the
Trustee is State Street Bank and Trust Company and it has not received
instructions with respect to how to vote given securities before two full
business days prior to the meeting at which such securities are to be voted, it
shall not vote such securities except to the extent they are shares of a
Designated Investment Company, in which case it shall vote such securities for
or against each proposal, or abstain from voting on each proposal, in the same
proportion as all other shares of such Designated Investment Company vote or
abstain from voting at the shareholder meeting either in person or by proxy. In
applying the foregoing, the Trustee is not required to vote particular shares of
a Designated Investment Company in the manner specified in the preceding
sentence, so long as all of the shares of the Designated Investment Company as
to which the Trustee has not received instructions are voted in the aggregate in
accordance with the preceding sentence. Notwithstanding the foregoing, the
Trustee shall not have the authority to vote shares of a Designated Investment
Company without instructions from the person or persons entitled to make
investment decisions unless either (a) the Securities and Exchange Commission
shall have issued an exemptive order pursuant to Section 6(c) of the Investment
Company Act of 1940, as amended, the application for which order describes the
Trustee's authorization to so vote without instructions, or (b) the Trustee has
received an opinion of its counsel that the exercise of the authority to vote
shares of a Designated Investment Company without instructions will not render
the Trustee an "affiliated person" as defined in the Investment Company Act of
1940, as amended.
11.18 Applicability to Loan Trustee. Where appropriate, the foregoing
provisions of this Section 11 shall apply to the Loan Trustee on the same basis
as if the Loan Trustee were the Trustee.
SECTION 12.
ADMINISTRATION
12.01 Appointment of Administrator. From time to time, the Employer may,
by identifying such person(s) in writing to both the Trustee and the
Participants, appoint one or more persons as Administrator (hereinafter referred
to in the singular). Such Administrator shall have all power and authority
necessary to carry out the terms of the Plan. A person appointed as
Administrator may also serve in any other fiduciary capacity, including that of
Trustee, with respect to the Plan. The Administrator may resign upon 15 days'
advance written notice to the Employer, and the Employer may at any time revoke
the appointment of the Administrator with or without cause. The Employer shall
exercise the power and fulfill the duties of the Administrator if at any time,
an Administrator has not been properly appointed in accordance with this Section
12.01 or the position is otherwise vacant.
12.02 Named Fiduciaries. The "Named Fiduciaries" within the meaning of
the Act shall be the Administrator and the Trustee.
12.03 Allocation of Responsibilities. Responsibilities under the Plan
shall be allocated among the Trustee, the Administrator, and the Employer as
follows:
(a) Trustee: The Trustee shall have exclusive responsibility to
hold, manage and invest, pursuant to instructions communicated to it in
accordance with Section 11.02 above, the funds received by it subject to the
powers granted to it under Section 11 hereof. To the extent that loans are made
to Participants in accordance with Section 10 hereof, these responsibilities
shall fall to the Loan Trustee.
(b) The Administrator: The Administrator shall have the
responsibility and authority to control the operation and administration of the
Plan in accordance with its terms including, without limiting the generality of
the foregoing, (i) any investment decisions assigned to it under the Adoption
Agreement or transmission to the Trustee of any participant investment decision
under Section 11.02; (ii) interpretation of the Plan, conclusive determination
of all questions of eligibility, status, benefits and rights under the Plan and
certification to the Trustee of all benefits payments under the Plan; (iii)
hiring of persons to provide necessary services to the Plan not provided by
Employees; (iv) preparation and filing of all statements, returns and reports
required to be filed by the Plan with any agency of Government; (v) compliance
with all disclosure requirements of all state or federal law; (vi) maintenance
and retention of all Plan records as required by law, except those required to
be maintained by the Trustee; and (vii) all functions otherwise assigned to it
under the terms of the Plan.
(c) Employer: The Employer shall be responsible for the design of
the Plan, as adopted or amended, the designation of the Administrator and
Trustee (and, if appropriate, the Loan Trustee) as provided in the Plan, the
delivery to the Administrator and the Trustee of Employee information necessary
for operation of the Plan, the timely making of the Employer Contributions
pursuant to Section 4.01 hereof, and the exercise of all functions provided in
or necessary to the Plan except those assigned in the Plan to other persons.
(d) This Section 12.03 is intended to allocate individual
responsibility for the prudent execution of the functions assigned to each of
the Trustees, the Loan Trustee, the Administrator and the Employer and none of
such responsibilities or any other responsibility shall be shared among them
unless specifically provided in the Plan. Whenever one such person is required
by the Plan to follow the directions of another, the two shall not be deemed to
share responsibility, but the person who gives the direction shall be
responsible for giving it and the responsibility of the person receiving the
direction shall be to follow it insofar as it is on its face proper under
applicable law.
12.04 More Than One Administrator. If more than one individual is
appointed as Administrator under Section 12.01, such individuals shall either
exercise the duties of the Administrator in concert, acting by a majority vote
or allocate such duties among themselves by written agreement delivered to the
Employer and the Trustee. In such a case, the Trustee may rely upon the
instruction of any one of the individuals appointed as Administrator regardless
of the allocation of duties among them.
12.05 No Compensation. The Administrator shall not be entitled to receive
any compensation from the funds held under the Plan for its services in that
capacity unless so determined by the Employer or required by law.
12.06 Record of Acts. The Administrator shall keep a record of all its
proceedings, acts and decisions, and all such records and all instruments
pertaining to Plan administration shall be subject to inspection by the Employer
at any time. The Employer shall supply, and the Administrator may rely on the
accuracy of, all Employee data and other information needed to administer the
Plan.
12.07 Bond. The Administrator shall be required to give bond for the
faithful performance of its duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
12.08 Agent for Service of Legal Process. The Administrator shall be
agent for service of legal process on the Plan.
12.09 Rules. The Administrator may adopt or amend and shall publish to
the Employees such rules and forms for the administration of the Plan, and may
employ or retain such attorneys, accountants, physicians, investment advisors,
consultants and other persons to assist in the administration of the Plan as it
deems necessary or advisable.
12.10 Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of its responsibilities hereunder and at
any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Trustee may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of all such delegates.
12.11 Claims Procedure. It is anticipated that the Administrator will
administer the Plan to provide Plan benefits without waiting for them to be
claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Participants and Beneficiaries.
(a) Manner of Making Claim. A claim for benefits by a Participant or
Beneficiary to be effective under this procedure must be made to the
Administrator and must be in writing unless the Administrator formally or by
course of conduct waives such requirements.
(b) Notice of Reason for Denial. If an effective claim is wholly or
partially denied, the Administrator shall furnish such Participant or
Beneficiary with written notice of the denial within 60 days after the original
claim was filed. This notice of denial shall set forth in a manner calculated
to be understood by the claimant (i) the reason or reasons for denial, (ii)
specific reference to pertinent plan provisions on which the denial is based,
(iii) a description of any additional information needed to perfect the claim
and an explanation of why such information is necessary, and (iv) an explanation
of the Plan's claims procedure.
(c) The Participant or Beneficiary shall have 60 days from receipt of
the denial notice in which to make written application for review by the
Administrator. The Participant or Beneficiary may request that the review be in
the nature of a hearing. The Participant or Beneficiary shall have the rights
(i) to have representation, (ii) to review pertinent documents, and (iii) to
submit comments in writing.
(d) The Administrator shall issue a decision on such review within 60
days after receipt of an application fro review, except that such period may be
extended for a period of time not to exceed an additional 60 days if the
Administrator determines that special circumstances (such as the need to hold a
hearing) requires such extension. The decision on review shall be in writing
and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based.
SECTION 13.
FEES AND EXPENSES
All reasonable fees and expenses of the Administrator or Trustee incurred
in the performance of their duties hereunder or under the Trust shall be paid by
the Employer; and to the extent not so paid by the Employer, said fees and
expenses shall be deemed to be an expense of the Trust and the Trustee is
authorized to charge the same to the Accounts of the
<PAGE>
Participants, and unless allocable to the Accounts of specific Participants,
they shall be charged against the respective accounts of all or a reasonable
group of Participants in such reasonable manner as the Trustee shall determine.
SECTION 14.
BENEFIT RECIPIENT INCOMPETENT OR
DIFFICULT TO ASCERTAIN OR LOCATE
14.01 Incompetency. If any portion of the Trust Fund becomes
distributable to a minor or to a Participant or Beneficiary who, as determined
by the sole discretion of the Administrator, is physically or mentally incapable
of handling his or her financial affairs, the Administrator may direct the
Trustee to make such distribution either to the legal representative or
custodian of, or any of the relatives and friends of, the incompetent or to
apply such distribution directly for the incompetent's support and maintenance.
Payments which are made in good faith shall completely discharge the Employer,
Administrator and Trustee from liability therefor.
14.02 Difficulty to Ascertain or Locate. If it is impossible or difficult
to ascertain the person who is entitled to receive any benefit under the Plan,
the Administrator in its discretion may direct that such benefit be (a) paid to
another person in order to carry out the Plan's purposes; or (b) retained in the
Trust; or (c) paid to a court pending judicial determination of the right
thereto.
SECTION 15.
DESIGNATION OF BENEFICIARY
Each participant and beneficiary may submit to the Trustee a properly
executed Designation of Beneficiary form. In order to be effective, such
designation (a) must have been properly executed and submitted to the Trustee
before the death of the Participant or beneficiary, as the case may be, and (b)
for Participants who die after August 22, 1984 leaving a surviving Spouse, must
be accompanied, or preceded, by a consent of the Participant's Spouse (unless
said Spouse is designated as the sole, primary Beneficiary). Such consent of
the Spouse must be in writing, acknowledge that the effect of such consent is
that the Spouse may receive no benefits under the Plan, be witnessed by a Plan
representative or a notary public, and be a limited consent to the payment of
death benefits to a specific person or persons. The last effective Designation
accepted by the Trustee shall be controlling, and whether or not fully
dispositive of the Participant's Account, thereupon shall revoke all
Designations (and related spousal consents) previously submitted by the
Participant or beneficiary, as the case may be. Each such executed Designation
(and related spousal consent) is hereby specifically incorporated herein by
reference and shall be construed and enforced in accordance with the laws of the
state in which the Trustee has its principal place of business.
SECTION 16.
SPENDTHRIFT PROVISION AND
DISTRIBUTIONS PURSUANT TO QUALIFIED
DOMESTIC RELATIONS ORDERS
16.01 General Spendthrift Rule. No interest of any Participant or
Beneficiary shall be assigned, anticipated or alienated in any manner nor shall
it be subject to attachment, to bankruptcy proceedings or to any other legal
process or to the interference or control of creditors or others, except (a) to
the extent that Participants may secure loans from the Trust with their Accounts
pursuant to Section 10 hereof and (b) pursuant to Section 16.02 hereof.
16.02 Account Division and Distribution Pursuant to Qualified Domestic
Relations Orders. The interest of a Participant may be assigned pursuant to a
"Qualified Domestic Relations Order" (as defined below). The Trustee shall make
distributions of such Participant's interest as are required by the order and
this Section 16.02.
(a) A "Qualified Domestic Relations Order" is any judgment, decree or
order, including the approval of a property settlement agreement (collectively
hereinafter referred to as an "order"), provided that:
(i) The order related to the provision of child support, alimony
or marital property rights and is made pursuant to state domestic relations or
community property laws;
(ii) The order creates or recognizes the existence of an
alternate payee's right to or assigns to an alternative payee rights to, receive
all or a portion of the benefits payable with respect to the Participant under
this Plan;
(iii) The order specifies the name and last known mailing
address of the Participant and each alternative payee covered by the order;
(iv) The order precisely specifies the amount or percentage of
the Participant's benefits to be paid to each alternate payee or the manner in
which the amount of percentage is to be determined;
(v) The order specifies the number of payments or the period to
which the order applies;
(vi) The order specifically names this Plan as a plan to which
the order applies;
(vii) The order does not require the Trustee to provide any form
of distribution other than those contained in Sections 8 and 9 hereof (or
Section 22 hereof, if that Section applies in the Participant's case) other than
in the form of a Qualified Joint and Survivor Annuity with respect to the
alternative payee and his or her subsequent spouse;
(viii) The order does not require the Trustee to provide
benefits at any time in excess of the Account balance;
(ix) If the order requires that distribution to the alternative
payee commence before distribution to the Participant commences, the order:
(A) specifies that, unless the Administrator otherwise
consents, distribution to the alternative payee will not commence prior to ten
years before the Participant's Normal Retirement Date; and
(B) specifies that the amount distributed is to be
calculated as if the Participant had retired on the date on which distributions
are required to commence; and
(x) The order does not require the payment of benefits to an
alternative payee which are required to be paid to another alternative payee
under a previously entered Qualified Domestic Relations Order.
(b) At the request of an alternative payee and pursuant to a
Qualified Domestic Relations Order, the Administrator may, in its discretion,
direct the Trustee to make a lump-sum distribution from a Participant's Account
to an alternative payee at any time prior to time when distribution of such
Account would otherwise occur pursuant to Section 8, 9 or 22 hereof.
(c) The Administrator may, in its discretion, provide a standard form
Qualified Domestic Relations Order to a Participant or any other person, on
request. If this form is properly completed, used without substantial
modification, and incorporated into an order which on its face appears to be
valid, the Administrator shall treat it as a Qualified Domestic Relations Order
and shall distribute named Participant's Account according to its terms. Any
manner of distribution authorized by the Administrator in such a standard form,
other than a manner of distribution specified in Section 8 and 9 hereof, shall
be authorized only as to the alternate payees by whom the standard form has been
used.
(d) The Administrator shall not treat any order entered after January
1, 1985 as a Qualified Domestic Relations Order unless it meets all of the
requirements of subsection (a). For the purposes of this subsection (d), the
Administrator shall treat a domestic relations order entered before January 1985
as a Qualified Domestic Relations Order regardless of whether it meets the
requirements of subsection (a). The Administrator and Trustee shall follow the
terms of a Qualified Domestic Relations Order regardless of whether the Plan has
been joined as a party to the litigation out of which the order arises.
Upon receipt of a domestic relations order entered after January 1, 1985,
the Administrator shall notify the Participant and alternate payee of (i) its
receipt of the order and (ii) its procedures to determine the qualified status
of the order in accordance with subsection (a). Within a reasonable period
after receipt of such order, the Administrator shall determine whether such
order is a Qualified Domestic Relations Order and notify the Participant and
each alternative payee of such determination. The alternate payee may designate
a representative to receive copies of future notices with respect to the
qualified status of the order.
(e) To the extent an order entered after January 1, 1985 calls for
the benefits to be paid to an alternate payee before the qualified nature of the
order is determined, a separate account shall be established to hold the benefit
payments affected by the order. If within 18 months, the Administrator
determines that the order (or a modification thereof) is a Qualified Domestic
Relations Order, the Administrator shall deal with the funds in the separate
account (increased by any earning and decreased by any losses thereon) in
accordance with the instructions of the Qualified Domestic Relations Order. If
within 18 months, the Administrator either (i) determines that the order is not
a Qualified Domestic Relations Order or (ii) is unable to determine whether the
order is a Qualified Domestic Relations Order, the Administrator shall return
the funds in the separate account (increased by any earnings and decreased by
any losses thereon) to the account(s) from which the funds were originally
removed. Any determination by the Administrator that an order is a Qualified
Domestic Relations Order after the expiration of the above discussed 18-month
period shall be applied on a prospective-only basis.
(f) The "alternate payee" referred to in this Section 16.02 shall be
any spouse, former spouse, child or other dependent of the Participant who is
recognized by a domestic relations order as being entitled to receive benefits
payable under the Plan with respect to the Participant. Such alternate payee
shall be considered a "beneficiary" for purposes of the reporting and disclosure
requirements of the Act.
SECTION 17.
NECESSITY OF QUALIFICATION
This Plan is established with the intent that it shall qualify under Code
Section 401(a) as that Section exists at the time the Plan is established. If
the Plan as adopted by the Employer fails to attain such qualification, the Plan
will no longer participate in this Prototype Plan and will be considered an
individually designed plan. If the Plan as adopted by the Employer fails to
attain or retain such qualification, the Employer shall promptly either amend
the Plan under Code Section 401(b) so that it does qualify, or direct the
Trustee to terminate the Trust, and distribute all the assets of the Trust
equitably among the contributors thereto in proportion to their contributions,
and the Plan and the Trust shall be considered to be rescinded and of no force
and effect.
SECTION 18.
AMENDMENT AND TERMINATION
18.01 Amendment or Termination by the Employer. The Employer may at any
time, and from time to time amend this Prototype Plan and the Adoption Agreement
(including a change in any election it has made in the Adoption Agreement), or
suspend or terminate this Plan by giving written notice to the Trustee, but the
Trust may not thereby be diverted from the exclusive benefit of the
Participants, their Beneficiaries, survivors or estates, or the administrative
expenses of the Plan, nor revert to the Employer, nor may an allocation or
contribution theretofore made be changed thereby, nor may any amendment directly
or indirectly deprive a Participant of such Participant's nonforfeitable rights
to benefits accrued to the date of the amendment.
No amendment to the Plan shall be effective to the extent that it would
have the effect of decreasing a Participant's Account balance or eliminating an
optional form of distribution. Notwithstanding the preceding sentence, a
Participant's Account balance may be reduced to the extent permitted under Code
Section 412(c)(8). Furthermore, no amendment to the Plan shall have the effect
of decreasing a Participant's vested interest determined without regard to such
amendment as of the later of the date such amendment is adopted or the date on
which it becomes effective.
The Employer may amend the Plan by adding overriding Plan language to the
Adoption Agreement where such language is necessary to satisfy Code Sections 415
or 416 because of the required aggregation of multiple plans under these Code
Sections. The Employer may also amend the Plan by adding language to allow the
Plan to operate under a waiver of the minimum funding requirement.
Any amendment by the Employer which is other than (a) a change in the
Employer's prior designation of an option in the Adoption Agreement (b) an
amendment referred in the Adoption Agreement which will allow the Plan to
satisfy the requirements of Code Section 415 or to avoid duplication of minimum
<PAGE>
benefits or accruals under Code Section 416 because of the required aggregation
of multiple plans, or (c) an amendment which allows the Plan to operate under a
waiver of the minimum funding requirement, will constitute a substitution by the
Employer of an individually designed plan for this Prototype Plan; thereafter,
the Plan shall no longer participate in the Prototype Plan and the general
amendment procedure of the Internal Revenue Service governing individually
designed plans will be applicable.
If an amendment changing the vesting schedule is executed (including
execution of this Adoption Agreement as an amendment to an existing plan),
Participants with five or more Vesting Years before the expiration of the
election period described in the next sentence shall have the right to elect the
vesting schedule in effect on the day before the election period. The election
period shall commence on the date the amendment is adopted and end on the latest
of (a) 60 days after the amendment is adopted, (b) 60 days after the Effective
Date, or (c) 60 days after the Participant is issued written notice of the
amendment by the Administrator. Failure to so elect shall be treated as a
rejection and such election or rejection shall be final.
Nothing contained herein shall constitute an agreement or representation by
any Sponsor or the Distributor that it will continue to maintain its sponsorship
of the Plan indefinitely.
18.02 Delegation. The Employer hereby delegates to the Sponsor the
authority to amend so much of the Adoption Agreement and this Prototype Plan as
in prototype form and, to the extent to which the Employer could effect such
amendment, the Employer shall be deemed to have consented to any amendment so
made. When an election within the prototype form has been made by the Employer,
it shall be deemed to continue after amendment of the prototype form unless and
until the Employer expressly further amends the election, notwithstanding that
the provision for the election in the amended prototype form is in a different
form or place; provided, however, that if the amended from inadvertently fails
to provide means to duplicate exactly the earlier election, such earlier
election shall continue until such further amendment. The immediately preceding
sentence is subject to the qualification that each Employer hereby delegates to
the Sponsor, in the event of such an amendment of the prototype form, authority
to determine conclusively that such a continuation of an earlier election by the
Employer is not advisable and to make the election for the Employer in the
amended prototype form which in the judgment of the Sponsor most nearly
corresponds with the election made by the Employer before the amendment of the
prototype form, provided the following procedure is followed: the election for
the Employer may be made with respect to any specified Employers as to whom it
may be made applicable singly, or such election may be made with respect to all
Employers as to whom it may be made applicable as a group; and the election
shall be made as of an effective date which has been specified on a notice
mailed or delivered, at the last address(es) of the Employer(s) on the records
of the Distributor, to the Employer(s) at least 20 days before the end of the
remedial amendment period. Such notice may be mailed to Employers to whom it
cannot be applicable by reason of a previous election made by the Employer or
otherwise, but it shall be effective only as to those Employers who have
received the notice and have not themselves made a new election with respect to
that item since the amendment of the prototype form and previous to the
effective date of such election by the Sponsor. The foregoing delegations of
authority to make elections, or to make amendments, shall not impose any duty on
the Sponsor to make a given election or amendment and shall not affect the
interpretation of the Plan if any so delegated authority is not used.
18.03 Distribution of Accounts Upon Termination. Upon termination or
partial termination of the Plan or, if this Plan is adopted as a profit sharing
plan, complete discontinuance of Employer Contributions under it, the
Administrator shall determine whether to pay the interests of Participants,
former Participants and Beneficiaries immediately, to retain such interest in
the Trust and pay them in the future according to Section 8, 9 and/or 22 as
applicable, or to use what other methods the Administrator deems advisable in
order to furnish whatever benefits the Trust will provide; provided any such
distributions pursuant to this Section 18.03 shall comply with the requirements
of Section 8, 9, and/or 22 hereof.
SECTION 19.
TRANSFERS
Nothing contained herein shall prevent the merger or consolidation of the
Plan with, or transfer of assets or liabilities of the Plan to, another plan
meeting the requirements of Code Section 401(a) or the transfer to the Plan of
assets or liabilities of another such plan so qualified under the Code. Any
such merger, consolidation or transfer shall be accompanied by the transfer of
such existing records and information as may be necessary to properly allocate
such assets among Participants, including any tax or other information necessary
for the Participants or persons administering the plan which is receiving the
assets. The terms of such merger, consolidation or transfer must be such that
if this Plan is then terminated, the requirements of Section 18.01 hereof would
be satisfied and each Participant would receive a benefit immediately after the
merger, consolidation or transfer equal to or greater than the benefit he or she
would have received if the Plan had terminated immediately before the merger,
consolidation or transfer.
SECTION 20.
OWNER-EMPLOYEE PROVISIONS
20.01 Purpose of Section. This Section is intended to insure that the
Plan complies with Code Section 401(d). Any ambiguity herein will be construed
to that end, and this Section 20 will override any other provision of the Plan
with which it may be inconsistent.
20.02 Control. For purposes of this Section 20, "Control" means the
ownership directly or indirectly of more than 50% of either the capital interest
or the profits interest in a partnership or an unincorporated trade or business.
For the purposes of applying the preceding sentence, an Owner-Employee, or 2 or
more Owner-Employees shall be treated as owning any interest in a partnership
which is owned, directly or indirectly, by a partnership which such Owner-
Employee, or such 2 or more Owner-Employees, are considered to Control.
20.03 Limitations. No benefits shall be provided to an Owner-Employee
under this Plan unless:
(a) if an Owner-Employee or group of Owner-Employees Controls the
trade or business covered by this Plan and also Control as an Owner-Employee or
Owner-Employees one or more other trades or businesses, this Plan and the plans
established for such other trades or businesses, when taken together, form a
single plan which satisfies the requirements of Sections 401(a) and (d) of the
Code with respect to the Employees of all the controlled trades or businesses;
and
(b) if an Owner-Employee or group of Owner-Employees controls another
trade or business but does not control the trade or business covered by this
Plan, the employees of such other trades or business are included in a Plan
which satisfies the requirements of Sections 401(a) and (d) of the Code and
which provides contributions and benefits for such employees which are not less
favorable than those provided for Owner-Employees under this Plan; and
(c) if an Owner-Employee is covered under the qualified retirement
plans of two or more trades or businesses which he or she does not Control but
the Owner-Employee Controls a trade or business, contributions or benefits for
the employers under the plan of the trade or business which the Owner-Employee
Controls are not less favorable than those provided for the Owner-Employee in
the most favorable qualified retirement plan of the trade(s) or business(es)
which the Owner-Employee does not Control.
SECTION 21.
TOP-HEAVY PROVISIONS
21.01 Purpose of Section. This Section is intended to insure that the
Plan complies with Code Section 416. If the Plan is or becomes Top-Heavy in any
Plan Year beginning after December 31, 1983, the provisions of this Section will
supersede any conflicting provision in the Plan.
21.02 Definitions. The terms used in this Section shall have the
following meanings:
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the determination period
was (i) an officer of the Employer having an annual compensation greater than
1.5 multiplied by the amount in effect under Code Section 415(c)(1)(A) for the
Plan Year (subject to the limitation that no more than the lesser of (A) 50
Employees or (B) the greater of 3 Employees or 10% of the Employees shall be
deemed to be officers), (ii) an owner (or considered an owner under Code Section
318) or 1 of the 10 largest interest in the Employer if both such individual was
an owner of more than 5% interest in the Employer (aggregated with the Employer
for this purpose are all members of (i) a controlled group of corporations (as
defined in Code Section 414(c) as modified by Code Section 415(h)), or (iii)
affiliated service groups (as defined in Code Section 414(m)) of which the
Employer is a part) and such individual's compensation exceeds the dollar
limitation under Code Section 415(c)(1)(A), (iii) a five-percent owner of the
Employer, or (iv) a one-percent owner of the Employer who has an annual
compensation of more than $150,000. The determination period is the Plan Year
containing the Determination Date and the 4 preceding Plan Years. The
determination of who is a Key Employee will be made in accordance with Code
Section 416(i)(1) and the regulations thereunder.
(b) Top-Heavy Plan. For any Plan Year beginning after December 31,
1983, this Plan is Top-Heavy if any of the following conditions exist:
(i) If the Top-Heavy Ratio for this Plan exceeds 60% and this
Plan is not part of any Required Aggregation Group or Permissive Aggregation
Group of plans.
(ii) If this Plan is part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for
the Required Aggregation Group of plans exceeds 60%.
(iii) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(c) Top-Heavy Ratio.
(i) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer has not maintained any defined benefit plan
which during the five-year period ending on the Determination Date(s) has or has
had accrued benefits. Top-Heavy Ratio for this Plan alone or for the Required
Aggregation Group or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account balances under all of
the plans as of the Determination Date(s) (including any part of any account
balance distributed in the five-year period ending on the Determination Date(s))
of all Key Employees who have received compensation from the Employer (other
than benefits under a qualified retirement plan) at any time during the five-
year period ending on the Determination Date(s), and the denominator of which is
the sum of all account balances as of the Determination Date(s) (including any
part of any account balance distributed in the five-year period ending on the
Determination Date(s)), of all Participants who have received compensation from
the Employer (other than benefits under a qualified retirement plan) at any time
during the five-year period ending on the Determination Date(s). Both the
numerator and denominator of the fraction shall be computed in accordance with
Code Section 416 and the Treasury Regulations promulgated thereunder. In
addition, both the numerator and denominator of the Top-Heavy Ratio shall be
adjusted to reflect any contribution which is not actually made as of the
Determination Date(s), but which is required to be taken into account on that
date under Code Section 416 and the Treasury Regulations promulgated thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer maintains or has maintained one or more defined
benefit plans which during the five-year period ending on the Determination
Date(s) has or has had accrued benefits, the Top-Heavy Ratio for any Required
Aggregation Group or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of (A) account balances under the
defined contribution plans as of the Determination Date(s) (including any part
of any account balance distributed in the five-year period ending on
<PAGE>
the Determination Date(s)) of all Key Employees who have received compensation
from the Employer (other than benefits under a qualified retirement plan) at any
time during the five-year period ending on the Determination Date(s) and (B) the
present value of accrued benefits under the defined benefit plans for all Key
Employees, who have received compensation from the Employer (other than benefits
under a qualified retirement plan) at any time during the five-year period
ending on the Determination Date(s) and the denominator of which is the sum of
(A) the account balances under the defined contribution plans as of the
Determination Date(s) (including any part of any account balance distributed in
the five-year period ending on the Determination Date(s)) of all participants
who have received compensation from the Employer (other than benefits under this
Plan) at any time during the five-year period ending on the Determination
Date(s) and (B) the present value of accrued benefits under the defined benefit
plans for all participants who have received compensation from the Employer
(other than benefits under this Plan) at any time during the five-year period
ending on the Determination Date(s). Both the numerator and denominator of the
fraction shall be computed in accordance with Code Section 416 and the Treasury
Regulations promulgated thereunder. In addition, both the numerator and
denominator of the Top-Heavy Ratio shall include aggregate distribution(s) of an
account balance or an accrued benefit made during the five-year period ending on
the Determination Date(s) and any contribution which is not actually made as of
the Determination Date(s), but which is required to be taken into account on
that date under Code Section 416 and the Treasury Regulations promulgated
thereunder.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the present value of accrued benefits will be determined as of the
most recent Valuation Date that falls within, or ends with, the 12-month period
ending on the Determination Date, except as provided in Code Section 416 and the
Treasury Regulations promulgated thereunder for the first and second plan years
of a defined benefit plan. The account balances and accrued benefits of a
Participant (A) who is not a Key Employee but who was a Key Employee in a prior
Plan Year or (B) who has not been credited with at least one Hour of Service at
any time during the five-year period ending on the Determination Date, will be
disregarded. The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will be made in
accordance with Code Section 416 and the Treasury Regulations promulgated
thereunder. Deductible Voluntary Contributions and any deductible employee
contributions under any other qualified plan maintained by the Employer will not
be taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year.
(d) Permissive Aggregation Group. The Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Code Sections 401(a)(4) and 410.
(e) Required Aggregation Group. (i) Each qualified plan of the
Employer in which at least one Key Employee participates or participated at any
time during the determination period (regardless of whether the plan has
terminated), and (ii) any other qualified plan of the Employer which enables a
plan described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) Determination Date. For any Plan Year subsequent to the first
Plan Year, the Determination Date shall be the last day of the preceding Plan
Year. For the first Plan Year of the Plan, the Determination Date shall be the
last day of that year.
(g) Valuation Date. See Section 2.49.
(h) Present Value. Present value shall be based only on the interest
rate employed as of the date in question by the Pension Benefit Guaranty
Corporation to value immediate annuities and the mortality rate specified in
Table LN at Treas. Reg. 20.2031-10, unless otherwise specified in the most
recently adopted or amended defined benefit plan maintained by the Employer.
21.03 Minimum Allocation.
(a) In any Plan Year in which this Plan is Top-Heavy, except as
otherwise provided in (d), (e) and (f) below, the Employer Contributions and
forfeitures allocated on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of 3% of such Participant's Compensation or,
in the case where the Employer has no defined benefit plan which designates this
Plan to satisfy Code Section 401, the largest percentage of Employer
Contributions and forfeitures stated as a percentage of the first $200,000 of a
Key Employee's Compensation, allocated on behalf of any Key Employee for that
Plan Year. The minimum allocation is determined without regard to any Social
Security contribution by the Employer. This minimum allocation shall be made
even though, under other provisions of this Plan, the Participant would not
otherwise be entitled to receive an allocation, or would have received a lesser
allocation for the year because (i) the Participant failed to complete the
minimum number of Hours of Service specified in the Adoption Agreement for
receiving an allocation, (ii) the Participant's Compensation was less than a
stated amount, or (iii) the Participant made insufficient mandatory
contributions to receive an Employer Contribution (allocated on a thrift
matching basis) sufficient to alleviate the need a minimum allocation under this
Section 21.03.
(b) For purposes of computing the minimum allocation, "Compensation"
will have the same meaning as in Section 2.07, disregarding any exclusion from
Compensation specified by the Employer in the Adoption Agreement.
(c) During any Plan Year for which a minimum allocation is required
under subsections (a) or (f) to a plan under which allocations shall be made on
an integrated basis pursuant to Section 4.01(a)(iii) or 4.01(b) or a matching
basis pursuant to Section 4.01(a)(ii)(B), Employer Contributions and forfeitures
will be allocated to each Participant's Employer Contribution Account in the
ratio that the Participant's Compensation for the Plan Year bears to all
Participants' Compensation for the Plan Year but not in excess of 3% of such
Compensation. The provisions of this Section 21.03(c) shall take precedence
over any conflicting provisions of Section 4.01. To the extent any amount of
Employer Contributions and forfeitures remains unallocated after the application
of this subsection (c), such amount shall be allocated in accordance with the
provisions of Section 4.01 hereof.
(d) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(e) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan (other
than a plan which incorporates the Prototype Plan) or plans of the Employer, and
the Employer has provided in the Adoption Agreement that the minimum allocation
or benefit requirement applicable to Top-Heavy Plans will be met in such other
plan or plans.
(f) The provision in subsection (a) above shall not apply in the
case of a Participant who is an Employee of an Employer who has adopted both a
profit sharing plan and a money purchase pension plan which incorporate this
Prototype Plan. In such case, the aggregate total of the Employer Contributions
and forfeitures under both plans allocated to the Employer Contribution Account
of a Participant who is not a Key Employee shall not be less than 3% of such
Participant's Compensation. Unless the Employer has specified otherwise in the
Adoption Agreement and such specification is sufficient to satisfy the minimum
allocation requirement referred to in the preceding sentence, subsection (c)
above shall apply to the allocation of Employer Contributions and forfeitures
under the profit sharing plan and, only to the extent that such allocation is
insufficient to satisfy the minimum allocation requirement referred to in the
preceding sentence, the money purchase pension plan.
21.04 Nonforfeitability of Minimum Allocation. The minimum allocation
required (to the extent required to be nonforfeitable under Code Section 416(b))
may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
21.05 Limitation on Compensation. For any Plan Year in which the Plan is
Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed
by the Secretary of the Treasury or his or her delegate) of a Participant's
Compensation for the Plan Year shall be taken into account for purposes of
allocating Employer Contributions under the Plan.
21.06 Minimum Vesting Schedule. Unless the Employer has specified a more
rapid vesting schedule in the Adoption Agreement, for any Plan Year in which
this Plan is Top-Heavy, the following minimum vesting schedule shall apply:
Nonforfeitable Percentage of
Vesting Years Employer Contribution Account
1 0%
2 20
3 40
4 60
5 80
6 or more 100
The minimum vesting schedule applies to all benefits within the meaning of
Code Section 411(a)(7) attributable to Employer Contributions and forfeitures,
including benefits accrued before the effective date of Code Section 416 and
benefits accrued before the Plan became Top-Heavy. Further, no reduction in
vested benefits may occur in the event the Plan's status as Top-Heavy changes
for any Plan Year. IF conversion of the Plan into a Top-Heavy Plan has resulted
in a change of the Plan's vesting schedule to the minimum vesting schedule
discussed above, the change shall be treated as an amendment to the Plan and the
election referred to in Section 18.01 hereof shall apply. This Section 21.06
does not apply to the Employer Contribution Account balances of any former
Participant who does not have an Hour of Service after the Plan has initially
become Top-Heavy and such former Participant's vested Employer Contribution
Account balance will be determined without regard to this Section.
21.07 Effect on Code Section 415 Limitations. Notwithstanding anything to
the contrary in Section 5 above, the following provisions apply if the Plan is
Top-Heavy.
(a) In any Plan Year in which the Top-Heavy ratio exceeds 90% (and
the Plan therefore becomes super Top-Heavy) the denominators of the Defined
Benefit Fraction (as defined in Section 5.05(c) above) and the Defined
Contribution Fraction (as defined in Section 5.05(d) above) shall be computed
using 100% of the dollar limitation stated therein instead of 125%.
(b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%, but is
less than 90%, the denominators of the Defined Benefit Fraction (as defined in
Section 5.05(c) above) and the Defined Contribution Fraction (as defined in
Section 5.05(d) above) shall be computed using 100% of the dollar limitation
described therein instead of 125%, unless the Employer has specified in the
Adoption Agreement that the minimum allocation provisions of Section 21.03 above
shall be computed using 4% of a Participant's Compensation, in which case the
dollar limitations of the Defined Benefit Fraction (as defined in Section
5.05(c) above) and the Defined Contribution Fraction (as defined in Section
5.05(d) above) shall continue to be computed using 125% of the dollar
limitations.
21.08 Termination of Top-Heavy Status. If the Plan ceases to be Top-Heavy
for any Plan Year and if the Employer has not specified otherwise in the
Adoption Agreement, the minimum vesting schedule described in Section 21.06
shall continue to apply. If the Employer has specified in the Adoption
Agreement that, upon conversion of the Plan to non-Top-Heavy status,
Participants' vested benefits are to be determined according to a schedule other
than the minimum vesting schedule described in Section 21.06, such change in
vesting schedules shall be treated as an amendment, and the election referred to
in Section 18.01 hereof shall apply.
SECTION 22.
SPECIAL DISTRIBUTION RULES
22.01 Special Rule for Profit Sharing Plan Participants. If this Plan is
adopted as a profit sharing plan and (a) it is determined that this Plan is a
direct or indirect transferee (including a plan which is amended into this Plan)
of a defined benefit plan, money purchase pension plan (including a target
benefit plan), stock bonus or profit sharing plan which would otherwise provide
a life annuity form of payment with respect to such Participant, (b) the Plan is
amended so as to allow a Participant to elect to receive his or her benefits in
the form of a life annuity and Participant elects to receive his or her
<PAGE>
benefits in such form, (c) the Plan is amended to provide that absent a
Qualified Election of a Participant's surviving spouse, someone other than the
Participant's surviving spouse becomes entitled to the Participant's vested
Account balance, or (d) if someone other than the Participant's surviving spouse
is the beneficiary of any insurance purchased with funds from the Participant's
Account, the provisions of Sections 8, 9, and 15 shall apply as if this Plan
were adopted as a money purchase pension plan.
22.02 Elections for Former Participants. An opportunity to make the
applicable distribution elections discussed below in this Section 22.02 must be
given to any living former Participant who had not begun receiving benefits from
this Plan on August 23, 1984 and who would not otherwise receive the benefit
forms prescribed by Sections 8 and 9 above.
(a) In the case of a former Participant who:
(i) would have been entitled to receive his or her benefits in
the form of a life annuity had he or she completed an Hour of Service during a
Plan Year commencing after December 31, 1984,
(ii) was credited with Service under this Plan or a predecessor
plan in a plan year beginning after December 31, 1975, and
(iii) had at least ten years of vesting Service when he or she
separated from Service,
the former Participant must be given an opportunity to elect to receive his or
her benefits in accordance with the provisions of Sections 8 and 9 applied as if
this Plan were adopted as a money purchase pension plan.
(b) In the case of a former Participant:
(i) who was credited with service under this Plan or a
predecessor plan after September 1, 1974;
(ii) who was not credited with service under this plan or a
predecessor plan in a plan year beginning after December 31, 1975; and
(iii) whose benefits would have been payable in the form of a
life annuity
the Participant must be given an opportunity to elect to receive his or her
benefits in accordance with the provisions of Section 22.04.
(c) In the case of a former Participant who:
(i) satisfies the requirements of subsection (a) but does not
exercise the election made available to him or her in subsection (a), or
(ii) satisfies the requirements of subsection (a) other than the
requirement of paragraph (iii),
the former participant shall have his or her benefits distributed in accordance
with the provisions of Section 22.04.
22.03 Election Period for Certain Elections by Separated Participants.
The period during which a former Participant entitled to make an election
pursuant to Section 22.02 shall commence on August 23, 1984 and end on the
earlier of the former Participant's death or the date benefits would otherwise
commence to said former Participant.
22.04 Benefit Form for Certain Former Participants. The benefits of a
former Participant who is entitled to elect, and has elected to have his or her
benefits distributed pursuant to this Section 22.04 or a former Participant
whose benefits are required to be distributed in accordance with the provisions
of this Section 22.04 shall be distributed in accordance with the following
provisions:
(a) If benefits in the form of a life annuity become payable to a
married former 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 prior to Normal Retirement Age;
or
(iv) separates from Service on or after attaining Normal
Retirement Age (or the qualified early retirement age) after satisfying the
eligibility requirement for the payment of benefits under the Plan and
thereafter dies before beginning to receive such benefits;
then such benefits will be received under this plan in the form of a Qualified
Joint and Survivor Annuity, unless the former Participant has elected otherwise
during the election period. For this purpose, the election period must begin at
least six months before the participant attains qualified early retirement age
and end not more than 90 days before the commencement of benefit distributions.
Any election hereunder must be in writing and delivered to the Administrator;
such election may be changed by the former Participant at any time by delivery
of written notification of such change and/or a separate written election to the
Administrator.
(b) A former Participant who is employed at the start of the election
period defined below will be given the opportunity to elect, during such
election period, to have a survivor annuity payable on death. If the former
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 former Participant had retired on
the day before his or her death. Any election under this provision must be in
writing and delivered to the Administrator; such election may be changed by the
former Participant at any time by delivery of written notification of such
change and/or a separate written election to the Administrator. The election
period begins on the later of (i) the 90th day before the former Participant
attains the qualified early retirement age or (ii) the date the former
Participant terminates employment with the Employer.
(c) The qualified early retirement age referred to in this Section
22.04 shall mean the latest of:
(i) the earliest date, under the plan, on which the former
Participant may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning before the
former Participant reaches Normal Retirement Age, or
(iii) the date the former Participant began participation.
SECTION 23.
DISTRIBUTION OPTION
NOTICE REQUIREMENTS
23.01 Notice of Waivability of Qualified Preretirement Survivor Annuity.
In the case of a Participant who is scheduled to receive Qualified Preretirement
Survivor Annuity pursuant to section 8.01 hereof, the Administrator shall
provide the Participant within the period beginning on the first day of the Plan
Year in which the Participant attains age 32 and ending with the close of the
Plan Year in which the Participant attains age 35, a written explanation of: (a)
the terms and conditions of a Qualified Preretirement Survivor Annuity; (b) the
Participant's right to make, and the effect of, an election to waive Qualified
Preretirement Survivor Annuity coverage; (c) the rights of a Participant's
Spouse; and (d) the Participant's right to make, and the effect of, a revocation
of a previous election to waive Qualified Preretirement Survivor Annuity
coverage. In the case of a Participant who becomes a Participant after the
first day of the Plan Year in which the Participant attained age 32 and who is
scheduled to receive a Qualified Preretirement Survivor Annuity pursuant to
Section 8.01 hereof, the Administrator shall provide the notice required by this
Section 23.01 no later than the close of the third Plan Year subsequent to the
Participant's commencement of participation in the Plan.
23.02 Notice of Waivability of Qualified Joint and Survivor Annuity. In
the case of a Participant who is scheduled to receive a Qualified Joint and
Survivor Annuity pursuant to the provisions of Section 9.03 hereof, the
Administrator shall provide to the Participant, within a reasonable period prior
to the commencement of distributions, a written explanation of: (a) the terms
and conditions of a Qualified Joint and Survivor Annuity; (b) the Participant's
right to make, and the effect of, an election to waive distribution in the form
of a Qualified and Joint Survivor Annuity coverage; (c) the rights of the
Participant's Spouse; and (d) the Participant's right to make, and the effect
of, a revocation of a previous election to waive distribution in the form of the
Qualified and Joint Survivor Annuity.
SECTION 24.
WAIVER OF MINIMUM FUNDING STANDARD
If an Employer who has adopted this Prototype Plan as a money purchase
pension plan is unable to satisfy the minimum funding standard (as described in
Code Section 412) for a given Plan Year, it may apply to the Internal Revenue
Service for a waiver of such minimum funding standard. If the waiver is
granted, the following provisions apply:
(a) An adjusted Account balance shall be maintained for each
Participant whose actual Account balance is less than or equal to his or her
adjusted Account balance.
(i) For the Plan Year for which the first waiver is granted, the
adjusted Account balance as of the Valuation Date for each affected Participant
equals:
(A) the Participant's actual Account balance, plus
(B) the amount that such Participant would have received if
the amount waived had been contributed.
(ii) For each Plan Year following the Plan Year for which a
waiver is granted, the adjusted Account balance for each Participant affected by
such waiver (calculated as of the Valuation Date for that Plan Year) equals:
(A) the adjusted Account balance as of the Valuation Date
in the prior Plan Year, plus
(B) the amount equal to the actual investment return
credited or charged to the Participant's actual Account balance, plus
(C) the amount equal to 5% of the excess of the amount in
(A) over the Participant's actual Account balance calculated as of the same
date, plus
(D) the amount equal to such Participant's allocated share
of the required Employer Contribution (whether or not waived) for the Plan Year
(determined without regard to adjusted waiver payments and discretionary
Employer Contributions), minus
(E) the amount of the Participant's adjusted Account
balance forfeited during the Plan Year under the Plan's provisions.
(b) For a given Plan Year, the Employer is required to contribute a
certain amount in order to satisfy the minimum funding standard for such Plan
Year. For each Plan Year which follows a Plan Year for which a waiver of the
minimum funding standard was granted the amount equals:
(i) the amount due as determined under Section 4.01(b) above
without regard to this Section), plus
(ii) the adjusted waiver amount.
(c) The adjusted waiver amount for a given Plan Year equals:
(i) the sum of the amounts necessary to amortize each waived
funding deficiency over a period of fifteen Plan Years (measured from the
Valuation Date of the Plan Year for which the corresponding waiver was granted)
at 5% interest, compounded annually, minus
(ii) the sum of the amounts necessary to amortize the total of
each Plan Year's forfeitures (which have arisen since the first waiver was
granted) over a period of fifteen Plan Years (measured from the Valuation Date
of the Plan Year in which the corresponding forfeitures arose) at 5% interest,
compounded annually.
(d) An amount equal to the adjusted waiver amount must be contributed
only until each Participant's actual Account balance equals the Participant's
adjusted Account balance.
(e) Any Plan provision which provides that Employer Contributions
shall be reduced immediately by forfeitures is revoked until each Participant's
actual Account balance equals that Participant's adjusted Account balance.
(f) Discretionary Employer Contributions, which are in addition to
the amounts contributed to satisfy the minimum funding standard, can be made in
any given Plan Year. However, the total Employer Contribution for the Plan Year
cannot exceed the then remaining underfunded amount (the sum of Participants'
adjusted Account balances minus total Plan assets).
(g) The adjusted waiver payments, discretionary Employer
contributions and the forfeitures of actual Account balances for the current
Plan Year shall be allocated as of that Plan Year's Valuation Date to the actual
Account balances of the affected Participants.
(h) Each time a waiver is granted, an original waiver amount ("OWA")
will be determined for each affected Participant. The OWA equals the
Participant's portion of the amount which was waived.
(i) Commencing with the Valuation Date of the Plan Year for which a
waiver is granted, a remaining original waiver amount ("ROWA") must be
calculated for each affected Participant. As of such Valuation Date the OWA
equals the ROWA. On the Valuation Date of a succeeding Plan Year the ROWA
equals the prior Plan Year's ROWA multiplied by
<PAGE>
1.05, minus the forfeiture of amounts in the prior Plan year's ROWA incurred in
the current Plan Year. For each waiver that is granted one OWA and a
corresponding ROWA will be established for each affected Participant.
(j) The sum of the adjusted waiver payments, discretionary Employer
Contributions and forfeitures of actual Account balances for a given Plan Year
are allocated to those Participants who have ROWAs by multiplying the sum of
these three amounts by the fraction:
(i) the numerator of which equals the sum of OWAs for a
particular Participant, and
(ii) the denominator of which equals the sum of the OWAs for all
Participants.
To determine the portion of this allocation which is to be assigned to a
given ROWA, multiply the allocation by the corresponding OWA, then divide by the
sum of the OWAs for the particular Participant.
(k) If the calculation of a ROWA results in a value which is less
than zero, then
(i) the ROWA is set equal to zero,
(ii) the corresponding OWA is set equal to zero, and
(iii) the excess payments will be reallocated to the remaining
ROWAs.
(l) A distribution is determined by multiplying a Participant's
vested percentage by his or her adjusted Account balance. However,
distributions from the Plan may not exceed a Participant's actual Account
balance. If so limited, plan Participants shall receive subsequent
distributions derived from future adjusted waiver payments.
SECTION 25.
MISCELLANEOUS
25.01 Misrepresentation. Notwithstanding any other provision herein, if
an Employee misrepresents his or her age or any other fact, any benefit payable
hereunder shall be the smaller of: (a) the amount that would be payable if
no facts had been misrepresented, or (b) the amount that would be payable if the
facts were as misrepresented.
25.02 Legal or Equitable Action. If any legal or equitable action with
respect to the Plan is brought by or maintained against any person, and the
results of such action are adverse to that person, attorney's fees and all other
costs to the Employer, the Administrator or the Trust of defending or bringing
such action shall be charged against the interest, if any, of such person under
the Plan.
25.03 No Enlargement of Plan Rights. It is a condition of the Plan, and
each Participant by participating herein expressly agrees, that he or she shall
look solely to the assets of the Trust for the payment of any benefit under the
Plan.
25.04 No Enlargement of Employment Rights. Nothing appearing in or done
pursuant to the Plan shall be construed (a) to give any person a legal or
equitable right or interest in the assets of the Trust or distribution
therefrom, nor against the Employer, except as expressly provide herein or (b)
to create or modify any contract of employment between the Employer and any
Employee or obligate the Employer to continue the services of any Employee.
25.05 Written Orders. In taking or omitting to take any action under this
Plan, the Trustee may conclusively rely upon and shall be protected in acting
upon any written orders from or determinations by the Employer or the
Administrator as appropriate, or upon any other notices, requests, consents,
certificates or other instruments or papers believed by it to be genuine and to
have been properly executed, and so long as it acts in good faith, in taking or
omitting to take any other action.
25.06 No Release from Liability. Nothing in the Plan shall relieve any
person from liability for any responsibility under Part 4 of Title I of the Act.
Subject thereto, neither Trustee, Loan Trustee, Administrator nor Distributor
nor any other person shall have any liability under the Plan, except as a result
of negligence or wilful misconduct, and in any event the Employer shall fully
indemnify and save harmless all persons from any liability except that resulting
from their negligence or wilful misconduct.
25.07 Discretionary Actions. Any discretionary action, including the
granting of a loan pursuant to Section 10 hereof, to be taken by the Employer or
the Administrator under this Plan shall be non-discriminatory in nature and all
Employees similarly situated shall be treated in a uniform manner.
25.08 Headings. Headings herein are primarily for convenience of
reference, and if they conflict with the text, the text shall control.
25.09 Applicable law. This Plan shall, to the extent state law is
applicable, be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the state in which (a) if the Trustee
is a corporation, the Trustee has its principal place of business; (b) if the
Trustee is an individual, the Trustee resides; or (c) if the Trustee is
individuals, where a majority of the individuals serving as Trustee reside. The
Employer's execution of the Adoption Agreement may be acknowledged where
required by applicable law.
25.10 No Reversion. Notwithstanding any other contrary provision of the
Plan, but subject nevertheless to Sections 5 and 16, no part of the assets in
the Trust shall revert to the Employer, and no part of such assets, other than
that amount required to pay taxes or administrative expenses, shall be used for
any purpose other than exclusive benefit of Employees or their Beneficiaries.
However, the Employer may request a return, and this Section 25.10 shall not
prohibit return, of an amount to the Employer under any of the following
circumstances:
(a) if the amount was all or part of an Employer contribution which
was made as a result of a mistake of fact and the amount contributed is returned
to the Employer within one year after the date on which the mistaken payment of
the contribution was made, or
(b) if the amount was all or part of an Employer contribution which
was conditioned on deductibility under Code Section 404 and this condition is
not satisfied, and the amount is returned to the Employer within one after the
date on which the deduction is disallowed, or
(c) if the amount was all or part of an Employer contribution which
was conditioned on the initial qualification of the Plan under Code Section
401(a), this condition is not satisfied, and the amount is returned to the
Employer within one year after the date on which initial qualification is
denied, or
(d) if the amount was all or part of an Employer contribution which
was conditioned on the qualification of the Plan as amended under Code Section
401(a), this condition is not satisfied, the Plan amendment was submitted to the
Internal Revenue Service for qualification within one year after it was adopted,
and the amount is returned to the Employer within one year after the date on
which requalification is denied.
For the purposes of this Section 25.10, all Employer contributions are
conditioned on initial qualification of the Plan under Code Section 401(a),
qualification of the Plan as amended under Code Section 401(a), and
deductibility under Code Section 404.
25.11 Notices. The Employer will provide the notice to other interested
parties contemplated under Code Section 7476 before requesting a determination
by the Secretary of the Treasury or his or her delegate with respect to the
qualification of the Plan.
25.12 Conflict. In the event of any conflict between the provisions of
this Plan and the terms of any contract or agreement issued thereunder or with
respect thereto, the provisions of the Plan shall control. In particular, the
proceeds of any life insurance contract purchased by the Trustee and not
governed by an effective Designation of Beneficiary form shall be paid to the
Participant's Spouse regardless of who is named as the beneficiary or
beneficiaries in the contract.
<PAGE>
SCUDDER FLEXI-PLAN AMENDMENT
FOR TAX REFORM ACT OF 1986
MODEL AMENDMENT II FOR DEFINED CONTRIBUTION PLANS
SECTION I: PURPOSE AND EFFECTIVE DATE
1.1. Purpose. The purpose of this amendment is to amend the plan to comply
with those provisions of the Tax Reform Act of 1986 that are effective prior to
the first year beginning after December 31, 1988. Nothing contained in this
amendment shall permit or require Matching Employer Contributions or Employee
Contributions under the plan unless such Matching Employer contributions or
Employee Contributions have been authorized by the employer under other
provisions of the plan or under other amendments thereto.
1.2. Effective Date. Except as otherwise provided, this amendment shall be
effective as of the first day of the first Plan Year beginning after December
31, 1986.
SECTION II: DEFINITIONS
For the purposes of this amendment only, the following definitions shall
apply:
2.1. "Adoption Agreement Amendment" shall mean that portion of this
amendment in which the employer makes any elections permitted under the
amendment.
2.2. "Affiliated Employer" shall mean any corporation which is a member of
a controlled group of corporations (as defined in section 414(b) of the Code)
which includes the employer, any trade or business (whether or not incorporated)
which is under common control (as defined in section 414(c) of the Code) with
the employer; any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in section 414(m) of the Code) which
includes the employer; and any other entity required to be aggregated with the
employer pursuant to regulations under section 414(o) of the Code.
2.3. "Code" shall mean the Internal Revenue Code of 1986 and amendments
thereto.
2.4. "Compensation" shall mean, for purposes of section V of this
amendment, compensation paid by the Employer to the Participant during the Plan
Year which is required to be reported as wages on the Participant's Form W-2 or
which, in the case of a self-employed individual, constitutes payment for
services rendered includible in the self-employed individual's gross income and,
if the provisions of the plan other than this amendment so provide, shall also
include compensation which is not currently includible in the Participant's
gross income by reason of the application of sections 125, 402(a)(8),
402(h)(1)(B), or 403(b) of the Code.
2.5. "Employee" shall mean employees of the Employer and shall include
leased employees within the meaning of section 414(n) (2) of the Code.
Notwithstanding the foregoing, if such leased employees constitute less than
twenty percent of the employer's nonhighly compensated workforce within the
meaning of section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall
<PAGE>
[PLEASE NOTE PREVIOUS PAGE ENDS WITH SECTION 2.5 CURRENT PAGE BEGINS WITH 4.1]
aggregate contributions as defined in section 401(m)(6)(B), and excess
deferrals as described in section 402(g), regardless of whether such
amounts are distributed or forfeited;
(ii) Forfeitures; and
(iii) Amounts described in sections 415(l)(1) and 419A(d)(2) of the Code.
4.1(b). Maximum Annual Addition. The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(i) the Defined Contribution Dollar Limitation, or
(ii) 25 percent of the Participant's compensation, within the meaning of
section 415(c)(3) of the Code for the Limitation Year.
4.1(c). Special Rules. The compensation limitation referred to in section
4.1(b)(ii) shall not apply to:
(i) Any contribution for medical benefits (within the meaning of section
419A(f)(2) of the Code) after separation from service which is otherwise
treated as an Annual Addition, or
(ii) Any amount otherwise treated as an Annual Addition under section
415(l)(1) of the Code.
4.1(d). Definitions. For purposes of section 4.1, "Defined Contribution
Dollar Limitation" shall mean $30,000 or, if greater, one-fourth of the defined
benefit dollar limitation set forth in section 415(b)(1) of the Code as in
effect for the Limitation Year.
4.2. Special Rules for Plans Subject to Overall Limitations Under Code
Section 415(e).
4.2(a). Recomputation Not Required. 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.
4.2(b). Adjustment of Defined Contribution Plan Enrollment. If the plan
satisfied the applicable requirements of section 415 of the Code as in effect
for all Limitation Years beginning before January 1, 1987, an amount shall be
subtracted from the numerator of the defined contribution plan fraction (not
exceeding such numerator) as prescribed by the Secretary of the Treasury so that
the sum of the defined benefit plan fraction and defined contribution plan
fraction computed under section 415(e)(1) of the Code (as revised by this
section IV) does not exceed 1.0 for such Limitation Year.
4.3. Limitation Year. For purposes of this section IV, "Limitation Year"
shall mean the limitation year specified in the plan, or if none is specified,
the calendar year.
4.4. Effective Date of Section IV Provisions. The provisions of this
section IV shall be effective for Limitation Years beginning after December 31,
1986.
4.5. For purposes of this section IV, Affiliated Employer shall also
include those employers described in section 415(h) of the Code.
<PAGE>
[PLEASE NOTE PREVIOUS PAGE ENDS WITH SECTION 4.5 CURRENT PAGE BEGINS WITH 5.4]
such plans were a single plan.
5.4(c). For purposes of determining the Contribution Percentage of an
Eligible Participant who is a Highly Compensated Employee, the Employee
Contributions, Matching Contributions and Compensation of such Eligible
Participant shall include the Employee Contributions, Matching Contributions and
Compensation of Family Members. Family Members with respect to Highly
Compensated Employees shall be disregarded as separate employees in determining
the Contribution Percentage both for Eligible Participants who are Nonhighly
Compensated Employees and both for Eligible Participants who are Highly
Compensated Employees.
5.4(d). The determination and treatment of the Contribution Percentage of
any Eligible Participant shall satisfy such other requirements as my be
prescribed by the Secretary of the Treasury.
5.5. Distribution of Excess Aggregate Contributions.
5.5(a). In General. Excess Aggregate Contributions plus any income and
minus any loss allocable thereto shall be forfeited, if otherwise forfeitable
under the terms of this plan, or if not forfeitable, distributed no later than
the last day of each Plan Year beginning after December 31, 1987, to
Participants to those accounts Employee Contributions or Matching Contributions
were allocated for the preceding Plan Year.(1) Excess Aggregate Contributions
shall be treated as Annual Additions under section 4.1(a) of this Amendment.
5.5(b). Excess Aggregate Contribution. For purposes of this amendment,
"Excess Aggregate Contributions" shall mean the amount described in section
401(m)(6)(B) of the Code.
5.5(c). Determination of Income or Loss. The Excess Aggregate Contributions
to be forfeited, if otherwise forfeitable under the terms of the plan, or if not
forfeitable, distributed to the Participant shall be adjusted for income or
loss. The income or loss allocable to Excess Aggregate Contributions shall be
determined by multiplying the income or loss allocable to the Participant's
Employee Contributions and Matching Contributions for the Plan Year by a
fraction, the numerator of which is the Excess Aggregate Contributions on behalf
of the Participant for the preceding Plan Year and the denominator of which is
the sum of the Participant's account balances attributable to Employee
Contributions and Matching Contributions on the last day of the preceding Plan
Year.
5.5(d). Accounting for Excess Aggregate Contributions. Excess Aggregate
Contributions shall be distributed from the Participant's Employee Contribution
account, and forfeited if otherwise forfeitable under the terms of the plan (or,
if not forfeitable, distributed) from the Participant's Matching Contribution
account in proportion to the Participant's Employee Contributions and Matching
Contributions for the Plan Year.
- ----------------------
(1)If Excess Aggregate Contributions plus any income and minus any loss
allocable thereto are forfeited (if forfeitable) or distributed more than 2 1/2
months after the last day of the Plan Year in which such Excess Aggregate
Contrbutions arose, then section 4979 of the Code imposes a ten (10) percent
excise tax on the employer maintaining the plan with respect to such accounts.
<PAGE>
[PLEASE NOTE PREVIOUS PAGE ENDS WITH SECTION 5.5 CURRENT PAGE BEGINS WITH 10.1]
would have been applied, if forfeited, to reduce employer contributions under
the plan.
SECTION X: PROFITS NOT REQUIRED
10.1. Applicability of this Section. This section X shall apply to the plan
only if such plan is a profit-sharing plan and the employer elects in the
Adoption Agreement to have this section apply.
10.2. Employer Contributions. Notwithstanding any other provision of the
plan, employer contributions for Plan Years specified in the Adoption Agreement
Amendment shall be made to the plan without regard to current or accumulated
earnings and profits for the taxable years or years ending with or within in
Plan Year. The plan shall continue to be designated to qualify as a
profit-sharing plan for purposes of section 401(a), 402, 412, and 417 of the
Code.
<PAGE>
THESE SECTIONS ARE TO REPLACE THE CORRESPONDING
SECTIONS OF THE SCUDDER FLEXI-PLAN DOCUMENT
SECTION 15.
DESIGNATION OF BENEFICIARY
Each participant and beneficiary may submit to the Trustee a properly
executed Designation of Beneficiary form. In order to be effective, such
designation (a) must have been properly executed and submitted to the Trustee
before the death of the Participant or beneficiary, as the case my be, and (b)
except in the case of the portion of a Participant's vested Account balance in a
money purchase pension plan which is not available for distribution in the form
of a Qualified Preretirement Survivor Annuity pursuant to Section 8.01 above,
for Participants who die after August 22, 1984 leaving a surviving Spouse, must
be accompanied, or preceded, by a consent of the Participant's Spouse (unless
said Spouse is designated as the sole, primary Beneficiary). Such consent of the
Spouse must be in writing, acknowledge that the effect of such consent is that
the Spouse may receive no benefits under the Plan, be witnessed by a Plan
representative or a notary public, and be limited consent to the payment of
death benefits to a specific person or persons. The last effective Designation
accepted by the Trustee shall be controlling, and whether or not fully
dispositive of the Participant's Account, thereupon shall revoke all
Designations (and related spousal consents) previously submitted by the
Participant or beneficiary, as the case may be. Each such executed Designation
(and related spousal consent) is hereby specifically incorporated herein by
reference and shall be construed and enforced in accordance with the laws of the
state in which the Trustee has its principal place of business.
SECTION 22.
SPECIAL DISTRIBUTION RULES
22.01 Special Rule for Profit Sharing Plan Participants. If this Plan is
adopted as a profit sharing plan and (a) it is determined that this Plan is a
direct or indirect transferee (including a plan which is amended into this Plan)
of a defined benefit plan, money purchase pension plan (including a target
benefit plan), stock bonus or profit sharing plan which would otherwise provide
a life annuity form of payment with respect to such Participant, (b) the Plan is
amended so as to allow a Participant to elect to receive his or her benefits in
the form of a life annuity and a Participant elects to receive his or her
benefits in such form, (c) the Plan is amended to provide that absent a
Qualified Election of a Participant's surviving spouse, someone other than the
Participant's surviving spouse becomes entitled to the Participant's vested
Account balance, or (d) if someone other than the Participant's surviving Spouse
is the beneficiary of any insurance purchased with funds from the Participant's
Account, the provisions of Section 8, 9 and 15 shall apply as if this Plan were
adopted as a money Purchase pension plan.
<PAGE>
SCUDDER FLEXI-PLAN
ENROLLMENT BOOKLET
=======================================================
- -------------------------=======================================================
Adoption Agreements
- -------------------------=======================================================
Contribution Forms
- -------------------------=======================================================
Transfer Forms
- -------------------------=======================================================
Designation of Beneficiary Forms
- -------------------------=======================================================
Notice to Interested Parties
SCUDDER
SERVING INVESTORS SINCE 1919
- -------------------------=======================================================
<PAGE>
- --------------------------------------------------------------------------------
HOW TO START
YOUR FLEXI-PLAN
================================================================================
Everything you need is right in this booklet. After reading all of the enclosed
material, just follow these simple steps:
- --------------------------------------------------------------------------------
1 Fill out the appropriate Adoption Agreements. You can choose the profit
sharing plan, the pension plan, or both. Build a customized retirement plan
by selecting the appropriate features.
- --------------------------------------------------------------------------------
2 Complete a Transfer Form if you are transferring assets from an existing plan
to Scudder.
- --------------------------------------------------------------------------------
3 Choose the fund or funds you and any participants would like to invest in and
complete the appropriate Contribution Form. Be sure that you and any
participants read the prospectus of the fund(s) selected.
- --------------------------------------------------------------------------------
4 Have your plan's participants fill out a Designation of Beneficiary for each
plan you adopt. If necessary, you can make copies of these forms for
additional participants.
- --------------------------------------------------------------------------------
5 Make copies of all the forms for your records
- --------------------------------------------------------------------------------
6 Send these forms with your check payable to State Street Bank and Trust Co.
in the reply envelope provided.
- --------------------------------------------------------------------------------
7 Post the "Notice to Interested Parties" for your employees.
- --------------------------------------------------------------------------------
If you have any questions or would like assistance in filling out these forms,
please call our Retirement Plan Specialists at 1-800-323-6105
They'll be happy to help you.
THIS BOOKLET CONTAINS:
================================================================================
Adoption Agreements
o A Flexi-Profit Sharing Plan Adoption Agreement. Complete this application to
establish a profit sharing plan.
o A Flexi-Money Purchase Pension Plan Adoption Agreement. Complete this
application to establish a pension plan.
- --------------------------------------------------------------------------------
Plan Contribution Forms
o A Flexi-Profit Sharing Plan Contribution Form. Use this form to tell us how to
divide and invest any contribution to the profit sharing plan.
o A Flexi-Money Purchase Pension Plan Contribution Form. Use this form to tell
us how to divide and invest any contribution to the pension plan.
- --------------------------------------------------------------------------------
Transfer Forms
o A Flexi-Profit Sharing Plan Transfer Form. Fill out this form to
move the assets of an existing profit sharing plan to Scudder.
o A Flexi-Money Purchase Pension Plan Transfer Form. Fill out this form to move
the assets of an existing pension plan to Scudder.
- --------------------------------------------------------------------------------
Designation of Beneficiary Forms
o A Flexi-Profit Sharing Plan Designation of Beneficiary. Each participant in
the profit sharing plan should complete one to name a beneficiary for his or her
vested balance.
o A Flexi-Money Purchase Pension Plan Designation of Beneficiary. Each
participant in the pension plan should complete one to name a beneficiary for
his or her vested balance.
- --------------------------------------------------------------------------------
Notice to Interested Parties
o Please post this notice for your employees in a common area of your workplace.
See instructions for posting at the top of the form.
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
==================
Profit Sharing Plan
Adoption Agreement
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Plan number 003 Boston, MA 02205-9047
- --------------------------------------------------------------------------------
INSTRUCTIONS:
These instructions are provided to help you make selections in the
corresponding sections of the Profit Sharing Plan Adoption Agreement. The
Adoption Agreement is designed with "pre-selected" options shaded in each
section. If you want the pre-selected option, please do not check or complete
the unshaded option below it. If you prefer the unshaded option, check the box
and fill in any blanks.
1. ELIGIBILITY
This section determines who will be covered by the plan. You determine the
waiting period, how many hours constitute a year of service, minimum age
required, and starting day for participation. You also decide whether you wish
to exclude certain classes of employees from participation in the plan. If this
is your first year of business, you must reduce the waiting period to make
contributions for this year.
2. VESTING OF EMPLOYER CONTRIBUTIONS
A. If you choose a waiting period of more than one year in 1.A., you must select
full and immediate vesting. If you choose a waiting period of one year or
less and want graduated vesting, check the unshaded option to select the
vesting schedule in Column 1. For a more rapid schedule, check the box and
complete Column 2.
B. If you choose immediate vesting, skip this section. If you choose graduated
vesting, you may select the 12 month period on which vesting years are
calculated. If you check the unshaded option, you may not check the box in
2.C., the following section.
C. Do not check the unshaded option if you checked the box in 2.B. If you did
not check the box in 2.B. and want participants to accrue a vesting year for
years they receive an employer contribution, whether or not the participant
completes the number of Hours of Service specified in Section 1.B., check the
box in 2.C.
D. Checking a box(es) in this section allows you to calculate vesting years
including a participant's service before the plan (or predecessor plan) was
established or before the plan year in which a participant turned 18.
3. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. This option allows you to decide whether you will make contributions for
former participants who retired or otherwise terminated participation in the
plan during the plan year. If you do not wish to make contributions for these
former participants, check the unshaded option.
B. If your plan is top heavy, you may be required to make minimum contributions
for non-key employees. If you maintain more than one qualified retirement
plan, this election lets you select the plan responsible for making these
minimum contributions.
Check and complete the unshaded option if you want to make any minimum plan
contributions from another tax qualified plan or from the Scudder Pension
Plan if you have adopted both the Scudder Profit Sharing and Pension Plans.
Do not check the unshaded option if you are adopting only the Profit Sharing
plan.
4. INTEGRATION WITH SOCIAL SECURITY
If you do not want your plan integrated with Social Security, skip this section.
If you do wish to integrate the plan, check the unshaded option and make the
selection in 4.A. for the wage level to which you want integration to apply and
in 4.B. for the rate of integration (check and complete the desired options).
5. NORMAL RETIREMENT DATE
The normal retirement date for plan participants will be 59-1/2 unless you check
and complete the unshaded option.
6. COMPENSATION
The unshaded option in this section allows you to base contributions on
compensation for the entire year an employee becomes a participant, even if the
employee becomes a participant during the year.
7. PARTICIPANT CONTRIBUTIONS
Non-deductible voluntary contributions (after-tax) are allowed by the plan
unless you select otherwise by checking the unshaded option.
8. INVESTMENT
Plan participants will have discretion over the investment of plan contributions
made for them unless the unshaded option is checked.
9. LOANS
Loans to participants from this plan are not permitted unless you check the
unshaded option. NOTE: Certain owners, including owner-employees, are prohibited
from taking loans from the plan.
10. EFFECTIVE DATE
The effective date of the plan will be the first day of the employer's fiscal
year, unless otherwise indicated by checking and completing the unshaded option.
11. PLAN YEAR
The plan year will be the employer's fiscal year unless you check and complete
the unshaded option.
12. AMENDMENT
If you are adopting the Profit Sharing Plan as an amendment to an existing plan,
please check the unshaded option.
13. LIMITATIONS ON ALLOCATIONS
This section advises you concerning the limitations on allocations of
contributions if you have other tax-qualified plans in addition to the
Flexi-Plan Profit Sharing Plan or Money Purchase Pension Plan.
14. LIMITATION YEAR
The limitation year will be the same as the plan year unless you check and
complete the unshaded option.
15. SIGNATURES
Please read and complete this section. State Street Bank and Trust Company is
predesignated as the Plan's trustee and the Adoption Agreement is presigned by
an authorized representative of State Street Bank.
If you elect to allow loans to participants in this Agreement, please designate
a loan trustee and obtain the loan trustee's signature. The loan trustee may be
an individual.
Please provide all the information requested, including the employer's tax
identification number and fiscal year. If you do not have a tax identification
number, please contact your local Internal Revenue Service office to obtain a
number.
ADOPTION AGREEMENT AMENDMENT
As permitted under the Tax Reform Act of 1986, an employer need not have profits
in a plan year in order to make employer contributions. Check the box is you
want this provision to apply to your plan.
If you have any questions about this Adoption Agreement, please call a Scudder
Retirement Plan Specialist at 1-800-323-6105.
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
Profit Sharing Plan
Adoption Agreement
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Plan number 003 Boston, MA 02205-9047
- --------------------------------------------------------------------------------
The undersigned (the "Employer") establishes, or amends, the (Scudder
automatically inserts employer's name) Profit Sharing Plan, by completing this
Adoption Agreement adopting or amending the Profit Sharing Plan in the form of
the Prototype Plan attached.
1. ELIGIBILITY
A. To become a Participant an Employee must complete 3 Years of Service
|_| or, if this box is checked, an Employee must complete ____ Year(s) of
Service, (insert less than "3"; select more than "1" only if the
employer selects full and immediate vesting in Section 2.A. below;
insert "0" for no waiting period).
B. The number of Hours of Service required to have a Year of Service is 1000
|_| or, if this box is checked, ____ (insert less than 1000 hours). However,
if the Year(s) of Service selected in A. above is or includes a
fractional year, an Employee is not required to complete any specified
number of Hours of Service to receive eligibility credit for such
fractional year.
C. To become a Participant an Employee need not attain any minimum age
|_| or, if this box is checked. a employee must be at least ____ (insert 21
or less) years of age.
D. An Employee who meets the above requirements shall become a Participant on
the first day the requirements are met
|_| or, if this box is checked, on the first day of the next month.
E. All Employees are entitled to be Participants
|_| or, if this box is checked, all Employees are entitled to be
Participants except (check one or both):
|_| Non-resident aliens who receive no earned income from the Employer which
constitutes income from sources within the United States
|_| Individuals covered by a collective bargaining contract which meets the
requirements specified in the Plan.
2. VESTING OF EMPLOYER CONTRIBUTIONS
A. Employer Contributions under the Plan shall be fully and immediately vested
and non-forfeitable
|_| or, if this box is checked, vested at the rate in Column 1 below, or at
a more rapid rate of vesting if specified in Column 2 below.
VESTING TABLE
Column 1 Column 2
-------- --------
Vesting Minimum Percentage
Years Percentage Selected
1 0 _________
2 20 _________
3 40 _________
4 60 _________
5 80 _________
6 100 _________
B. Vesting Years and One-Year Breaks in Service for the purpose of vesting
shall be measured on the Plan Year
|_| or, if this box is checked, on the 12 consecutive month period beginning
on the Participant's initial date of employment or an anniversery of
that date.
Note: If you make this election, you may not check the box in Section
2.C. below.
C. The Participant will have a Vesting Year only if the Participant completes
the number of Hours of Service specified in Section 1.B.
|_| or, if this box is checked, if the Participant either completes the
number of Hours of Service specified in Section 1.B. or receives an
allocation of the Employer Contribution for the Plan Year, or both.
D. The following Service will be included in determining Vesting Years only if
checked below:
|_| Service before the Employer maintained this Plan or a predecessor plan
|_| Service before the first Plan Year in which a Participant attained age
18.
<PAGE>
3. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. A former Participant who has retired, died, otherwise terminated Service, or
transferred to an ineligible class of Employee during the Plan Year shall
share in the allocation of Employee Contributions for the Plan Year
|_| or, if this box is checked, shall not share in the allocation of
Employer Contributions.
B. Any required minimum top heavy allocations will be made first from this Plan
|_| or, if this box is checked, first from the ____________________________
Plan (insert name of another qualified plan maintained by the Employer)
4. INTEGRATION WITH SOCIAL SECURITY
The Plan will not be integrated with Social Security
|_| or, if this box is checked, will be integrated with Social Security on
the following basis:
A. The Integration Level for a Plan Year will be the Social Security Wage
Base for such Plan Year
|_| or, if this box is checked, $_________________ (not to exceed the
Social Security Wage Base)
B. The Integration Rate for a Plan Year will be the OASDI Rate for each
Plan Year
|_| or, if this box is checked, ____________________% (not in excess of
OASDI Rate)
Note: An Employer may elect to integrate the Plan with Social Security only
if the Employer does not maintain another qualified retirement plan
integrated with Social Security.
5. NORMAL RETIREMENT DATE
A Participant's Normal Retirement Date shall be age 59-1/2
|_| or, if this box is checked, age ________________ (insert more than
59-1/2 but not more than 65).
6. COMPENSATION
"Compensation" shall only include amounts paid during the Plan Year by the
Employer to the Employee while the Employee was a Participant
|_| or, if this box is checked, "Compensation" shall include amounts paid by
the Employer to the Employee during the entire Plan Year in which an
Employee became a Participant whether or not such Employee was a
Participant for the entire Plan Year.
7. PARTICIPANT CONTRIBUTIONS
Non-deductible Voluntary contributions by a Participant are permitted
|_| or, if this box is checked, are not permitted.
8. INVESTMENT
Investment decisions shall be made by the Participant
|_| or, if this box is checked, by the Administrator.
9. LOANS
Loans to a Participant are not permitted
|_| or, if this box is checked, are permitted.
10. EFFECTIVE DATE
The Effective Date of the Adoption Amendment shall be the first day of the
Employee's fiscal year during which the Plan is adopted or amended
|_| or, if this box is checked, ____________________ (insert date).
11. PLAN YEAR
The Plan Year shall be the same as the fiscal year of the Employee
|_| or, if this box is checked, shall end on the last day of the month of
________________.
12. AMENDMENT
Execution of the Adoption Agreement is not an amendment to an existing plan
|_| or, if this box is checked, is an amendment to an existing plan.
<PAGE>
13. LIMITATION ON ALLOCATIONS
If the Employer maintains or has even maintained another qualified defined
contribution plan other than a Scudder Money Purchase Pension Plan (Plan number
002 or 004) or a plan amended into the Prototype Plan in which any Participant
in the Plan is or was a participant or could possibly become a participant, the
provisions of Section 5.03 of the Prototype Plan will apply.
If the Employer maintains or has ever maintained a qualified defined benefit
plan in which any Participant in this Plan is or was a participant or could
possibly become a participant, the provisions of Section 5.04 of the Prototype
Plan will apply.
14. LIMITATION YEAR
The Limitation Year shall be identical for all plans maintained by the Employee
as the Plan Year.
|_| or, if this box is checked, shall end on the last day of the
month of ________________.
15. SIGNATURES
The Employer (1) covenants and agrees that whenever a Participant makes a
contribution the Employer shall ascertain the Participant has received a copy of
the current prospectus relating to the shares of any Designated Investment
Company in which such contribution is to be invested plus, where required by any
state or federal law, the current prospectus relating to any other investment in
which contributions are to be invested, and (2) by remitting such a contribution
to the Trustee the Employer shall be deemed to represent that the Employer has
received a current prospectus, and (3) by remitting any other contribution to
the Trustee the Employer shall be deemed to represent that the Employer has
received a current prospectus of any Designated Investment Company in which it
is to be invested, plus, where required by any state or federal law, the current
prospectus relating to any other investment in which contributions are to be
invested.
An Employer adopting this plan may rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Internal Revenue Code, provided that the
Employer has never maintained, is not maintaining, and will not (while
maintaining this Plan) adopt another qualified plan (other than the Scudder
Money Purchase Pension Plan (plan number 002 or 004) or a plan which is being
amended into this Plan or the Scudder Money Purchase Pension Plan (plan number
002 or 004)) or after December 31, 1985, a welfare benefit fund (as defined in
Code Section 419(e)) which provides post-retirement medical benefits allocated
to separate accounts for Key Employees (as defined in Code Section 419A(d)(3)).
An employer who adopts or maintain multiple plans other than the Scudder Profit
Sharing Plan (plan number 001 or 003) together with the Scudder Money Purchase
Pension Plan (plan number 002 or 004) may apply for a determination letter from
the appropriate Key District Director of the Internal Revenue to obtain reliance
that the plans are qualified.
This Adoption Agreement may be used only in conjunction with basic plan document
#01.
__________________________________
Name of Employer
__________________________________
Signature of Employer
__________________________________
Date
__________________________________
Street Address
__________________________________
City State Zip
__________________________________
Daytime Telephone
__________________________________
Employer Tax Identification Number
__________________________________
Employer Fiscal Year
__________________________________
Name of Loan Trustee*
__________________________________
Signature
*NOTE: If you elect to allow loans to Participants in Section 9, you must
designate a Loan Trustee.
Trustee:
State Street Bank and Trust Company
By: /s/ G. Reeves
ADOPTION AGREEMENT AMENDMENT
Employer Contributions in Profit Sharing Plan.
(check the option below if you wish it to apply to your plan)
|_| Effective for Plan Years beginning on or after ___________________
[fill in the first day of the Plan Year in which this Adoption Agreement
Amendment is executed or a subsequent anniversary of such date],
notwithstanding any other provision of the plan, the employer contributions
shall be made to the plan without regard to current or accumulated earnings and
profits for the taxable year or years ending with or within such Plan Year.
Please make copies of all completed forms for your records.
<PAGE>
To be Completed by Employer
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
==================
Profit Sharing Plan
Contribution Form
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Boston, MA 02205-9047
- --------------------------------------------------------------------------------
Employer Information
Name____________________________________ Tax I.D. #__________________
Business Address________________________ Telephone___________________
City________________________State________Zip Code____________________
- --------------------------------------------------------------------------------
Telephone Exchange Option
You or your plan participants will be able to exchange shares from one Scudder
Fund into any other Scudder Fund by telephone, telegram, or TWX. The new account
will have the identical registration as the account from which the shares are
transferred.
- --------------------------------------------------------------------------------
Participant Information
The minimum investment for the first Scudder plan you establish (either the
Profit Sharing Plan or the Pension Plan) is $500 times the number of
participants, which may be allocated in any amounts among the participants (e.g.
2 participants, minimum investment = $1000 which can be allocated $700 for one
and $300 for the other). If you are establishing both plans, the minimum
investment for the second plan is $300 times the number of participants.
Participants may invest in more than one Scudder Fund if at least $500 is
invested in each fund.
|_| Check here if assets to be invested in the Profit Sharing Plan will include
a transfer from an existing plan. Please also complete the enclosed
transfer form. (Please designate allocation of transfer money on the
transfer form, and not on this form.)
Scudder Fund(s) Contribution Amount
Selected Employer Employee Total
Participant_______________ _____________ $_______ $_______ $_____
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
Participant_______________ _____________ ________ ________ ______
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
Participant_______________ _____________ ________ ________ ______
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
(Please attach additional pages if necessary) Total investment $=====
Please make your contribution check payable to State Street Bank and Trust Co.
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
==================
Profit Sharing Plan
Transfer Form
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Boston, MA 02205-9047
- --------------------------------------------------------------------------------
1. Name and Address of Employer
Name____________________________________ Tax I.D.# _________________
Business Address________________________ Telephone _________________
City______________________ State________ Zip Code __________________
2. Instructions to Present Trustee
Name of Trustee_____________________________________________________
Address_________________________________ Telephone _________________
City______________________ State________ Zip Code __________________
Present Account #'s _______________________________
_______________________________
_______________________________
I request that the Trustee of my present qualified retirement plan transfer
the assets of my profit sharing plan to State Street Bank and Trust
Company, which I have appointed as Trustee of my Scudder Flexi-Profit
Sharing Plan. All assets should be transferred as cash according to the
following instructions:
|_| Please transfer all of my present retirement plan assets and
resign as Trustee
or
|_| Please transfer $____ of my present retirement plan assets and
retain the balance.
Other instructions (e.g. make transfer upon maturity date of __/__/__): __
__________________________________________________________________________
- --------------------------------------------------------------------------------
Trustee should make check payable to:
State Street Bank and Trust Company A/C _________________ Scudder Flexi-
(employer name)
Profit Sharing Plan.
Return check in the enclosed envelope to Scudder Fund Distributors, Inc.,
Retirement Plan Services, P.O. Box 9047, Boston, MA 02205-9047.
- --------------------------------------------------------------------------------
3. Instructions to State Street Bank and Trust Company
Upon receipt of the assets from my previous profit sharing plan trustee,
please invest them in the Scudder Flexi-Profit Sharing Plan in the Scudder
funds as indicated below:
<TABLE>
<CAPTION>
Scudder Fund(s) Account# Employer Employee
Participant Selected (if existing) Contribution Contribution Total
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
_____________ _____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________ _____________
_____________ _____________ _____________ _____________ _____________ _____________
</TABLE>
(Please attach additional pages if necessary.)
- --------------------------------------------------------------------------------
4. Signature of Employer
__________________________ _______________________________________
Date Employer Signature
5. Acceptance by New Trustee (To be completed by Scudder Fund Distributors,
Inc. and State Street Bank and trust company)
State Street Bank and Trust Company accepts the appointment as successor trustee
of the above Profit Sharing Plan account and requests the liquidation and
transfer of assets as indicated above.
Scudder Fund Distributors, Inc. State Street Bank and Trust Company
By: __________________________
Date: ________________________ By: /s/ G. Reeves
--------------------------------
This form is valid only is signed by an authorized representative of Scudder
Fund Distributors, Inc.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
==================
Profit Sharing Plan
Designation of Beneficiary
_________________________ Return this form to:
Name of Employer
_________________________ Scudder Fund Distributors, Inc.
Fund(s) Retirement Plan Services
_________________________ P.O. Box 9047
Account #'s, if assigned Boston, MA 02205-9047
- --------------------------------------------------------------------------------
Name of Participant _______________________
Note: You must file a separate Designation of Beneficiary form for the
Flexi-Money Purchase Pension Plan.
- --------------------------------------------------------------------------------
Instructions
With this form you designate the beneficiary who will receive your Plan assets
if you die while a balance remains in your account. Your spouse must consent if
less than 100% is left to him or her. This form is not effective until filed
with the Plan Trustee.
- --------------------------------------------------------------------------------
Examples of beneficiary designations
o Sandra Casey (SS# 000-00-0000), 3 Oak Street, Chicago, IL 60060, my wife,
if living at my death; otherwise to my children who survive me, in equal
shares. If any child does not survive me, such deceased child's share shall
go by right of representation to that child's issue who survive me. (Note:
"issue" refers to children, grandchildren, etc.)
o Sandra Casey (SS# 000-00-0000) 3 Oak Street, Chicago, IL 60060, my wife, if
living at my death; otherwise to James Casey (SS# ###-##-####), 321 Elm
Street, San Mateo, CA 94042, my son, if living at my death. If he is not
living at my death, then to his issue who survive me by right of
representation.
o James Casey (SS# ###-##-####), 321 Elm Street, San Mateo, CA 94042, my son,
and Mary Casey (SS# 999-99-9999), 7 Beech Avenue, Dallas, TX 75302, my
daughter, in equal shares, if they both survive me; otherwise all to the
one of them who survives me. If neither survives me, to X charity.
These are only examples. You may wish to consult an attorney before naming
beneficiaries.
- --------------------------------------------------------------------------------
Name your plan Beneficiaries and list their Social Security Numbers and
addresses if possible
The following beneficiaries are entitled to receive the assets of my Plan upon
my death. This designation revokes any previous designation. I understand that I
can change this choice of beneficiary by submitting a new form to the Trustee
for the Scudder Plan.
Beneficiaries (Please print): _____________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
- --------------------------------------------------------------------------------
Sign here
____________________________ ____________________
Your signature Date
- --------------------------------------------------------------------------------
Obtain the consent of your spouse if necessary (both boxes may be checked). If
box (a) is checked, your spouse's signature must be witnessed by a Notary Public
or Plan Representative
|_| (a) If less than 100% of the assets in the Plan have been left to me as
primary beneficiary, I consent to such designation and limit my consent to
the beneficiaries indicated above. In addition, recognizing that I also
have a right to limit my consent to a specific form of benefits (such as a
lump sum distribution or installment payments over a period of time). I
relinquish that right and consent to any form of benefits which may be
elected under the plan. I understand that my spouse must execute a new
designation if he or she wants to designate another beneficiary.
|_| (b) As spouse of a Participant who is a resident of Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, or Washington, I consent to
(1) the naming of another person as primary beneficiary to receive more
than one-half the plan distributions or (2) the naming of myself as primary
beneficiary and others as contingent beneficiaries.
I acknowledge that I have read the above election and understand the effect
its exercise shall have on me.
____________________________ _____________________
Spouse's signature Date
____________________________ |_| Plan representative
Witness or
|_| Notary Public
State: ____________
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER FLEXI-PLAN
==================
Money Purchase Pension Plan
Adoption Agreement
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Plan number 004 Boston, MA 02205-9047
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INSTRUCTIONS:
These instructions are provided to help you make selections in the
corresponding sections of the Money Purchase Pension Plan Adoption Agreement.
The Adoption Agreement is designed with "pre-selected" options shaded in each
section. If you want the pre-selected option, please do not check or complete
the unshaded option below. If you prefer the unshaded option, check the box and
fill in any blanks.
1. ELIGIBILITY
This section determines who will be covered by the plan. you determine the
waiting period, how many hours constitute a year of service, minimum age
required, and starting day for participation. You also decide whether you wish
to exclude certain classes of employees from participation in the plan. If this
is your first year of business, you must reduce the waiting period to make
contributions this year.
2. VESTING OF EMPLOYER CONTRIBUTIONS
A. If you choose a waiting period of more than one year in 1.A., you must
select full and immediate vesting. If you choose a waiting period of one
year or less and want graduated vesting, check the unshaded option to
select the vesting schedule in Column 1. For a more rapid schedule, check
the box and complete Column 2.
B. If you choose immediate vesting, skip this section. If your choose
graduated vesting, you may select the 12 month period on which vesting
years are calculated. If you check the unshaded option, you may not check
the box in 2.C., the following section.
C. Do not check the unshaded option if you checked the box in 2.B. If you did
not check the box in 2.B. and want participants to accrue a vesting year
for years they receive an employer contribution, whether or not the
participant completes the number of Hours of Service specified in Section
1.B., check the box in 2.C.
D. Checking a box(es) in this section allows you to calculate vesting years
including a participant's service before the plan (or predecessor plan) was
established or before the plan year in which a participant turned 18.
3. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. This option allows you to decide whether you will make contributions for
former participants who retired or otherwise terminated participation in
the plan during the plan year. If you do not wish to make contributions for
these former participants, check the unshaded option.
B. If you plan is top heavy, you may be required to make minimum contributions
for non-key employees. If you maintain more than one qualified retirement
plan, this election lets you select the plan responsible for making these
minimum contributions.
Check and complete the unshaded option if you want to make any minimum plan
contributions from another tax-qualified plan or from this Pension Plan if
you have adopted both the Scudder Profit Sharing and Pension Plans.
Do not check the unshaded option if you are adopting only the Money
Purchase Pension Plan.
4. NORMAL RETIREMENT DATE
The normal retirement date for plan participants will be 59 1/2 unless you check
and complete the unshaded option.
5. COMPENSATION
The unshaded option in this section allows you to base contributions on
compensation for the entire year an employee becomes a participant, even if the
employee becomes a participant during the year.
6. PARTICIPANT CONTRIBUTIONS
Non-deductible voluntary contributions (after-tax) are allowed by the plan
unless you select otherwise by checking the unshaded option.
7. INVESTMENT
[Illegible]
8. LOANS
Loans to participants from this plan are not permitted unless you check the
unshaded option. NOTE: Certain owners, including owner-employees, are prohibited
from taking loans from the Plan.
9. EFFECTIVE DATE
The effective date of the plan will be the first day of the employer's fiscal
year, unless otherwise indicated by checking and completing the unshaded option.
10. PLAN YEAR
The plan year will be the employee's fiscal year unless you check and complete
the unshaded option.
11. AMENDMENT
If you are adopting the Money Purchase Pension Plan as an amendment to an
existing plan, please check the unshaded option.
12. PENSION CONTRIBUTIONS AND INTEGRATION WITH SOCIAL SECURITY
If you do not want your plan integrated with Social Security, complete the blank
in the shaded option to designate the contribution rate for the plan. Do not
check the unshaded option.
If you do wish to integrate the plan, check the unshaded option and then specify
the integration rate and integration level. Note: If integration is selected,
please indicate, at the end of the unshaded option, the rate for contributions
made to the plan exclusive of Social Security contribution. The rate chosen
should not result in total contributions to any participant exceeding 25% of
compensation. (For a self-employed individual, the rate should not exceed 25%,
which is the same of 20% of net profits before contributions to the plan for the
self-employed. See guide for more information.)
13. LIMITATIONS ON ALLOCATIONS
This section advises you concerning the limitations on allocations of
contributions if you have other tax-qualified plans in addition to the
Flexi-Plan Profit Sharing Plan or Money Purchase Pension Plan.
14. LIMITATION YEAR
The limitation year will be the same as the plan year unless you check and
complete the unshaded option.
15. SIGNATURES
Please read and complete this section. State Street Bank and Trust Company is
predesignated as the Plan's trustee and the Adoption Agreement is presigned by
an authorized representative of State Street Bank.
If you elect to allow loans to participants in this Agreement, please designate
a loan trustee and obtain the loan trustee's signature. The loan trustee may be
an individual.
Please provide all the information requested, including the employer's tax
identification number and fiscal year. If you do not have a tax identification
number, please contact your local Internal Revenue Service office to obtain a
number.
ADOPTION AGREEMENT AMENDMENT
As permitted under the Tax Reform Act of 1986, forfeitures may be reallocated to
participants rather than reducing future contributions. Check the box if you
want this provision to apply to your plan.
If you have any questions about this Adoption Agreement [Illegible]
<PAGE>
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SCUDDER FLEXI-PLAN
===================
Money Purchase Pension Plan
Adoption Agreement
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Plan number 004 Boston, MA 02205-9047
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The undersigned (the "Employer") establishes, or amends, the (Scudder
automatically inserts employer's name) Money Purchase Pension Plan, by
completing the Adoption Agreement adopting or amending the Money Purchase
Pension Plan in the form of the Prototype Plan attached.
1. ELIGIBILITY
A. To become a Participant an Employee must complete 3 Years of Service
|_| or, if this box is checked, an Employee must complete _______ Year(s)
of Service, (insert less than "3"; select more than "1" only if the
employer selects full and immediate vesting in Section 2.A. below;
insert "0" for no waiting period).
B. The number of Hours of Service required to have a Year of Service is 1000
|_| or, if this box is checked, ______ (insert less than 1000 hours).
However, if the Year(s) of Service selected in A. above is or includes
a fraction year, an Employee is not required to complete any specified
number of Hours of Service to receive eligibility credit for such
fractional year.
C. To become a Participant an Employee need not attain any minimum age
|_| or, if this box is checked, an Employee must be at least ____ (insert
21 or less) years of age.
D. An Employee who meets the above requirements shall become a Participant on
the first day the requirements are met
|_| or, if this box if checked, on the first day of the next month.
E. All Employees are entitled to be Participants
|_| or, if this box is checked, all Employees are entitled to be
Participants except (check one or both):
|_| Non-resident aliens who receive no earned income from the
Employer which constitutes income from sources within the United
States
|_| Individuals covered by a collective bargaining contract which
meets the requirements specified in the Plan.
2. VESTING OF EMPLOYER CONTRIBUTIONS
A. Employer Contributions under the Plan shall be fully and immediately vested
and non-forfeitable
|_| or, if this box is checked, vested at the rate in Column 1 below, or
at a more rapid rate of vesting if specified in Column 2 below.
VESTING TABLE
Column 1 Column 2
----------- ----------
Vesting Minimum Percentage
Years Percentage Selected
1 0 __________
2 20 __________
3 40 __________
4 60 __________
5 80 __________
6 100 __________
B. Vesting Years and One-Year Breaks in Service for the purpose of vesting
shall be measured on the Plan Year
|_| or, if this box is checked, on the 12 consecutive month period
beginning on the Participant's initial date of employment or an
anniversary of that date.
Note: If you make this election, you may not check the box in Section 2.C.
below.
C. The Participant will have a Vesting Year only if the Participant completes
the number of Hours of Service specified in Section 1.B.
|_| or, if this box is checked, if the Participant either completes the
number of Hours of Service specified in Section 1.B. or receives an
allocation of the Employer Contribution for the Plan Year, or both.
D. The following Service will be included in determining Vesting Years only if
checked below:
|_| Service before the Employer maintained this Plan or a predecessor plan
|_| Service before the first Plan Year in which a Participant attained age
18.
<PAGE>
3. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. A former Participant who has retired, died, otherwise terminated Service,
or transferred to an ineligible class of Employees during the Plan year
shall share in the allocation of Employer Contributions for the Plan Year
|_| or, if this box is checked, shall not share in the allocation of
Employer Contributions.
B. Any required minimum top heavy allocations will be made first from this
Plan unless the Employer has also adopted a Scudder Profit Sharing Plan
(plan number 001 and 003), in which case the minimum top heavy allocations
will be made first from that plan.
|_| or, if this box is checked, first from the _______________ Plan
(insert name of another qualified plan maintained by the Employer).
4. NORMAL RETIREMENT DATE
A. Participant's Normal Retirement Date shall be age 59 1/2
|_| or, if this box is checked, age ________________ (insert more than 59
1/2 but not more than 65).
5. COMPENSATION
"Compensation" shall only include amounts paid during the Plan Year by the
Employer to the Employee while the Employee was a Participant
|_| or, if this box is checked, "Compensation" shall include amounts paid
by the Employer to the Employee during the entire Plan Year in which
an Employee became a Participant whether or not such Employee was a
Participant for the entire Plan Year.
6. PARTICIPANT CONTRIBUTIONS
Non-deductible Voluntary contributions by a Participant are permitted
|_| or, if this box is checked, are not permitted.
7. INVESTMENT
Investment decisions shall be made by the Participant
|_| or, if this box is checked, by the Administrator.
8. LOANS
Loans to a Participant are not permitted
|_| or, if this box is checked, are permitted.
9. EFFECTIVE DATE
The Effective Date of the Plan or Amendment shall be the first day of the
Employer's fiscal year during which the Plan is adopted or amended
|_| or, if this box is checked, _____________________ (insert date).
10. PLAN YEAR
The Plan Year shall be the same as the fiscal year of the Employer
|_| or, if this box is checked, shall end on the last day of the month of
___________________.
11. AMENDMENT
Execution of the Adoption Agreement is not an amendment to an existing plan
|_| or, if this box is checked, is an amendment to an existing plan.
12. PENSION CONTRIBUTIONS AND INTEGRATION WITH SOCIAL SECURITY
The Plan will not be integrated with Social Security and for each Plan Year the
Employer will contribute to the Account of each Participant entitled to an
allocation under Section 3, _____________% (insert not more than 25%) of that
Participant's Compensation for the Plan Year.
|_| or, if this box is checked,
the Plan will be integrated with Social Security and for each Plan
Year, the Employer will contribute
|_| the OASDI Rate
or
|_| ___________% (not to exceed the OASDI Rate)
of such Participant's Compensation in excess of (check one):
|_| the Social Security Wage Base
or
|_| [Illegible text] Social Security Wage Base
<PAGE>
Note: Rates chosen should not result in total contributions to any Participant
exceeding 25% of that Employee's aggregate Compensation.
Employer contributions allocable to a Participant shall be reduced by that
Participant's allocation of forfeitures arising during preceding Plan
Years.
An Employer may elect to integrate the Plan with Social Security only if
the Employer does not maintain another qualified retirement plan integrated
with Social Security.
13. LIMITATION ON ALLOCATIONS
If the Employer maintains or has ever maintained another qualified defined
contribution plan other than a Scudder Profit Sharing Plan (Plan number 001 or
003) or a plan amended into the Prototype Plan in which any Participant in this
Plan is or was a participant or could possible become a participant, the
provisions of Section 5.03 of the Prototype Plan will apply.
If the Employer maintains or has ever maintained a qualified defined benefit
plan in which any Participant in this Plan is or was a participant or could
possibly become a participant, the provisions of Section 5.04 of the Prototype
Plan will apply.
14. LIMITATION YEAR
The Limitation Year shall be identical for all plans maintained by the Employer
and is the Plan Year
|_| or, if this box is checked, shall end on the last day of the month of
_________________.
15. SIGNATURES
The Employer (1) covenants and agrees that whenever a Participant makes a
contribution the Employer shall ascertain that the Participant has received a
copy of the current prospectus relating to the shares of any Designated
Investment Company in which such contribution is to be invested plus, where
required by any state or federal law, the current prospectus relating to any
other investment in which contributions are to be invested, and (2) by remitting
such a contribution to the Trustee the Employer shall be deemed to represent
that the Participant has received such a prospectus, and (3) by remitting any
other contribution to the Trustee the Employer shall be deemed to represent that
the Employer has received a current prospectus of any Designated Investment
Company in which it is to be invested, plus, where required by any state or
federal law, the current prospectus relating to any other investment in which
contributions are to be invested.
An Employer adopting this plan may rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Internal Revenue Code, provided that the
Employer has never maintained, is not maintaining, and will not (while
maintaining this Plan) adopt a qualified plan (other than the Scudder Profit
Sharing Plan (plan number 001 or 003) or a plan which is being amended into this
Plan or the Scudder Profit Sharing Plan (plan number 001 and 003)) or after
December 31, 1985, a welfare benefit fund (as defined in Code Section 419(e))
which provides post retirement benefits allocated to separate accounts for Key
Employees (as defined in Code Section 419A(d)(3)).
An employer who adopts or maintains multiple plans other than the Scudder Profit
Sharing Plan (plan number 001 or 003) together with the Scudder Money Purchase
Pension Plan (plan number 002 or 004) may apply for a determination letter from
the appropriate Key District Director of the Internal Revenue to obtain reliance
that the plans are qualified.
This Adoption Agreement may be used only in conjunction with basic plan document
#01.
_________________________________ _____________________________
Name of Employer Name of Loan Trustee*
_________________________________ _____________________________
Signature of Employer Signature
_________________________________ *NOTE: If you elect to allow loans
Date to Participants in Section 8, you
must designate a Loan Trustee
_________________________________
Street Address Trustee:
_________________________________
City State Zip State Street Bank and Trust Company
_________________________________ By: /s/ G. Reeves
Daytime Telephone --------------------------
_________________________________ ADOPTION AGREEMENT AMENDMENT
Employer Tax Identification Number Benefit Forfeitures in Money Purchase Plan
(check the option below if you wish
_________________________________ it to apply to your plan)
Employer Fiscal Year
Please make copies of all completed forms for your records
|_| Notwithstanding any other provision of the plan, forfeitures occurring in
Plan Years beginning on or after __________ [fill in the first day of the
Plan Year in which this Adoption Agreement Amendment is executed or a
subsequent anniversary of such date] shall be allocated to those
Participants entitled to an allocation of employer contributions for the
Plan Year in which the forfeiture occurs.
<PAGE>
To be Completed by Employer
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SCUDDER FLEXI-PLAN
==================
Money Purchase Pension Plan
Contribution Form
Return this form to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
P.O. Box 9047
Boston, MA 02205-9047
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Employer Information
Name____________________________________ Tax I.D. #__________________
Business Address________________________ Telephone___________________
City________________________State________Zip Code____________________
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Telephone Exchange Option
You or your plan participants will be able to exchange shares from one Scudder
Fund into any other Scudder Fund by telephone, telegram, or TWX. The new account
will have the identical registration as the account from which the shares are
transferred.
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Participant Information
The minimum investment for the first Scudder plan you establish (either the
Profit Sharing Plan or the Pension Plan) is $500 times the number of
participants, which may be allocated in any amounts among the participants (e.g.
2 participants, minimum investment = $1000 which can be allocated $700 for one
and $300 for the other). If you are establishing both plans, the minimum
investment for the second plan is $300 times the number of participants.
Participants may invest in more than one Scudder Fund if at least $500 is
invested in each fund.
|_| Check here if assets to be invested in the Money Purchase Pension Plan will
include a transfer from an existing plan. Please also complete the enclosed
transfer form. (Please designate allocation of transfer money on the transfer
form, and not on this form.)
Scudder Fund(s) Contribution Amount
Selected Employer Employee Total
Participant_______________ _____________ $_______ $_______ $_____
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
Participant_______________ _____________ ________ ________ ______
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
Participant_______________ _____________ ________ ________ ______
Birth Date_______________ _____________ ________ ________ ______
Social Security #________ _____________ ________ ________ ______
(Please attach additional pages if necessary) Total investment $=====
Please make your contribution check payable to State Street Bank and Trust Co.
<PAGE>
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SCUDDER FLEXI-PLAN
==================
Money Purchase Pension Plan
Designation of Beneficiary
Waiver of Qualified Preretirement Survivor Annuity
_________________________ Return this form to:
Name of Employer
_________________________ Scudder Fund Distributors, Inc.
Fund(s) Retirement Plan Services
_________________________ P.O. Box 9047
Account #'s, if assigned Boston, MA 02205-9047
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Name of Participant _______________________
Note: You must file a separate Designation of Beneficiary form for the
Flexi-Profit Sharing Plan.
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Instructions
With this form you designate the beneficiary who will receive your account
balance if you die while a balance remains in your account. Please not that if
you are married and you die before beginning distributions from the Plan, your
spouse is automatically entitled to 50% of the account balance in the form of a
preretirement survivor annuity, unless you make the waiver election below
(Waiver of Preretirement Survivor Annuity) and your spouse consents (on the back
of this form).
In addition, once you begin distributions from your account, the
distributions will be in the form of a joint and survivor annuity whether you
are married or unmarried, unless you waive that right (a separate waiver form is
available to waive the joint and survivor annuity).
If you waive the preretirement survivor annuity with your spouse's consent,
the beneficiary designation below will apply to your entire account balance. If
you do not waive the annuity, or if your spouse does not consent to the waiver,
the beneficiary designation will apply only to the 50% of the account not
distributable as a preretirement survivor annuity.
- --------------------------------------------------------------------------------
Examples of beneficiary designations
o Sandra Casey (SS# 000-00-0000), 3 Oak Street, Chicago, IL 60060, my wife,
if living at my death; otherwise to my children who survive me, in equal
shares. If any child does not survive me, such deceased child's share shall
go by right of representation to that child's issue who survive me. (Note:
"issue" refers to children, grandchildren, etc.)
o Sandra Casey (SS# 000-00-0000) 3 Oak Street, Chicago, IL 60060, my wife, if
living at my death; otherwise to James Casey (SS# ###-##-####), 321 Elm
Street, San Mateo, CA 94042, my son, if living at my death. If he is not
living at my death, then to his issue who survive me by right of
representation.
o James Casey (SS# ###-##-####), 321 Elm Street, San Mateo, CA 94042, my son,
and Mary Casey (SS# 999-99-9999), 7 Beech Avenue, Dallas, TX 75302, my
daughter, in equal shares, if they both survive me; otherwise all to the
one of them who survives me. If neither survives me, to X charity.
These are only examples. You may wish to consult an attorney before naming
beneficiaries.
- --------------------------------------------------------------------------------
Name your plan Beneficiaries and list their Social Security Numbers and
addresses if possible
The following beneficiaries are entitled to receive the assets of my Plan upon
my death. This designation revokes any previous designation. I understand that I
can change this choice of beneficiary by submitting a new form to the Trustee
for the Scudder Money Purchase Pension Plan.
Beneficiaries (Please print): ____________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
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Waiver of Preretirement Survivor Annuity
This waiver is effective only when executed by a married individual either (a)
during or after the plan year in which such individual attains age 35, or (b)
after the individual separates from service, if earlier. Check box if you are
eligible and you wish to make a waiver election.
|_| I waive automatic payment of the portion of my account balance which would
otherwise be distributed as a preretirement survivor annuity. I acknowledge
that I have read and understood the information provided to me concerning
such annuity. I reserve the right to revoke this election to waive the
annuity coverage.
________________________________________________________________________________
Sign here
__________________________________ __________________________
Your signature Date
_________/___/______
Your Date of Birth
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(over, please)
<PAGE>
Obtain the consent of your spouse if necessary (both boxes may be checked). If
box (a) is checked, your spouse's signature must be witnessed by a Notary Public
or Plan Representative
|_| (a) I, the spouse of the Participant, have read the above waiver of
preretirement survivor annuity and understand that the effect such waiver
has on me may be that all death benefits under the plan may be paid to
someone other than me. By signing below, I consent to my spouse's waiver of
a preretirement survivor annuity. My consent is limited to the
beneficiary(ies) listed above. In addition, recognizing that I also have
the right to limit my consent to a specific form of benefits (such as a
lump sum distribution or installments over a period of time), by signing
below, I relinquish that right and consent to any form of benefits which
may be elected under the Plan.
I understand that my spouse must execute a new designation if he or
she wants to designate another beneficiary.
|_| (b) As spouse of a Participant who is a resident of Arizona, California,
Idaho, Louisiana, Nevada, New Mexico, Texas, or Washington, I consent to
(1) the naming of another person as primary beneficiary to receive more
than one-half of my spouse's account balance or (2) the naming of myself as
primary beneficiary and others as contingent beneficiaries.
I acknowledge that I have read the above election and understand the
effect its exercise shall have on me.
______________________________ _________________________
Spouse's signature Date
Witness_________________________________________________
|_| Plan Rep. or |_| Notary Public
State: _________________________
Commission Expires: ____________
<PAGE>
[In the printed material, this page contains photocopies of two IRS approval
letters]
IRS
Approval
Letters
<PAGE>
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NOTICE TO INTERESTED PARTIES
================================================================================
After enrolling in the Scudder Flexi-Plan, please complete this notice and post
it in a common area for your employees' information.
(Where no determination letter submission is required in order for the employer
to obtain reliance, this notice must be posted 9 to 23 days after adoption or
amendment of a plan. Where a determination letter submission is required, this
notice must be posted 7 to 21 days prior to the submission.)
An employer adopting a master or prototype plan or an amendment thereto or a
restatement thereof, is required to notify all interested parties including all
employees and any self-employed individuals) of such adoption, amendment, or
restatement. Recently, ___________________ (name of employer) |_| adopted |_|
restated the |_| __________________ Money Purchase Pension Plan |_|
_____________________ Profit Sharing Plan (the "Plan"). The Internal Revenue
Service, On August 5, 1985, issued an opinion letter with respect to this
(amended form of) plan as a tax qualified prototype.
1. Notice to employees of ____________________________________ (name of
employer)(the "Employer").
An application |_| is |_| is not to be made to the Internal Revenue Service
by the Employer for determination on the qualification of the employee
benefit pension plan described below.
2. The Employer has |_| adopted |_| restated the employee pension benefit plan
described below on ___________________________.
3. The name of the plan is _______________________________ (insert full name
of plan from first paragraph of adoption agreement).
4. The plan's identification number is ____. (For instance, the first plan
will be No. 001 and subsequent plans No. 002, 003, etc.)
5. The name and address of the Employer is _________________________
___________________________________________________________________.
6. The prototype plan's Opinion Letter number is |_| C212885a (if the Plan is
a profit sharing plan) |_| C212883a (if the Plan is a money purchase
pension plan).
7. The plan's sponsor is Scudder Fund Distributors, Inc., 175 Federal Street,
Boston, Massachusetts 02110.
8. The Employer's Tax Identification Number is _____________________.
9. The plan administrator's name and address is ____________________
___________________________________________________________________.
(If none appointed, insert Employer's name).
10. The address of the Key District Director having jurisdiction over the plan
is ______________________________________________.*
* Please refer to chart at Appendix A, attached hereto.
11. The employees eligible to participate under the plan are (describe by
class): __________________________________________________________________
_________________________________________________________________________.
12. The Internal Revenue Service |_| has |_| has not previously issued a
determination letter with respect to the qualification of this plan.
13. Check Appropriate Box:
|_| For employers who are required to make a determination letter
submission to the IRS:
The application will be filed on ____________________________ with the
Key District Director, Internal Revenue Service at ___________________
for an advance determination as to whether the plan meets the
qualification requirements of section 401, 403(a) or 405(a) of the
Internal Revenue Code with respect to the plan's |_| initial
qualification |_| amendment |_| termination |_| merger |_|
consolidation or |_| transfer of plan assets or liabilities.
|_| For employers who are not required to make a determination letter to
the IRS.
It is not contemplated that the plan will be submitted to the Internal
Revenue Service for an advance determination as to whether it meets
the qualification requirements of section 401 of the Internal Revenue
Code with respect to either its initial qualification or any
subsequent amendment.
RIGHTS OF INTERESTED PARTIES
14. You have the right to submit to the Key District Director, at the above
address, either individually or jointly with other interested parties, your
comments as to whether this plan meets the qualification requirements of
the Internal Revenue Code. You may instead, individually or jointly with
other interested parties, request the Department of Labor to submit, on
your behalf, comments to the Key District Director regarding qualification
of the plan. If the Department declines to comment on all or some of the
matters [Illegible text].
<PAGE>
REQUESTS FOR COMMENTS BY THE DOL
15. Check Appropriate Box:
|_| For employers who are required to make a determination letter
submission to the IRS:
The Department of Labor may not comment on behalf of interested
partied unless requested to do so by the lesser of 10 employees or 10% of
the employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this plan is _____. If
you request the Department to comment, your comment must be in writing and
must specify the matters upon which comments are requested, and also must
include:
(1) the information contained in items 2 through 9 of this Notice; and
(2) the number of persons needed for the Department to comment.
|_| For employers who are not required to make a determination letter
submission to the IRS:
The Department of Labor may not comment on behalf of interested
partied unless requested to do so by the lesser of 10 employees or 10% of
the employees who qualify as interested parties. The number of persons
needed for the Department to comment with respect to this plan is _____. If
you request the Department to comment, your comment must be in writing and
must specify the matters upon which comments are requested, and must also
include:
(1) the information contained in items 2 through 9 of this Notice; and
(2) the number of persons needed for the Department to comment.
- --------------------------------------------------------------------------------
A request to the Department to comment should be addressed as follows:
Administrator of Pension and Welfare Benefit Programs
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20216
ATTN: 3001 Comment Request
COMMENTS TO THE IRS
16. Check Appropriate Box:
|_| For employers who are required to make a determination letter
submission to the IRS:
Comments submitted by you to the Key District Director must be in
writing and received by him by _______________________ (the 45th day
after the date on which the application for determination is received
by the Key District Director). However, if there are matters you
request the Department of Labor to comment upon your behalf, and the
Department declines, you may submit comments on these matters to the
Key District Director to be received by him on __________________
(within 15 days from the time the Department notifies you that it will
not comment on a particular matter), or by ________________________
(the 45th day after the date on which the application for
determination is received by the Key District Director), whichever is
later. A request to the Department to comment on your behalf must be
received by it by ____________________ (the 15th day after the date on
which the application for determination is received by the Key
District Director) if you wish to preserve your right to comment on a
matter upon which the Department declines to comment, or by
____________________ (the 25th day after the date on which the
application for determination is received by the Key District
Director) if you wish to waive that right.
|_| For employers who are not required to make a determination letter
submission to the IRS:
Comments submitted by you to the Key District Director must be in
writing and received by him by _______________________ (the 75th day
after the date on which the plan is adopted or amended). However, if
there are matters you request the Department of Labor to comment upon
your behalf, and the Department declines, you may submit comments on
these matters to the Key District Director to be received by him on
__________________ (within 15 days from the time the Department
notifies you that it will not comment on a particular matter), or by
________________________ (the 75th day after the date on which the
plan is adopted or amended), whichever is later. A request to the
Department to comment on your behalf must be received by it by
____________________ (the 45th day after the date on which the plan is
adopted or amended) if you wish to preserve your right to comment on a
matter upon which the Department declines to comment, or by
____________________ (the 55th day after the date on which the plan is
adopted or amended) if you wish to waive that right.
ADDITIONAL INFORMATION
17. Check Appropriate Box:
|_| For employers who are required to make a determination letter
submission to the IRS:
Detailed instruction regarding the requirements for notification of
interested parties may be found in sections 6,7 and 8 of Revenue Procedure
80-30. Additional information concerning this adoption or amendment
(including, where applicable, an updated copy of the plan and related
trust; the application for determination; and any additional documents
dealing with the application for determination; and copies of section 6 of
Revenue Procedure 80-30) is available at _________________ during the hours
of __________________ for inspection and copying. (There is a nominal
charge for copying and/or mailing.)
<PAGE>
|_| For employers who are not required to make a determination letter
submission to the IRS:
Detailed instruction regarding the requirements for notification of
interested parties may be found in sections 6,7 and 8 of Revenue Procedure
80-30. Additional information concerning this adoption or amendment
(including, where applicable, a description of the provisions providing for
nonforfeitable benefits; a description of the circumstances which may
result in ineligibility or loss of benefits; a description of the source of
financing of the plan; and copies of section 6 of Revenue Procedure 80-30)
is available at _________________ during the hours of __________________
for inspection and copying. (There is a nominal charge for copying and/or
mailing.)
Appendix A
Key District Addresses
Key District IRS Districts Covered
Mid Atlantic Region
Baltimore Baltimore, Pittsburgh, Richmond
31 Hopkins Plaza
Baltimore, MD 21201
Newark Newark, Philadelphia, Wilmington
70 Broad Street
Newark, NJ 07102
North Atlantic Region
Brooklyn Albany, Augusta, Boston, Brooklyn,
35 Tillary Street Buffalo, Burlington, Hartford,
Brooklyn, NY 11201 Manhattan, Portsmouth, Providence
Central Region
Cincinnati Cincinnati, Cleveland, Detroit,
550 Main Street Indianapolis, Louisville,
Cincinnati, OH 45202 Parkersburg
Midwest Region
Chicago Aberdeen, Chicago, Des Moines,
230 S. Dearborn Street Fargo, Helena, Milwaukee, Omaha,
Chicago, IL 60604 St. Louis, St. Paul, Springfield
Southeast Region
Atlanta Atlanta, Birmingham, Columbia,
275 Peachtree Street, NE Greensboro, Jackson, Jacksonville,
Atlanta, GA 30303 Little Rock, Nashville, New Orleans
Southwest Region
Dallas Albuquerque, Austin, Cheyenne,
1100 Commerce Street Dallas, Denver, Houston, Oklahoma
Dallas, TX 75202 City, Phoenix, Salt Lake City, Wichita
Western Region
Los Angeles Anchorage, Boise, Honolulu, Laguna
300 N. Los Angeles Street Niguel, Los Angeles, Portland, Reno,
Los Angeles, CA 90012 Sacramento, San Francisco, San Jose,
Seattle
<PAGE>
-------------
TELEPHONE
NUMBERS AND
ADDRESSES
=============
-----------------------------------------
For questions about Scudder Flexi-Plan
Call: (Toll-free)
1-800-323-6105
or
Write to:
Scudder Funds
Group Retirement Plans Dept.
175 Federal Street
Boston, MA 02110-2267
-----------------------------------------
For questions about the Scudder Funds
Call: (Toll-free)
1-800-225-2470
or
Write to:
Scudder Funds
160 Federal Street
Boston, MA 02110
-----------------------------------------
To arrange transactions and for questions
about existing accounts
Call: (Toll-free)
1-800-225-5163
or
Write to:
Scudder Funds
P.O. Box 2291
Boston, MA 02107-2291
================================================================================
Scudder Offices
Boston
160 Federal Street
Boston, Massachusetts 02110
800-225-2470
Chicago
111 East Wacker Drive, 22nd Fl.
Chicago, Illinois 60601
312-861-2700
Cincinnati
555 Carew Tower
Cincinnati, Ohio 45202
513-621-4200
Cleveland
950 Terminal Tower
Cleveland, Ohio 44113
216-241-7744
Houston
1100 Louisiana Street
Suit 2190
Houston, Texas 77002
713-659-3838
800-445-0544 (in Texas)
Los Angeles
333 South Hope Street, 37th Fl.
Los Angeles, California 90071
213-628-1144
New York
345 Park Avenue, 26th Fl.
New York, New York 10154
212-326-6200
Philadelphia
Three Mellon Bank Center
Philadelphia, Pennsylvania 19102
215-864-7200
Portland, Oregon
One S.W. Columbia Street
Suite 575
Portland, Oregon 97258
503-224-3999
San Francisco
101 California Street, 41st Fl.
San Francisco, California 94111
415-981-8191
West Palm Beach
Phillips Point, Suite 1100
777 South Flagler Drive
West Palm Beach
Florida, 33401
305-832-3600
<PAGE>
Return a copy to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
175 Federal Street
Boston, MA 02110
SCUDDER FLEX I-PLAN
Profit Sharing Plan
Plan number 005 Adoption Agreement
The undersigned (the "Employer") establishes, or amends, the (Scudder
automatically inserts employer's name) Profit Sharing Plan, by completing this
Adoption Agreement adopting or amending the Profit Sharing Plan in the form of
the Prototype Plan attached.
I. ELIGIBILITY
A. To become a Participant an Employee must complete 3 Years of
Service
|_| or, if this box is checked, an Employee must complete _____
Year(s) of Service, (insert less than "3"; select more than
"1" only if the Employer selects full and immediate vesting
in Section II.A. below; insert "0" for no waiting period).
B. The number of Hours of Service required to have a Year of Service
is 1000
|_| or, if this box is checked, _____ (insert less than 1000
hours). However, if the Year(s) of Service selected in A.
above is or includes a fractional year, an Employee is not
required to complete any specified number of Hours of
Service to receive eligibility credit for such fractional
year.
C. To become a Participant an Employee need not attain any minimum
age
|_| or, if this box is checked, an Employee must be at least
_____ (insert "21" or less) years of age.
D. An Employee who meets the above requirements shall become a
Participant on the first day the requirements are met
|_| or, if this box is checked, on the first day of the next
month.
<PAGE>
E. All Employees are entitled to be Participants except [one or more
may be selected]:
|_| Non-resident aliens who receive no earned income from the
Employer which constitutes income from sources within the
United States
|_| Individuals covered by a collective bargaining contract
which meets the requirements specified in the Plan
|_| Salaried Employees
|_| Hourly-paid Employees
|_| Piece-rate Employees
|_| Employees paid by commission
|_| Employees covered by another retirement plan to which the
Employer is required to contribute
|_| Employees in the following non-discriminatory
classification:
___________________________________________________________.
Note: If Employees are excluded from the Plan under one or more of the
classifications above (not including the first two
classifications) the exclusion must NOT result in discrimination
in favor of officers, shareholders or highly paid Employees.
-2-
<PAGE>
II. EMPLOYER CONTRIBUTIONS
Each Plan Year, the Employer shall make an Employer Contribution to
the Plan in an amount determined by it, in its discretion
|_| and, if this box is checked, an amount equal to _____% of
aggregate Nondeductible Voluntary Contributions made during the
Plan Year by Participants whose Non-deductible Voluntary
Contributions equal or exceed _____% [insert "0" or a number not
in excess of the next chosen number] of such Participant's
Compensation, but only to the extent that such Participant's
Non-deductible Voluntary Contributions do not exceed _____%
[insert "6" or less] of such Participant's Compensation; plus
such additional amount as shall be determined by the Employer, in
its discretion, to be allocated in proportion to Participant's
Non-deductible Voluntary Contributions in excess of the second
above designated percentage, but not in excess of the last above
designated percentage.
III. VESTING OF EMPLOYER CONTRIBUTIONS
A. Employer Contributions under the Plan shall be fully and
immediately vested and non-forfeitable
or, check one:
|_| Vested at the "Top-Heavy" rate in Column 1 below
|_| Vested at the "4-40 vesting" rate in Column 2 below
|_| Vested at the rate specified in Column 4 below, which rate
shall be at least as rapid as the rate in Column 3 below.
-3-
<PAGE>
VESTING TABLE
Column 1 Column 2 Column 3 Column 4
Vesting "Top-Heavy" "4-40 Vesting" Minimum Percent age
Years Percentage Percentage Percentage Elected
------- ----------- -------------- ---------- -----------
1 0 0 0 _____
2 20 0 0 _____
3 40 0 0 _____
4 60 40 0 _____
5 80 45 25 _____
6 100 50 30 _____
7 100 60 35 _____
8 100 70 40 _____
9 100 80 45 _____
10 100 90 50 _____
11 100 100 60 _____
12 100 100 70 _____
13 100 100 80 _____
14 100 100 90 _____
15 100 100 100 _____
B. Vesting Years and One-Year Breaks in Service for the purpose of
vesting shall be measured on the Plan Year
|_| or, if this box is checked, on the 12 consecutive month
period beginning on the Participant's initial date of
employment or an anniversary of that date.
Note: If you make this election, you may not make elections
in Sections III.C. or IV.B.
C. The Participant will have a Vesting Year only if the Participant
completes the number of Hours of Service specified in Section
I.B.
|_| or, if this box is checked, if the Participant either
completes the number of Hours of Service specified In
Section I.B. or receives an allocation of the Employer
Contribution for the Plan Year, or both.
-4-
<PAGE>
D. The following Service will be included in determining Vesting
Years only if checked:
|_| Service before the first Plan Year in which the Participant
attained age 18
|_| Service before the Employer maintained this Plan or a
predecessor plan
|_| Service before January 1, 1971, unless the Participant has
completed at least 3 Vesting Years after December 31, 1970
|_| Service before the first Plan Year to which ERISA is
applicable if this Plan is a continuation of an earlier plan
which would have disregarded such service
|_| Service after five consecutive One-Year Breaks in Service
(but this exclusion shall apply only for the purpose of
computing the vested percentage of Employer Contributions
made before such break)
|_| Service before a period of consecutive One-Year Breaks in
Service, if the Participant had no vested interest at the
time of such breaks and the number of consecutive One-Year
Breaks in Service equals or exceeds the greater of five or
the number of Vesting Years before such break without
counting Vesting Years excluded by an earlier application of
this provision.
E. If the Plan shifts out of Top-Heavy status for any Plan Year, the
vesting schedule in effect while the Plan was Top-Heavy will
continue to be in effect for all existing and future Participants
|_| or, if this box is checked, the Plan will shift to the
vesting schedule selected in Section III.A. for all Plan
Years during which the Plan is not Top-Heavy.
-5-
<PAGE>
IV. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. A former Participant who has retired, died, otherwise terminated
Service, or transferred to an ineligible class of Employees
during the Plan Year shall share in the allocation of Employer
Contributions for the Plan Year
|_| or, if this box is checked, shall not share in the
allocation of Employer Contributions.
B. Participants will share in the allocation of Employer
Contributions for a Plan Year regardless of the number of Hours
of Service completed in such Plan Year
|_| or, if this box is checked, in a Plan Year in which the Plan
is not Top-Heavy, only if they complete during such Plan
Year the number of Hours of Service specified in Section
I.B.
C. Any minimum Top-Heavy allocations of the Plan will be made first
by this Plan
|_| or, if this box is checked, by the ____________ Plan (insert
name of another qualified plan maintained by the Employer).
D. In any Year in which the Plan is Top-Heavy, the minimum Top-Heavy
Allocation shall be at the rate of 3%
|_| or, if this box is checked, at the rate of 4%.
Note: The Employer may not make a selection in A. or B. above, if
it has previously made an election in Section II.
V. INTEGRATION WITH SOCIAL SECURITY
The Plan will not be integrated with Social Security
|_| or, if this box is checked, will be integrated with Social
Security on the following basis:
-6-
<PAGE>
A. The Integration Level for a Plan Year will be the Social Security
Wage Base for such Plan year
|_| or, if this box is checked, $________ (not in excess of
Social Security Wage Base).
B. The Integration Rate for a Plan Year will be the OASDI Rate for
such Plan Year
|_| or, if this box is checked, ________% (not in excess of
OASDI rate).
Note: An employer may elect to integrate the Plan with Social
Security only if the Employer both does not maintain another
qualified retirement plan integrated with Social Security
and has not made an election in Section II above.
VI. NORMAL RETIREMENT DATE
A participant's Normal Retirement Date shall be age 59-1/2
|_] or, if this box is checked, age __________ (insert more than
59-1/2 but not more than 65).
VII. COMPENSATION
"Compensation" shall Include mounts paid during the Plan Year by the
Employer to the Employee while the Employee was a Participant
|_| or, if this box is checked, "Compensation" shall include
amounts paid by the Employer to the Employee during the
entire Plan Year in which an Employee became a Participant
whether or not such an Employee was a Participant for the
entire Plan Year.
|_| and, if this box is checked, "Compensation" shall not
include the following (select one or more if desired):
( ) Bonuses
( ) Commissions
( ) Overtime Payments
( ) Other (specify) ____________________.
-7-
<PAGE>
Note: The above exclusions from Compensation shall only apply if
benefits under this plan are not integrated with Social
Security Benefits. Furthermore, the above exclusions must
not result in prohibited discrimination under Code Section
401(a)(4).
VIII. PARTICIPANT CONTRIBUTIONS
A. Nondeductible Voluntary Contributions by a Participant are
permitted
|_| or, if this box is checked, are not permitted.
B. Deductible Voluntary Contributions (QVECs) by a Participant are
not permitted
|_| or, if this box is checked, are permitted.
IX. INVESTMENT
Investment decisions shall be made by the Participant
|_| or, if this box is checked, by the Administrator.
X. LOANS
Loans to a Participant are not permitted
|_| or, if this box is checked, are permitted.
XI. EFFECTIVE DATE
The Effective Date of this Plan or amendment shall be the first day of
the Employer's fiscal year during which the Plan is adopted or amended
|_| or, if this box is checked, ____________________.
-8-
<PAGE>
XII. PLAN AND LIMITATION YEARS
A. The Plan Year shall be the same as the fiscal year of the
Employer
|_| or, if this box is checked, shall end on the last day of the
month of _______________
B. The Limitation Year shall be identical for all plans of the
Employer and is the Plan Year
|_| or, if this box is checked, shall end on the last day of the
month of _________________.
XIII. AMENDMENT
Execution of this Adoption Agreement is not an amendment to an
existing plan
|_| or, if this box is checked, is an amendment to an existing
plan.
XIV. LIMITATIONS ON ALLOCATIONS
This section applies only for an employer who maintains or has ever
maintained another qualified retirement plan, other than the Scudder
Prototype Plan adopted as a Money Purchase Pension Plan, or a Plan
amended into the Scudder Prototype Plan, in which any participant in
this plan is or was a participant or could possibly become a
participant.
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan, the provisions of Section 5 of the Prototype
Plan will apply as if the other plan were a master or prototype
plan
|_| or, if this box is checked, the attached rider describes the
method by which the plans will limit total Annual Addition
to the Maximum Permissible Amount described in Section 5.5
of the Plan and reduce any excess amount in a manner that
precludes Employer discretion.
-9-
<PAGE>
B. If the Participant is, or has ever been, a participant in a
defined benefit plan maintained by the Employer, the provisons
of Section 5 of the Prototype Plan will apply
or, if this box is checked, the attached rider describes the
method by which the plans involved will satisfy the 1.0
limitation described in Section 5.4 of the Plan and reduce
any excess amount in a manner that precludes Employer
discreation.
XV. APPOINTMENT OF TRUSTEES:
The Employer hereby designates the following person or persons as
Trustee(s) under the Trust:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
XVI. SIGNATURES
The Employer (1) convenants and agrees that whenever a Participant
makes a contribution the Employer shall ascertain that the Participant
has received a copy of the current prospectus relating to the shares
of any Designated Investment Company in which such contribution is to
be invested, plus, where required by any state or federal law, the
current prospectus relating to any other investment in which
contributions are to be invested, and (2) by remitting such a
contribution to the Trustee the Employer shall be deemed to represent
that the Participant has received such a prospectus, and (3) by
remitting any other contribution to the Trustee the Employer shall be
deemed to represent that the Employer has received a current
prospectus of any Designated Investment Company in which it is to be
invested, plus, where required by any state or federal law, the
current prospectus relating to any other investment in which
contributions are to be invested.
An Employer adopting this Plan may not rely on the opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Code D Section 401. An
Employer who wishes to obtain such reliance should apply for a
determination letter from the appropriate Key District Director of the
Internal Revenue Service to obtain reliance that the Plan is
qualified.
This Adoption Agreement may be used in conjunction with basic Plan
Document #01.
-10-
<PAGE>
IN WITNESS WHEREOF, the Employer has hereunto executed this Adoption
Agreement as of the _______ day of ______________ , 19_____.
__________________________________ Trustee(s) Signature(s):
Print Name of Employer
__________________________________ _____________________________
Signature of Employer
__________________________________ _____________________________
Street Address
__________________________________ _____________________________
City State Zip
__________________________________ _____________________________
Telephone
__________________________________ _____________________________
Employer Tax Identification Number Date
__________________________________
Employer Fiscal Year
Scudder Fund Distributors, Inc., acknowledges receipt of a copy of the
executed Adoption Agreement and agrees to accept contributions under the Plan on
behalf of the Designated Investment Companies.
SCUDDER FUND DISTRIBUTORS
By:_________________________
-11-
<PAGE>
- --------------------------------------------------------------------------------
The Flexi-Plan has been amended for all Tax Reform changes effective in 1987 and
1988. The Adoption Agreement below has been included as part of this Tax Reform
Amendment.
- --------------------------------------------------------------------------------
ADOPTION AGREEMENT AMENDMENT
Employer Contributions in Profit Sharing Plan.
----------------------------------------------
(check the option below if you wish it to apply to your plan)
|_| Effective for Plan Years beginning on or after [_____________ fill in the
first day of the Plan Year in which this Adoption Aqreement Amendment is
executed or a subsequent anniversary of such date], notwithstanding any other
provision of the plan, the employer contributions shall be made to the plan
without regard to current or accumulated earnings and profits for the taxable
year or years ending with or within such Plan Year.
<PAGE>
Return to:
Scudder Fund Distributors, Inc.
Retirement Plan Services
175 Federal Street
Boston, MA 02210
SCUDDER FLEXI-PLAN
Money Purchase Pension Plan
Adoption Agreement
Plan number 006
The undersigned (the "Employer") establishes, or amends, the (Scudder
automatically inserts employer's name) Money Purchase Pension Plan, by
completing this Adoption Agreement adopting or amending the Money Purchase
Pension Plan in the form of the Prototype Plan attached.
I. ELIGIBILITY
A. To become a Participant an Employee must complete 3 Years of
Service
|_| or, if this box is checked, an Employee must complete
Year(s) of Service, (insert less than "3"; select more than
"1" only if the Employer selects full and immediate vesting
in Section II.A. below; insert "0" for no waiting period).
B. The number of Hours of Service required to have a Year of Service
is 1000
|_| or, if this box is checked, _____(insert less than 1000
hours). However, if the Year(s) of Service selected in A.
above is or includes a fractional year, an Employee is not
required to complete any specified number of Hours of
Service to receive eligibility credit for such fractional
year.
C. To become a Participant an Employee need not attain any minimum
age
|_| or, if this box is checked, an Employee must be at least
(insert "21" or less) years of age.
D. An Employee who meets the above requirements shall become a
Participant on the first day the requirements are met
|_| or, if this box is checked, on the first day of the next
month.
<PAGE>
E. All Employees are entitled to be Participants except (one or more
may be selected):
|_| Non-resident aliens who receive no earned income from the
Employer which constitutes income from sources within the
United States
|_| Individuals covered by a collective bargaining contract
which meets the requirements specified in the Plan
|_| Salaried Employees
|_| Hourly-paid Employees
|_| Piece-rate Employees
|_| Employees paid by commission
|_| Employees covered by another retirement plan to which the
Employer is required to contribute
|_| Employees in the following non-discriminatory
classification:
____________________________________________________________
Note: If Employees are excluded from the Plan under one or more of the
classifications above (not including the first two classifications)
the exclusion must NOT result in discrimination in favor of officers,
shareholders or highly paid Employees.
II. VESTING OF EMPLOYER CONTRIBUTIONS
A. Employer contributions under the Plan shall be fully and
immediately vested and non-forfeitable
or, check one:
|_| Vested at the "Top-Heavy" rate in Column 1 below
|_| Vested at the "4-40 vesting" rate in Column 2 below
-2-
<PAGE>
|_| Vested at the rate specified in Column 4 below, which rate
shall be at least as rapid as the rate in Column 3 below.
VESTING TABLE
Column 1 Column 2 Column 3 Column 4
Vesting "Top-Heavy" "4-40 Vesting" Minimum Percentage
Years Percentage Percentage Percentage Elected
------- ----------- ------------- ---------- ------------
1 0 0 0 ____________
2 20 0 0 ____________
3 40 0 0 ____________
4 60 40 0 ____________
5 80 45 25 ____________
6 100 50 30 ____________
7 100 60 35 ____________
8 100 70 40 ____________
9 100 80 45 ____________
10 100 90 50 ____________
11 100 100 60 ____________
12 100 100 70 ____________
13 100 100 80 ____________
14 100 100 90 ____________
15 100 100 100 ____________
B. Vesting Years and One-Year Breaks in Service for the purpose of
vesting shall be measured on the Plan Year
|_| or, if this box is checked, on the 12 consecutive month
period beginning on the Participant's initial date of
employment or anniversary of that date.
Note: If you make this election, you may not make elections in
Sections II.C. or IV.B.
C. The Participant will have a Vesting Year only if the Participant
completes the number of Hours of Service specified in Section
I.B.
|_| or, if this box is checked, if the Participant either
completes the number of Hours of Service specified in
Section I.B. or receives an allocation of the Employer
Contribution for the Plan Year, or both.
-3-
<PAGE>
D. The following Service will be included in determining Vesting
Years only if checked:
|_| Service before the first Plan Year in which the Participant
attained age 18
|_| Service before the Employer maintained this Plan or a
predecessor plan
|_| Service before January 1, 1971, unless the Participant has
completed at least 3 Vesting Years after December 31, 1970
|_| Service before the first Plan Year to which ERISA is
applicable if this Plan is a continuation of an earlier plan
which would have disregarded such service
|_| Service after five consecutive One-Year Breaks in Service
(but this exclusion shall apply only for the purpose of
computing the vested percentage of employer Contributions
made before such break)
|_| Service before a period of consecutive One-Year breaks in
Service, if the participant had no vested interest at the
time of such breaks and the number of consecutive One-Year
Breaks in Service equals or exceeds the greater of five or
the number of Vesting Years before such break without
counting Vesting Years excluded by an earlier application of
this provision.
E. If the Plan shifts out of Top-Heavy status for any Plan Year, the
vesting schedule in effect while the Plan was Top-Heavy will
continue to be in effect for all existing and future Participants
|_| or, if this box is checked, the Plan will shift to the
vesting schedule selected in Section II.A. for all Plan
Years during which the Plan is not Top-Heavy.
III. EMPLOYER CONTRIBUTIONS AND INTEGRATI0N WITH SOCIAL SECURITY
The Plan will not be integrated with Social Security, and for each
Plan Year the Employer will contribute to the Account of each
Participant entitled to an allocation under Section IV, __________%
(insert not more than 25%) of that Participant's compensation for the
Plan Year
-4-
<PAGE>
or, check and complete one:
|_| The Plan will be integrated with Social Security and for
each Plan Year, the Employer will contribute
|_| the OASDI Rate
or
|_| ___________% (not to exceed the OASDI Rate)
of such Participant's Compensation in excess of (check one)
|_| the Social Security Wage Base
or
|_| $__________ (not to exceed the Social Security
Wage Base)
Plus, an amount equal to _________% of each Participant's
Compensation for the Plan Year.
|_| The Plan will not be integrated with Social Security and for
each Plan Year the Employer will contribute an amount equal
to ___% of the aggregate Nondeductible Voluntary
Contributions made during the Plan Year by Participants
whose Nondeductible Voluntary Contributions for the Plan
Year equal or exceed ___% (insert "0" or a number not in
excess of the next chosen number) of such Participant's
Compensation, but only to the extent that such Participant's
Nondeductible Voluntary Contributions do not exceed ___%
insert "6" or less) of such Participant's Compensation.
Notes: Rates chosen should not result in total contributions to
any Participant exceeding 25% of that Employee's aggregate
compensation.
Employer contributions allocable to a Participant shall be
reduced by that Participant's allocation of forfeitures
arising during preceding Plan Years.
An Employer may elect to integrate the Plan with Social
Security only if the Employer does not maintain another
qualified retirement plan integrated with Social Security.
-5-
<PAGE>
IV. ALLOCATION OF EMPLOYER CONTRIBUTIONS
A. A former Participant who has retired, died, otherwise terminated
Service, or transferred to an ineligible class of Employees
during the Plan Year shall share in the allocation of Employer
Contributions for the Plan Year
|_| or, if this box is checked, shall not share in the
allocation of Employer Contributions.
B. Participants will share in the allocation of Employer
Contributions for a Plan Year regardless of the number of Hours
of Service completed in such Plan Year
|_| or, if this box is checked, in a Plan Year in which the Plan
is not Top-Heavy, only if they complete during such Plan
Year the number of Hours of Service specified in Section
I.B.
C. Any minimum Top-Heavy allocations of the Plan will be made first
by this Plan, unless the Employer has adopted the Scudder Profit
Sharing Plan, in which case, the minimum Top-Heavy allocation
will be made first from that plan
|_| or, if this box is checked, by the __________________Plan
(insert name of another qualified plan maintained by the
Employer).
D. In any Year in which the Plan is Top-Heavy, the minimum Top-Heavy
Allocation shall be at the rate of 3%
|_| or, if this box is checked, at the rate of 4%
V. NORMAL RETIREMENT DATE
A Participant's Normal Retirement Date shall be age 59-1/2
|_| or, if this box is checked, age_________(insert more than
59-1/2 but not more than 65).
-6-
<PAGE>
VI. COMPENSATION
"Compensation" shall include amounts paid during the Plan Year by the
Employer to the Employee while the Employee was a Participant
|_| or, if this box is checked, "Compensation" shall include
amounts paid by the Employer to the Employee during the
entire Plan Year in which an Employee became a Participant
whether or not such an Employee was a Participant for the
entire Plan Year.
|_| and, if this box is checked, "Compensation" shall not
include the following (select one or more if desired):
( ) Bonuses
( ) Commissions
( ) Overtime Payments
( ) Other (specify)_________________
Note: The above exclusions from Compensation shall only apply if
benefits under this plan are not integrated with Social
Security Benefits. Furthermore, the above exclusions must
not result in prohibited discrimination under Code Section
401(a)(4).
VII. PARTICIPANT CONTRIBUTIONS
A. Nondeductible Voluntary Contributions by a Participant are
permitted
|_| or, if this box is checked, are not permitted.
B. Deductible Voluntary Contributions (QVECs) by a Participant are
not permitted
|_| or, if this box is checked, are permitted.
VIII. INVESTMENT
Investment decisions shall be made by the Participant
|_| or, if this box is checked, by the Administrator.
-7-
<PAGE>
IX. LOANS
Loans to a Participant are not permitted
|_| or, if this box is checked, are permitted.
X. EFFECTIVE DATE
The Effective Date of this Plan or amendment shall be the first day of
the Employer's fiscal year during which the Plan is adopted or amended
|_| or, if this box is checked,____________________
(Insert date)
XI. PLAN AND LIMITATION YEARS
A. The Plan Year shall be the same as the fiscal year of the
Employer
|_| or, if this box is checked, shall end on the last day of the
month of ___________.
B. The Limitation Year shall be identical for all plans of the
Employer and is the Plan Year
|_| or, if this box is checked, shall end on the last day of the
month of ___________.
XII. AMENDMENT
Execution of this Adoption Agreement is not an amendment to an
existing plan
|_| or, if this box is checked, is an amendment to an existing
plan.
XIII. LIMITATIONS ON ALLOCATIONS
This section applies only for an employer who maintains or has ever
maintained another qualified retirement plan, other than the Scudder
Prototype Plan adopted as a Profit Sharing Plan, or a Plan amended
into the Scudder Prototype Plan, in which any Participant in this plan
is or was a Participant or could possibly become a Participant.
-8-
<PAGE>
A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or Prototype Plan, the provisions of Section 5 of the Prototype
Plan will apply as if the other plan were a master or prototype
plan
|_| or, if this box is checked, the attached rider describes the
method by which the plans will limit total Annual Addition
to the Maximum Permissible Amount described in Section 5.5
of the Plan and reduce any excess amount in a manner that
precludes Employer discretion.
B. If the Participant is, or has ever been, a Participant in a
defined benefit plan maintained by the Employer, the provisions
of Section 5 of the Prototype Plan will apply
|_| or, if this box is checked, the attached rider describes the
method by which the plans involved will satisfy the 1.0
limitation described in Section 5.4 of the Plan and reduce
any excess amount in a manner that precludes Employer
discretion.
XIV. APPOINTMENT OF TRUSTEES:
The Employer hereby designates the following person or persons as
Trustee(s) under the Trust:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
XV. SIGNATURES
The Employer (1) convenants and agrees that whenever a Participant
makes a contribution the Employer shall ascertain that the Participant
has received a copy of the current prospectus relating to the shares
of any Designated Investment Company in which such contribution is to
be invested, plus, where required by any state or federal law, the
current prospectus relating to any other investment in which
contributions are to be invested, and (2) by remitting such a
contribution to the Trustee the Employer shall be deemed to represent
that the Participant has received such a prospectus, and (3) by
remitting any other contribution to the Trustee the Employer shall be
deemed to represent that the Employer has received a current
prospectus of any Designated Investment Company in which it is to be
invested, plus, where required by any state or federal law, the
current prospectus relating to any other investment in which
contributions are to be invested.
-9-
<PAGE>
An Employer adopting this Plan may not rely on the opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this plan is qualified under Code Section 401. An
Employer who wishes to obtain such reliance should apply for a
determination letter from the appropriate Key District Director of the
Internal Revenue Service to obtain reliance that the plan is
qualified.
This Adoption Agreement may be used in conjunction with Basic Plan
Document #01.
IN WITNESS WHEREOF, the Employer has hereunto executed this Adoption
Agreement as of the _______ day of ______________, 19_____.
___________________________________ Trustee(s) Siqnature(s):
Print Name of Employer
___________________________________ ___________________________________
Signature of Employer
___________________________________ ___________________________________
Street Address
___________________________________ ___________________________________
City State Zip
___________________________________ ___________________________________
Telephone
___________________________________ ___________________________________
Employer Tax Identification Number
___________________________________ ___________________________________
Employer Fiscal Year Date
Scudder Fund Distributors, Inc., acknowledges receipt of a copy of the
executed Adoption Agreement and agrees to accept contributions under the Plan on
behalf of the Designated Investment Companies.
SCUDDER FUND DISTRIBUTORS, INC.
By:
-10-
Exhibit 14(b)
================================================================================
Scudder IRA
Plan
and
Disclosure
Statement
================================================================================
Scudder IRA Form 1-88
Scudder
Individual Retirement Custodial Account
(Under Section 408(a) of the Internal Revenue Code)
The Depositor whose name appears on the Scudder Application is establishing
an individual retirement account (under section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian named on the Application has given the Depositor the
disclosure statement required under the Income Tax Regulations under section
408(a) of the Code.
The Depositor has deposited with he Custodian the amount indicated on the
Application.
The Depositor and the Custodian make the following agreement:
Article I
- --------------------------------------------------------------------------------
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8),
408(d)(3) of the code or an employer contribution to a simplified employee
pension plan as described in section 408(k).
<PAGE>
Article II
- --------------------------------------------------------------------------------
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
- --------------------------------------------------------------------------------
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) of the Code).
Article IV
- --------------------------------------------------------------------------------
1. The Depositor's entire interest in the custodial account must be or
begin to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
The payments must begin by the April 1 following the calendar year in
which the Depositor reaches age 70 1/2.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
The payments must begin by the April 1 following the calendar year in
which the Depositor reaches age 70 1/2.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy
(e) Equal of substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of of Depositor and his or her designated beneficiary.
Even if distributions have begun to be made under option (d) or (e), the
Depositor may receive a distribution of the balance in the custodial account at
any time by giving written notice to the Custodian. If the Depositor does not
choose any of the methods of distribution described above by the April 1
following the calendar year in which he or she reaches age 70 1/2, distribution
to the Depositor will be made on that date by a single sum payment. If the
Depositor elects as a means of distribution (b) or (c) above, the annuity
contract must satisfy the requirements of section 408(b)(1), (3), and (4) of the
Code. If the Depositor elects as a means of distribution (d) or (e) above, the
annual payment required to be made by the Depositor's required beginning date is
for the calendar year the Depositor reached age 70 1/2. Annual payments for
subsequent years, including the year the Depositor's required beginning date
occurs, must be made by December 31 of that year.
2. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after the Depositor's required beginning
date, distribution must continue to be made in accordance with
paragraph 1.
(b) If the Depositor dies before the Depositor's required beginning date,
the entire remaining interest will, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death.
or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries.
The election of either (i) or (ii) must be made by December 31 of the year
following the year of the Depositor's death. If the beneficiary or beneficiaries
do not elect either of the distribution options described in (i) and (ii),
distribution will be made in accordance with (ii) if the beneficiary is the
Depositor's surviving spouse and in accordance with (i) if the beneficiary or
beneficiaries are or include anyone other than the surviving spouse. In the case
of distributions under (ii), distributions must commence by December 31 of the
year following the year of the Depositor's death. If the Depositor's spouse is
the beneficiary, distributions need not commence until December 31 of the year
the Depositor would have attained age 70 1/2, if later.
(c) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
3. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph (1), determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Depositor and
designated beneficiary as of their birthdays in the year the Depositor reaches
age 70 1/2. In the case of distribution in accordance with paragraph (2)(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence. Unless the Depositor (or spouse) elects not to have life expectancy
recalculated, the Depositor's life expectancy (and the life expectancy of the
Depositor's spouse, if applicable) will be recalculated annually using their
attained age as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated beneficiary
(other than the spouse) will not be recalculated. The minimum annual payment may
be made in a series of installments (e.g. monthly, quarterly, etc.) as long as
the total payments for the year made by the date required are not less than the
minimum amounts required.
Article V
- --------------------------------------------------------------------------------
Unless the Depositor dies, is disabled (as defined in section 72(m) of the
Code), or reaches age 59 1/2 before any amount is distributed from the custodial
account, the Custodian must receive from the Depositor a statement explaining
how he or she intends to dispose of the amount distributed.
Article VI
- --------------------------------------------------------------------------------
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) of the
Code and related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
<PAGE>
Article VII
- --------------------------------------------------------------------------------
Notwithstanding any other article which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) of the Code and
related regulations will be invalid.
Article VIII
- --------------------------------------------------------------------------------
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear on the Application.
Article IX
- --------------------------------------------------------------------------------
1. Please refer to Scudder IRA Application which is incorporated herein by
reference.
2. Depositor's Selection of Investments
Depositor directs Custodian to invest all custodial funds in investment
shares issued by the "Mutual Funds(s)," or in the other investments which have
been designated by Scudder Fund Distributors, Inc. (or its successors) as
eligible for investment hereunder, which have been selected by Depositor until
Depositor hereafter gives custodian contrary instructions pursuant to Article
IX, paragraph ("para.") 6 below, which governs investment of the custodial
account in "Mutual Fund" shares or other investment.
3. Contributions
(a) Periodic Contributions. Periodic contributions which Depositor intends
to be tax-deductible under Internal Revenue Code Section 219 shall be in cash
and are to be invested under this Agreement. Depositor contemplates future
periodic contributions within the tax-deductible limits and in accordance with
the rules for tax-deductibility specified in the Internal Revenue Code.
Depositor assumes full and sole responsibility for making sure that the sum of
periodic contributions during a single taxable year of Depositor does not exceed
those limits or violate those rules. Depositor should not contribute to the
custodial account after it ceases to be exempt by reason of either section
408(e) or 415(g) of the Internal Revenue Code.
(b) Rollover Contributions From an Individual Retirement Account or
Individual Retirement Annuity Funded Exclusively With Deductible Contributions.
A rollover contribution by Depositor from an individual retirement account or
individual retirement annuity funded exclusively with deductible contributions
shall be a deposit in cash to be invested under this agreement, with respect to
which contribution, Depositor warrants that
(1) it meets the requirements for a rollover contribution from such an
individual requirement account or individual retirement annuity as are contained
in Code Section 408(d) and that
(2) no portion of such rollover contribution is attributable to a distribution
from an employee's trust, an employee annuity, an annuity contract or a U.S.
retirement bond as described in Internal Revenue Code Sections 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(c)(3)(C).
(c) Rollover Contributions Attributable to Distributions From Employer
Plans. A rollover contribution by Depositor other than a contribution described
in paragraph (b) above shall be a deposit in cash to be invested under this
Agreement with respect to which contribution Depositor warrants that 91) the
amount rolled over is attributable to a distribution from an employees' trust,
an employee annuity, an annuity contract, a qualified bond purchase plan, or a
U.S. retirement bond, which meets the requirements of Code section 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C); and (2) Depositor will make no
additional contributions to the custodial account in which such contribution is
deposited, except as other wise permitted by Scudder Fund Distributors, Inc.
If permitted by Scudder Fund Distributors, Inc. rollover contributions may
be received under this Agreement with respect to qualified voluntary employee
contributions as defined in Internal Revenue Code Section 219(e)(2) and such
contributions shall thereafter be held and administered hereunder by the
Custodian in accordance with all applicable law with respect to accumulated
deductible employee contributions as defined in Internal Revenue Code Section
72(g)(5)(B).
(d) Transfer from an Individual Retirement Account or Individual Retirement
Annuity. Depositor may make an opening contribution hereunder by directing the
transfer of a cash amount from a custodian or trustee or an individual
retirement account or individual retirement annuity to the Custodian be made for
investment under this Agreement.
(1) From IRA Funded with Deductible Contributions. Where no portion of such
transferred amount is attributable to a distribution from an employees
trust, an employee annuity, an annuity contract or a U.S. retirement bond
as described in Internal Revenue Code Sections 402(a)(5), 403(a)(4),
403(b)(8), 405(d)(3), or 409(b)(3)(C). Depositor warrants that Depositor
did not inherit the account or annuity, or if Depositor did inherit the
account or annuity, that Depositor is the surviving spouse of the
individual for whose benefit the account was originally maintained or the
annuity was originally purchased.
(2) From IRA Funded with Distributions Attributable to an Employer Plan.
With respect to any other transferred amount, Depositor:
(A) agrees that no additional contributions will be made to the
custodial account in which such contribution is deposited except as
otherwise permitted by Scudder Fund Distributors Inc.
(B) that the entire amount of such transferred amount is attributable
to a distribution from an employees trust, an employee annuity, an
annuity contract, a qualified bond purchase plan, or a U.S. retirement
bond, as described in Internal Revenue Code Sections 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), 409(b)(3)(C), or other applicable
law;
(3) that if the transferred amount had been a rollover contribution it
would have complied with he requirements of subparagraph (b) or (c) above.
4. Tax Reform Act of 1986
Notwithstanding anything to the contrary herein, the provisions of this
agreement are to be interpreted in accordance with the provisions of the
Internal Revenue Code of 1986, to the extent any provisions of this agreement
conflicts with the provisions of the Internal Revenue Code of 1986, it shall be
deemed to have been amended in such manner as best preserves the original intent
of the unamended provision of the agreement while also bringing the provision
into compliance with the relevant provision(s) of the Internal Revenue Code of
1986.
5. Custodian's Fees
(a) Custodian shall be entitled to receive such reasonable fees with
respect to the establishment and administration of this custodial account as are
established by it from time to time.
(b) Upon thirty (30) days prior written notice. Custodian may change its
fee schedule.
Custodian's fees, any income, gift, estate and inheritance taxes or other
taxes of any kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial account, that
may be levied or assessed in respect to such assets and all other administrative
expenses incurred by Custodian in the performance of its duties including fees
for legal services rendered to Custodian, may be charged to the custodial
account, with the right to liquidate Mutual Fund shares or other investments for
this purpose or Custodian's options to the Depositor.
<PAGE>
6. Custodial Account
(a) This Agreement shall take effect only when accepted and signed by
Custodian. As directed, Custodian shall then open and maintain a separate
custodial account for Depositor and invest the initial contribution hereunder in
shares of the Mutual Fund(s) or other investments selected by Depositor in
Article IX Para 1. "Mutual Fund" means a regulated investment company which is
defined in Internal Revenue Code Section 851(a) and which has been designated by
Scudder Fund Distributors, Inc. (or its successors) as appropriate for
investment hereunder.
(b) Every subsequent contribution shall be invested in accordance with
instructions authorized by Depositor indicating Depositor's choice of the Mutual
Funds or other investments designated by Scudder Fund Distributors, Inc. (or its
successors) as appropriate for investment hereunder. Depositor agrees that the
listing shall not be construed as an endorsement by Custodian of the Mutual
Funds or other investment in which contributions may be invested, final choice
of which is in the sole discretion of Depositor. The Custodian does not
undertake to render any investment advice whatsoever to Depositor; its sole
duties are those prescribed in Article IX, para. 8(c).
(c) The Custodian shall invest subsequent contributions as directed.
However, if any such instructions authorized by Depositor are not received as
required, or if received, are in the opinion of Custodian unclear, or if the
accompanying contribution would cause the Depositor to exceed the maximum
limitation on tax deductibility. Custodian may hold or return all or a portion
of the contribution uninvested without liability for loss of income or
appreciation or for other loss, and without liability for interest, pending
receipt of written instructions or clarification.
(d) All dividends and capital gains distributions received on shares of a
Mutual Fund held in the custodian account shall (unless received in additional
such shares be reinvested in shares of that Mutual Fund, if available, which
shall be credited to the account. If any distribution on such shares may be
received at the election of the shareholder in additional such shares or in cash
or other property. Custodian shall elect to receive it in additional such
shares. All accumulations on account of other investments shall be reinvested in
Depositor's custodial account.
(e) All Mutual Fund shares or other investments acquired by Custodian
hereunder shall be registered in the name of Custodian (with or without
identifying Depositor) or of its nominee. Custodian shall deliver, or cause to
be executed and delivered, to Depositor all notices, prospectuses, financial
statements, proxies, and proxy soliciting materials relating to such Mutual
Funds shares or other investments held in the custodial account. Custodian shall
not vote any such Mutual Fund shares or other investments except in accordance
with any written instructions received from Depositor.
7. Distributions
(This paragraph 7 supplements Article IV on Scudder IRA Form 12-86 of the
Agreement and must be read in conjunction with it.)
(a) Distribution of the custodial account assets in accordance with Article
IV shall be made in a manner set forth in subparagraph (c)(1) or (2), whichever
applies, except as Article IV otherwise requires and at such time as Depositor
(or Depositor's Beneficiary if Depositor is deceased) shall elect by written
order to Custodian, provided that distribution (except for distribution on
account of Depositor's disability or death, return of an "excess contribution"
referred to in subparagraph (d) or a "rollover" from this account), must be no
earlier than age 59 1/2 if Depositor wants to avoid an "early distribution
additional tax" under Code section 408(f) or other applicable law. For that
purpose, Depositor will be considered disabled if Depositor can prove, as
provided in Code section 72(m)(7), that Depositor is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or be of
long-continued and indefinite duration. Depositor's (or Depositor's Beneficiary
if Depositor is deceased) will order distribution in the manner and at the time
permitted or required by Article IV and this paragraph. Custodian assumes no
responsibility for the tax treatment of any distribution from the custodial
account, such responsibility accrues solely to person ordering the distribution.
(b) Custodian assumes (and shall have) no responsibility to make any
distribution on order of Depositor (or Depositor's Beneficiary if Depositor is
deceased) unless and until such order specifies the occasion for such
distribution, the elected manner of distribution and any declaration required by
Article V. Also, before making any such distribution or before honoring any
assignment of the custodial account. Custodian shall be furnished with any and
all applications, certificates, tax waivers, signature guarantees, and other
documents (including proof of any legal representative's authority) deemed
necessary or advisable by Custodian, but Custodian shall not be responsible for
complying with an order which appears on its face to be genuine, or for refusing
to comply if not satisfied it is genuine, and assumes no duty of further
inquiry.
(c) Upon receipt of a proper written order as required above Custodian
shall distribute the assets of the custodial account in cash or kind as follows:
(1) Distribution to Depositor. If the distribution order calls for the
custodial account to be paid to Depositor under Article IV then
distribution shall be made in one or more of the following ways as
specified in the order.
(A) In a lump sum.
(B) In installments pursuant to a cash withdrawal plan, provided that
such a plan suitable for prearranging the distributions described in
this subparagraph (b) is available for Custodian's use under the rules
governing the investments held in the custodial account. A suitable
cash withdrawal plan will provide for periodic liquidation of some of
investments held in the custodial account to yield the cash necessary
to pay each installment. Prior to January 1, 1985, a suitable cash
withdrawal plan will provide for payment of installments over a period
not longer than the life expectancy of Depositor or the joint life and
the last survivor expectancy of Depositor and Depositor's spouse.
Subsequent to December 31, 1984, a suitable cash withdrawal plan will
provide for payment of installments ratably over a period of not
longer than the life expectancy of the Depositor or the joint life and
last survivor expectancy of the Depositor and the Depositor's
Beneficiary (as defined in subparagraph (c)(2) of this Para. 7). The
life expectancies referred to in this Agreement shall be determined by
using applicable Internal Revenue Service tables. The amount
distributed each year shall be at least equal to the quotient obtained
by dividing the entire custodial account remaining at the beginning of
that year by the adjusted life expectancy of Depositor, the joint life
and last survivor expectancy of Depositor and Depositor's spouse, or
the joint life and last survivor expectancy of Depositor's Beneficiary
(whichever is applicable). Prior to January 1, 1985 the life or joint
life and last survivor expectancy used to calculate the minimum amount
to be distributed in a given year shall be equal to the relevant
expectancy as it was determined as of when Depositor attained age 70
1/2 reduced by the number of whole years elapsed, if any, since
Depositor attained age 70 1/2. Subsequent to December 31, 1984, the
adjusted life of joint life and last survivor expectancy used to
calculate the minimum amount to be distributed in a given year shall
be at the Depositor's election, either determined by referring to the
<PAGE>
applicable Internal Revenue Service table and determining the relevant
expectancy as of the particular year in question of by using a
previously determined expectancy and reducing such expectancy by the
number of whole years elapsed since it was determined. Notwithstanding
any implication to the contrary in this subsection (B) no distribution
need be made in any year or a lesser amount may be distributed during
such year if the aggregate amounts distributed through the end of such
year are at least equal to the aggregate of the minimum amounts
required by this subparagraph (B) to have been distributed. Moreover,
during Depositor's lifetime the entire custodial account remaining for
distribution at any time under this subparagraph (B) may, pursuant to
proper supplementary written order as specified above be distributed
to Depositor.
(C) By the purchase and distribution of a single-premium contract
meeting the requirements of Code section 408(b)(1), (3), (4) and,
prior to January 1, 1985, (5) applicable to an "individual retirement
annuity."
(2) Distribution upon Death of Depositor or Depositor's Spouse. Prior to
January 1, 1985, if Custodian receives a proper written order for
distribution on account of the Depositor's death or the spouse's death, if
distributions were being made to the spouse over the joint life and last
survivor expectancy. Custodian shall distribute the then-remaining
custodial account to Depositor's (or, if applicable, the spouse's)
Beneficiary within five (5) years of Depositor's (or, if applicable, the
spouse's) death either in a lump sum or installments; provided, however,
that if distributions have already begun before Depositor's death for a
specified term, then Custodian may instead continue to make the
distribution in the same manner and without regard to the foregoing
five-year limitation; provided further, that if Depositor's Beneficiary is
Depositor's spouse and if Depositor's Beneficiary elects to treat the
account as if Depositor's Beneficiary were the Depositor, then the
Custodian may distribute the account as directed by the Depositor's
Beneficiary as if such person were the Depositor and in accordance with the
Articles IV and IX. Subsequent to December 31, 1984, if Custodian receives
a proper written order for distribution on account of the Depositor's death
or the spouse's death, if distributions were being made to the Depositor's
surviving spouse, then the Custodial shall distribute the then-remaining
custodial account to the Depositor's (or, if applicable, the spouse's)
Beneficiary over the life of the Depositor's (or, if applicable, the
spouse's) Beneficiary or within a period not greater than the greater of
five (5) years after the Depositor's (or, if applicable, the spouse's)
death or the life expectancy of Depositor's (or, if applicable, the
spouse's) Beneficiary; provided, however, that if distributions have
already begun before Depositor's death for a specified term. Custodian
shall continue to distribute the custodial account over a period at least
as rapid as that specified term. The term "Depositor's Beneficiary" means
the person or persons designated as such by the "designating person" (as
defined below) on a form acceptable to Custodian for use in connection with
this Agreement, signed by the designating person, and filed with the
Custodian in accordance with this subparagraph (2). The form may name
persons or estates to take upon the contingency of survival. However, the
term "Depositor's Beneficiary" means the designating persons estate to the
extent no such designation on such a form effectively disposes of the
custodial account as of when such distribution is to commence. Moreover, a
form shall not become effective for that purpose until it is filed with the
Custodian during the lifetime of the designating person. The term last
accepted by Custodian before such distribution is to commence upon becoming
effective during the designating person's lifetime, shall be controlling
and, whether or not fully dispositive of the custodial account, thereupon
shall revoke all such forms previously filed by that person. The term
"designating person" means Depositor; after Depositor's death, it also
means the person or persons (other than Depositor's estate) who begin to
receive a portion of the custodial account pursuant to such a designation
by Depositor and designations by such a person shall relate solely to the
balance of that portion remaining in the custodial account as of when
distribution pursuant to a designation by that person is to commence. The
Custodian shall accept all such forms only in the Commonwealth of
Massachusetts and they shall be considered part of this Agreement for
purposes of Article IX, para. 13(c).
(3) Any annuity which Custodian is to purchase and distribute under this
Agreement may be filed or variable, but Custodian shall not be required to
distribute in that manner unless the premium for that annuity is at least
$1,000.
(4) Depositor's beneficiary shall not have the right or power to anticipate
any part of the custodial account or to sell, assign, transfer, pledge or
hypothecate any part thereof. The custodial account shall not be liable for
the debts of Depositor's Beneficiary or subject to any seizure, attachment,
execution or other legal process in respect thereto.
(d) If during a taxable year under Article I a total amount as contributed
which exceeds the amount deductible for that year, either because such amount
exceeds the tax-deductible limits specified in the Internal Revenue Code, or
because of attainment of age 70 1/2 in that year, or for some other reason, then
upon receiving written notice specifying the year in question, the amount of the
excess, the reason it is an excess, and the amount of net income in the
custodial account attributable to such excess -- Custodian shall distribute cash
to Depositor in an amount equal to the sum of such excess and earnings. if the
excess Custodian's discretion unless otherwise instructed by depositor in lieu
of being distributed, said sum shall be treated by Depositor as a contribution
in the then current or a succeeding taxable year, in accordance with applicable
law.
8. Additional Provisions Regarding the Custodian
(a) When and after distributions of the custodial account to Depositor's
Beneficiary commence, all rights and obligations assigned to Depositor by
provisions of this Agreement shall inure to and be enjoyed and exercised by,
Depositor's beneficiary instead of Depositor. Until such distributions commence
to such a person, the Custodian shall not be responsible for treating such
person's predecessor to such rights and obligations as still possessing the
same.
(b) Custodian shall keep adequate records of transactions it is required to
perform hereunder. Not later than sixty (60) days after the close of each
calendar year or after the Custodian's resignation or removal pursuant to
Article IX, para. 10(1). Custodian shall render to Depositor a written report or
reports reflecting the transactions effected by it during such period and the
assets of the custodial account at the close of the period. Sixty (60) days
after rendering such report(s), Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to its
acts and transactions known in or reflected by such report(s), except with
respect to those as to which the recipient of such report(s) shall have filed
written objections with the Custodian within the latter such sixty-day period.
<PAGE>
(c) Custodian shall be an agent for Depositor to receive and invest
contributions as authorized by Depositor, hold and distribute such investments
and keep adequate records and report thereon, all in accordance with this
Agreement. The parties do not intend to confer any fiduciary duties on Custodian
and none shall be implied. Custodian may perform any of its administrative
duties through other persons designated by Custodian from time to time, except
the Mutual Fund shares or other investments must be registered as stated in
para. 6(e) of this Article IX and Custodian intends initially to delegate all
such duties to Boston Financial Data Services, Inc., which is partially owned by
Custodian' s parent company, but no such delegation or future change therein
shall not be liable (and assumes no responsibility) for the collection of
contributions, the deductibility of any contribution or its propriety under this
Agreement or the purpose or property of any distribution ordered in accordance
with Article IX, para. 7, or made in accordance with Article IX, para. 12. which
matters are the sole responsibility of Depositor and Depositor's Beneficiary.
(d) Depositor shall always fully indemnify Custodian and save it harmless
from any and all liability whatsoever which may arise either (1) in connection
with this Agreement and matters which it contemplates, except that which arised
due to Custodian's negligence or willful misconduct, or (2) with respect to
making or failing to make any distribution, other than for failure to make
distribution in accordance with any order therefor which is in full compliance
with both Article IV and para. 7(a) and (b) of Article IX. Custodian shall not
be obligated or expected to commence or defend any legal action or proceeding in
connection with this Agreement or such matters unless agreed upon by Custodian
and Depositor, and unless fully indemnify for so doing to Custodian's
satisfaction.
(e) Custodian may conclusively rely upon and shall be protected in acting
upon any written order from or authorized by Depositor or Depositor's
beneficiary or any other notice, request, consent, certificate or their
instrument, paper, or other communication believed by it to be genuine, and to
have been issued in proper form and with proper authority and, so long as it
acts in good faith, in taking or omitting to take any other action in reliance
thereon.
9. Amendment
(This paragraph 9 supplements Article VIII on Scudder IRA Form 12-86 of the
Agreement and must be read in conjunction with it.)
(a) Depositor retains the right to amend this Agreement in any respect at
any time effective on a stated date which shall be at least sixty (60) days
after giving written notice of the amendment (including its exact terms) to
Custodian by registered or certified mail unless Custodian waives such notice as
to that amendment. If Custodian does not wish to continue serving in that
capacity under this Agreement as so amended, it may resign in accordance with
Article IX, para. 10. Depositor also delegates, to the distributor (principal
underwriter) of a plurality of the Mutual Funds described in Article IX, para.
6(b), Depositor's right so to amend, including retroactively, as necessary or
appropriate in the opinion of counsel satisfactory to the distributor, in order
to conform with pertinent provisions of the Code and other laws or successor
provisions of law or to obtain a governmental ruling that such requirements are
met, to adopt a prototype or master plan (when one becomes available) for
investment in shares of such Mutual Funds or other investment, or as otherwise
may be advisable in the opinion of such counsel provided the distributor amends
in the same manner all agreements comparable to this one, having the same
Custodian, permitting investment in shares of such Mutual Funds or other
investments, and under which such power has been delegated to it. Such an
amendment by the distributor shall be communicated in writing to Depositor and
Custodian and Depositor shall be deemed to have consented thereto unless, within
thirty (30) days after such communication to Depositor is mailed. Depositor
either (1) gives Custodian a proper written order for a lump-sum distribution of
the custodial account, or (2) removes Custodian and simultaneously appoints a
Successor Custodian under Article IX, para. 1.
(b) This paragraph 9 shall not be construed to restrict Custodian's freedom
to agree with distributors of Mutual Fund shares, or others, upon the terms by
which shares of additional Mutual Funds or other investments may be chosen for
investment as contemplated in Article IX, para. 6(b), or Custodian's freedom to
change fee schedules in the manner approved by Article IX, para. 5(b), and no
such agreement or change shall be deemed to be an amendment of this Agreement.
10. Resignation or Removal of Custodian
(a) Custodian may resign at any time upon at least thirty (30) days prior
notice in writing to Depositor, and may be removed by Depositor at any time upon
at least thirty (30) days prior notice in writing to Custodian. Upon such
resignation or removal, Depositor shall appoint a Successor Custodian to serve
under this Agreement. Upon receipt by Custodian of written acceptance of such
appointment by the Successor Custodian, Custodian shall transfer to such
Successor the assets of the custodial account and all necessary records (or
copies thereof) pertaining thereof, provided that (if so requested by Custodian)
any Successor Custodian agrees not to dispose of any such records without
Custodian's consent. Custodian is authorized, however, to reserve such a portion
of such assets as it may deem advisable for payment of all its fees,
compensation, costs, and expenses, or for payment of any other liabilities
constituting a charge on or against Custodian, with any balance of such reserve
remaining after the payment of all such items to be paid over to the Successor
Custodian.
(b) If within thirty (30) days after Custodian's resignation or removal or
such longer time as Custodian may agree to, Depositor has not appointed a
Successor Custodian which has accepted such appointment, Custodian shall
terminate the custodial account pursuant to Article IX, para. 11, unless within
that time the distributor referred to in Article IX, para. 9(a), appoints such
Successor and gives written notice thereof to Depositor and Custodian.
(c) Custodian shall not be liable for the acts or omissions of such
Successor.
(d) The Custodian, and every Successor Custodian appointed to serve under
this Agreement, must be a bank as defined in Code section 408(n) or such other
person who qualifies to serve in the manner prescribed by Code section 408(a)(2)
and satisfies the Depositor, distributor or Custodian, upon request, as to such
qualification.
(e) After Custodian has transferred the custodial account assets (including
any reserve balance as contemplated above) to the Successor Custodian, Custodian
shall be relieved of all further liability with respect to this Agreement, the
custodial account, and the assets thereof.
11. Termination of Account
(a) Custodian shall terminate the custodial account if within the time
specified in Article IX, para. 10(b), after Custodian's resignation or removal,
neither Depositor nor the distributor has appointed a Successor Custodian which
has accepted such appointment. Termination of the custodial account shall be
effected by distributing all assets thereof in a lump sum in cash or in kind to
Depositor subject to Custodian's right to reserve funds as provided in Article
IX, para 10(a).
<PAGE>
(b) Upon termination of the custodial account, this Agreement shall
terminate and have no further force and effect, and Custodian shall be relieved
from all further liability with respect to this Agreement, the custodial
account, and all assets thereof so distributed.
12. Liquidation of Account
(a) Notwithstanding anything contained in this Agreement to the contrary,
Scudder Fund Distributors, Inc. shall have the right to direct Custodian, by
written order to Custodian, to liquidate the custodial account if the value of
the account at the time of such written order is less than a minimum value
established on a non-discriminatory basis from time to time by Scudder Fund
Distributors, Inc., and upon receipt of such written order (which Scudder Fund
Distributors, Inc. shall have no duty to make and which, if made, may be made
with respect to any specified accounts as to which it may be made applicable
singly or to all accounts as to which it may be made applicable as a group),
Custodian shall forthwith proceed to liquidate the custodial account by
distributing all assets thereof in a lump sum in cash or in kind to Depositor,
subject to Custodian's right to reserve such a portion of such assets as it may
deem advisable for payment of all its fees, compensation, costs, and expenses,
or for payment to any other liabilities constituting a charge on or against the
assets of the custodial account or on or against Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over to
Depositor.
(b) Neither Scudder Fund Distributors, Inc. nor Custodian shall be liable
for, or in any way responsible with respect to, any penalty or any other loss
incurred by any person with respect to a distribution made hereunder and upon
liquidation of the custodial account as aforesaid, this Agreement shall
terminate and have no further force and effect, and Custodian and Scudder Fund
Distributors, Inc. shall be relieved from all further liability with respect to
this Agreement, the custodial account, and all assets thereof so distributed.
13. Miscellaneous
(a) References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time hereafter, including
successors to such sections.
(b) Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on Custodian's records.
(c) This agreement is accepted by Custodian in, and shall be construed and
administered in accordance with the laws of the Commonwealth of Massachusetts.
This Agreement is intended to qualify under section 408 of the Code as an
Individual Retirement Account and for the Retirement Savings deduction under
section 219 of the Code, and if any provision hereof is subject to more than one
interpretation or any term used herein is subject to more than one construction
which is consistent with that intent. However, neither the Custodian nor any
Mutual Fund (or company associated therewith) shall be responsible for whether
or not such intentions are achieved through use of this Agreement and Depositor
is referred to depositor's attorney for any such assurances.
CUSTODIAN
DISCLOSURE STATEMENT
The following information is being provided to you by the State Street Bank
and Trust Company, the Custodian of the Scudder Individual Retirement Accounts,
in accordance with the requirements of the Internal Revenue Service. Please read
it together with the Individual Retirement Plan and the prospectus for the
shares of each Mutual Fund selected by you for the investment of your
contributions to that Plan, copies of which you should have already received
from the distributor of those shares. The provisions of the Plan and prospectus
must prevail over this statement in any instance where the statement is
incomplete or appears to conflict.
The Employee Retirement Income Security Act of 1974 has provided an
entirely new program that may enable you to plan for your retirement by creating
a "retirement plan" with federally tax-deductible dollars. This federal income
tax deduction is available even if you do not otherwise itemize your deductions.
In addition, any earnings on the assets held in your individual retirement
account will not be subject to federal income tax until you actually begin to
receive a distribution from your account. The state income tax treatment of your
account may differ, and details should be available from your state taxing
authority or your own tax adviser.
As with most other laws that provide special tax treatment, there are
certain restrictions and limitations involved with respect to your individual
retirement account:
1. Only a limited amount of savings can qualify for the preferential tax
treatment -- 100% of your compensation or earnings from
self-employment up to an annual maximum of $2,000.
Undercertain conditions, an individual and his or her unemployed
spouse, or employed spouse with less than $250 of earnings, may each
open an IRA.
Annual deductions for contributions are allocable if a joint income
tax return is field and the deductions are limited to the lesser of
100% of the employed spouse's wages or $2,250, and the amount
contributed to either individual retirement account may not exceed
$2,000.
In the case of an individual retirement account which meets the
requirements of a so-called Simplified Employee Pension Plan, an
employer may contribute a deductible amount equal to 15% of the
employee's compensation up to an annual maximum of $30,000. The amount
of such contribution is includible in the employee's income as wages
(for federal income tax purposes) but is deductible by him or her. The
employee is also allowed an annual deduction for his or her own
individual retirement account contributions limited to the lesser of
100% of the employee's compensation of $2,000.
There is a 6% penalty tax on any so-called "excess contribution" if
you make one, that is, on the portion of a contribution made to your
IRA in excess of the amount which can be currently deducted. Some
examples of when this can occur are when you make a contribution to
your IRA in excess of the allowable deduction limitations, or you
contribute during or after the calendar year in which you reach 70
1/2. The 6% penalty tax on any "excess contribution" also attaches for
each following year until the excess is withdrawn or used up in an
excess contribution plus earnings on it is withdrawn before the time
for filing the individual's tax return for the year of the
contribution (including extensions), there will be no 6% penalty tax.
The amount withdrawn will not be considered a premature distribution
<PAGE>
nor taxes as ordinary income, except the earnings withdrawn will be
included in the income of the taxpayer. In addition, in certain cases
an excess contribution may be withdrawn after the time for filing the
individual's tax return without resulting in taxable income to the
individual. Also, excess contributions for one year may be carried
forward and deducted in the next year.
2. Contributions must be made to a Trust or Custodial Account in which
the Trustee Custodian is either a bank or such other person who has
been approved by the Secretary of the Treasury. No part of your
contribution may be invested in life insurance or be commingled with
other proiperty except in a common trust fund or common investment
fund.
3. No deduction is allowed for (a) contributions other than in cash; (b)
contributions (other than those by an employee to a Simplified
Employer Pension Plan) made during your calendar year in which you
attain age 70 1/2 or thereafter; or (c) for any amount you contribute
which was a distribution from another retirement plan ("rollover"
contribution). However, the limitations in paragraph 1 do not apply to
such rollovers.
4. Individuals receiving compensation may establish their own individual
retirement accounts even if they are already covered under
tax-qualified plans (including Keogh plans for self-employed
individuals), government plans, or certain annuities.
5. Your interest in the account must be nonforfeitable at all times.
6. An individual is allowed to transfer, or rollover, such individual's
investment in one type of individual retirement plan to another
without any tax liability. Also, under certain conditions, an
individual may roll over (tax-free) a distribution received from a
qualified plan or a tax sheltered annuity. However, strict limitations
apply to such rollovers, and you should seek a competent tax advice in
order to comply with all the rules governing rollovers.
7. Since the purpose of the IRA savings plan is to accumulate funds for
retirement, your receipt or use of any portion of this account (for
example, as collateral for a loan) before you attain age 59 1/2 would
be considered as an early distribution unless the distribution is a
result of death or disability. The amount of an early distribution
would be includible in your gross income and would also subject you to
a penalty tax equal to 10% of the distribution unless you transfer it
to another IRA under circumstances whereby it qualifies as a rollover.
8. If you or your beneficiary were to engage in any prohibited
transaction (such as any sale, exchange or leasing of any property
between you and the account, or any interference with the independent
status of the account) then the account would lose its exemption from
tax and be treated as having been distributed to you. The value of the
entire account would be includible in your gross income, and if you
were then under age 59 1/2 you would also be subject to the 10%
penalty tax on early distributions.
9. Your entire interest in your account must be distributed, or begin to
be distributed, to you no later than the first April 1st of the year
following the later of the year in which you attain age 70 1/2.
Distribution may be made at once in a imp sum or it may be made in
installments. However, installment payments cannot be scheduled to be
made over a period which extends beyond your life expectancy (as
determined annually), or the joint life and last survivor expectancy
of you and the beneficiary you designate (as determined annually, if
that beneficiary is your spouse). However, where the beneficiary is
other than the spouse, the value of the expected distributions to you,
determined at the time distributions commence, must equal at least 50%
of the total value at that time. If the amount distributed during the
calendar year is less than the minimum amount required to be
distributed, the recipient would be subject to a penalty tax equal to
50% of the difference between the amount required to be distributed
and the amount actually distributed. If you die before the entire
interest is distributed to you, but after you have begun to receive
distributions, your entire account must be distributed to your
beneficiary over a period no longer than the last determined life
expectancy or life and last survivor expectancy over which your
account was being distributed prior to your death. If you die before
the entire interest has begun to be distributed to you and your spouse
is your beneficiary, distributions to your spouse must either (a) be
completed within 5 years of your death or (b) commence before the
later of one year after your death or the date on which you would have
attained age 70 1/2 and continue over his or her life or a period not
exceeding his or her life expectancy. If you die before the entire
interest has begun to be distributed to your beneficiary must either
(a) be completed within five years of your death or (b) commence with
one year after your death and continue over your beneficiary's life or
a period not exceeding his or her life expectancy.
10. Amounts distributed to you are invaluable in your gross income when
you receive them and are taxable as ordinary income without any
special lump-sum distribution privileges. However, normal four-year
income averaging may be available.
11. You must file Treasury Form 5329 with the Internal Revenue Service for
each calendar year during which there is an excess contribution,
premature distribution, or during which there is an insufficient
distribution as refereed to in paragraph 9.
12. The Individual Retirement Account Plan has been approved as to form by
the Internal Revenue Service. This approval is a determination only as
to the form of the account and does not represent a determination of
the merits of such account.
13. Information about the shares of each mutual fund available for
investment by your individual retirement account must be furnished to
you in form of a prospectus governed by rules or the Securities and
Exchange Commission. Please refer to the prospectus for detailed
information concerning your mutual fund. Growth in the value of your
account cannot be guaranteed or projected. However, the income and
operating expenses of a mutual fund will affect the value of its
shares, and hence the value of your account, as does any increase or
decrease in the value of the assets of the mutual fund. The fund's
prospectus containing information regarding current income and
expenses of your mutual fund.
Fees and other expenses maintaining your account may be charged to you
or your account. The Custodian's fee schedule is referred to in
Article IX of the Plan document and is distributed to you with it.
<PAGE>
14. The information contained in this Disclosure Statement and the terms
of the related Custodial Account agreement are applicable to
Individual Retirement Accounts set up, and contributions made, with
respect to the 1986 calendar year. Effective January 1, 1987, the law
with regard to the establishment, maintenance and termination of
Individual Retirement Accounts has been substantially modified. For
example, a married individual will only be able to make a fully
deductible contribution to his or her account (an amount equal to the
lesser of his or her compensation or earnings from self-employment, of
$2,000) if the married couple files a joint Federal income tax return
and they satisfy either of the following standards: (a) their combined
adjusted gross income is less than $40,000 or (b) neither spouse
actively participates in an employer-sponsored retirement plan. A
single individual will be subject to similar rules except that the
adjusted gross income limit is $25,000. Married couples and single
individuals who do not satisfy the active-participant standard and
whose adjusted gross incomes exceed the applicable limit by not more
than $10,000 will be eligible to make limited deductible Individual
Retirement Account contributions. Generally speaking, for every $5 by
which a couple's or single individual's adjusted gross income exceeds
the applicable limit, the $2,000 cap on the amount of deductible
contributions is reduced by $1. Individuals who are not eligible to
make fully deductible Retirement Account contributions will be
permitted to make nondeductible contributions equal to the difference
between (a) the lesser of his or her compensation or earnings from
self-employment, or $2,000, minus (b) the maximum amount the
individual is permitted to contribute on a deductible basis. Earnings
on both deductible and non-deductible contributions will accumulate on
a tax-deferred basis.
If you have not received this Disclosure Statement at least seven calendar
days before the establishment of your Individual Retirement Account, you have
the right to revoke your Individual Retirement Account during the seven calendar
day period following the establishment of it. In order to so revoke your
Individual retirement Account, you must do so in writing and you must mail or
deliver your revocation to Scudder Fund Distributors, Inc., 175 Federal Street,
Retirement Plan Services, Boston, MA 01220. If your revocation is mailed, the
date of the postmark (or the date of certification or registration if sent by
certified or registered mail) will be considered your revocation date. If you so
revoke your individual retirement account during the seven-day period, the
entire amount of your account, without any adjustments (for items such as
administrative expenses, fees, or fluctuation in market value) will be returned
to you.
You may obtain further information from any district office of the Internal
Revenue Service.
Scudder
[Logo] IRA Portfolio
12-8-28 (c) Scudder Fund Distributors, Inc.
<PAGE>
400-28
Scudder IRA Application
&
IRA Transfer Request
for ....
- ---------------------------------------------
Return these forms to:
Scudder Fund Distributors, Inc.
P.O. Box 2291
Boston, MA 02107-2291
- ---------------------------------------------
It's easy to open a Scudder IRA. Just complete the Scudder IRA Application and
return it in the enclosed postage-paid envelope today.
A Few Tips
o Please make check(s) payable to "Scudder Funds."
o You have two forms--an IRA Application and an IRA Transfer Request.
Please do not separate them, even if you use only one.
o Please fill out each section carefully, preferably in print or type.
This helps us avoid any delays in processing your Application.
o Please be sure to sign your name exactly as it appears in your Account
Registration (Part 1).
o If you are transferring IRA assets from another IRA sponsor, please
fill out the attached IRA Transfer Request form and return it along
with your Application and a check for any investment you may be making
at this time.
If you already have a Scudder IRA, complete only the IRA Transfer
Request form.
Please return this form today. It will only take a few minutes and
will let us put your money to work for you that much sooner!
<PAGE>
Scudder
[Logo] IRA Portfolio Application
1. IRA Account Registration
___________________________________ ___________________________________
Name Social Security Number
( )
___________________________________ ___________________________________
Address Daytime Phone
/ /
________________ ________ _________ ___________________________________
City State Zip Date of Birth
2. Type of IRA & Fund Choices
/___/ New IRA. $2000 maximum per year. Contribution for tax year 198__
/___/ Transfer IRA. IRA assets transferred directly from your present
custodian to Scudder. If the transfer establishes your first Scudder
IRA, please complete this Application and an IRA Transfer Request
making sure to indicate fund(s) choices on both forms. If transferring
to an existing Scudder IRA, complete only the IRA Transfer Request. A
separate Transfer Request must be completed for each IRA being
transferred.
/___/ Rollover IRA. (check one)
/___/ Assets distributed from an employer-sponsored retirement
plan.
or
/___/ 60-day Rollover. You have taken receipt of your IRA assets
from another institution and are enclosing a check for part
or all of these funds.
The minimum initial investment is $240.
If you choose more than one fund, the minimum initial investment is $500 for
each fund.
$ Amount Money Market Funds
__________ Cash Investment Trust
__________ Government Money Fund
Income Funds
__________ GNMA Fund
__________ Income Fund
__________ Target Fund (multi-Portfolios),
__________ U.S. Government 1990_______________
__________ General 19______________
Maturity year
U.S. Gov't. Zero Coupon
__________ Target Fund _______________
Maturity year
Growth & Income Funds
__________ Equity Income Fund
__________ Growth and Income Fund
Growth Funds
__________ Japan Fund
__________ Capital Growth Fund
__________ Development Fund
__________ Global Fund
__________ International Fund
$ Total
==========
3. Designation of Beneficiary & Signatures
(Please be sure to sign your name exactly as it apears in Part 1.)
The following person(s) are to receive the balance of my IRA assets upon my
death. This designation revokes any previous one I may have filed with the
Custodian. (Provide name(s), address(es), and Social Security Number(s).)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Any resident of a Community Property State who designates a spouse as primary
beneficiary and others as contingent beneficiaries, or designates more than half
the distribution to beneficiaries other than a spouse, must obtain the spouse's
consent.
Spouse's
consent X______________________________________________________ _______________
Signature Date
I hereby designate the beneficiaries listed and adopt with the custodian this
Scudder Individual Retirement Account agreement which uses the language of IRS
Form 5305-A. Once the Custodian acknowledges receipt of this form by mail, it
shall be deemed accepted, and therefore, effective as of the date I signed it. I
have received and read the Scudder IRA plan and the prospectus(es) of the
fund(s) selected.
X /s/ G. Reeves
- -------------------------------------------------------------------------------
State Street Bank and Trust Company, Custodian
X______________________________________________________________ _______________
Your Signature Date (exactly as in Part 1) Date
<PAGE>
Scudder Extra Application
[IRA Portfolio For your spouse or friend
1. IRA Account Registration
___________________________________ ___________________________________
Name Social Security Number
( )
___________________________________ ___________________________________
Address Daytime Phone
/ /
________________ ________ _________ ___________________________________
City State Zip Date of Birth
2. Type of IRA & Fund Choices
/___/ New IRA. $2000 maximum per year. Contribution for tax year 198__
/___/ Transfer IRA. IRA assets transferred directly from your present
custodian to Scudder. If the transfer establishes your first Scudder
IRA, please complete this Application and an IRA Transfer Request
making sure to indicate fund(s) choices on both forms. If transferring
to an existing Scudder IRA, complete only the IRA Transfer Request. A
separate Transfer Request must be completed for each IRA being
transferred.
/___/ Rollover IRA. (check one)
/___/ Assets distributed from an employer-sponsored retirement
plan.
or
/___/ 60-day Rollover. You have taken receipt of your IRA assets
from another institution and are enclosing a check for part
or all of these funds.
The minimum initial investment is $240.
If you choose more than one fund, the minimum initial investment is $500 for
each fund.
$ Amount Money Market Funds
__________ Cash Investment Trust
__________ Government Money Fund
Income Funds
__________ GNMA Fund
__________ Income Fund
__________ Target Fund (multi-Portfolios),
__________ U.S. Government 1990_______________
__________ General 19______________
Maturity year
U.S. Gov't. Zero Coupon
__________ Target Fund _______________
Maturity year
Growth & Income Funds
__________ Equity Income Fund
__________ Growth and Income Fund
Growth Funds
__________ Japan Fund
__________ Capital Growth Fund
__________ Development Fund
__________ Global Fund
__________ International Fund
$ Total
==========
3. Designation of Beneficiary & Signatures
(Please be sure to sign your name exactly as it apears in Part 1.)
The following person(s) are to receive the balance of my IRA assets upon my
death. This designation revokes any previous one I may have filed with the
Custodian. (Provide name(s), address(es), and Social Security Number(s).)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Any resident of a Community Property State who designates a spouse as primary
beneficiary and others as contingent beneficiaries, or designates more than half
the distribution to beneficiaries other than a spo9use, must obtain the spouse's
consent.
Spouse's
consent X______________________________________________________ _______________
Signature Date
I hereby designate the beneficiaries listed and adopt with the custodian this
Scudder Individual Retirement Account agreement which uses the language of IRS
Form 5305-A. Once the Custodian acknowledges receipt of this form by mail, it
shall be deemed accepted, and therefore, effective as of the date I signed it. I
have received and read the Scudder IRA plan and the prospectus(es) of the
fund(s) selected.
X /s/ G. Reeves
- -------------------------------------------------------------------------------
State Street Bank and Trust Company, Custodian
X______________________________________________________________ _______________
Your Signature Date (exactly as in Part 1) Date
RETURN THIS FORM IN THE POSTPAID ENVELOPE PROVIDED, OR MAIL TO:
SCUDDER FUNDS, P.O. BOX 2291, BOSTON, MA 02107-2291.
<PAGE>
It's easy to open a Scudder IRA. Just complete this Scudder IRA Application
and return it in the enclosed postage-paid envelope today.
A Few Tips
o Please make check(s) payable to "Scudder Funds".
o You have two forms--an IRA Application and an IRA Transfer Request.
Please do not separate them, even if you use only one.
o Please fill out each section carefully, preferably in print or type.
This helps us avoid any delays in processing your Application.
o Please be sure to sign your name exactly as it appears in your Account
Registration (Part 1).
o If you are transferring IRA assets from another IRA sponsor, please
fill out an IRA Transfer Request form and return it along with your
Application and a check for any investment you may be making at this
time.
If you already have a Scudder IRA, complete only the IRA Transfer
Request form.
Please return this form today. It will only take a few minutes and
will let us put your money to work for you that much sooner!
<PAGE>
Scudder [Logo] IRA Portfolio IRA Transfer Request
Complete this form if you wish to transfer the assets in your current IRA
directly to the Scudder IRA. If establishing a new Scudder IRA, complete the
Scudder IRA Application as well. Return this form in the postpaid envelope
provided. We will send you a notice confirming that we received this form, and
arrange to complete the transfer. The amount you transfer does not affect the
amount you can invest and deduct annually. If you wish to transfer assets held
in another type of plan, e.g. Keogh, profit-sharing, 403(b), etc., please call
us for the proper forms. This form is only for IRA transfers.
1. Name & Address
___________________________________ ___________________________________
Name Social Security Number
( )
___________________________________ ___________________________________
Address Daytime Phone
/ /
________________ ________ _________
City State Zip
2. Instructions to Present Custodian
- --------------------------------------------------------------------------------
Name of Current Custodian/Trustee
- --------------------------------------------------------------------------------
Attention: (Person or department handling transfers)
___________________________________
Address
________________ ________ _________
City State Zip
/___/ Please transfer all of my IRA assets.
/___/ Please transfer $_____ of my IRA assets.
Other instructions (e.g., make transfer upon maturity)
/ /
- -------------------------------------------------------------------------------
maturity date
- --------------------------------------------------------------------------------
IRA Account Number (with this Custodian)
( )
- --------------------------------------------------------------------------------
Custodian's Phone Number
I request that the above-named Custodian or Trustee transfer my IRA assets as
cash to State Street Bank and Trust Company, Custodian of my Scudder IRA.
- --------------------------------------------------------------------------------
Please make the check payable to:
Scudder Funds, A/C (Investor name), Scudder IRA
Mail to: The Scudder Funds Retirement Plan Services,
P.O. Box 9647, Boston, MA 02205-9918
X
- --------------------------------------------------------------------------------
[ILLEGIBLE]
- -------------------------------------------------------------------------------
Please ask your present custodian if a signature guarantee is required.
3. Fund Choices (If you invest in 2 or more funds, the minimum initial
investment is $500 for each fund.
$ Amount Money Market Funds Acct. #*
_____________ Cash Investment Trust _____________
_____________ Government Money Fund _____________
Growth & Income Funds
_____________ Equity Income Fund _____________
_____________ Growth and Income Fund _____________
Growth Funds
_____________ Japan Fund _____________
_____________ Capital Growth Fund _____________
_____________ Development Fund _____________
_____________ Global Fund _____________
_____________ International Fund _____________
_____________ GNMA Fund _____________
_____________ Income Fund _____________
Target Fund
(Multi-Portfolios),
_____________ U.S. Government 1990 _____________
_____________ General 199_____________
Maturity year _____________
U.S. Government Zero Coupon
_____________ Target Fund______________ _____________
Maturity year
Total _____________
* When transferring to an existing Scudder IRA, please provide your Scudder IRA
account number.
================================================================================
For Scudder use only, do not complete.
Acceptance by Custodian
We agree to accept custodianship and the transfer described above for the
Scudder IRA Plan established on behalf of the above-names individual. State
Street Bank and Trust Company accepts its appointment as successor Custodian of
the above IRA account and requests the liquidation and transfer of assets as
indicated above.
Scudder Fund Distributors, Inc.
By _____________________________________________________________________________
Date ___________________________________________________________________________
State Street Bank & Trust Company
By /s/ G. Reeves
-----------------------------------------------------------------------------
<PAGE>
Scudder
[Logo] IRA Portfolio
Scudder Fund Distributors, Inc.
175 Federal Street, Boston, MA 02110
National Toll-Free Number
1-800-225-2470
Exhibit 14(c)
================================================================================
Scudder IRA
Plan
&
Disclosure
Statement
================================================================================
Scudder IRA Form 1-88
Scudder
Individual Retirement Custodial Account
(Under Section 408(a) of the Internal Revenue Code)
The Depositor whose name appears on the Scudder Application is establishing
an individual retirement account (under section 408(a) of the Internal Revenue
Code) to provide for this or her retirement and for the support of his or her
beneficiaries after death.
The Custodian named on the Application has given the Depositor the
disclosure statement required under the Income Tax Regulations under section
408(i) of the Code.
The Depositor has deposited with the Custodian the amount indicated on the
Application.
Article I
- --------------------------------------------------------------------------------
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8),
408(d)(3) of the Code or an employer contribution to a simplified employee
pension plan as described in section 408(k).
<PAGE>
Article II
- --------------------------------------------------------------------------------
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
- --------------------------------------------------------------------------------
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) of the Code).
Article IV
- --------------------------------------------------------------------------------
1. The Depositor's entire interest in the custodial account must be or
begin to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
The payments must begin by the April 1 following the calendar year in
which the Depositor reaches age 70 1/2.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
The payments must begin by the April 1 following the calendar year in
which the Depositor reaches age 70 1/2.
(d) Equal or substantially equal annual payments over a specified period
that my not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
Even if distributions have begun to be made under option (d) or (e), the
Depositor may receive a distribution to the balance in the custodial account at
any time by giving written notice to the Custodian. If the Depositor does not
choose any of the methods of distribution described above by the April 1
following the calendar year in which he or she reaches age 70 1/2, distribution
to the Depositor will be made on that date by a single sum payment. If the
Depositor elects as a means of distribution (b) or (c) above, the annuity
contract must satisfy the requirements of section 408(b)(1), (3), and (4) of the
Code. If the Depositor elects as a means of distribution (d) or (e) above, the
annual payment required to be made by the Depositor's required beginning date is
for the calendar year the Depositor reached age 70 1/2. Annual payments for
subsequent years, including the year the Depositor's required beginning date
occurs, must be made by December 31 of that year.
2. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after the Depositor's required beginning
date, distribution must continue to be made in accordance with
paragraph 1.
(b) If the Depositor dies before the Depositor's required beginning date,
the entire remaining interest will, at the election of the beneficiary
or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death,
or
(ii) be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries.
The election of either (i) or (ii) must be made by December 31 of the year
following the year of the Depositor's death. If the beneficiary or beneficiaries
do no elect either of the distribution options described in (i) and (ii),
distribution will be made in accordance with (ii) if the beneficiary is the
Depositor's surviving spouse and in accordance with (i) if the beneficiary or
beneficiaries are or include anyone other than the surviving spouse. In the case
of distributions under (ii), distributions must commence by December 31 of the
year following the year of the Depositor's death. If the Depositor's spouse is
the beneficiary, distributions need not commence until December 31 of the year
the Depositor would have attained age 70 1/2, if later.
(c) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
3. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph (1), determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Depositor and
designated beneficiary as of their birthdays in the year the Depositor reaches
age 70 1/2. In the case of distribution in accordance with paragraph (2)(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence. Unless the Depositor (or spouse) elects not to have life expectancy
recalculated, the Depositor's life expectancy (and the life expectancy of the
Depositor's spouse, if applicable) will be recalculated annually using their
attained ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated beneficiary
(other than the spouse) will not be recalculated. The minimum annual payment may
be made in a series of installments (e.g. monthly, quarterly, etc.) as long as
the total payments for the year made by the date required are not less than the
minimum amounts required.
Article V
- --------------------------------------------------------------------------------
Unless the Depositor dies, is disabled (as defined in section 72(m) of the
Code), or reaches age 59 1/2 before any amount is distributed from the custodial
account, the Custodian must receive from the Depositor a statement explaining
how he or she intends to dispose of the amount distributed.
Article VI
- --------------------------------------------------------------------------------
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) of the
Code and related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
<PAGE>
Article VII
- --------------------------------------------------------------------------------
Notwithstanding any other article which may by added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) of the Code and
related regulations will be invalid.
Article VIII
- --------------------------------------------------------------------------------
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear on the Application.
Article IX
- --------------------------------------------------------------------------------
1. Please refer to Scudder IRA Application which is incorporated herein by
reference.
2. Depositor's Selection of Investments
Depositor directs Custodian to invest all custodial funds in investment
shares issued by the "Mutual Fund(s)," or in the other investments which have
been designated by Scudder Fund Distributors, Inc. (or its successors) as
eligible for investment hereunder, which have been selected by Depositor until
Depositor hereafter gives custodian contrary instructions pursuant to Article
IX, paragraph ("para.") 6 below, which governs investment of the custodial
account in "Mutual Fund" shares or other investments.
3. Contributions
(a) Periodic Contributions. Periodic contributions which Depositor intends
to be tax-deductible under Internal Revenue Code Section 219 shall be in cash
and are to be invested under this Agreement. Depositor contemplates future
periodic contributions within the tax-deductible limits and in accordance with
the rules for tax-deductibility specified in the Internal Revenue Code.
Depositor assumes full and sole responsibility for making sure that the sum of
periodic contributions during a single taxable year of Depositor does not exceed
those limits or violate those rules. Depositor should not contribute to the
custodial account after it ceases to be exempt by reason of either section
408(e) or 415(g) of the Internal Revenue Code.
(b) Rollover Contributions From an Individual Retirement Account or
Individual Retirement Annuity Funded Exclusively With Deductible Contributions.
A rollover contribution by Depositor from an individual retirement account or
individual retirement annuity funded exclusively with deductible contributions
shall be a deposit in cash to be invested under this agreement, with respect to
which contribution, Depositor warrants that
(1) it meets the requirements for a rollover contribution from such an
individual retirement account or individual retirement annuity as are contained
in Code Section 408(d) and that
(2) no portion of such rollover contribution is attributable to a distribution
from an employees' trust, an employees annuity, an annuity contract or a U.S.
retirement bond as described in Internal Revenue Code Sections 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C).
(c) Rollover Contributions Attributable to Distributions From Employer
Plans. A rollover contribution by Depositor other than a contribution described
in paragraph (b) above shall be a deposit in cash to be invested under this
Agreement with respect to which contribution Depositor warrants that (1) the
amount rolled over is attributable to a distribution from an employees' trust,
an employee annuity, an annuity contract, a qualified bond purchase plan, or a
U.S. retirement bond, which meets the requirements of Code section 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C); and (2) Depositor will make no
additional contributions to the custodial account in which such contribution is
deposited, except as otherwise permitted by Scudder Fund Distributors, Inc.
If permitted by Scudder Fund Distributors, In., rollover contributions may
be received under this Agreement with respect to qualified voluntary employee
contributions as defined in Internal Revenue Code Section 219(e)(2) and such
contributions shall thereafter be held and administered hereunder by the
Custodian in accordance with all applicable law with respect to accumulated
deductible employee contributions as defined in Internal Revenue Code Section
72(o)(5)(B).
(d) Transfer from an Individual Retirement Account or Individual Retirement
Annuity. Depositor may make an opening contribution hereunder by directing the
transfer of a cash amount from a custodian or trustee of an individual
retirement account or individual retirement annuity to the Custodian be made for
investment under this Agreement.
(1) From IRA Funded with Deductible Contributions. Where no portion of such
transferred amount is attributable to a distribution from an employees'
trust, an employee annuity, an annuity contract or a U.S. retirement bond
as described in Internal Revenue Code Sections 402(a)(5), 403(a)(4),
403(b)(8), 405(d)(3), or 409(b)(3)(C), Depositor warrants that the
Depositor did not inherit the account or annuity, or if the Depositor did
inherit the account or annuity, that Depositor is the surviving spouse of
the individual for whose benefit the account was originally maintained or
the annuity was originally purchased.
(2) From IRA Funded with Distributions Attributable to an Employer Plan.
With respect to any other transferred amount, Depositor:
(A) agrees that no additional contributions will be made to the
custodial account in which such contribution is deposited, except as
otherwise permitted by Scudder Fund Distributors, Inc.;
(B) that the entire amount of such transferred amount is attributable
to a distribution from an employees' trust, an employee annuity, an
annuity contract, a qualified bond purchase plan, or a U.S. retirement
bond, as described in Internal Revenue Code Sections 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C), or other applicable
law.
(3) that if the transferred amount had been a rollover contribution, it
would have complied with the requirements of subparagraph (b) or (c) above.
4. Tax Reform Act of 1986.
Notwithstanding anything to the contrary herein, the provisions of this
agreement are to interpreted in accordance with the provisions of the Internal
Revenue Code of 1986; to the extent any provision of this agreement conflicts
with the provisions of the Internal revenue Code of 1986, it shall be deemed to
have been amended in such manner as best preserves the original intent of the
unamended provision of the agreement which also bringing the provision into
compliance with the relevant provision(s) of the Internal Revenue Code of 1986.
5. Custodian's Fees
(a) Custodian shall be entitled to receive such reasonable fees with
respect to the establishment and administration of this custodial account as are
established by it from time to time.
(b) Upon thirty (30) days prior written notice, Custodian may change its
fee schedule.
Custodian's fees, any income, gift, estate and inheritance taxes or other
taxes of any kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial account, that
may be levied or assessed in respect to such assets, and all other
administrative expenses incurred by Custodian in the performance of its duties
including fees for legal services rendered to Custodian, may be charged to the
custodial account, with the right to liquidate Mutual Fund shares or other
investments for this purpose, or (at Custodian's option) to the Depositor.
<PAGE>
6. Custodial Account
(a) This Agreement shall take effect only when accepted and signed by
Custodian. As directed, Custodian shall then open and maintain a separate
custodial account for Depositor and invest the initial contribution hereunder in
shares of the Mutual Fund(s) or other investments selected by Depositor in
Article IX Para. 1. "Mutual Fund" means a regulated investment company, which is
defined in Internal Revenue Code Section 851(a) and which has been designated by
Scudder Fund Distributors, Inc. (or its successors) as appropriate for
investment hereunder.
(b) Every subsequent contribution shall be invested in accordance with
instructions authorized by Depositor indicating Depositor's choice of the Mutual
Funds or other investments designated by Scudder Fund Distributors, Inc. (or its
successors) as appropriate for investment hereunder. Depositor agrees that the
listing shall not be construed as an endorsement by Custodian of the Mutual
Funds or other investments in which contributions may be invested, final choice
of which is in the sole discretion of Depositor. The Custodian does not
undertake to render any investment advice whatsoever to Depositor; its sole
duties are those prescribed in Article IX, para. 8(c).
(c) The Custodian shall invest subsequent contributions as directed.
However, if any such instructions authorized by Depositor are not received as
required, or if received, are in the opinion of Custodian unclear, or if the
accompanying contribution would cause the Depositor to exceed the maximum
limitation on tax deductibility, Custodian may hold or return all or a portion
of the contribution uninvested without liability for loss of income or
appreciation or for other loss, and without liability for interest, pending
receipt of written instructions or clarification.
(d) All dividends and capital gains distributions received on shares of a
Mutual Fund held in the custodial account shall (unless received in additional
such shares) be reinvested in shares of that Mutual Fund, if available, which
shall be credited to the account. If any distribution of such shares may be
received at the election of the shareholder in additional such shares or in cash
or other property, Custodian shall elect to receive it in additional such
shares. All accumulations on account of other investments shall be reinvested in
Depositor's custodial account.
(e) All Mutual Fund shares or other investments acquired by Custodian
hereunder shall be registered in the name of Custodian (with or without
identifying Depositor) or its nominee. Custodian shall deliver, or cause to be
executed and delivered, to Depositor all notices, prospectuses, financial
statements, proxies, and proxy soliciting materials relating to such Mutual
Funds shares or other investments held in the custodial account. Custodian shall
not vote any such Mutual Fund shares or other investments except in accordance
with any written instructions received from Depositor.
7. Distributions
(This paragraph 7 supplements Article IV on Scudder IRA Form 12-86 of the
Agreement and must be read in conjunction with it.)
(a) Distribution of the custodial account assets in accordance with Article
IV shall be made in a manner set forth in subparagraph (c)(1) or (2), whichever
applies, except as Article IV otherwise requires and at such time as Depositor
(or Depositor's Beneficiary if Depositor is deceased) shall elect by written
order to Custodian, provided that distribution (except for distribution on
account of Depositor's disability or death, return of an "excess contribution"
referred to in subparagraph (d) or a "rollover" from this account), must be no
earlier than age 59 1/2 if Depositor wants to avoid an "early distribution
additional tax" under Code section 408(f) or other applicable law. For that
purpose, Depositor will be considered disabled if depositor can prove, as
provided in Code section 72(m)(7), that Depositor is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or be of
long-continued and indefinite duration. Depositor's (or Depositor's Beneficiary
if Depositor is deceased) will order distribution in the manner and at the time
permitted or required by Article IV and this paragraph. Custodian assumes no
responsibility for the tax treatment of any distribution from the custodial
account; such responsibility accrues solely to the person ordering the
distribution.
(b) Custodian assumes (and shall have) no responsibility to make any
distribution on order of Depositor (or Depositor's Beneficiary if Depositor is
deceased) unless and until such order specifies the occasion for such
distribution, the elected manner of distribution, and any declaration required
by Article V. Also, before making any such distribution or before honoring any
assignment of the custodial account. Custodian shall be furnished with any and
all applications, certificates, tax waivers, signature guarantees, and other
documents (including proof of any legal representative's authority) deemed
necessary or advisable by Custodian, but Custodian shall not be responsible for
complying with an order which appears on its face to be genuine, or for refusing
to comply if not satisfied it is genuine, and assumes no duty of further
inquiry.
(c) Upon receipt of a proper written order as required above, Custodian
shall distribute the assets of the custodial account in cash or kind as follows:
(1) Distribution to Depositor. If the distribution order calls for the
custodial account to be paid to Depositor under Article IV then
distribution shall be made in one or more of the following ways as
specified in the order.
(A) In a lump sum.
(B) In installments pursuant to a cash withdrawal plan, provided that
such a plan suitable for prearranging the distributions described in
this subparagraph (B) is available for Custodian's use under the rules
governing the investments held in the custodial account. A suitable
cash withdrawal plan will provide for periodic liquidation of some of
investments held in the custodial account to yield the cash necessary
to pay each installment. Prior to January 1, 1985, a suitable cash
withdrawal plan will provide for payment of installments over a period
not longer than the life expectancy of Depositor or the joint life and
last survivor expectancy of Depositor and Depositor's spouse.
Subsequent to December 31, 1984, a suitable cash withdrawal plan will
provide for payment of installments ratably over a period of not
longer than the life expectancy of the Depositor or the joint life and
last survivor expectancy of the Depositor and the Depositor's
Beneficiary (as defined in subparagraph (c)(2) of this Para. 7) The
file expectancies referred to in this Agreement shall be determined by
using applicable Internal Revenue Service tables. The amount
distributed each year shall be at least equal to the quotient obtained
by dividing the entire custodial account remaining at the beginning of
that year by the adjusted life expectancy of Depositor, the joint life
and last survivor expectancy of Depositor and Depositor's spouse, or
the joint life and last survivor expectancy of Depositor's Beneficiary
(whichever is applicable). Prior to January 1, 1985, the life or joint
life and last survivor expectancy used to calculate the minimum amount
to be distributed in a given year shall be equal to the relevant
expectancy as it was determined as of when Depositor attained age
70 1/2 reduced by the number of whole years elapsed, if any, since
Depositor attained age 70 1/2. Subsequent to December 31, 1984, the
adjusted life or joint life and last survivor expectancy used to
calculate the minimum amount to be distributed in a given year shall
be at the
<PAGE>
Depositor's election, either determined by referring to the applicable
Internal Revenue Service table and determining the relevant expectancy
as of the particular year in question or by using a previously
determined expectancy and reducing such expectancy by the number of
whole years elapsed since it was determined. Notwithstanding any
implication to the contrary in this subsection (B), no distribution
need be made in any year, or a lesser amount may be distributed during
such year, if the aggregate amounts distributed through the end of
such year are at least equal t the aggregate of the minimum amounts
required by the subparagraph (B) to have been distributed. Moreover,
during Depositor's lifetime the entire custodial account remaining for
distribution at any time under this subparagraph (B) may, pursuant to
proper supplementary written order as specified above, be distributed
to Depositor.
(C) By the purchase and distribution of a single-premium contract
meeting the requirements of Code section 408(b)(1), (3), (4) and,
prior to January 1, 1985, (5) applicable to an "individual retirement
annuity."
(2) Distribution upon Death of Depositor or Depositor's Spouse. Prior to
January 1, 1985, if Custodian receives a proper written order for
distribution on account of the Depositor's death or the spouse's death, if
distributions were being made to the spouse over the joint life and last
survivor expectancy, Custodian shall distribute the then-remaining
custodial account to Depositor's (or, if applicable, the spouse's)
Beneficiary within five (5) years of Depositor's (or, if applicable, the
spouse's) death either in a lump sum or installments; provided, however,
that if distributions have already begun before Depositor's death for a
specified term, then Custodian may instead continue to make the
distribution in the same manner and without regard to the foregoing
five-year limitation; provided further, that if Depositor's Beneficiary is
Depositor's spouse and if Depositor's Beneficiary elects to treat the
account as if Depositor's Beneficiary were the Depositor, then the
Custodian may distribute the account as directed by the Depositor's
Beneficiary as if such person were the Depositor and in accordance with
Articles IV and IX. Subsequent to December 31, 1984, if Custodian receives
a proper written order for distribution on account of the Depositor's death
or the spouse's death, if distributions were being made to the Depositor's
surviving spouse, then the Custodian shall distribute the then-remaining
custodial account to the Depositor's (or, if applicable, the spouse's)
Beneficiary over the life of the Depositor's (or, if applicable, the
spouse's) Beneficiary; provided, however, that if distributions have
already begun before Depositor's death for a specified term, Custodian
shall continue to distribute the custodial account over a period at least
as rapid as that specified term. The term "Depositor's Beneficiary" means
the person or persons designated as such by the "designating person" (as
defined below) on a form acceptable to Custodian for use in connection with
the Agreement, signed by the designating person, and filed with the
Custodian in accordance with this subparagraph (2). The form may name
persons or estates to take upon the contingency of survival. However, the
term "Depositor's Beneficiary" means the designating person's estate to the
extent no such designation on such a form effectively disposes of the
custodial account as of when such distribution is to commence. Moreover, a
form shall not become effective for that purpose until it is file with the
Custodian during the lifetime of the designating person. The form last
accepted by Custodian before such distribution is to commence, upon
becoming effective during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the custodial account,
thereupon shall revoke all such forms previously filed by that person. The
term "designating person" means Depositor; after Depositor's death, it also
means the person or persons (other that Depositor's estate) who begin to
receive a portion of the custodial account pursuant to such a designation
by Depositor, and designations by such a person shall relate solely to the
balance of that portion remaining in the custodial account as of when
distribution pursuant to a designation by that person is to commence. The
Custodian shall accept all such forms only in the Commonwealth of
Massachusetts, and the shall be considered part of this Agreement for
purposes of Article IX, para. 13(c).
(3) Any annuity which Custodian is to purchase and distribute under this
Agreement may be fixed or variable, but Custodian shall not be required to
distribute in that manner unless the premium for that annuity is at least
$1,000.
(4) Depositor's Beneficiary shall not have the right or power to anticipate
any part of the custodial account or to sell, assign, transfer, pledge or
hypothecate any part thereof. The custodial account shall not be liable for
the debts of Depositor's Beneficiary or subject to any seizure, attachment,
execution or other legal process in respect thereto.
(d) If during a taxable year under Article I a total amount is contributed
which exceeds the amount deductible for that year, either because such amount
exceeds the tax-deductible limits specified in the Internal Revenue Code, or
because of attainment of age 70 1/2 in that year, or for some other reason, then
upon receiving written notice specifying the year in question, the amount of the
excess, the reason it is an excess, and the amount of net income in the
custodial account attributable to such excess -- Custodian shall distribute cash
to Depositor in an amount equal to the sum of such excess and earnings. If the
excess contribution did not arise because of attainment of age 70 1/2, then (in
Custodian's discretion unless otherwise instructed by Depositor) in lieu of
being distributed, said sum shall be treated by Depositor as a contribution in
the then current or a succeeding taxable year, in accordance with applicable.
Law.
8. Additional Provisions Regarding the Custodian
(a) When and after distributions of the custodial account to Depositor's
Beneficiary commence, all right and obligations assigned to Depositor by
provisions of this Agreement shall inure to, and be enjoyed and exercised by,
Depositor's Beneficiary instead of Depositor, shall not be responsible for
treating such person's predecessor to such rights and obligations as still
possessing the same.
(b) Custodian shall keep adequate records of transactions it is required to
perform hereunder. Not later than sixty (60) days after the close of each
calendar year or after the Custodian's resignation or removal pursuant to
Article IX, para. 10(a) Custodian shall render to Depositor a written report or
reports reflecting the transactions effected by it during such period and the
assets of the custodial account at the close of the period. Sixty (60) days
after rendering such report(s), Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to its
acts and transactions shown in or reflected by such report(s), except with
respect to those as to which the recipient of such report(s) shall have filed
written objections with the Custodian within the latter such sixty-day period.
<PAGE>
(c) Custodian shall be an agent for Depositor to receive and invest
contributions as authorized by Depositor, hold and distribute such investments,
and keep adequate records and report thereon, all in accordance with this
Agreement. The parties do not intend to confer any fiduciary duties on
Custodian, and none shall be implied. Custodian may perform any of its
administrative duties through other persons designated by Custodian from time to
time, except that Mutual Fund shares or other investments must be registered as
stated in para. 6(e) of this Article IX; and Custodian intends initially to
delegate all such duties to Boston Financial Data Services, Inc., which is
partially owned by Custodian's parent company; but no such delegation or future
change therein shall be considered as an amendment to this Agreement. Custodian
shall not be liable (and assumes no responsibility) for the collection of
contributions, the deductibility of any contribution or its propriety under this
Agreement, or the purpose or propriety of any distribution ordered in accordance
with Article IX, para. 7, or made in accordance with Article IX, para. 12,
which matters are the sole responsibility of Depositor and Depositor's
Beneficiary.
(d) Depositor shall always fully indemnify Custodian and save it harmless
from any and all liability whatsoever which may arise either (1) in connection
with this Agreement and matters which it contemplates, except that which arises
due to Custodian's negligence or willful misconduct, or (2) with respect to
making or failing to make any distribution, other than for failure to make
distribution in accordance with an order therefor which is in full compliance
with both Article IV and para. 7(a) and (b) of Article IX. Custodian shall not
be obligated or expected to commence or defend any legal action or proceeding in
connection with this Agreement or such matters unless agreed upon by Custodian
and Depositor, and unless fully indemnified for so doing to Custodian's
satisfaction.
(e) Custodian may conclusively rely upon and shall be protected in acting
upon any written order from or authorized by Depositor or Depositor's
Beneficiary or any other notice, request, consent, certificate or other
instrument, paper, or other communication believed by it to be genuine and to
have been issued in proper from and with proper authority, and, so long as it
acts in good faith, in taking or omitting to take any other action in reliance
thereon.
9. Amendment
(This paragraph 9 supplements Article VIII on Scudder IRA From 12-86 of the
Agreement and must be read in conjunction with it.)
(a) Depositor retains the right to amend this Agreement in any respect at
any time, effective on a stated date which shall be at least sixty (60) days
after giving written notice of the amendment (including its exact terms) to
Custodian by registered or certified mail unless Custodian waives such notice as
to that amendment. If Custodian does not wish to continue serving in that
capacity under this Agreement as so amended, it may resign in accordance with
Article IX, para. 10. Depositor also delegates, to the distributor (principal
underwriter) of a plurality of the Mutual Funds described in Article IX, para.
6(b), Depositor's right so to amend, including retroactively, as necessary or
appropriate in the opinion of counsel satisfactory to the distributor, in order
to conform with pertinent provisions of the Code and other laws or successor
provisions of law or to obtain a governmental ruling that such requirements are
met, to adopt a prototype or master plan (when one becomes available) for
investment in shares of such Mutual Funds or other investments, or as otherwise
may be advisable in the opinion of such counsel, provided the distributor amends
in the same manner all agreements comparable to this one, having the same
Custodian, permitting investment in shares of such Mutual Funds or other
investments, and under which such power has been delegated to it. Such an
amendment by the distributor shall be communicated in writing to Depositor and
Custodian, and Depositor shall be deemed to have consented thereto unless,
within thirty (30) days after such communication to Depositor is mailed.
Depositor either (1) gives Custodian a proper written order for a lump-sum
distribution of the custodial account, or (2) removes Custodian and
simultaneously appoints a Successor Custodian under Article IX, para. 10.
(b) This paragraph 9 shall not be construed to restrict Custodian's freedom
to agree with distributors of Mutual Fund shares, or others, upon the terms by
which shares of additional Mutual Funds or other investments may be chosen for
investment as contemplated in Article IX, para. 6(b), or Custodian's freedom to
change fee schedules in the manner approved by Article IX, para. 5(b), and no
such agreement or change shall be deemed to be an amendment of this Agreement.
10. Resignation or Removal of Custodian
(a) Custodian may resign at any time upon at least thirty (30) days prior
notice in writing to Depositor, and may be removed by Depositor at any time upon
at least thirty (30) days prior notice in writing to Custodian. Upon such
resignation or removal, Depositor shall appoint a Successor Custodian to serve
under this Agreement. Upon receipt by Custodian of written acceptance of such
appointment by the Successor Custodian, Custodian shall transfer to such
Successor the assets of the custodial account and all necessary records (or
copies thereof) pertaining thereto, provided that (if so requested by Custodian)
any Successor Custodian agrees not to dispose of any such records without
Custodian's consent. Custodian is authorized, however, to reserve such a portion
of such assets as it may deem advisable for payment of all its fees,
compensation, costs, and expenses, or for payment of any other liabilities
constituting a charge on or against Custodian, with any balance of such reserve
remaining after the payment of all such items to be paid over to the Successor
Custodian.
(b) If within thirty (30) days after Custodian's resignation or removal or
such longer time as Custodian may agree to, Depositor has not appointed a
Successor Custodian which has accepted such appointment, Custodian shall
terminate the custodial account pursuant to Article IX, para. 11, unless within
that time the distributor referred to in Article IX, para. 9(a) appoints such
Successor and gives written notice thereof to Depositor and Custodian.
(c) Custodian shall not be liable for the acts or omissions of such
Successor.
(d) The Custodian, and every Successor Custodian appointed to serve under
this Agreement, must be a bank as defined in Code section 408(n) or such other
person who qualifies to serve in the manner prescribed by Code section 408(a)(2)
and satisfies the Depositor, distributor, or Custodian, upon request, as to such
qualification.
(e) After Custodian has transferred the custodian account assets (including
any reserve balance as contemplated above) to the Successor Custodian, Custodian
shall be relieved of all further liability with respect to this Agreement, the
custodial account, and the assets thereof.
11. Termination of Account
(a) Custodian shall terminate the custodial account if, within the time
specified in Article IX, para. 10(b), after Custodian's resignation or removal,
neither Depositor nor the distributor has appointed a Successor Custodian which
has accepted such appointment. Termination of the custodial account shall be
effected by distributing all assets thereof in a lump sum in cash or in kind to
Depositor subject to Custodian's right to reserve funds as provided in Article
IX, para. 10(a)
<PAGE>
(b) Upon termination of the custodial account, this Agreement shall
terminate and have no further force and effect, and Custodian shall be relieved
from all further liability with respect to this Agreement, the custodial
account, and all assets thereof so distributed.
12. Liquidation of Account
(a) Notwithstanding anything contained in this Agreement to the contrary,
Scudder Fund Distributors, Inc. shall have the right to direct Custodian, by
written order to Custodian, to liquidate the custodial account if the value of
the account at the time of such written order is less than a minimum value
established on a non-discriminatory basis from time to time by Scudder Fund
Distributors, Inc., and upon receipt of such written order (which Scudder Fund
Distributors, Inc. shall have no duty to make and which, if made, may be made
with respect to any specified accounts as to which it may be made applicable
singly or to all accounts as to which it may be made applicable as a group),
Custodian shall forthwith proceed to liquidate the custodial account by
distributing all assets thereof in a lump sum in cash or in kind to Depositor,
subject to Custodian's right to reserve such a portion of such assets as it may
deem advisable for payment of all its fees, compensation, costs, and expenses,
or for payment of any other liabilities constituting a charge on or against the
assets of the custodial account or on or against Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over to
Depositor.
(b) Neither Scudder Fund Distributors, Inc. nor Custodian shall be liable
for, or in any way responsible with respect to, any penalty or any other loss
incurred by any person with respect to a distribution made hereunder and upon
liquidation of the custodial account as aforesaid, this Agreement shall
terminate and have no further force and effect, and Custodian and Scudder Fund
Distributors, Inc. shall be relieved from all further liability with respect to
this Agreement, the custodial account, and all assets thereof so distributed.
13. Miscellaneous
(a) References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time hereafter, including
successors to such sections.
(b) Except where otherwise specifically required in this Agreement, any
notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on Custodian's records.
(c) This agreement is accepted by Custodian in, and shall be construed and
administered in accordance with the laws of the Commonwealth of Massachusetts.
This Agreement is intended to qualify under section 408 of the Code as an
Individual Retirement Account and for the Retirement Savings deduction under
section 219 of the Code, and if any provision hereof is subject to more than one
interpretation or any term used herein is subject to more than one construction,
such ambiguity shall be resolved in favor of that interpretation or construction
which is consistent with that intent. However, neither the Custodian, nor any
Mutual Fund (or company associated therewith) shall be responsible for whether
or not such intentions are achieved through use of this Agreement, and Depositor
is referred to Depositor's attorney for any such assurances.
CUSTODIAN
DISCLOSURE STATEMENT
The following information is being provided to you by the State Street Bank
and Trust Company, the Custodian of the Scudder Individual Retirement Accounts,
in accordance with the requirements of the Internal Revenue Service. Please read
it together with the Individual Retirement Plan and the prospectus for the
shares of each Mutual Fund selected by you for the investment of your
contributions to that plan, copies of which you should have already received
from the distributor of those shares. The provisions of the Plan and prospectus
must prevail over this statement in any instance where the statement is
incomplete or appears to conflict.
The Employee Retirement Income Security Act of 1974 has provided an
entirely new program that may enable you to plan for your retirement by creating
a "retirement plan" with federally tax-deductible dollars. This federal income
tax deduction is available even if you do not otherwise itemize your deductions.
In addition, any earnings on the assets held in your individual retirement
account will not be subject to federal income tax until you actually begin to
receive a distribution from your account. The state income tax treatment of your
account may differ, and details should be available from your state taxing
authority or your own tax adviser.
As with most other laws that provide special tax treatment, there are
certain restrictions and limitations involved with respect to your individual
retirement account:
1. Only a limited amount of savings can qualify for the preferential tax
treatment -- 100% of your compensation or earning from self-employment
up to an annual maximum of $2,000.
Under certain conditions, an individual and his or her unemployed
spouse, or each employed spouse with less that $250 of earnings, may
each open an IRA.
Annual deductions for contributions are allowable if a joint income
tax return is filed and the deductions are limited to the lesser of
100% of the employed spouse's wages or $2,250, and the amount
contributed to either individual retirement account may not exceed
$2,000.
In the case of an individual retirement account which meets the
requirements of a so-called Simplified Employee Pension Plan, an
employer may contribute a deductible amount equal to 15% of the
employee's compensation up to an annual maximum of $30,000. The amount
of such contribution is includible in the employee's income as wages
(for federal income tax purposes) but is deductible by him or her. The
employee is also allowed an annual deduction for his or her own
individual retirement account contributions limited to the lesser of
100% of the employee's compensation or $2,000.
There is a 6% penalty tax on any so-called "excess contribution" if
you make one, that is, on the portion of a contribution made to your
IRA in excess of the amount which can be currently deducted. Some
examples of when this can occur are when you make a contribution to
your IRA in excess of the allowable deduction limitations, or you
contribute during or after the calendar year in which you reach
70 1/2. The 6% penalty tax on any "excess contribution" also attaches
for each following year until the excess is withdrawn or used up. If
an excess contribution plus earnings on it is withdrawn before the
time for filing the individual's tax return for the year of the
contribution (including extensions), there will be no 6% penalty tax.
The amount with-
<PAGE>
drawn will not be considered a premature distribution nor taxed as
ordinary income, except the earnings withdrawn will be included in the
income of the taxpayer. In addition, in certain cases an excess
contribution may be withdrawn after the time for filing the
individual's tax return without resulting in taxable income to the
individual. Also, excess contributions for one year may be carried
forward and deducted in the next year.
2. Contributions must be made to a Trust or Custodial Account in which
the Trustee/Custodian is either a bank or such other person who has
been approved by the Secretary of the Treasury. No part of your
contribution may be invested in life insurance or be commingled with
other property, except in a common trust fund or common investment
fund.
3. No deduction is allowed for (a) contributions other than in cash; (b)
contributions (other than those by an employer to a Simplified
Employee Pension Plan) made during your calendar year in which you
attain age 70 1/2 or thereafter; or (c) for any amount you contribute
which was a distribution from another retirement plan ("rollover"
contribution). However, the limitations in paragraph 1 do not apply to
such rollovers.
4. Individuals receiving compensation may establish their own individual
retirement accounts even if they are already covered under
tax-qualified plans (including Keogh plans for self-employed
individuals), government plans, or certain annuities.
5. Your interest in the account must be nonforfeitable at all times.
6. An individual is allowed to transfer, or rollover, such individual's
investment in one type of individual retirement plan to another
without any tax liability. Also, under certain conditions, an
individual may roll over (tax-free) a distribution received from a
qualified plan or a tax-sheltered annuity. However, strict limitations
apply to such rollover, and you should seek competent tax advice in
order to comply with all the rules governing rollovers.
7. Since the purpose of the IRA savings plan is to accumulate funds for
retirement, your receipt or use of any portion of this account (for
example, as collateral for a loan) before you attain age 59 1/2 would
be considered as an early distribution unless the distribution is a
result of death or disability. The amount of an early distribution
would be includable in your gross income and could also subject you to
a penalty tax equal to 10% of the distribution unless you transfer it
to another IRA under circumstances whereby it qualifies as a rollover.
8. If you or your beneficiary were to engage in any prohibited
transaction (such as any sale, exchange or leasing of any property
between you and the account, or any interference with the independent
status of the account) then the account would lose its exemption from
tax and be treated as having been distributed to you. The value of the
entire account would be includable in your gross income, and if you
were then under age 59 1/2, you would also be subject to the 10%
penalty tax on early distributions.
9. Your entire interest in your account must be distributed, or begin to
be distributed, to you no later than the first April 1st of the year
following the later of the year in which you attain age 70 1/2.
Distribution may be made at one in a lump sum or it may be made in
installments. However, installment payments cannot be scheduled to be
made over a period which extends beyond your life expectancy (as
determined annually) or the joint life and last survivor expectancy of
you and the beneficiary you designate (as determined annually, if that
beneficiary is you spouse). However, where the beneficiary is other
than the spouse, the value of the expected distributions to you,
determined at the time distributions commence, must equal at least 50%
of the total value at that time. If the amount distributed during a
calendar year is less than the minimum amount required to be
distributed, the recipient would be subject to a penalty tax equal to
50% of the difference between the amount required to be distributed
and the amount actually distributed. If you die before the entire
interest is distributed to you, but after you have begun to receive
distributions, your entire account must be distributed to your
beneficiary over a period no longer than the last determined life
expectancy or life and last survivor expectancy over which your
account was being distributed prior to your death. If you die before
the entire interest has begun to be distributed to you and your spouse
is your beneficiary, distributions to your spouse must either (a) be
completed within 5 years of your death or (b) commence before the
later of one year after your death or the date on which you would have
attained age 70 1/2, and continue over his or her life or a period not
exceeding his or her life expectancy. If you die before the entire
interest has begun to be distributed to you and your spouse is not
your beneficiary, distributions to your beneficiary must either (a) be
completed within five years of your death and continue over your
beneficiary's life or a period not exceeding his or her life
expectancy.
10. Amounts distributed to you are includable in your gross income when
you receive them and are taxable as ordinary income without any
special lump-sum distribution privileges. However, normal four-year
income averaging may be available.
11. You must file Treasury Form 5329 with the Internal Revenue Service for
each calendar year during which there is an excess contribution,
premature distribution, or during which there is an insufficient
distribution as referred to in paragraph 9.
12. The Individual Retirement Account Plan has been approved as to form by
the Internal Revenue Service. This approval is a determination only as
to the form of the account and does not represent a determination of
the merits of such account.
13. Information about the shares of each mutual fund available for
investment by your individual retirement account must be furnished to
you in the form of a prospectus governed by the rules of the
Securities and Exchange Commission. Please refer to the prospectus for
detailed information concerning your mutual fund. Growth in the value
of your account cannot be guaranteed or projected. However, the income
and operating expenses of a mutual fund will affect the value of its
shares, and hence the value of your account, as does any increase or
decrease in the value of the assets of the mutual fund. The fund's
prospectus contains information regarding current income and expenses
of your mutual fund.
Fees and other expenses of maintaining your account may be charged to
you or your account. The Custodian's fee schedule is referred to in
Article IX of the Plan document and is distributed to you with it.
<PAGE>
14. The information contained in this Disclosure Statement and the terms
of the related Custodial Account agreement are applicable to
Individual Retirement Accounts set up, and contributions made, with
respect to the 1986 calendar year. Effective January 1, 1987, the law
with regard to the establishment, maintenance and termination of
Individual Retirement Accounts has been substantially modified. For
example, a married individual will only be able to make a fully
deductible contribution to his or her account (an amount equal to the
lesser of his or her compensation or earnings from self-employment, or
$2,000) if the married couple files a joint Federal income tax return
and they satisfy either of the following standards: (a) their combined
adjusted gross income is less than $40,000 or (b) neither spouse
actively participates in an employer-sponsored retirement plan. A
single individual will be subject to similar rules except that the
adjusted gross income limit is $25,000. Married couples and single
individuals who do not satisfy the active-participant standard and
whose adjusted gross incomes exceed the applicable limit by not more
than $10,000 will be eligible to make limited deductible Individual
Retirement Account contributions. Generally speaking, for every $5 by
which a couple's or single individual's adjusted gross income exceeds
the applicable limit, the $2,000 cap on the amount of deductible
contributions is reduced by $1. Individuals who are not eligible to
make fully deductible Retirement Account contributions will be
permitted to make nondeductible contributions equal to the difference
between (a) the lesser of his or her compensation or earnings from
self-employment, or $2,000, minus (b) the maximum amount the
individual is permitted to contribute on a deductible basis. Earnings
on both deductible and non-deductible contributions will accumulate on
a tax-deferred basis.
If you have not received this Disclosure Statement at least seven calendar
days before the establishment of your Individual Retirement Account, you have
the right to revoke your Individual Retirement Account during the seven calendar
day period following the establishment of it. In order to so revoke your
Individual Retirement Account, you must do so in writing and you must mail or
deliver your revocation to Scudder Fund Distributors, Inc., 175 Federal Street,
Retirement Plan Services, Boston, MA 02110. If your revocation is mailed, the
date of the postmark (or the date of certification or registration if sent by
certified or registered mail) will be considered your revocation date. If you so
revoke your individual retirement account during the seven-day period, the
entire amount of your account, without any adjustments (for items such as
administrative expenses, fees, or fluctuation in market value) will be returned
to you.
You may obtain further information from any district office of the Internal
Revenue Service.
Scudder
[Logo} IRA Portfolio
12-8-28 (c) Scudder Fund Distributors, Inc.
<PAGE>
SCUDDER IRA-SEP
HOW TO ADOPT THE IRS MODEL SEP (FORM 5305-SEP)
EMPLOYERS
1. Complete Form 5305-SEP
a. Fill in employer name.
b. Fill in eligibility requirements.
c. Sign and date the form and retain the original for your files.
Send a copy of the completed form to:
The Scudder Funds
175 Federal Street
Boston, MA 02110
Attn: L. Thompson
Do not send a copy to the IRS.
2. Provide each eligible employee with a copy of the completed Form
5305-SEP (including the agreement form, instructions, and questions
and answers).
3. Contact Scudder for employee IRA kits. Call toll-free at
1-800-225-2470.
4. Make timely contributions to your employees' IRAs.
IMPORTANT
Your adoption of the IRS Model SEP will not be effective until you have
given all eligible employees copies of the completed Form 5305-SEP and all
eligible employees have adopted their own IRAs.
EMPLOYEES
1. Eligible employees must adopt their own Individual Retirement
Accounts. Employees can obtain information about the Scudder IRA from
you, the employer, or by calling Scudder's toll-free number listed
above.
2. Eligible employees should notify you when they open their IRAs and
give you instructions for depositing SEP contributions to their
accounts.
35-3-97
<PAGE>
Form 5305-SEP OMB No. 1545-0499
(Rev January 1987) Expires 10-31-88
Department of the Treasury -----------------
Internal Revenue Service Do NOT File with
Internal Revenue
Service
Simplified Employee Pension-Individual
Retirement Accounts Contribution Agreement
(Under Section 408(k) of the Internal Revenue Code)
- --------------------------------------------------------------------------------
(Business name--employer) makes the following agreement under the terms of
section 408(k) of the Internal Revenue Code and the instructions to this form.
The employer agrees to provide for discretionary contribution in each
calendar year to the Individual Retirement Accounts or Individual Retirement
Annuities (IRA's) of all eligible employees who are at least _____ years old
(not over 21 years old)(see instruction "Who May Participate") and worked in at
least ____ years (not over 3 years) of the immediately preceding 5 years (see
instruction "Who May Participate"). This |_| includes |_| does not include
employees covered under a collective bargaining agreement and |_| includes |_|
does not include employees whose total compensation during the year is less than
$300.
The employer agrees that contributions made on behalf of each eligible
employee will:
o Be made only on the first $200,000 of compensation (as adjusted per Code
section 408(k)(3)(C)).
o Be made in an amount that is the same percentage of total compensation for
every employee.
o Be limited to the smaller of $30,000 (or if greater, 1/4 of the dollar
limitation in effect under section 415(b)(1)(A)) or 15% of compensation.
o Be paid to the employee's IRA trustee, custodian, or insurance company (for
an annuity contract).
___________________________________ ____________________
Signature of employer Date
___________________________________
By
- --------------------------------------------------------------------------------
Instructions for the Employer
(Section references are to the Internal Revenue Code, unless otherwise noted.)
Paperwork Reduction Act Notice. -- The Paperwork Reduction Act of 1980 says we
must tell you why we are collecting this information, how it is to be used, and
whether you have to give it to us. The information is used to determine if you
are entitled to a deduction for contributions made to a SEP. Your completing
this form is only required if you want to establish a Model SEP.
Purpose of Form. -- Form 5305-SEP (Model SEP) is used by an employer to make an
agreement to provide benefits to all employees under a Simplified Employee
Pension (SEP) plan described in section 408(k). This form is NOT to be filed
with IRS.
What is a SEP Plan? -- A SEP provides an employer with a simplified way to make
contributions toward an employee's retirement income. Under a SEP, the employer
is permitted to contribute a certain amount (see below) to an employee's
Individual Retirement Account or Individual Retirement Annuity (IRA's). The
employer makes contributions directly to an IRA set up by an employee with a
bank, insurance company, or other qualified financial institution. When using
this form to establish a SEP, the IRA must be a model IRA established on an IRS
form or a master or prototype IRA for which IRS has issued a favorable opinion
letter. Making the agreement on Form 5305-SEP does not establish an employer IRA
as described under section 408(c).
This form may not be used by an employer who:
o Currently maintains any other qualified retirement plan.
o Has maintained in the past a defined benefit plan, even if now terminated.
o Has any eligible employees for whom IRA's have not been established.
o Uses the services of leased employees (as described in section 414(n)).
o Is a member of an affiliated service group (as described in section
414(m)), a controlled group of corporations (as described in section
414(b)), or trades or businesses under common control (as described in
section 414(c)), UNLESS all eligible employees of all the members of such
groups, trades, or businesses, participate under the SEP.
o This form should only be used if the employer will pay the cost of the SEP
contributions. This form is not suitable for a SEP that provides for
contributions at the election of the employee whether or not made pursuant
to a salary reduction agreement.
Who May Participate. -- Any employee who is at least 21 years old and has
performed "service" for you in at least 3 years of the immediately preceding 5
years must be permitted to participate in the SEP. However, you may establish
less restrictive eligibility requirements if you choose. "Service" is any work
performed for you for any period of time, however short. Further, if you are a
member of an affiliated service group, a controlled group of corporations, or
trades or businesses under common control, "service" includes any work performed
for any period of time for any other member of such group, trades, or
businesses. Generally, to make the agreement, all eligible employees (including
all eligible employees, if any, of other members of an affiliated service group,
a controlled group of corporations, or trades or businesses under common
control) must participate in the plan. However, employees covered under a
collective bargaining agreement and certain nonresident aliens may be excluded
if section 410(b)(3)(A) or 410(b)(3)(C) applies to them. Employees whose total
compensation for the year is less than $300 may be excluded.
Amount of Contributions. -- You are not required to make any contributions to an
employee's SEP-IRA in a given year. However, if you do make contributions, you
must make them to the IRA's of all eligible employees, whether or not they are
still employed at the time contributions are made. The contributions made must
be the same percentage of each employee's total compensation (up to a maximum
compensation base of $200,000 as adjusted per section 408(k)(3)(C) for cost of
living changes). The contributions you make in a year for any one employee may
not be more than the smaller of $30,000 or 15% of that employee's total
compensation (figured without considering the SEP-IRA contributions).
For this purpose, compensation includes:
o Amounts received for personal services actually performed (see section
1.219-1(c) of the Income Tax Regulations); and
o Earned income defined under section 401(c)(2).
In making contributions, you may not discriminate in favor of any employee
who is highly compensated.
Under this form you may not integrate your SEP contributions with, or
offset them by, contributions made under the Federal Insurance Contributors Act
(FICA).
Currently, employers who have established a SEP using this agreement and
have provided each participant with a copy of this form, including the questions
and answers, are not required to file the annual information returns, Forms
5500, 5500-C, 5500-R, or 5500EZ for the SEP.
<PAGE>
Form 5305-SEP (Rev 1-87) Page 2
- --------------------------------------------------------------------------------
Deducting Contributions. -- You may deduct all contributions to a SEP subject to
the limitations of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your taxable year with or
within which the calendar year ends. Contributions made for a particular taxable
year and contributed by the due date of your income tax return (including
extensions) shall be deemed made in that taxable year.
Making the Agreement. -- This agreement is considered made when (1) IRA's have
been established for all of your eligible employees, (2) your have completed al
blanks on the agreement form without modification, and (3) your have given all
your eligible employees copies of the agreement form, instructions, and
questions and answers.
Keep the agreement form with your records; do not file it with IRS.
Information for the Employee
The information provided explains what a Simplified Employee Pension plan is,
how contributions are made, and how to treat your employer's contributions for
tax purposes.
Please read the questions and answers carefully. For more specific
information, also see the agreement form and instructions to your employer on
this form.
Questions and Answers
1. Q. What is a Simplified Employee Pension, or SEP?
A. A SEP is a retirement income arrangement under which your employer may
contribute any amount each year up to the smaller of $30,000 or 15% of your
compensation into your own Individual Retirement Account/Annuity (IRA).
Your employer will provide you with a copy of the agreement containing
participation requirements and a description of the basis upon which employer
contributions may be made to your IRA.
All amounts contributed to your IRA by your employer belong to you, even
after you separate from service with that employer.
The $30,000 limitation referred to above may be increased by 1/4 of the
dollar limitation in effect under section 415(b)(1)(A).
2. Q. Must my employer contribute to my IRA under the SEP?
A. Whether or not your employer makes a contribution to the SEP is entirely
within the employer's discretion. If a contribution is made under the SEP, it
must be allocated to all the eligible employees according to the SEP agreement.
The Model SEP specifies that the contribution on behalf of each eligible
employee will be the same percentage of compensation (excluding compensation
higher than $200,000) for all employees.
3. Q. How much may my employer contribute to my SEP-IRA in any year?
A. Under the Model SEP (Form 5305-SEP) that your employer has adopted, your
employer will determine the amount of contribution to be made to your IRA each
year. However, the contribution for any year is limited to the smaller of
$30,000 or 15% of your compensation for that year. The compensation used to
determine this limit does not include any amount which is contributed by your
employer to your IRA under the SEP. The agreement does not require an employer
to maintain a particular level of contributions. It is possible that for a given
year no employer contribution will be made on an employee's behalf.
Also see Question 5.
4. Q. How do I treat my employer's SEP contributions for my taxes?
A. The amount your employer contributes for years beginning after 1986 is
excludable from your gross income subject to certain limitations including the
lesser of $30,000 or 15% of compensation mentioned in 1.a. above and is not
includable as taxable wages on your Form W-2.
5. Q. May I also contribute to my IRA if I am a participant in a SEP?
A. Yes. You may still contribute the lesser of $2,000 or 100% of your
compensation to an IRA. However, the amount which is deductible is subject to
various limitations.
Also see Question 11.
6. Q. Are there any restrictions on the IRA I select to deposit my SEP
contributions in?
A. Under the Model SEP that is approved by IRS, contributions must be made
to either a Model IRA which is executed on an IRS form or a master or prototype
IRA for which IRS has issued a favorable opinion letter.
7. Q. What if I don't want a SEP-IRA?
A. Your employer may require that you become a participant in such an
arrangement as a condition of employment. However, if the employer does not
require all eligible employees to become participants and an eligible employee
elects not to participate, all other employees of the same employer may be
prohibited from entering into a SEP-IRA arrangement with that employer. If one
or more eligible employees do not participate and the employer attempts to
establish a SEP-IRA agreement with the remaining employees, the resulting
arrangement may result in adverse tax consequences to the participating
employees.
8. Q. Can I move funds from my SEP-IRA to another tax-sheltered IRA?
A. Yes, it is permissible for you to withdraw, or receive, funds from your
SEP-IRA, and no more than 60 days later, place such funds in another IRA, or
SEP-IRA. This is called a "rollover" and may not be done without penalty more
frequently than at one-year intervals. However, there are no restrictions on the
number of times you may make "transfers" if you arrange to have such funds
transferred between the trustees, so that you never have possession.
9. Q. What happens if I withdraw my employer's contribution from my IRA?
A. If you don't want to leave the employer's contribution in your IRA, you
may withdraw it at any time, but any amount withdrawn is includable in you
income. Also, if withdrawals occur before attainment of age 59 1/2, and not on
account of death or disability, you may be subject to a penalty tax.
10. Q. May I participate in a SEP even though I'm covered by another plan?
A. An employer may not adopt this IRS Model SEP (Form 5305-SEP) if the
employer maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. However, if you work for several employers you
may be covered by a SEP of one employer and a different SEP or pension or
profit-sharing plan of another employer.
Also see Questions 11 and 12.
11. Q. What happens if too much is contributed to my SEP-IRA in one year?
A. Any contribution that is more than the yearly limitations may be
withdrawn without penalty by the due date (plus extensions) for filing your tax
return (normally April 15th) but is includable in your gross income. Excess
contributions left in your SEP-IRA account after that time are subject to a 6%
excise tax. Withdrawals of those contributions may be taxed as premature
withdrawals.
Also see Question 10.
12. Q. Do I need to file any additional forms with IRS because I
participate in a SEP?
A. No.
13. Q. Is my employer required to provide me with information about
SEP-IRA's and the SEP agreement?
A. Yes, your employer must provide you with a copy of the executed SEP
agreement (Form 5305-SEP), these Questions and Answers, and provide a statement
each year showing any contribution to your IRA.
Also see Question 4.
14. Q. Is the financial institution where I establish my IRA also required
to provide me with information?
A. Yes, it must provide you with a disclosure statement which contains the
following items of information in plain, nontechnical language
(1) the statutory requirements which relate to your IRA;
(2) the tax consequences which follow the exercise of various options and
what those options are;
(3) participation eligibility rules and rules on the deductiblity and
nondeductibility of retirement savings;
(4) the circumstances and procedures under which you may revoke your IRA,
including the name, address, and telephone number of the person designated to
receive notice of revocation (this explanation must be prominently displayed at
the beginning of the disclosure statement);
(5) explanations of when penalties may be assessed against you because of
specified prohibited or penalized activities concerning your IRA; and
(6) financial disclosure information which
(a) either projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of computing and
allocating annual earnings and charges which may be assessed;
(b) describes whether, and for what period, the growth projections for
the plan are guaranteed, or a statement of the earnings rate and terms on which
the projection is based;
(c) states the sales commission to be charged in each year expressed
as a percentage of $1,000, and
(d) states the proportional amount of any nondeductible life insurance
which ma be a feature of your IRA.
See Publication 590, Individual Retirement Arrangements (IRA's), available
at most IRS offices for a more complete explanation of the disclosure
requirements.
In addition to this disclosure statement, the financial institution is
required to provide you with a financial statement each year. It may be
necessary to retain and refer to statements for more than one year in order to
evaluate the investment performance of the IRA and in order that you will know
how to report IRA distributions for tax purposes.
(c) U.S. Government Printing Offices: 1987-201-993/60175
<PAGE>
Scudder IRA Application
&
IRA Transfer Request
for ...
- --------------------------------------------
- --------------------------------------------
Return these forms to:
Scudder Fund Distributors, Inc.
P.O. Box 2291
Boston, MA 02107-2291
It's easy to open a Scudder IRA. Just complete the Scudder IRA Application and
return it in the enclosed postage-paid envelope today.
A Few Tips
o Please make check(s) payable to "Scudder Funds."
o You have two forms--an IRA Application and an IRA Transfer Request. Please
do not separate them, even if you use only one.
o Please fill out each section carefully, preferably in print or type. This
helps us avoid any delays in processing your Application.
o Please be sure to sign your name exactly as it appears in your Account
Registration (Part 1).
o If you are transferring IRA assets from another IRA sponsor, please fill
out the attached IRA Transfer Request form and return it along with your
Application and a check for any investment you may be making at this time.
If you already have a Scudder IRA, complete only the IRA Transfer Request
form.
Please return this form today. It will only take a few minutes and will let
us put your money to work for you that much sooner!
<PAGE>
Scudder
[Logo] IRA Portfolio Application
1. IRA Account Registration
____________________________________ _______________________________
Name Social Security Number
____________________________________ (___)__________________________
Address Daytime Phone
_______________________ _____ ______ ____/____/____
City State Zip Date of Birth
2. Type of IRA & Fund Choices
|_| New IRA. $2000 maximum per year. Contribution for tax year 198__.
|_| Transfer IRA. IRA assets transferred directly from your present custodian
to Scudder. If the transfer establishes your first Scudder IRA, please
complete this Application and an IRA Transfer Request making sure to
indicate fund(s) choices on both forms. If transferring to an existing
Scudder IRA, complete only the IRA Transfer Request. A separate Transfer
Request must be completed for each IRA being transferred.
|_| Rollover IRA. (check one)
|_| Assets distributed from an employer-sponsored retirement plan.
or
|_| 60-day Rollover. You have taken receipt of your IRA assets from
another institution and are enclosing a check for part or all of these
funds.
The minimum initial investment is $240.
If you choose more than one fund, the minimum initial investment is $500 for
each fund.
$ Amount
Money Market Funds
_______________ Cash Investment Trust
_______________ Government Money Fund
Income Funds
_______________ GNMA Fund
_______________ Income Fund
Target Fund (multi-Portfolios)
_______________ U.S. Government 1990
_______________ General 19_____________
Maturity year
U.S. Gov't. Zero Coupon
_______________ Target Fund __________
Maturity year
Growth & Income Funds
_______________ Equity Income Fund
_______________ Growth and Income Fund
Growth Funds
_______________ Japan Fund
_______________ Capital Growth Fund
_______________ Development Fund
_______________ Global Fund
_______________ International Fund
$ Total
===============
3. Designation of Beneficiary & Signatures
(Please be sure to sign your name exactly as it appears in Part 1.)
The following person(s) are to receive the balance of my IRA assets upon my
death. This designation revokes any previous one I may have filed with the
Custodian. (Provide name(s), address(es), and Social Security Number(s).)
______________________________________
______________________________________
______________________________________
Any resident of a Community Property State who designates a spouse as primary
beneficiary and others as contingent beneficiaries, or designates more than half
the distribution to beneficiaries other than a spouse, must obtain the spouse's
consent.
Spouse's
consent X________________________________ _________________
Signature Date
I hereby designate the beneficiaries listed and adopt with the custodian this
Scudder Individual Retirement Account agreement which uses the language of IRS
Form 5305-A. Once the Custodian acknowledges receipt of this form by mail, it
shall be deemed accepted, and therefore, effective as of the date I signed it. I
have received and read the Scudder IRA plan and the prospectus(es) of the
fund(s) selected.
X /s/ G. Reeves
- -------------------------------------------------
State Street Bank and Trust Company, Custodian
X_____________________________________ ____________________
Your Signature (Exactly as in Part 1) Date
<PAGE>
Scudder
[Logo] IRA Portfolio
- ----------------------------------------
Extra Application
- ----------------------------------------
For your spouse or a friend
1. IRA Account Registration
____________________________________ _______________________________
Name Social Security Number
____________________________________ (___)__________________________
Address Daytime Phone
_______________________ _____ ______ ____/____/____
City State Zip Date of Birth
2. Type of IRA & Fund Choices
|_| New IRA. $2000 maximum per year. Contribution for tax year 198__.
|_| Transfer IRA. IRA assets transferred directly from your present custodian
to Scudder. If the transfer establishes your first Scudder IRA, please
complete this Application and an IRA Transfer Request making sure to
indicate fund(s) choices on both forms. If transferring to an existing
Scudder IRA, complete only the IRA Transfer Request. A separate Transfer
Request must be completed for each IRA being transferred.
|_| Rollover IRA. (check one)
|_| Assets distributed from an employer-sponsored retirement plan.
or
|_| 60-day Rollover. You have taken receipt of your IRA assets from
another institution and are enclosing a check for part or all of these
funds.
The minimum initial investment is $240.
If you choose more than one fund, the minimum initial investment is $500 for
each fund.
$ Amount
Money Market Funds
_______________ Cash Investment Trust
_______________ Government Money Fund
Income Funds
_______________ GNMA Fund
_______________ Income Fund
Target Fund (multi-Portfolios)
_______________ U.S. Government 1990
_______________ General 19_____________
Maturity year
U.S. Gov't. Zero Coupon
_______________ Target Fund __________
Maturity year
Growth & Income Funds
_______________ Equity Income Fund
_______________ Growth and Income Fund
Growth Funds
_______________ Japan Fund
_______________ Capital Growth Fund
_______________ Development Fund
_______________ Global Fund
_______________ International Fund
$ Total
===============
3. Designation of Beneficiary & Signatures
(Please be sure to sign your name exactly as it appears in Part 1.)
The following person(s) are to receive the balance of my IRA assets upon my
death. This designation revokes any previous one I may have filed with the
Custodian. (Provide name(s), address(es), and Social Security Number(s).)
______________________________________
______________________________________
______________________________________
Any resident of a Community Property State who designates a spouse as primary
beneficiary and others as contingent beneficiaries, or designates more than half
the distribution to beneficiaries other than a spouse, must obtain the spouse's
consent.
Spouse's
consent X________________________________ _________________
Signature Date
I hereby designate the beneficiaries listed and adopt with the custodian this
Scudder Individual Retirement Account agreement which uses the language of IRS
Form 5305-A. Once the Custodian acknowledges receipt of this form by mail, it
shall be deemed accepted, and therefore, effective as of the date I signed it. I
have received and read the Scudder IRA plan and the prospectus(es) of the
fund(s) selected.
X /s/ G. Reeves
- -------------------------------------------------
State Street Bank and Trust Company, Custodian
X_____________________________________ ____________________
Your Signature (Exactly as in Part 1) Date
RETURN THIS FORM IN THE POSTPAID ENVELOPE PROVIDED, OR MAIL TO:
SCUDDER FUNDS, P.O. BOX 291, BOSTON, MA 02107-2291.
<PAGE>
It's easy to open a Scudder IRA. Just complete the Scudder IRA Application and
return it in the enclosed postage-paid envelope today.
A Few Tips
o Please make check(s) payable to "Scudder Funds."
o You have two forms--an IRA Application and an IRA Transfer Request. Please
do not separate them, even if you use only one.
o Please fill out each section carefully, preferably in print or type. This
helps us avoid any delays in processing your Application.
o Please be sure to sign your name exactly as it appears in your Account
Registration (Part 1).
o If you are transferring IRA assets from another IRA sponsor, please fill
out the attached IRA Transfer Request form and return it along with your
Application and a check for any investment you may be making at this time.
If you already have a Scudder IRA, complete only the IRA Transfer Request
form.
Please return this form today. It will only take a few minutes and will let
us put your money to work for you that much sooner!
<PAGE>
Scudder [Logo] IRA Portfolio IRA Transfer Request
Complete this form if you wish to transfer the assets in your current IRA
directly to the Scudder IRA. If establishing a new Scudder IRA, complete the
Scudder IRA Application as well. Return this form in the postpaid envelope
provided. We will send you a notice confirming that we received this form, and
arrange to complete the transfer. The amount you transfer does not affect the
amount you can invest and deduct annually. If you wish to transfer assets held
in another type of plan, e.g. Keogh, profit-sharing, 403(b), etc., please call
us for the proper forms. This form is only for IRA transfers.
1. Name & Address
_________________________________ ______________________________
Name Social Security Number
_________________________________ (___)_________________________
Address Daytime Phone
_____________________ _____ _____ ______________________________
City State Zip
2. Instructions to Present Custodian
_________________________________
Name of Current Custodian/Trustee
_________________________________
Attention: (Person or department
handling transfers)
_________________________________
Address
_____________________ _____ _____
City State Zip
|_| Please transfer all of my IRA assets.
|_| Please transfer $________ of my IRA assets.
Other instructions (e.g., make transfer upon maturity)
______________________________________/___/_____
maturity date
_______________________________________
IRA Account Number (with this Custodian)
_______________________________________
Custodian's Phone Number
I request that the above-named Custodian or Trustee transfer my IRA assets as
cash to State Street Bank and Trust Company, Custodian of my Scudder IRA.
Please make the check payable to:
Scudder Funds, A/C (Investor name), Scudder IRA
Mail to: The Scudder Funds Retirement Plan Services,
P.O. Box 9647, Boston, MA 02205-9918
X______________________________________
Please ask your present custodian if a signature guarantee is required.
3. Fund Choices
If you invest in 2 or more funds,
the minimum initial investment is $500 for each fund.
$ Amount Money Market Funds Acct. #*
_______________ Cash Investment Trust _______________
_______________ Government Money Fund _______________
Growth & Income Funds
_______________ Equity Income Fund _______________
_______________ Growth and Income Fund _______________
Growth Funds
_______________ Japan Fund _______________
_______________ Capital Growth Fund _______________
_______________ Development Fund _______________
_______________ Global Fund _______________
_______________ International Fund _______________
Income Funds
_______________ GNMA Fund _______________
_______________ Income Fund _______________
Target Fund (multi-Portfolios)
_______________ U.S. Government 1990 _______________
_______________ General 19_____________ _______________
Maturity year
U.S. Gov't. Zero Coupon
_______________ Target Fund __________ _______________
Maturity year
Total $
===============
* When transferring to an existing Scudder IRA, please provide your Scudder
IRA account number.
================================================================================
For Scudder use only, do not complete.
Acceptance by Custodian
We agree to accept custodianship and the transfer described above for the
Scudder IRA Plan established on behalf of the above-named individual. State
Street Bank and Trust Company accepts its appointment as successor Custodian of
the above IRA account and requests the liquidation and transfer of assets as
indicated above.
Scudder Fund Distributions, Inc.
By _______________________ State Street Bank & Trust Company
Date _____________________ By /s/ G. Reeves
-----------------------------------------
<PAGE>
Scudder
[Logo] IRA Portfolio
Scudder Fund Distributors, Inc.
175 Federal Street, Boston, MA 02110
National Toll-Free Number
1-800-225-2470
<PAGE>
SIMPLIFIED EMPLOYEE PENSIONS (SEPs)
QUESTIONS AND ANSWERS
- --------------------------------------------------------------------------------
Q. 1. What is a SEP? A. A SEP is a simplified retirement
plan which allows employers to make
contributions directly to their
employees' own Individual
Retirement Accounts (IRAs).
Employers receive a tax deduction
for the full amount of each
contribution.
- --------------------------------------------------------------------------------
Advantages of a SEP
Q. 2. What are the advantages of a SEP? A. The SEP has many advantages over
other types of retirement plans. An
employer who adopts a SEP will only
have to comply with minimal
reporting and disclosure
requirements. Because the SEP is a
"simplified" plan, the IRS does not
require an annual 5500 report for
the plan, nor does it require a
Summary Plan Description, a Notice
to Interested Parties, or a Summary
Annual Report. The employer is only
required to give a copy of the SEP
agreement to each employee and to
notify participants each year of
the amount that was contributed on
their behalf to the SEP. The
employer, in most cases, does not
have to set up any accounts or
arrange for the recordkeeping of
the plan, because the contributions
are made to the employees' own
IRAs. The employees set up their
IRAs and decide how the money
should be invested.
Q. 3. How much can an employer contribute A. The employer can annually
to a SEP for each participant? contribute up to 15% of an
employee's compensation or $30,000,
whichever is less, for each
employee.
Q. 4. Can an employee also make IRA A. Yes. The employee can also make IRA
contributions to the same IRA? contributions of up to $2,000 to
the same account (starting in 1987,
an employee's IRA deduction may be
limited, see the enclosed Scudder
IRA Owners Manual for an
explanation).
<PAGE>
- --------------------------------------------------------------------------------
IRS Model SEP
Q. 5. What is the IRS Model SEP? A. It is a model SEP plan that the IRS
developed to meet all the
requirements of the Internal
Revenue Code. This model plan is
IRS Form 5305-SEP, Simplified
Employee Pension-Individual
Retirement Accounts Contribution
Agreement. If the employer elects
to use the IRS Model SEP, the
employer cannot make any changes to
this form.
Q. 6. Who may use the IRS model SEP? A. Any employer (including sole
proprietors, partnerships or
corporations) who does not
currently maintain another
qualified plan and who has never
maintained a defined benefit plan.
Q. 7. Does the employer have to file for A. No. If an employer uses the IRS
IRS approval of the plan? Model SEP, he or she is assured
that the plan meets all the
requirements of the Internal
Revenue Code, and would not have to
file for any additional ruling or
an opinion or determination letter
from the IRS.
Q. 8. Does the IRS Model SEP allow for A. No.
social security integration?
- --------------------------------------------------------------------------------
Establishing a SEP
Q. 9. When can a SEP be adopted? A. A SEP can be adopted for the 1986
calendar year any time on or before
April 15, 1987.
Q. 10. How is the SEP adopted? A. First, the employer must complete
the IRS Form 5305-SEP and
distribute copies of it to all
employees. Second, all eligible
employees must either have an IRA
or establish one.
Q. 11. Can SEPs be maintained on a A. For 1986, a SEP can only be
calendar or a taxable year? maintained on a calendar basis. For
1987 and later years, a SEP can be
maintained on either a calendar
year or on the employer's taxable
year.
<PAGE>
Q. 12. Must all employees be eligible to A. No. If the employer uses the IRS
participate? Model SEP, the following employees
may be excluded: (a) employees
under the age of 21, (b) employees
who have not worked for the
employer during at least 3 of the
last 5 calendar years, (c)
employees who were paid less than
$200 ($300, for taxable years after
1986), (d) employees covered by
certain collective bargaining
agreements, and (e) nonresident
aliens who receive no income from
the employer from a U.S. source.
Q. 13. Must all eligible employees have A. Yes, because the Model SEP is not
IRAs? established until all eligible
employees have IRAs. If an employee
cannot or will not open an IRA, the
employer can open an IRA on behalf
of that employee.
Q. 14. What information about the SEP is A. The employer must give each
the employer required to give an employee a copy of the IRS Model
employee? SEP Form once the employee becomes
eligible to participate. The
employer is also required to notify
the employee each year of the
amount contributed to that
employee's IRA for the year. If
contributions are made to an IRA in
the Scudder funds, participant
statements will confirm the amount
of the contribution and provide the
necessary notice.
Q. 15. How is the IRS notified of the SEP A. For 1986, the employer reports any
contribution and how does the SEP contributions on the employee's
employee treat the contribution? Form W-2 as wages. The employee can
then deduct the amount of the
contribution up to the lesser of
$30,000 or 15% of the employee's
compensation (not including the SEP
contribution). There is no Federal
income tax, F.I.C.A., or F.U.T.A.
withholding on contributions under
SEPs to IRAs on amounts meeting the
employee's deduction limit. If
contributions are made after the
end of the tax year, the employer
may have to issue an additional
Form W-2 showing only the amount of
the contribution. For 1987 and
later years, the amount of any SEP
contribution will be excluded from
the employee's compensation, but
must still be listed for
informational
<PAGE>
purposes on the Form W-2. If the
contributions are made after the
end of the tax year, the employer
will have to issue a revised Form
W-2 to employees.
- --------------------------------------------------------------------------------
Making Contributions to a SEP
Q. 16. Are employer contributions tax A. Yes, up to the lesser of $30,000 or
deductible? 15% of compensation, for each
employee.
Q. 17. What is the deadline for making A. For 1986, the contributions may be
contributions? made up until April 15, 1987. If
the employer's fiscal year is not
the calendar year, the
contributions may only be deducted
for the fiscal year in which the
calendar year ends. For example, if
an employer's fiscal year ends May
31, 1987, the employer may deduct
for that fiscal year only
contributions made for calendar
year 1986. For 1987, regardless of
whether the plan is a calendar year
or a fiscal year SEP, contributions
for the appropriate year can be
made up until the due date for the
employer's tax return, including
any extensions.
Q. 18. What is compensation? A. The IRS defines compensation as
wages, salaries, profession fees or
other amounts received for personal
services actually rendered by the
employee.
Q. 19. What is compensation for a A. For self-employed individuals,
self-employed individual? compensation is "earned income,"
which is the individual's net
profits less the amount of the
retirement plan contribution for
the individual. For example, assume
a self-employed individual has
$100,000 of net profits (bottom
line, Schedule C) after the
deduction for the SEP contributions
for the employees. A SEP
contribution of $13,043 (13.043% X
$100,000) may be made to the
self-employed individual's IRA.
This is equal to 15% of "earned
income" of $86,957 [15% ($100,000 -
$13,043)].
<PAGE>
Q. 20. May all of an employee's A. No, the employer's contributions
compensation be taken into may not be based on more than
account? $200,000 of an employee's
compensation.
Q. 21. How are employer contributions A. The employer contributions must
allocated? equal the same percentage of
compensation for each employee.
Q. 22. Is the employer required to make A. No, however, if the employer does
contributions to the SEP every make contributions, they must be
year? made for all employees eligible for
that year, whether or not the
employees are still employed when
the contributions are made.
Exhibit 14(d)
SCUDDER
403(b) Program
================================================================================
A tax-advantaged investment program using the Scudder family of pure no-load(TM)
mutual funds
For employees of educational and other tax-exempt organizations
Build retirement assets for tomorrow while saving on taxes today
1
<PAGE>
- ------------
CONTENTS
============
Highlights 3
- --------------------------------------------------------------------------------
How 403(b) Plans Benefit You 4
- --------------------------------------------------------------------------------
Why a Scudder 403(b)? 6
- --------------------------------------------------------------------------------
Questions and Answers 7
- --------------------------------------------------------------------------------
How to Use Your Scudder 403(b) 10
- --------------------------------------------------------------------------------
Sample Statement 11
- --------------------------------------------------------------------------------
Scudder Plan 12
- --------------------------------------------------------------------------------
Telephone Numbers and Addresses 15
- --------------------------------------------------------------------------------
Scudder Retirement Plan Specialists are ready to answer any questions you
may have about the Scudder 403(b) Program. Call toll-free 1-800-323-6105.
2
<PAGE>
---------------------------------------------
HIGHLIGHTS
================================================================================
A Unique Program
Employees of colleges, universities, public school systems, many hospitals and
other tax-exempt organizations have a unique opportunity to set aside money for
retirement by taking advantage of special tax benefits designed to encourage
early and active retirement planning. With a special mutual fund custodial
account, called a 403(b) plan, you and your employer can make tax- advantaged
investments today, for a more secure retirement tomorrow.
A 403(b) plan can help you build substantial retirement income and save on
current taxes because every dollar invested is sheltered from taxes while in
your account. You don't pay taxes while in your account. You don't pay taxes
until money is withdrawn, usually at retirement when you may be in a lower tax
bracket.
Scudder makes a good thing even better by offering the special advantages of
investing in a family of mutual funds--investment choice, flexibility, low cost,
and helpful service.
================================================================================
Scudder Funds for You
Scudder 403(d) plan investments are made in the Scudder family of mutual funds.
With the Scudder Funds you can design an investment strategy that suit your
objectives now and in the future. You get a wide range of investment choice,
including money market, income, and growth fund. And, to make your investment
even more flexible, you can exchange among funds with a free telephone call.
Such flexibility means you are never locked into an investment decision. As our
retirement investment needs or market conditions change, your 403(b) investment
strategy can change too.
And remember, you can use the Scudder Funds for your IRA as well.
================================================================================
Scudder Investment Specialists
Scudder, Stevens & Clark, investment adviser to the Scudder Funds, is one of the
largest and most experienced investment management firms in the country. Since
1919, investing has been our only business and service to the investor our only
product. Today we offer a broad range of mutual fund and investment management
products. Through our network of offices around the country, we provide
specialized investment services to employee benefit and retirement plans,
endowments and foundations, corporate case management funds, insurance plans,
individuals' portfolios and, of course, mutual funds.
As a convenience to investors, Scudder Funds Centers in Boston, Chicago,
Cincinnati, Cleveland, Houston, Los Angeles, New York, Portland, San Francisco,
and West Palm Beach offer the opportunity to conduct business in person with
professional Service Representatives. The Scudder offices, their addresses and
phone numbers are listed on the inside back cover.
3
<PAGE>
----------------------------
HOW 403(b) PLANS BENEFIT YOU
================================================================================
Retirement planning is becoming an increasingly important activity for Americans
young and old. This rising awareness of the need to build retirement savings to
help ensure a comfortable lifestyle when working years are over stems from many
factors. Concerns today about inflation, the future of Social Security benefits,
and the effect of taxes on income all play a part in causing people to plan for
retirement earlier and more actively. A 403(b) plan can help you do just that.
By making regular investments in our 403(b) program you can build retirement
income while reducing your current tax bill.
================================================================================
Current Tax Savings
There are many good reasons to make 403(b)investments. Few are so compelling as
the opportunity to reduce your taxes. Every dollar you invest in a 403(b) plan
through salary reduction is subtracted from your wages (as reported on your W-2
form) and is not included in calculating your federal income taxes. You pay no
federal income tax on this money until you start withdrawing it, normally at
retirement. Certain states also allow you to exclude 403(b) investments when
calculating state income taxes, so your tax savings may be even greater. The net
result is that you pay less in current taxes and the extra money goes to work
for you. Let's look at what this might mean for different 403(b) participants.
SINGLE TAXABLE TAXABLE
RETURN INCOME TAXES* JOINT RETURN INCOME TAXES*
- ------ ------- ------ ------------ ------- ------
No contribution $25,000 $ 4,680 No contribution $40,000 $ 7,333
to 403(b) plan to 403(b) plan
Salary reduction Salary reduction
for 403(b) for 403(b)
investment -$ 2,400 investment -$ 6,000
------- -------
After 403(b) plan After 403(b) plan
contribution $22,600 $ 4,008 contribution $34,000 $ 5,653
- --------------------------------------------------------------------------------
Savings on $ 622 Savings on $ 7,680
current taxes current taxes
* Federal income taxes calculated with the 28% marginal rate for 1988.
4
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
Tax Deferred Compounding
Another way you benefit with a 403(b) is that all earnings on your
investment--whether interest, dividends, or capital gains--are reinvested, and
grow free of taxes until you're ready to use them. The advantages of investing
for your retirement through a 403(b) instead of an investment program not
offering the benefits of current tax savings and tax-deferred compounding are
highlighted in the following example.
If you start your 403(b) at age 35 and invest $2,400 each year ($200 per month),
by age 65 you will accumulate $452,098 (before taxes) assuming a 10% annual
return. By comparison, if you take the same $200 per month, pay taxes at a 28%
rate, and invest in a taxable investment plan earning a 10% pre-tax (7.2%
after-tax) annual return, you will accumulate $253,845. Of course, 403(b)
accumulations are taxed when withdrawn, but normally at retirement when you may
be in a lower tax bracket. Even after paying taxes on your distributions, a
403(b) plan can offer you a significant advantage in reaching your retirement
goals.
500
400
$452,098 (before taxes)
With the 403(b) advantage
300
$ Dollars
(Thousands)
200
$253,845 (after taxes)
Without the 403(b) advantage
100
0
10 20 30
30 years
For illustration purposes, we've assumed an annual investment
return of 10% and a 25% tax rate. Your actual return and tax
bracket aren't likely to be constant from year to year and there
can be no guarantee that a specific rate or return will be
achieved.
5
<PAGE>
- --------------------------------------------------------------------------------
WHY A SCUDDER 403(b)?
================================================================================
A Family of No-Load Mutual Funds
The Scudder 403(b) program offers you a family of mutual funds for retirement
investments. This flexible, low-cost approach provides you with a comprehensive
but not overwhelming selection of investment options. You determine how your
Scudder 403(b) plan is invested, thereby tailoring an investment strategy to
meet your needs.
For more information on the Scudder Funds, please see the blue booklet entitled
"How to select the right Scudder funds for you."
================================================================================
Wide Choice
A Scudder 403(b) plan offers you choice among a broad range of mutual funds. You
may choose from money market, income, growth and income, and growth funds, which
allow you to emphasize stability, income, or growth--or any
combination--depending on your investment objective.
================================================================================
Flexibility
With the Scudder 403(b), you're not limited to one investment choice. Invest in
as many eligible funds as you wish. You may make investment changes in writing
or with a toll-free phone call. Changes may be made at any time unless your
employer's guidelines provide otherwise. So, for example, you can start with a
growth fund and easily switch to more conservative investments as you approach
retirement.
================================================================================
Low Cost
One of the most important advantages of the Scudder 403(b) plan is its low cost
to you. All Scudder funds are pure no-load (no sales, account, or redemption
charges). This means that 100 percent of your contribution is invested in the
fund or funds of your choice. You pay no separate charges for opening,
maintaining, or closing your plan account.
================================================================================
Account Records and Investment Information
As a Scudder fund shareholder, you receive account transaction statements
describing activity in your account, fund reports listing current interest to
investors.
================================================================================
Direct Access to Scudder
Scudder Retirement Plan Specialists are available to help you with your 403(b)
plan. Call them at our toll-free number listed on the inside back cover.
6
<PAGE>
- --------------------------------------------------------------------------------
QUESTIONS AND ANSWERS
================================================================================
Making Investments
Q. What is a 403(b) plan?
A. A 403(b) is a special, tax-advantaged, retirement savings account for people
working in public school systems, colleges, universities, many hospitals and
other tax-exempt organizations described in section 501(c)(3) of the Internal
Revenue Code. Sometimes called Tax-Sheltered Annuities (TSAs) or Tax-Deferred
Annuities (TDAs), 403(b) plans shelter income from current taxes, and investment
earnings grow free of taxes while in the plan. 403(b)s that invest in mutual
funds, technically called 403(b)(7) plans after the Internal Revenue Code
section that permits them, offer the special advantages of mutual funds--choice,
flexibility, professional management, and diversification.
Q. How do I make contributions?
A. Through a salary reduction agreement with your employer, you set aside a
portion of your pay in your plan account before income taxes are withheld.
Complete the enclosed 403(b) Application and then ask your employer about any
additional procedures for starting contributions to your plan.
Q. How do I know the maximum amount I can contribute to my 403(b) plan each
year?
A. Your employer will often tell you the amount of your maximum annual
contribution. If necessary, Scudder Fund Distributors can provide a
questionnaire for you to complete. Send it to us and we can compute the amount
for you. However, the final responsibility for the accuracy of the contribution
limit is yours.
Q. May I choose any fund I wish for my initial contribution?
A. Yes. You are not limited to a specific Scudder fund for your initial
contribution. And, you may maintain investments in as many of the eligible
Scudder funds as you wish, as long as you meet the required minimums listed on
the following page.
Q. Can I exchange previously invested assets among funds?
A. Yes. You may move already invested assets among funds with a toll-free call
or by writing to us. Phone numbers and addresses for arranging transactions are
on the inside back cover. Be sure to specify account number(s) and fund name(s).
Q. Can I change my investment instructions for allocating my future
contributions among funds?
A. Yes. Group 403(b) participants may complete the Allocation Change Form
available from your employer or our Boston retirement plan office. If you are
not a group participant, just notify our employer which funds your future
contributions should be directed to. Allocation changes cannot be made by
telephone.
7
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
Q. Can I change the level of my 403(b) salary reduction?
A. Yes. The Internal Revenue Service allows you to change the amount of salary
reduction once a calendar year. Please check with your employer for more
information.
Q. Can I suspend contributions to the Scudder 403(b) plan?
A. Yes. You are free to suspend or stop participation at the end of any payroll
period by notifying your employer. However, you cannot participate again for the
rest of the calendar year.
Q. Can I transfer to the Scudder 403(b) from another carrier?
A. Yes. You may transfer your existing 403(b) assets to a Scudder 403(b) without
tax liability if your existing carrier permits transfers. Just complete the
Scudder 403(b) Transfer Request form included with this kit. If you have
questions, contact a Scudder Service Representative at 1-800-225-2470.
Q. Can I continue to invest in an IRA as well as a 403(b) plan?
A. Yes, however, if your income exceeds $40,000 (for joint filers, $25,000 for
single filers), and you are a 403(b) plan participant, then part or all of your
IRA contribution will be non-deductible. All income earned in your IRA will grow
free of taxes until withdrawn. Call or write for more information on the Scudder
IRA.
================================================================================
Fees, Charges, and Minimums
Q. What fees are involved?
A. Since the Scudder funds are "no-load," you pay no sales charges when you buy
or sell fund shares. In addition, there are no separate charges for opening,
maintaining, or closing your account. Fund expenses, such as management fees,
are paid out of the gross investment income of each fund, as detailed in each
fund's prospectus.
Q. What minimums are there?
A. There is no minimum initial investment. However, you will need to invest at
least $240 during each twelve month period you are in the plan, until your
investment reaches $1,000. You may invest in more than one fund as long as you
have at least $500 in each fund.
8
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
Distributions and Withdrawals
Q. When can I withdraw my Scudder 403(b) plan assets?
A. You may withdraw 403(b) accumulations when you retire, leave your employer,
reach age 59 1/2, or become disabled. Should you encounter financial hardship,
you may withdraw part or all of your plan accumulation under certain
circumstances. However, any distribution made before you reach age 59 1/2,
become disabled, or die, will be subject to a 10% penalty by the IRS, unless:
o after you have left your employer, payments are made over your
lifetime, or over your lifetime and that of any beneficiary
or
o payments are made after you have reached age 55, because you have
retired early.
Check with your employer for any special distribution and withdrawal
requirements. (Criteria for determining financial hardship are subject
to further clarification from the Internal Revenue Service.)
Q. What happens to my 403(b) plan if I leave my employer before I retire?
A. All contributions to your 403(b) plan are yours to keep. You may be eligible
to make 403(b) contributions with your new employer. If not, you can either
"rollover" your 403(b) plan assets into an IRA or, if your employer permits,
simply leave them until you are ready to use them.
Q. What happens to the money in my 403(b) plan when I die?
A. The Custodian pays the money to the person you name as your beneficiary. This
kit includes a Designation of Beneficiary form for this purpose. You can change
your beneficiary by filing a new form. If you do not designate a beneficiary,
any undistributed plan assets will be paid to a surviving spouse, or to your
estate if no spouse survives you. The full market value of your 403(b) plan will
be paid at the time of the distribution. There are no closing costs or
administrative fees. (Since tax consequences may differ depending on your
choices, you may wish to consult your attorney or tax adviser before making a
designation.)
================================================================================
Account Information
Q. What reports do I receive about my 403(b) plan?
A. You receive comprehensive account transaction statements. Statement
information includes the trade date, dollar amount, share price, number of
shares involved, and shares owed after each transaction. A sample statement is
shown on page 11.
Q. Who can answer my questions?
A. Professionals from Scudder Fund Distributors will answer your questions about
the Scudder 403(b) plan, investment objectives and characteristics of any of the
Scudder Funds, and requests for literature. Please refer to the back page for
the appropriate toll-free number to call.
9
<PAGE>
- --------------------------------------------------------------------------------
How to Use Your Scudder 403(b)
================================================================================
Getting Started
Enrolling in the Scudder 403(b) program is easy. Simply complete the enclosed
Scudder 403(b) Application and forward it as directed by your employer. Also
complete your employer's salary reduction authorization.
================================================================================
Transferring from Another Carrier
To transfer any assets you may have from another 403(b) plan carrier to Scudder,
just complete the enclosed Scudder 403(b) Transfer Request and return it as
instructed on the form.
================================================================================
Exchanging among Scudder Funds
You may exchange dollars already invested in one Scudder fund to another, with a
toll-free call or in writing.
By phone:
Simply call toll-free: 1-800-225-5163. It will be helpful to have your
account number(s) handy. If your call is received prior to 4:00 p.m.,
Eastern time, your exchange will be made at the share price computed
that evening. If received after that time, the exchange will take
place at the next business day's share price.
In writing:
Write to Scudder Funds, P.O. Box 2291, Boston, MA 02107-2291. Written
exchanges will be processed promptly. Please be sure to reference your
existing account numbers and indicate your fund choices. Sign your
name exactly as it appears on your statement.
Exchanging assets already invested will not affect your investment instructions
for future contributions. To change the funds receiving your future investments,
please refer to the following section "Changing Contribution Allocation".
================================================================================
Changing Contribution Allocation
Group participants can change the fund or funds receiving contributions, or
change the proportionate amount received by a particular fund, by completing the
Scudder Allocation Change Form. Allocation Change Forms are available either
from your employer or from Scudder.
Participants who are not a part of a group 403(b) plan should simply notify
their employer which funds future contributions should be directed to. Please
note that change of allocation requests cannot be accepted over the telephone.
They must be in writing and will apply only to future contributions, not to
previously invested dollars.
================================================================================
Questions?
If you have any questions about a Scudder 403(b) program or the enrollment
forms, please call a Scudder Retirement Plan Specialist at: 1-800-323-6105.
10
<PAGE>
- --------------------------------------------------------------------------------
SAMPLE ACCOUNT TRANSACTION STATEMENT
The figures in the illustration below are not intended to be the actual prices
or current estimated returns of any particular Scudder fund. They are for
illustrative purposes only. Some plan statements will have all your fund
investments listed on one statement.
================================================================================
RETIREMENT PLAN STATEMENT
9/30/XX
STATE STREET BANK AND TRUST CO. SCUDDER GROWTH AND INCOME FUND
CUSTODIAN FOR THE 403(B) PLAN OF
STATE UNIVERSITY Statements are issued for each
SUSAN JUDITH JACKSON Scudder fund held.
49 CLIFF DRIVE
HOUSTON, TX 77002
<TABLE>
<CAPTION>
Tax ID or Soc. Sec. No. ###-##-#### PLEASE REFER TO THIS AND MAIL TO
Account No. 520-48-8519 JACKSSUSAJ ACCOUNT NUMBER IN ALL
CORRESPONDENCE
- ---------------------------------------------------------------------------------------------------
[?] [?] DOLLAR AMOUNT SHARE SHARES THIS TOTAL
DATE DATE TRANSACTION OF TRANSACTION PRICE TRANSACTION SHARES ORDERED
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dates on which
retirement plan
contribution is
invested and
confirmed by the
custodian of the BEGINNING BALANCE 1446.660
funds SALARY REDUCTION 130.00 13.55 9.594 1456.254
2/28 2/28 SALARY REDUCTION 130.00 13.72 9.480 1465.734
3/1 3/1 Dividends periodically 190.54 13.77 13.840 1479.574
reinvested (.13 =
dividend per SHARE)
3/31 3/31 EMPLOYER CONTRIB. 515.00 13.85 37.184 1516.758
4/30 4/30 SALARY REDUCTION 130.00 13.58 9.572 1526.330
5/16 5/16 SALARY REDUCTION 130.00 13.78 9.433 1535.763
5/31 5/31 SALARY REDUCTION 130.00 13.72 9.480 1545.243
6/1 6/1 INCOME REINVEST .14 212.44 13.80 15.394 1560.637
6/30 6/30 EMPLOYER CONTRIB. 485.00 Price per 34.970 1595.607
SHARE of
the fund
on the
trade date
7/31 7/31 SALARY REDUCTION 130.00 13.81 Number of 1605.020
fund shares
purchased
on the date
8/31 8/31 Represents contribution
made by salary reduction 130.00 13.82 9.410 1614.430
9/1 9/1 INCOME REINVEST .15 234.15 13.79 16.980 Total Shares
owned after
latest
transaction
- ----------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS LONG TERM
AND OTHER CAPITAL GAINS INCOME
CONTRIBUTIONS DISTRIBUTION DIVIDENDS ACCOUNT VALUE AS OF LATEST CONFIRM DATE
637.13 + 637.13 + Latest account value
- ----------------------------------------------------------------------------------------------------
Cumulative figures indicating
the level of current and prior
year contributions
- ----------------------------------------------------------------------------------------------------
INVESTOR COPY
====================================================================================================
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
SCUDDER PLAN
================================================================================
Scudder 403(b)
Custodial Agreement
ARTICLE I. EFFECTIVE DATE
This Scudder 403(b)(7) Custodial Agreement shall become effective on the
date on which the Custodial mails an acknowledgment of receipt of the
incorporated Scudder 403(b) Application to the Employee who executed such
Scudder 403(b) Application.
ARTICLE II. DEFINITIONS
2.01. Account means the separate account or account established and
maintained by the Custodian for an Employee pursuant to this Agreement.
2.02. Agreement or Scudder 403(b) (7) Agreement means this document and the
Application.
2.03. Application or Scudder 403(b) Application means the document(s) which
established the Agreement and is (are) executed by the Employer, Employee and
Custodian.
2.04. Beneficiary means the person or persons (including entities)
designated by the Employee as entitled to receive the Account balance, if any,
at the Employee's death. If at the time of the Employee's death, no designated
Beneficiary is alive, Beneficiary shall mean the Employee's surviving spouse or,
if the Employee does not leave a surviving spouse, the Employee's estate.
2.05. Code means the Internal Revenue Code of 1986, as amended.
2.06. Contributions shall mean Salary Reduction Contributions, Employer
Direct Contributions, and Nondeductible Voluntary Contributions.
2.07. Custodian means the party who executed the Application as Custodian,
and any successor thereto, provided that such successor is either a bank or
another person who satisfies the requirements of Code Section 401(f)(2).
2.08. Designated Investment Company means a regulated investment company
for which Scudder, Stevens & Clark Ltd., its successor or any affiliates, acts
as the investment advisor and which has been designated by the Distributor as
appropriate for investment hereunder.
2.09. Designation of Beneficiary means a form executed and submitted to the
Custodian in accordance with the terms of Article IX.
2.10. Disability means the inability of the Employee to engage in any
substantial gainful activity because of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration.
2.11. Distributor means Scudder Fund Distributors, Inc. and any successor
thereto.
2.12. Employee means an individual who is employed by the Employer and who
has properly executed the Application.
2.13. Employer means the employer who is listed on the Application.
2.14. Employer Direct Contribution means the amount, other than Salary
Reduction Contributions, contributed by the Employer to the Account.
2.15. Salary Reduction Contribution means the amount not included in the
Employee's compensation pursuant to a written salary reduction agreement and
transmitted by the Employer to the Custodian for addition to the Employee's
Account.
ARTICLE III. MAINTENANCE OF A CUSTODIAL ACCOUNT
3.01. Salary Reduction Contributions to the Account. The Employee may make
Salary Reduction Contributions to the Account. Any salary reduction agreement
between the Employer and the Employee shall be effective only as to amounts
earned by the Employee after such agreement becomes effective. Each such
agreement shall be irrevocable as to both the Employer and the Employee except
that either party may terminate such agreement as of the end of any payroll
period so that the agreement will not apply to compensation subsequently earned.
Subject to the immediately preceding sentence, the Employee may modify a salary
reduction agreement no more than once in each calendar year.
3.02. Employer Direct Contribution to the Account. The Employer may make
Employer Direct Contributions to the Account.
3.03. Transfers to and from the Account. All direct or indirect asset
transfers to an Account from an existing custodial account described in Code
Sections 403(b)(7) or an annuity contract qualified under Code Section 403(b)(1)
shall be in cash unless the Custodian otherwise consents. The Employee has the
right by proper written instrument to cause a transfer of cash or, if agreed to
by the Custodian, shares of a Designated Investment Company, to another
custodial account described in Code Section 403(b)(7), an annuity contract
qualified under Code Section 403(b)(1), an individual retirement account
described in Code Section 408(a) or an individual retirement annuity described
in Code Section 408(b).
3.04. Rollovers to the Account. The Custodial shall accept rollover
contributions; it shall be the Employee's responsibility to ensure that such
contributions satisfy the applicable provisions of the Code.
3.05. Other Contributions. If permitted by the Custodian, the Employee may
make voluntary contributions to the Account. To the extent that such
contributions are "deductible employee contributions" (within the meaning of
Code Section 72(o)(5)(A), made with respect to calendar years ended before
January 1, 1987, they shall be administered in accordance with the provisions of
Code Section 72(o). The Employee's other voluntary contributions plus similar
contributions made by the Employee under other 403(b) arrangements and/or
qualified retirement plans may not exceed 10% of the Employee's aggregate
compensation during his or her period of participation in such arrangements
and/or plans.
ARTICLE IV. INVESTMENT OF CONTRIBUTIONS
4.01. Purchase of Shares. As soon as is practical after the Custodian
receives a Contribution, it shall invest such Contribution in shares of one or
more Designated Investment Companies in accordance with the Employee's most
recent effective investment instructions. The Account may be invested in the
shares of not more than one Designated Investment Company, provided that any
minimum investment limits specified by the Distributor are met.
4.02. Registration and Safekeeping. Any stock of a Designated Investment
Company shall be registered in the name of the Custodian or its nominee and will
be held in unissued form.
4.03. Reports and Voting of Securities. The Custodial shall deliver to the
Employee or, if applicable, to his or her Beneficiary, all notices,
prospectuses, financial statements, proxies and proxy solicitation materials
received by it with respect to investments made for the Employee's Account. The
Custodial shall vote all shares only in accordance with the instructions of the
Employee (or, if applicable, Beneficiary) as expressed in an executed proxy.
Notwithstanding the foregoing, if the Custodian has not received instructions as
to how to vote given shares before two full business days prior to the meeting
at which such securities are to be voted, it shall vote such securities for or
against each proposal, or abstain from voting on each proposal, in the same
proportion as all other shares of such Designated Investment Company vote or
abstain from voting at the shareholders meeting either in person or by proxy;
provided, however, that the Custodial shall not have the authority to vote
shares of a Designated Investment Company without instructions from the person
or persons entitled to make investment decisions unless either (a) the
Securities and Exchange Commission shall have issued an exemptive order pursuant
to Section 6(c) of the Investment Company Act of 1940, as amended, the
application for which order describes the Custodian's authorization to so vote
without instructions, or (b) the Custodian has received an opinion of its
counsel that the exercise of this authority to vote shares of a Designated
Investment Company without instructions will not render the Custodian an
"affiliated person" as defined in the Investment Company Act of 1940, as
amended.
4.04. Dividends. All capital gains distributions and dividends received on
the shares of a Designated Investment Company shall be reinvested in shares of
that Designated Investment Company.
4.05. Change of Investments. Subject to Section 4.01, an Employee (or his
or her surviving Beneficiary to whom distributions are being made or his or her
spouse or former spouse pursuant to a domestic relations order) may in any
manner specified by the Distributor direct that the investment in a Designated
Investment Company be changed, in whole or in part, to other Designated
Investment Companies. Notwithstanding the preceding sentence, if the Distributor
determines in its own judgment that there has been trading within the Account,
any Designated Investment Company may refuse to sell its shares to such Account.
Where the Beneficiary is entitled to exercise the rights enumerated in this
Section 4.05 with respect to a separate account and the Beneficiary is more than
one person, the majority of such persons must agree before any power they have
as a Beneficiary may be exercised.
ARTICLE V. DISTRIBUTIONS AND WITHDRAWALS
5.01. Instructions to Custodian. The Custodian shall not be responsible for
making any distributions until such time as it has been notified in writing by
the Employee to begin making distributions. No distribution will be made upon
the death of the Employee unless the Custodian has been notified in writing of
the Employee's death, and the Custodian, in its opinion, has been provided with
adequate verification of such death. Distributions to the Employee (or, if
applicable, his or her Beneficiary) of amounts in the Account shall be made in
cash and/or, if the Distributor consents, in kind.
5.02. Employee Withdrawals.
(a) After Attainment of Age 59 1/2. At any time after the Employee
attains age 59 1/2, he or she may withdraw amounts from his or her Account by
making written instructions to the Custodian as to the amounts to be so
withdrawn.
(b) Hardship Withdrawals. If, at any time, the Employee encounters
financial hardship, the Employee may withdraw amounts from his Account. For the
purposes of this subsection (b), determination as to whether the Employee has
encountered financial hardship shall be made according to rules of uniform
application and in accordance with applicable law, governmental regulations or
ruling. Before the Employee may exercise his withdrawal rights pursuant to this
subsection (b), the Employee must submit to the Custodian written proof of such
determination of hardship and written instructions to the Custodian as to the
amounts so withdrawn.
(c) Withdrawal of Excess Deferrals. If, on or before the first March 1
following the close of a calendar year, the Employee notifies the Custodian in
writing that an amount in the Account constitutes a deferral (including Salary
Reduction Contributions) in excess of the limit set forth in Code Section 402(g)
(generally, $9,500), the Custodian shall distribute such amount (and any income
allocable to such amount) on or before the next following April 15.
5.03 Distributions at Separation from Service. Distributions upon
separation from service will be made only upon written notice from the Employee
to the Custodian. The written notice shall list the date on which distribution
shall commence, and the manner in which and the period over which distribution
shall be made. The Employee must elect to
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<PAGE>
commence receiving distribution(s) not later than the first April 1 following
the later of the calendar year during which the Employee attains age 70 1/2 or
the calendar year during which the employee retires. The Employee must elect a
manner of distribution which will result in (a) payment(s) which will at all
times equal or exceed the minimum distributions required under Code Sections
401(a)(9) and 403(b)(10), and (b) the present value (determined at the time
distribution commences) of payments to be made to the Employee over the
Employee's life expectancy (as determined under Section 1.72-9 of the Treasury
Regulations) equaling more than 50% of the present value of the total payments
to be made.
5.04. Distributions at the Employee's Death. At the Employee's death,
distributions shall be made in the form elected by the Beneficiary unless the
Employee has specified the form of distribution. The Beneficiary must notify the
Custodian in writing (in a form acceptable to the Custodian) of the Employee's
death. To the extent the Beneficiary may elect the form of distribution, the
Beneficiary must provide written notice to the Custodian listing the date on
which distribution shall commence, and the manner in which and the period over
which distribution shall be made. Any form of distribution must comply with the
following requirements:
(a) Death While Receiving Distributions. If the Employee has already
begun to receive distributions from the Account, the Account Balance which
remains at the time of the Employee's death shall be distributed to the
Beneficiary at least as rapidly as under the distribution method being used at
the time of the Employee's death.
(b) Death Prior to Receiving Distributions. (i) If the Employee dies
before distribution from the Account has commenced and the Employee's spouse is
not the Beneficiary, the Employee's entire Account balance must be distributed
to the Employee's Beneficiary either (A) within five years after the Employee's
death, or (B) in substantially equal annual or more frequent installments over a
period not exceeding the life expectancy of the Beneficiary (as determined as of
the date of the Employee's death using the return multiples in Section 1.72-9 of
the Treasury Regulations) provided that such distributions commence within one
year after the Employee's death.
(ii) If the Employee dies before distribution from the Account has commenced and
the Employee's spouse is the Beneficiary, the Employee's entire Account balance
must be distributed to the Employee's spouse either (A) within five years after
the Employee's death, or (B) in substantially equal annual or more frequent
installments over a period not longer than the spouse's life expectancy (as
determined as of the time distribution is commenced and recalculated annually
(if requested), by using the return multiples contained in Section 1.72-9 of the
Treasury Regulations) provided that such distribution is commenced on or before
the later of the date on which the Employee would have attained age 70 1/2 or
one year after the Employee's death.
5.05. Distributions upon Disability. If the Employee suffers a Disability,
the Employee may elect to receive distribution(s) from his or her Account by
providing written notice to the Custodian. The written notice shall list the
date on which distribution shall commence, and the manner in which and the
period over which distribution shall be made. The Employee must elect to
commence receiving distribution(s) not later than the first April 1 following
the calendar year during which the Employee attains age 70 1/2. The Employee
must elect a manner of distribution which will result in (a) payment(s) which
will at all times equal or exceed the minimum distributions required under Code
Sections 401(a)(9) and 403(b)(10), and (b) the present value (determined at the
time distribution commences) of payments to be made to the Employee over the
Employee's life expectancy (as determined under Section 1.72-9 of the Treasury
Regulations) equaling more than 50% of the present value of the total payments
to be made.
5.06. Distribution to Incompetents. If a distribution is payable to a
person known by the Custodian to be a minor or a person under a legal
disability, the Custodian may, in its absolute discretion, make all or any part
of the distribution to (a) a parent or such person, (b) the guardian, committee
or other legal representative, wherever appointed, of such person, including a
custodian for such person under a Uniform Gifts to Minors Act or similar act,
(c) any person having the control and custody of such person, or (d) to such
person directly.
5.07. Distributions Pursuant to Domestic Relations Orders. Where required
by law, the Custodian shall make distributions pursuant to any "qualified
domestic relations order" (as defined in the Employee Retirement Income Security
Act of 1974, as amended) and any other domestic relations order.
ARTICLE VI. CUSTODIAN
6.01. Duties. The Custodian shall:
(a) Receive transmitted Contributions;
(b) Provide safekeeping for the assets in the Account;
(c) Collect income;
(d) Execute orders for purchase, sale or exchange of Designated
Investment Company shares and make settlements in accordance with general
practice;
(e) Maintain records of all transactions in the Account;
(f) Transmit to each Employee, not less frequently than annually,
appropriate statements of the amount of the Custodian's compensation, if any,
charged to the Account;
(g) File with the Internal Revenue Service and/or any other government
agency such returns, reports, forms, and other information as may be required of
it as Custodian;
(h) Perform all other duties and services consistent with the purposes
and intentions of this Agreement.
The Custodian may perform any of its administrative duties through other
persons designated by the Custodian from time to time.
6.02. Share Redemptions. If cash funds are required to pay taxes, fees, or
other expenses pursuant to Article VI or to make payments to the Employee or his
Beneficiary pursuant to Article V, the Employee (or Beneficiary, if applicable)
shall instruct the Custodian in writing which shares shall be redeemed or sold
if the Account is invested in shares of more than one Designated Investment
Company, unless the item for which cash is required is clearly allocable to an
investment in a specific Designated Investment Company. In the absence of such
written instructions, the Custodian shall exercise its discretion.
6.03. Limitations on Liabilities and Duties.
(a) The Custodian shall be fully protected in acting or omitting to
take any action in reliance upon any document, order (including any domestic
relations order) or other direction believed by the Custodian to be genuine and
properly given. Conversely, the Custodian shall be fully protected in acting or
omitting to take any action in reliance on its belief than any document, order
or other direction either is not genuine or was not properly given.
(b) To the extent permitted by law, 30 days after providing to the
Employee the statements required under Section 6.01(f), the Custodian shall be
released and discharged from all liability to the Employer or any third party as
to the matters contained in such statement unless the Employee files written
objections with the Custodian within such 30-day period.
(c) In no event shall the Custodian or Distributor be under a
fiduciary duty to the Employee in regard to the selection of investments or be
liable for any loss incurred on account of a selected investment.
(d) The Custodian and Distributor shall have no responsibility with
regard to the initial or continued qualification of the Account under Code
Section 403(b)(7).
(e) Neither the Custodian nor the Distributor shall be obligated to
determine the amount of any Contribution due or to collect any Contribution from
the Employee.
(f) Neither the Custodian nor the Distributor shall be held
responsible for determining the amount, character, or timing of any distribution
to the Employee.
(g) Neither the Custodian nor the Distributor shall have
responsibility, and the Employee shall have sole responsibility, with respect to
the computation of the Employee's "exclusion allowance" as defined in Code
Section 403(b)(2), any applicable limitation(s) on contributions under Code
Section 415(c), any election available to the Employee under Code Section 415,
any applicable limit on elective deferrals (including Salary Reduction
Contributions) under Code Section 402(g), or any matters relating to any tax
consequences with respect to Contributions, Account earnings, Account
distributions, transfers or rollovers.
(h) The Custodian shall not be required to carry out any instructions
not given in accordance with this Agreement and neither the Custodian nor the
Distributor shall be liable for the loss of income, or for appreciation or
depreciation in share value that shall result from the Custodian's failure to
follow instructions not given in accordance with this Agreement.
(i) If instructions are received that, in the opinion of the
Custodian, are unclear, neither the Custodian nor the Distributor shall be
liable for loss of income, or for appreciation or depreciation in share value
during the period preceding the Custodian's receipt of written clarification of
the instructions.
(j) The Custodian shall have no responsibility to make any
distribution or process any withdrawal by order of the Employee or Beneficiary
unless and until the requisite written instructions specify the occasion for
such action and the Custodian is furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents (including
proof of any legal representative's authority) deemed necessary or advisable by
the Custodian.
(k) The Custodian shall neither assume nor have any duty of inquiry
about any matter arising under the Plan.
(l) Neither the Custodian nor the Distributor shall have any liability
to the Employee or Beneficiary for any tax penalty or other damages resulting
from any inadvertent failure by the Custodian to make a distribution under this
Agreement.
(m) Neither the Custodian nor the Distributor shall be liable for
interest on temporary cash balances, if any, maintained in the Account.
(n) To the extent permitted by law, the Employee shall always fully
indemnify the Custodian and hold it harmless from any and all liability
whatsoever which may arise either (i) in connection with this Agreement and
matters which it contemplates (except that which arise due to the Custodian's
negligence or willful misconduct) or (ii) with respect to making or failing to
make any distribution, other than for failure to make distribution in accordance
with instructions therefor which are in full compliance with both Article IX and
this Section 6.03.
(o) Except as required by law, the Custodian shall not be obligated or
expected to commence or to defend a legal action or proceeding in connection
with this Agreement, unless the Custodian and the Employee agree that the
Custodian will defend a given legal action and the Custodian is fully
indemnified for so doing to its satisfaction.
(p) Neither the Employer nor the Distributor shall have any
responsibility or liability for any acts or omissions of the Custodian
hereunder.
6.04. Compensation. In consideration for its services hereunder, the
Custodian shall be entitled to receive the applicable fees specified in its then
current fee schedule, if any. The Custodian may substitute a revised fee
schedule from time to time upon 30 days' written notice to the Employer or
Employee. The Custodian shall be entitled to such
13
<PAGE>
reasonable additional fees as it may from time to time determine for services
required of it and not clearly identified on the fee schedule.
6.05. Resignation and Removal. The Custodian may resign by giving at least
30 days' written notice to the Employer or Employee. The Distributor may remove
the Custodian hereunder by giving at least 30 days' written notice to the
Custodian. In each case, the Distributor shall designate a successor custodian
qualified pursuant to Section 2.07 hereof, which successor shall accept such
appointment by a writing to be submitted to the Employer or Employee, and the
Custodian.
On the effective date of its resignation or removal, the Custodian shall
transfer to the designated successor custodian the assets and records (or copies
thereof) of the Account provided, however, that the Custodian may retain
whatever assets it deems necessary for payment of its fees, costs, expenses,
compensation, and any other liabilities which constitute a charge on or against
the assets of the Account or on or against the Custodian.
ARTICLE VII. FEES, TAXES, AND OTHER EXPENSES
Any income taxes or other taxes of any kind whatsoever that may be levied
or assessed upon or in respect of the Account (including any transfer taxes
incurred in connection with the investment and reinvestment of Account assets),
expenses, fees and administrative costs incurred by the Custodian in the
performance of its duties (including fees for legal services rendered to the
Custodian), and the Custodian's compensation as determined under Section 6.04,
if any, shall constitute a charge upon the assets of the Account. At the
Custodian's option, such fee, tax or expense shall be paid from the Account or
by the Employee.
ARTICLE VIII. PROTECTION OF EMPLOYEE BENEFITS
8.01. Nonforfeitability. At no time shall any part of the Account be used
for purposes other than for the exclusive benefit of the Employee. The
Employee's rights to Contributions shall be nonforfeitable at all times after
such Contributions are transferred to the Custodian.
8.02. Non-alienability. Any right or benefit which shall be payable under
the terms of this Agreement shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt at such shall be void. Furthermore, no right or benefit shall be subject
to the debts, contracts, liabilities, engagements or torts of the person who is
entitled to such right or benefit, and no such right or benefit shall be subject
to attachment or legal process for or against such person.
ARTICLE IX. BENEFICIARY DESIGNATION
Each Employee may submit to the Custodian a properly executed written
Designation of Beneficiary acceptable to the Custodian for use in connection
with this Agreement. Any such Designation of Beneficiary shall not be effective
unless it is filed during the Employee's lifetime with the Custodian at the
Custodian's home office. Whether or not fully dispositive of the Account, the
most recently filed Designation of Beneficiary accepted by the Custodian shall
be controlling and all previously filed designations shall be considered
superseded and shall have no effect. If a Beneficiary dies while receiving
distributions, the portion of the Account to which the Beneficiary would have
been entitled (had he or she survived) shall be paid to the Beneficiary's
beneficiary or beneficiaries (or if impossible, to the Beneficiary's estate) in
a lump sum within 90 days after the Custodian receives notification of the
Beneficiary's death.
ARTICLE X. AMENDMENT
10.01. By the Distributor. The Distributor may amend this Agreement in its
entirety or any portion thereof. The Distributor shall provide copies of such
amendment to the Employer and/or Employee. Neither this Section nor any other
portion of this Agreement shall impose on the Distributor an affirmative
obligation to amend the Agreement.
10.02. Limitations. No amendment shall be made:
(a) Which would cause or permit any part of the Account to be diverted
to purposes other than for the exclusive benefit of the Employee and/or his or
her Beneficiary, or cause or permit any portion of such assets to revert to or
become the property of the Employer.
(b) Without the written consent of the Custodian, or
(c) Which would retroactively deprive any Employee of any benefit to
which he or she was entitled under the Agreement, unless such amendment is
necessary, in the opinion of counsel, to conform the Agreement to, or satisfy
the conditions of Code Section 403(b), any other law, or any governmental
regulation or ruling, provided that this prohibition shall not be construed to
prohibit prospective amendment of the Agreement (including prospective amendment
to eliminate a benefit) where such prospective amendment is permitted by law.
ARTICLE XI. TERMINATION
11.01. Automatic Termination on Distribution. This Agreement shall
terminate when all the assets held in the Account established hereunder have
been distributed or otherwise transferred out of the Account.
11.02. Termination on Disqualification. This Agreement shall terminate if,
after notification by the Internal Revenue Service that the Employee's Account
does not qualify under Code Section 403(b)(7), the Employer and/or Distributor
do not make the amendments necessary to so qualify the Account. On such
termination of this Agreement, the Custodian shall distribute all assets in an
Account, in its discretion in cash or in kind, to the Employee or, in the event
of the Employee's death, to the Beneficiary, subject to the Custodian's right to
reserve funds as provided in Section 6.05.
ARTICLE XII. MISCELLANEOUS
12.01. Applicable Law. This Agreement shall be construed and administered
in accordance with the laws of the state in which the home office of the
Custodian is located.
12.02. Employer's Signature. If the Employer does not sign the Application
and is not required to do so under the Code and the regulations thereunder, the
Employee, to the extent allowed by law, assumes all obligations and
responsibilities of the Employer under this Agreement.
12.03. Change of Address. The Employer, or if permitted by the Custodian,
the Employee, shall notify the Custodian in writing of any change of address
within 30 days of such change.
12.04. Notice. Any notice from the Custodian to the Employee pursuant to
this Agreement shall be effective when sent by U.S. Mail to the address of
record of the Employer or Employee. Any notice to the Custodian pursuant to this
Agreement shall be by first class mail addressed to its home office.
12.05. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the successors in interest of the parties hereto.
12.06. Construction. It is intended that this Agreement, together with the
other documents comprising the 403(b)(7) arrangement pursuant to which the
Employee's funds are invested under this Agreement, qualify as a custodial
account under Code Section (403(b)(7). This Agreement shall be construed and
limited by applicable laws, and the powers and discretions conferred hereunder
shall be exercised in a manner consistent with that purpose. Subject to the
provisions of this Section and Section 12.09 below, in the event of any conflict
between this Agreement and the documents incorporated in this Agreement by
reference, the provisions of this Agreement shall prevail.
12.07. Separability. If any provision of this Agreement shall be held
invalid or illegal for any reason, such determination shall not affect any
remaining provisions of this Agreement, but this Agreement shall be construed
and enforced as if such invalid or illegal provision has never been included in
this Agreement.
12.08. Statutory Requirements. In the event any applicable state or local
law, regulation or rule conflicts with and/or supplements the terms of this
Agreement, such law, regulation or rule shall be deemed to supersede and/or
supplement the terms of this Agreement, provided that the Distributor and the
Custodian receive written notice of such law, regulation, or rule.
12.09. Separate Employer Plan. If the Employer has established a written
separate 403(b) plan, the terms of such plan will supersede any provisions of
this Agreement which conflict with such terms; provided that the Employer has
furnished the Distributor with a copy of such written plan and the Custodian has
agreed in writing to be bound by the terms thereof.
14
<PAGE>
-----------
TELEPHONE
NUMBERS AND
ADDRESSES
================================================
For questions about Call: (Toll-free)
the Scudder Funds 1-800-225-2470
or
Write to:
Scudder Funds
160 Federal Street
Boston, MA 02110
================================================
To arrange Call: (Toll-free)
transactions and 1-800-225-5163
for questions about or
existing accounts Write to:
Scudder Funds
P.O. Box 2291
Boston, MA 02107-2291
================================================
For questions Call: (Toll-free)
about your Scudder 1-800-323-6105
403(b) plan or
Write to:
Scudder Funds
Group Retirement Plans Dept.
175 Federal Street
Boston, MA 02110-2267
================================================================================
Scudder Offices
Boston
166 Federal Street
Boston, Massachusetts 02110
800-225-2470
Chicago
111 East Wacker Drive (22nd Fl.)
Chicago, Illinois 60601
312-861-2700
Cincinnati
555 Carew Tower
Cincinnati, Ohio 45202
513-721-4200
Cleveland
950 Terminal Tower
Cleveland, Ohio 44113
216-241-7744
Houston
1000 Louisiana Street
Suite 2190
Houston, Texas 77002
713-659-3838
800-445-0544 (in Texas)
Los Angeles
333 South Hope Street (37th Fl.)
Los Angeles, California 90071
213-628-1144
New York
345 Park Avenue (26th Fl.)
New York, New York 10154
212-326-6370
Philadelphia
Three Mellon Bank Center
Philadelphia, Pennsylvania 19102
215-864-7200
Portland, Oregon
One S.W. Columbia Street
Suite 575
Portland, Oregon 97258
503-224-3999
San Francisco
101 California Street (41st Fl.)
San Francisco, California 94111
415-981-8191
West Palm Beach
Phillips Point, Suite 1100
777 South Flagler Drive
West Palm Beach, Florida 33401
401-832-3600
800-422-0323 (in Florida)
15
<PAGE>
- -----------------
SCUDDER FUNDS
================= -------------------------------------
403(b) Application Please return to your Benefits Office
unless otherwise instructed
-------------------------------------
- --------------------------------------------------------------------------------
1. PARTICIPANT INFORMATION (please print)
- --------------------------------------------------------------------------------
Name___________________________________________ Daytime Telephone (___)________
Address_________________________________________________________________________
City_______________________________ State_______________________ Zip____________
Social Security Number - - Date of Birth________________
- --------------------------------------------------------------------------------
2. EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Name____________________________________________________________________________
Address_________________________________________________________________________
City_______________________________ State_______________________ Zip____________
Employer Group Number (obtain from employer if your account is
part of a group program)
- --------------------------------------------------------------------------------
3. INVESTMENT INSTRUCTIONS
- --------------------------------------------------------------------------------
Check appropriate box(es) for initial contribution source:
|_| Employee contribution |_| Transfer of assets (please complete the Scudder
|_| Employer contribution 403(b) Transfer Request form and send it with
|_| Rollover check for $____ this application)
%
MONEY MARKET $ Amount or (group programs only)
Scudder Cash Investment Trust ______________ ____________________
Scudder Government Money Fund ______________ ____________________
INCOME
Scudder GNMA Fund ______________ ____________________
Scudder Income Fund ______________ ____________________
Scudder Target Fund
(multi-Portfolios)
U.S. Government 1990 ______________ ____________________
General 19______________ ______________ ____________________
Maturity Year
Scudder U.S. Government Zero ______________ ____________________
Coupon
Target Fund______________ ______________ ____________________
Maturity Year
GROWTH AND INCOME
Scudder Equity Income Fund ______________ ____________________
Scudder Growth and Income Fund ______________ ____________________
GROWTH
The Japan Fund ______________ ____________________
Scudder Capital Growth Fund ______________ ____________________
Scudder Development Fund ______________ ____________________
Scudder Global Fund ______________ ____________________
Scudder International Fund ______________ ____________________
TOTAL $
______________ ____________________
______________ ____________________
Do not select a fund for which you have not received a prospectus. If you would
like additional prospectuses, please call 1-800-225-2470.
- --------------------------------------------------------------------------------
4. TELEPHONE EXCHANGE
- --------------------------------------------------------------------------------
Shareholders are able to exchange by telephone, telegram, or TWX shares in one
Scudder fund for shares of any other Scudder fund. The recipient account must
have the identical registration and address as the account from which it is
exchanged.
- --------------------------------------------------------------------------------
5. ADOPTION OF AGREEMENT AND SIGNATURE
- --------------------------------------------------------------------------------
By this application, my employer and I direct the Custodian to open a separate
Custodial Investment Account for my benefit according to the Scudder 403(b)
Custodial Agreement, and agree to the provisions contained in the Agreement. I
acknowledge that I have received a current prospectus for the fund(s) selected
for investment.
__________________________ ______________________________________________
Employee's Signature Signature of Employer
/s/ G. Reeves
__________________________ ______________________________________________
Date State Street Bank and Trust Company, Custodian
IMPORTANT: This Agreement is not effective until acknowledgement of the receipt
of this Application is mailed by the Custodian to the Employee. Please complete
Designation of Beneficiary on reverse side.
---------------------------------------------------------
For Benefits Office use only:
After reviewing and signing this application, sent it to:
Scudder Funds P.O. Box 2291 Boston, MA 02107-2291
---------------------------------------------------------
16
<PAGE>
- -----------------
SCUDDER FUNDS
=================
403(b) Designation of Beneficiary
- --------------------------------------------------------------------------------
Instructions With this form you designate the beneficiary who is to
receive your Plan assets if you die while a balance remains
in your account. This designation is not effective until
filed with the Custodian.
Section 2.04 and Article IX of the Custodial Agreement
provide for the distribution of plan assets when the
beneficiary form on file does not completely dispose of the
plan assets.
- --------------------------------------------------------------------------------
Examples of o Sandra Casey (SS #000-00-0000), 3 Oak Street, Chicago,
beneficiary Il 60060, my wife, if living at my death; otherwise, in
designations equal shares, to my children who survive me. If any
child does not survive me, such deceased child's share
shall go by right of representation to that child's
issue who survive me. (Note: "issue" refers to
children, grandchildren, etc.)
o Sandra Casey (SS #000-00-0000), 3 Oak Street, Chicago,
Il 60060, my wife, if living at my death; otherwise, to
James Casey (SS ####-##-####), 231 Elm Street, San
Mateo, CA 94042, my son, if living at my death. If he
is not living at my death, then to his issue who
survive me by right of representation.
o James Casey (SS ####-##-####), 231 Elm Street, San
Mateo, CA 94042, my son, and Mary Casey (SS
#999-99-9999), 17 Beech Avenue, Dallas, TX 73302, my
daughter, in equal shares, if they both survive me;
otherwise all to the one of them who survive me. If
neither survives me, to XYZ charity.
These are only examples. You may wish to consult an attorney
before naming beneficiaries.
- --------------------------------------------------------------------------------
Name your Plan The following beneficiaries are entitled to receive the
beneficiaries and assets of my Plan upon my death. This designation revoked
provide their any previous designation. I understand that I can change
Social Security this choice of beneficiary by submitting a new form to State
Numbers and Street Bank and Trust Company, the Custodian for the Scudder
addresses if Plan.
possible.
Beneficiaries (please print):_______________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
- --------------------------------------------------------------------------------
Sign here ______________________________________ ____________________
Your signature Date
- --------------------------------------------------------------------------------
Spousal consent
Obtain the consent (a) |_| The Participant's employer makes contributions to
of your spouse if the Plan account (or, if, for any other reason, this
your designation is an employer-sponsored plan) and lese than 100% of
above results in the assets in the Plan have been left to me as
either or both of primary beneficiary. I consent to such designation
the circumstances and limit my consent to the beneficiaries indicated
described in (a) above. In addition, recognizing that I also have a
and (b). right to limit my consent to a specific form of
benefit (such as a lump sum distribution or
installment payments over a period of time), I
relinquish that right and consent to any form of
benefits which may be elected under the Plan.
and/or
Either or both boxes
may be checked. (b) |_| As spouse of a Participant who is a resident of
Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, or Washington, I consent to (1) the
naming of another person as primary beneficiary to
receive more than one-half the Plan distributions or
(2) the naming of myself as primary beneficiary and
others as contingent beneficiaries.
I acknowledge that I have read the above elections and
understand the effect their exercise will have on me. I also
understand that my spouse must execute a new designation if
he or she wants to designate another beneficiary.
______________________________________ ____________________
Spouse's signature Date
Witness |_| Plan Representative
If box (a) is checked _________________________ or
spouse's signature Witness |_| Notary Public
must be witnessed by State: ___________________
a Notary Public or a Commission expires:_______
Plan Representative.
17
<PAGE>
SCUDDER 403(b)
EMPLOYER ADOPTION AGREEMENT
All Employees will be eligible to participate in the plan, unless the
Employer specifies otherwise in writing attached to this Adoption Agreement.
I. PLAN NAME
The name of this Plan will be:
The ___________________________________________ 403(b) Plan.
(insert name of Employer)
II. EMPLOYER CONTRIBUTIONS BY SALARY REDUCTION
Employer Contributions |_| may |_| may not be made by Salary
Reduction Contributions. If allowed, these Contributions must be
made according to a salary reduction agreement, described in
Section 3.01 of the Custodial Agreement, between the Employer and
the Employee.
NOTE: If the Employer chooses either mandatory contributions or
employee thrift contributions (see sections III and IV below),
Employer Contributions by salary reduction must be allowed.
III. MANDATORY CONTRIBUTIONS BY SALARY REDUCTION
|_| In order to participate in any Employer Direct Contributions
which the Employer may make directly to the Employee's Account
for any taxable year of the Employee, the Employee must agree
with the Employer to make mandatory contributions of at least
___% of the Employee's compensation according to a salary
reduction agreement between the Employer and the Employee.
NOTE: The Employer may not require both mandatory contributions and
employee thrift contributions (see section IV below).
IV. EMPLOYER MATCHING AND EMPLOYEE THRIFT CONTRIBUTIONS
|_| For each taxable year of the Employee that the Employee has
agreed to make thrift contributions under a salary reduction
agreement with the Employer, the Employee may contribute up to
___ % (not over 6%) of compensation as a thrift contribution for
that taxable year and the Employer will match the Employee's
thrift contribution by contributing ___% of the Employee's thrift
contribution.
<PAGE>
|_| For each taxable year of the Employee that the Employee has
agreed to make thrift contributions under a salary reduction
agreement with the Employer, the amount of the allowable employee
thrift contribution, which cannot exceed 6% of compensation, and
the amount of the employer matching contribution will be
determined according to the provisions specified in an attachment
to this Adoption Agreement.
V. EMPLOYEE CONTRIBUTIONS
Employee non-deductible voluntary contributions are:
|_| permitted.
|_| not permitted.
VI. PERMITTED INVESTMENTS
Contributions under the provisions of the Scudder 403(b)
Custodial Agreement may be invested in:
|_| All Scudder funds (except tax-free funds)
|_| __________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________
(please list permitted Scudder Funds).
VII. PROCEDURES FOR CHANGING INVESTMENTS
Employees or Employees' beneficiaries may change the investments
of their 403(b) Accounts by giving instructions directly to the:
|_| Plan Administrator.
|_| Custodian.
VIII. DISTRIBUTION INSTRUCTIONS TO CUSTODIAN
The Custodian will make distributions upon a written request from
the:
|_| Employer or Plan Administrator.
|_| Employee.
|_| Employer, Plan Administrator or Employee.
<PAGE>
IX. WITHDRAWALS BY AN EMPLOYEE WHO HAS REACHED AGE 59-1/2
Withdrawals from an account by an Employee who has reached the
age of 59-1/2:
|_| are not permitted.
|_| are permitted.
X. WITHDRAWALS BY AN EMPLOYEE ON ACCOUNT OF FINANCIAL HARDSHIP*
Withdrawals from an account by an Employee who has encountered
financial hardship:
|_| are not permitted.
|_| are permitted.
XI. DISTRIBUTION TO AN EMPLOYEE UPON SEPARATION FROM SERVICE*
Distributions to an Employee will commence:
|_| upon the Employee's separation from service.
|_| upon the Employee's separation from service, or at age
____, if later.
|_| at the times specified in an attachment to this
Adoption Agreement.
XII. AMENDMENT
This adoption agreement |_| is |_| is not an amendment to an
existing plan.
XIII. ADOPTION OF AGREEMENT BY EMPLOYER AND CUSTODIAN
By completing and signing this Adoption Agreement, the
Employer agrees to open a custodial account under Internal
Revenue Code Section 403(b)(7) for each Employee who signs a
Scudder 403(b) Application Form. The Employer also adopts a
Scudder 403(b) Plan according to the provisions in this
Adoption Agreement and the Scudder 403(b) Custodial
Agreement. If any selections in this Adoption Agreement are
inconsistent with the applicable provisions of the Custodial
Agreement, the selections here will control.
<PAGE>
The Scudder 403(b) Custodial Agreement, including this Employer Adoption
Agreement, becomes effective on the date both the Custodian and the Employer
have signed this Agreement.
__________________________________________ State Street Bank and Trust
Name of Employer Company
__________________________________________
Signature of Employer BY__________________________
__________________________________________ __________________________
Street Address
__________________________________________
City/Town and Zip
__________________________________________
Date
* Please note that, in general, if an Employee receives a hardship
withdrawal or a distribution before reaching the age of 59-1/2, dying or
becoming disabled, the withdrawal or distribution may be subject to a 10% IRS
early withdrawal penalty tax. A distribution which is rolled over into an IRA
will not be subject to this penalty, however.
<PAGE>
SCUDDER 403(b)
EMPLOYER ADOPTION AGREEMENT
All Employees will be eligible to participate in the plan, unless the Employer
specifies otherwise in writing attached to this Adoption Agreement.
I. PLAN NAME
The name of this Plan will be:
The ______________________________________ 403(b) Plan.
(insert name of Employer)
II. EMPLOYER CONTRIBUTIONS BY SALARY REDUCTION
Employer Contributions |_| may |_| may not be made by Salary
Reduction Contributions. If allowed, these Contributions must be
made according to a salary reduction agreement, described in
Section 3.01 of the Custodial Agreement, between the Employer and
the Employee.
NOTE: If the Employer chooses either mandatory contributions or
employee thrift contributions (see sections III and IV below),
Employer Contributions by salary reduction must be allowed.
III. MANDATORY CONTRIBUTIONS BY SALARY REDUCTION
|_| In order to participate in any Employer Direct Contributions
which the Employer may make directly to the Employee's Account
for any taxable year of the Employee, the Employee must agree
with the Employer to make mandatory contributions of at least
___% of the Employee's compensation according to a salary
reduction agreement between the Employer and the Employee.
NOTE: The Employer may not require both mandatory contributions and
employee thrift contributions (see section IV below).
IV. EMPLOYER MATCHING AND EMPLOYEE THRIFT CONTRIBUTIONS
|_| For each taxable year of the Employee that the Employee has
agreed to make thrift contributions under a salary reduction
agreement with the Employer, the Employee may contribute up to
___ % (not over 6%) of compensation as a thrift contribution for
that taxable year and the Employer will match the Employee's
thrift contribution by contributing ___% of the Employee's thrift
contribution.
<PAGE>
|_| For each taxable year of the Employee that the Employee has
agreed to make thrift contributions under a salary reduction
agreement with the Employer, the amount of the allowable employee
thrift contribution, which cannot exceed 6% of compensation, and
the amount of the employer matching contribution will be
determined according to the provisions specified in an attachment
to this Adoption Agreement.
V. EMPLOYEE CONTRIBUTIONS
Employee non-deductible voluntary contributions are:
|_| permitted.
|_| not permitted.
VI. PERMITTED INVESTMENTS
Contributions under the provisions of the Scudder 403(b)
Custodial Agreement may be invested in:
|_| All Scudder funds (except tax-free funds).
|_| __________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________
(please list permitted Scudder Funds).
VII. LOANS
Loans to an Employee are:
|_| permitted according to the provisions specified in an
attachment to this Adoption Agreement.
|_| not permitted.
VIII. PROCEDURES FOR CHANGING INVESTMENTS
Employees or Employees' beneficiaries may change the investments
of their 403(b) Accounts by giving instructions directly to the:
|_| Plan Administrator.
|_| Custodian.
<PAGE>
IX. DISTRIBUTION INSTRUCTIONS TO CUSTODIAN
The Custodian will make distributions upon a written request from
the:
|_| Employer or Plan Administrator.
|_| Employee.
|_| Employer, Plan Administrator or Employee.
X. WITHDRAWALS BY AN EMPLOYEE WHO HAS REACHED AGE 59-1/2
Withdrawals from an account by an Employee who has reached the
age of 59-1/2:
|_| are not permitted.
|_| are permitted.
XI. WITHDRAWALS BY AN EMPLOYEE ON ACCOUNT OF FINANCIAL HARDSHIP*
Withdrawals from an account by an Employee who has encountered
financial hardship:
|_| are not permitted.
|_| are permitted.
XII. DISTRIBUTION TO AN EMPLOYEE UPON SEPARATION FROM SERVICE*
Distributions to an Employee will commence:
|_| upon the Employee's separation from service.
|_| upon the Employee's separation from service, or at age
____, if later.
|_| at the times specified in an attachment to this
Adoption Agreement.
XIII. AMENDMENT
This adoption agreement |_| is |_| is not an amendment to an
existing plan.
<PAGE>
XIV. ADOPTION OF AGREEMENT BY EMPLOYER AND CUSTODIAN
By completing and signing this Adoption Agreement, the Employer
agrees to open a custodial account under Internal Revenue Code
Section 403(b)(7) for each Employee who signs a Scudder 403(b)
Application Form. The Employer also adopts a Scudder 403(b) Plan
according to the provisions in this Adoption Agreement and the
Scudder 403(b) Custodial Agreement. If any selections in this
Adoption Agreement are inconsistent with the applicable
provisions of the Custodial Agreement, the selections here will
control.
The Scudder 403(b) Custodial Agreement, including this Employer Adoption
Agreement, becomes effective on the date both the Custodian and the Employer
have signed this Agreement.
_______________________________________________ State Street Bank and Trust
Name of Employer Company
_______________________________________________
Signature of Employer BY ________________________
_______________________________________________ ________________________
Street Address
_______________________________________________
City/Town and Zip
_______________________________________________
Date
* Please note that, in general, if an Employee receives a hardship
withdrawal or a distribution before reaching the age of 59-1/2, dying or
becoming disabled, the withdrawal or distribution may be subject to a 10% IRS
early withdrawal penalty tax. A distribution which is rolled over into an IRA
will not be subject to this penalty, however.
Exhibit 14(e)
SCUDDER
401(k) PROGRAM
- --------------------------------------------------------------------------------
A Family of Pure No-Load(TM) Mutual Funds
A Flexible Prototype Plan
Versatile Administrative Systems
- --------------------------------------------------------------------------------
Choose a turn-key 401(k) program or
enhance your current plan with the
Scudder Funds
<PAGE>
- --------------------
INTRODUCTION
- --------------------
Today, more and more successful firms are discovering the advantages of
flexible, cost-effective 401(k) plans. Over 80% of the nation's largest
companies already have 401(k) plans in place.
The Scudder 401(k) Program consists of the Scudder funds, the Scudder
prototype plan, and the Scudder administrative systems.
You can adopt an entire turn-key program, or use the Scudder funds as high
quality, performance-driven alternatives to the investments offered by a
separately designed 401(k) plan. You will not find a more flexible
program.
This brochure is your opportunity to learn all the advantages of the
Scudder 401(k) Program. The accompanying booklet "How to select the right
Scudder funds for you" is your in-depth guide to the Scudder funds.
Scudder Retirement Plan Specialists are ready to answer any questions you
may have about the Scudder 401(k) Program. Call toll-free 1-800-323-6105.
<PAGE>
- --------------------------------------------------------------------------------
The
Scudder
401(k) Program
|
|
------------------------------------------------------------------
| | |
| | |
Family of Model Administrative
Mutual Plan Systems
Funds |
|
-------------------------------
| |
| |
Employer Employee
Contributions Contributions
This brochure is divided into several sections, each highlighting a
specific segment of the Scudder 401(k) Program.
2
<PAGE>
SCUDDER: OVER 65 YEARS OF
EXPERIENCE
- --------------------------------------------------------------------------------
Founded in Boston in Scudder, Stevens & Clark is one of the
1919 nation's largest and most respected
investment counsel firms, managing
over $30 billion for individual,
corporate, and institutional clients
worldwide. Scudder is independent and
privately owned.
- --------------------------------------------------------------------------------
First for investors Right from the start, Scudder has put
performance and investor service
first. That's why Scudder introduced
the first no-load mutual funds in
1928, offered the nation's first
international growth fund, and is a
leader in offering mutual funds for
retirement plans. Today, Scudder
maintains one of the largest
independent research staffs in the
industry.
- --------------------------------------------------------------------------------
National service Scudder has offices in eleven cities
network across the country to better serve
investors who prefer to conduct
business in person. For more
information about any of the Scudder
funds, you're welcome to visit us in
Boston, Chicago, Cincinnati,
Cleveland, Houston, Los Angeles, New
York, Philadelphia, Portland, San
Francisco, or West Palm Beach.
[PHOTO OMITTED]
CAPTION: Scudder Retirement Plan Specialists
will work with you when you use the
Scudder 401(k) program.
3
<PAGE>
THE SCUDDER MUTUAL FUNDS
FOR YOUR 401(k) PLAN
- --------------------------------------------------------------------------------
Traditional advantages Choosing the Scudder Funds as
investment options for your plan
gives you all the traditional
advantages of a no-load mutual fund
family, like broad diversification,
professional management, and more.
- --------------------------------------------------------------------------------
Choice Scudder offers you a full range of
funds to choose from. We can help
you meet virtually any objective,
from capital preservation to high
current income to aggressive growth.
Many employers prefer a balanced
approach when selecting funds for
their plan, including at least one
money market, income, growth and
income, and growth fund.
- --------------------------------------------------------------------------------
Flexibility Scudder offers participants free
exchange privileges, so they can move
among eligible funds as their needs
or objectives change. You can
specify the frequency with which
these changes are permitted in your
plan.
- --------------------------------------------------------------------------------
Low cost All of the Scudder funds are pure no-
load(TM) (commission-free). Your
employees pay no set-up fees, no
maintenance fees, no termination
fees, and no sales charges to buy or
sell fund shares.
- --------------------------------------------------------------------------------
Convenience Scudder fund investors can easily
follow the prices of their shares
each day in the local paper--or by
calling Scudder's toll-free 24-hour
price/yield information line.
- --------------------------------------------------------------------------------
Service Friendly, professional Service
Representatives are always available
to answer a question or explain the
objectives of a fund. Scudder is as
close as your phone.
[PHOTO OMITTED]
CAPTION: Scudder's Service Representatives
can answer your Scudder fund
questions.
4
<PAGE>
ADVANTAGES OF THE SCUDDER
401(k) PLAN FOR YOU--THE EMPLOYER
- --------------------------------------------------------------------------------
The Scudder 401(k) plan The Scudder prototype plan can be used
is flexible by a wide variety of employers. You
can amend an existing profit sharing
or thrift plan into the Scudder 401(k)
plan, or use the Scudder plan to start
a new retirement program.
The essence of a 401(k) plan is the
ability to combine salary deferral
contributions from employees with
profit sharing contributions from
employers, in a single tax-advantaged
plan. The Scudder 401(k) plan offers
you all the advantages of a thrift or
profit sharing plan, plus the added
benefit of a systematic savings
program using pre-tax dollars. It's
an attractive, popular plan offering
employees a unique opportunity for
asset accumulation and favorable tax
treatment.
- --------------------------------------------------------------------------------
The Scudder 401(k) plan The low cost and simplicity of
is cost-effective and maintaining the Scudder 401(k) plan
convenient will surprise you. You will not incur
any fees for using either the Scudder
funds or the Scudder prototype plan.
Take advantage of the Scudder Plan,
and you'll also save the time and
expense of writing your own. Scudder
will work to keep you informed so you
can keep your plan up-to-date as tax
laws change.
- --------------------------------------------------------------------------------
401(k) contributions are The contributions you make and the pre-
tax-deductible tax contributions made by your
employees are fully tax-deductible by
the employer as contributions to a
retirement plan.
In addition, with a 401(k) plan in
place, state unemployment insurance
and worker's compensation costs may be
reduced because they are based on
employee compensation--which is
lowered (actually deferred) by
participation in your 401(k) plan.
- --------------------------------------------------------------------------------
The Scudder 401(k) plan Adopting the Scudder 401(k) plan can
will enhance your improve your firm's image and employee
benefits package morale. Most important, you will find
it helps you attract, motivate, and
retain highly qualified personnel. A
401(k) plan is an innovative,
responsive addition to your employee
benefits package.
- --------------------------------------------------------------------------------
A 401(k) plan will The availability of a salary deferral
encourage your employees plan makes it easy and convenient for
to save for retirement your employees to invest for their
futures. Changing tax laws make
401(k) plans even more attractive
alternatives for employees who have
lost their IRA deductions.
5
<PAGE>
ADVANTAGES OF THE SCUDDER
401(k) PLAN FOR YOUR EMPLOYEES
- --------------------------------------------------------------------------------
There are two major First, your employees can contribute pre-
tax benefits for 401(k) tax dollars to a 401(k) plan, cutting their
plan participants. current taxes.
[BAR CHART OMITTED] Second, all contributions to a 401(k) plan
The Power of Tax- compound tax-deferred, allowing
Deferred Investing participants to accumulate substantially
greater assets than they could with a
The chart compares tax- conventional savings program. Tax-deferred
deferred programs like compounding is one of the keys to real
the Scudder 401(k) growth.
with taxable savings
programs over 10, 20, For example, an employee earning $20,000
and 30 years. who defers 5% of salary--just $1,000 each
year--would build an account worth over
$170,000 after 30 years (before taxes)
assuming a constant 10% rate of return.
This employee would accumulate only $74,000
(after taxes, assuming 28% bracket)
investing the same amount and earning the
same return in a taxable savings program.
401(k) accumulations are only taxed when
withdrawn, usually during retirement.
(There is no assurance that a participant
will earn 10% annually--actual earnings
could be more or less. A participant's
salary would also be likely to rise over
this period. Savings are more significant
at higher wage levels.)
- --------------------------------------------------------------------------------
Employer matching You may elect to make matching
contributions help contributions, providing your employees
build a retirement with added incentive to plan for their
account. retirement income needs.
In addition, your plan may allow
participants to make voluntary, non-
deductible contributions of up to 10% of
their salaries. All earnings on this money
are tax deferred until withdrawn. This
greatly enhances your employees' ability to
defer taxes and accumulate assets.
- --------------------------------------------------------------------------------
401(k) plan There is no easier nor more convenient way
participants can to save than through payroll deduction.
save conveniently
- --and direct their Participants personally select the
own accounts investment options that best meet their
individual goals. A 401(k) plan gives your
employees the freedom to actively plan for
their futures. And regular account
statements keep employees informed of their
progress--and aware of the value of this
important employee benefit.
- --------------------------------------------------------------------------------
Participants have Distributions can be taken when a plan
access to their participant retires or separates from
accounts in special service, but these may be subject to an
circumstances early withdrawal penalty. Once a plan
participant reaches age 59-1/2,
distributions can be taken without penalty.
In addition, withdrawals can be made under
certain hardship conditions, if you select
this distribution option for your plan.
Participants may also be permitted to
borrow from their accounts, which can be an
important source of funds in times of need.
6
<PAGE>
TAILOR THE SCUDDER 401(k) PLAN
TO YOUR OWN SPECIFICATIONS
- --------------------------------------------------------------------------------
A flexible plan you can The Scudder 401(k) plan is a unique and
customize flexible profit sharing plan with many
distinct advantages for both employers and
employees. It's the product of 30 years of
retirement planning experience. Adopting
the Scudder plan allows you to tailor your
401(k) to specific requirements.
Below are just a few of the options at your
command when you build a 401(k) plan at
Scudder.
- --------------------------------------------------------------------------------
Employee eligibility You determine eligibility. You can require
a waiting period of up to three years and a
minimum age of up to 21 before allowing an
employee to participate in the plan. You
may also limit participation to certain
classes of employees.
Starting in 1989, you may require that
employees wait one year before contributing
to the plan, and up to two years before
becoming eligible for employer
contributions.
- --------------------------------------------------------------------------------
Includable You can elect to either include or exclude
compensation certain types of compensation such as
bonuses, commissions, and overtime pay for
the purpose of calculating 401(k)
contributions.
- --------------------------------------------------------------------------------
Vesting schedules If you make contributions on behalf of your
employees you are free to select a vesting
schedule which encourages extended service.
- --------------------------------------------------------------------------------
Loans and hardship You can permit participants to borrow from
withdrawals their balances in the plan, at a reasonable
interest rate, and/or take early
distributions in cases of hardship.
- --------------------------------------------------------------------------------
Types of permissible You have great leeway in selecting the
contributions kinds of contributions to allow in your
plan. The different types can be divided
into employer and employee contributions.
o Employer Matching contributions. You can match your
contributions participant's contributions with employer
dollars to encourage participation in the
plan.
Profit sharing contributions. You can make
annual profit sharing contributions to the
plan on behalf of each participant. As
with all profit sharing plans,
contributions can be varied each year, or
even skipped if desired.
o Employee Salary deferral contributions. Salary
contributions deferral contributions allow participants
to reduce their current income taxes and
save for their retirement through automatic
contributions to a tax-qualified retirement
plan. Participants can contribute up to
$7,313* through salary reduction in 1988.
Deferred cash contributions. You can
reward employees with bonus payments, and
allow them to take these bonuses in cash or
in the form of a contribution of the entire
amount to your 401(k) plan.
*This amount is indexed to inflation, and
adjusted annually.
7
<PAGE>
PROFESSIONAL ADMINISTRATIVE
SUPPORT
- --------------------------------------------------------------------------------
Whether you adopt the complete Scudder
401(k) Program, or simply use the Scudder
funds as investments for your 401(k) plan,
we'll provide the recordkeeping system
which is right for you. We recognize that
no two organizations have identical needs,
so we offer two different systems.
- --------------------------------------------------------------------------------
For employers with Scudder Benefit Plan Administration System
larger plans requiring (SBPAS). SBPAS is appropriate for larger
more complete and more complex 401(k) plans, plans
recordkeeping requiring non-discrimination testing, loan
processing, or vesting schedules, and plans
offering company stock or GICs as
investment options.
SBPAS maintains detailed participant and
plan account records, and prepares 1099-Rs
and W-2Ps. SBPAS can record contributions,
process exchanges and withdrawals, add new
participants, allocate earnings, track
vesting schedules, and record loan
activity. SBPAS generates comprehensive
reports for management, and consolidated
quarterly statements for participants.
There is an annual fee for this system
which is based upon the services your
program requires.
- --------------------------------------------------------------------------------
For employers with less Scudder Plan Accounting. This system is
complicated designed for employers using the Scudder
administrative needs prototype 401(k) plan. The employer
allocates contributions among the funds,
while the system maintains detailed
participant account and beneficiary records
and prepares 1099-Rs and W-2Ps. The system
links all the accounts in your plan,
producing a master management report for
you. There is no fee for using this
system.
Benefits of Scudder 401(k)
Recordkeeping Systems
<TABLE>
<CAPTION>
# of Comprehensive Exchange Employer
Participants Participant Between Vesting Management Distribution 1099-R Loan
Accepted Statements Funds Schedules Reports Processing W-2P Processing*
-------- ---------- ----- --------- ------- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scudder
Benefit any X X X X X X X
Plan number
Administration
System
Scudder
Accounting 10 or X X -- X X X --
Plan more**
</TABLE>
<TABLE>
<CAPTION>
Non-
discrimi-
nation 5500 Annual Beneficiary
Testing Preparation Fees Files
------- ----------- ---- -----
<S> <C> <C> <C> <C>
Scudder
Benefit X X X --
Plan
Administration
System
Scudder
Accounting -- -- -- X
Plan
</TABLE>
* These are optional services which incur an extra charge.
** The Scudder 401(k) plan is also appropriate for employers with less than 10
participants. Call our Retirement Plan Specialists for more information.
8
<PAGE>
SCUDDER SERVICE AND
ASSISTANCE
- --------------------------------------------------------------------------------
Employee Scudder knows that the success of a 401(k)
communications program is often measured by the level of
assistance employee participation. Toward that end
Scudder will help you introduce your plan
and help you design employee information
kits. Scudder's communication kits explain
in plain English the advantages of salary
deferral, tax-deferred compounding, and the
different Scudder funds offered by your
plan. Scudder will also work with you to
design employee presentations to encourage
participation.
Of course, each of your employees has toll-
free telephone access to Scudder's
professional Service Representatives.
These helpful, knowledgeable people can
answer their questions, and explain the
objectives of each Scudder Fund
[PHOTO OMITTED]
CAPTION: You can put Scudder's experienced,
dedicated Retirement Plan Specialists
to work for your company's plan.
- --------------------------------------------------------------------------------
Conclusion The Scudder 401(k) Program can meet the
401(k) needs of virtually any organization.
You can create your own unique plan using
the distinctive elements of the Scudder
program:
o a wide range of performance-driven
investments
o a flexible, comprehensive prototype plan
o administrative systems to meet virtually
any need
The Scudder 401(k) Program is backed by our
commitment to service and assistance--a
commitment to the success of your plan.
9
<PAGE>
TELEPHONE NUMBERS AND
ADDRESSES
- --------------------------------------------------------------------------------
For questions about the Call: (Toll-free)
Scudder 401(k) Program 1-800-323-6105
and help in selecting
the right Scudder Funds or
to offer
Write To:
The Scudder Funds
Group Retirement Plan Department
175 Federal Street
Boston, MA 02110-2267
Retirement Plan Specialists will answer
your 401(k) questions and help you complete
our enrollment forms.
- --------------------------------------------------------------------------------
Scudder Offices Boston New York
166 Federal Street 345 Park Avenue
Boston, MA 02110 (26th Floor)
800-225-2470 New York, NY 10154
212-326-6370
Chicago
111 East Wacker Drive Philadelphia
(22nd Floor) Three Mellon Bank
Chicago, IL 60601 Center
312-861-2700 Philadelphia, PA 19102
215-864-7200
Cincinnati
555 Carew Tower Portland, Oregon
Cincinnati, OH 45202 One S.W. Columbia
513-621-4200 Street
Suite 575
Cleveland Portland, OR 97258
950 Terminal Tower 503-224-3999
Cleveland, OH 44113
216-241-7744 San Francisco
101 California Street
Houston (41st Floor)
1000 Louisiana Street San Francisco, CA
Suite 2190 94111
Houston, TX 77002 415-981-8191
713-659-3838
800-445-0544 (in Texas) West Palm Beach
Phillips Point
Los Angeles Suite 1100
333 South Hope Street 777 South Flagler Drive
(37th Floor) West Palm Beach, FL
Los Angeles, CA 90071 33401
213-628-1144 407-832-3600
800-422-0323 (in
Florida)
<PAGE>
This booklet is being sent to you by
Scudder Fund Distributors, Inc.,
underwriter of the Scudder funds, and
must be preceded or accompanied by a
current fund prospectus. SCUDDER
- --------------------------------------------------------------------------------
1-800-323-6105 175 Federal Street, Boston, MA 02110
(ask for a Retirement Plan Specialist) 17-58(c)1988, Scudder Fund
Distributors, Inc.
<PAGE>
Complete and post this Notice in a common area for your employees'
information. If you are required to file for a determination letter on the
qualified status of your plan, you must post this Notice 7 to 21 days
before you submit your determination letter request. If you are not
required to file for a determination letter, you must post the Notice 9 to
23 days after you adopt or amend the Plan.
SCUDDER 401(k) PROTOTYPE PLAN
NOTICE TO INTERESTED PARTIES
An employer adopting a master or prototype plan or an amendment
thereto or a restatement thereof, is required to notify all interested
parties (including all employees and any self-employed individuals) of such
adoption, amendment or restatement. Recently, ____________________ (name
of employer) [_] adopted [_] restated the [_] _________________ Money
Purchase Pension Plan [_] __________________________________ Profit Sharing
Plan (the "Plan"). The Internal Revenue Service, on May 1, 1987, issued an
opinion letter with respect to this (amended form of) plan as a tax
qualified prototype.
1. Notice to employees of ____________________________________________
(name of employer) (the "Employer").
An application [_] is [_] is not to be made to the Internal Revenue Service
by the Employer for a determination on the qualification of the employee
benefit pension plan described below.
2. The Employer has [_] adopted [_] restated the employee pension benefit
plan described below on ____________________________________.
3. The name of the Plan is _____________________________________. (insert
full name of plan from first paragraph of Adoption Agreement).
4. The Plan's identification number is _________________________. (For
instance, the first plan will be No. 001 and subsequent plans No. 002, 003,
etc.)
5. The name and address of the Employer is ______________________________
___________________________________________________________________________
__________________________________________________________________________.
6. The prototype plan's Opinion Letter number is C212885a-k.
7. The Plan's sponsor is Scudder Fund Distributors, Inc., 175 Federal
Street, Boston, Massachusetts 02110.
8. The Employer's Tax Identification Number is _________________________.
9. The Plan Administrator's name and address is _________________________
___________________________________________________________________________
__________________________________________________________________________.
(If none appointed, insert Employer's name.)
<PAGE>
10. The address of the Key District Director having jurisdiction over the
Plan is __________________________________________________________________.
* Please refer to chart at Appendix A, attached hereto.
11. The employees eligible to participate under the plan are (describe by
class): ___________________________________________________________________
__________________________________________________________________________.
12. The Internal Revenue Service [_] has [_] has not previously issued a
determination letter with respect to the qualification of this plan.
13. Check appropriate box:
[_] For employers who are required to make a determination letter
submission to the IRS:
The application will be filed on _______________________ with the Key
District Director, Internal Revenue Service at ______________________
_________________________ for an advance determination as to whether
the plan meets the qualification requirements of section 401, 403(a)
or 405(a) of the Internal Revenue Service Code with respect to the
plan's [_] initial qualification [_] amendment [_] termination [_]
[_] merger [_] consolidation or [_] transfer of plan assets or
liabilities.
[_] For employers who are not required to make a determination letter
submission to the IRS:
It is not contemplated that the plan will be submitted to the Internal
Revenue Service for an advance determination as to whether it meets
the qualification requirements of section 401 of the Internal Revenue
Code with respect to either its initial qualification of any
subsequent amendment.
RIGHTS OF INTEREST PARTIES
14. You have the right to submit to the Key District Director, at the
above address, either individually or jointly with other interested
parties, your comments as to whether this plan meets the qualification
requirements of the Internal Revenue Code. You may instead, individually
or jointly with other interested parties, request the Department of Labor
to submit, on your behalf, comments to the Key District Director regarding
qualification of the plan. If the Department declines to common on all or
some of the matters you raise, you may, individually, or jointly if your
request was made to the Department jointly, submit your comments to these
matters directly to the Key District Director.
REQUESTS FOR COMMENTS BY THE DOL
15. Check appropriate box:
[_] For employers who are required to make a determination letter
submission to the IRS:
<PAGE>
The Department of Labor may not comment on behalf of interested
parties unless requested to do so by the lesser of 10 employees of 10%
of the employees who qualify as interested parties. The number of
persons needed for the Department to comment with respect to this plan
is ___________. If you request the Department to comment, your
comment must be in writing and must specify the matters upon which
comments are requested, and must also include:
(1) the information contained in items 3 through 5 of this
Notice; and
(2) the number of persons needed for the Department to comment.
[_] For employers who are not required to make a determination letter
submission to the IRS:
The Department of Labor may not comment on behalf of interested
parties unless requested to do so by the lesser of 10 employees of 10%
of the employees who qualify as interested parties. The number of
persons needed for the Department to comment with respect to this plan
is ___________. If you request the Department to comment, your
comment must be in writing and must specify the matters upon which
comments are requested, and must also include:
(1) the information contained in items 2 through 9 of this
Notice; and
(2) the number of persons needed for the Department to comment.
A request to the Department to comment should be addressed as follows:
Administrator of Pension and Welfare Benefit Programs
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, D.C. 20216
ATTN: 3001 Comment Request
COMMENTS TO THE IRS
16. Check appropriate box:
[_] For employers who are required to make a determination letter
submission to the IRS:
Comments submitted by you to the Key District Director must be in
writing and received by him by ___________________________ (the 45th
day after the date on which the application for determination is
received by the Key District Director). However, if there are matters
that you request the Department of Labor to comment upon on your
behalf, and the Department declines, you may submit comments on these
matters to the Key District Director to be received by him on
__________________________ (within 15 days from the time the
Department notifies you that it will not comment on a particular
<PAGE>
matter), or by ___________________________ (the 45th day after the
date on which the application for determination is received by the Key
District Director), whichever is later. A request to the Department
to comment on our behalf must be received by it by
____________________________ (the 15th day after the date on the
application for determination is received by the Key District
Director) if you wish to preserve your right to comment on a matter
upon which the Department declines to comment, or by
_____________________ (the 25th day after the date on which the
application for determination is received by the Key District
Director) if you wish to waive that right.
[_] For employers who are not required to make a determination letter
submission to the IRS:
Comments submitted to you by the Key District Director must be in
writing and received by him by _______________________ (the 75th day
after the date on which the plan is adopted or amended). However, if
there are matters that you request the Department of Labor to comment
upon on your behalf, and the Department declines, you may submit
matters to the Key District Director to be received by him on
_________________________ (within 15 days from the time the Department
notifies you that it will not comment on a particular matter), or by
_________________________ (the 75th day after the date on which the
plan is adopted or amended), whichever is later. A request by the
Department to comment on your behalf must be received by it by
_________________________ (the 45th day after the date on which the
plan is adopted or amended) if you wish to preserve your right to
comment on a matter upon which the Department declines to comment, or
by ______________________ (the 55th day after the date on which the
plan is adopted or amended) if you wish to waive that right.
ADDITIONAL INFORMATION
17. Check appropriate box:
[_] For employers who are required to make a determination letter
submission to the IRS:
Detailed instruction regarding the requirements for notification of
interested parties may be found in sections 6, 7, and 8 of Revenue
Procedure 80-30. Additional information concerning this adoption or
amendment (including, where applicable, an updated copy of the plan
and related trust; the application for determination; any additional
documents dealing with the application for determination; and copies
of section 6 of Revenue Procedure 80-30) is available at _____________
______________________________________________________________________
during the hours of __________________________________ for inspection
and copying. (There is a nominal charge for copying and/or mailing.)
[_] For employers who are not required to make a determination letter
submission to the IRS:
<PAGE>
Detailed instruction regarding the requirements for notification of
interested parties may be found in sections 6, 7, and 8 of Revenue
Procedure 80-30. Additional information concerning this adoption or
amendment (including, where applicable, a description of the
provisions providing for nonforfeitable benefits; a description of the
circumstances which may result in ineligibility or loss of benefits; a
description of the source of financing of the plan; and copies of
section 6 of Revenue Procedure 80-30) is available at ________________
______________________________________________________________________
during the hours of __________________________________ for inspection
and copying. (There is a nominal charge for copying and/or mailing.)
Appendix A
Key District Addresses
Mid-Atlantic Region
-------------------
Key District IRS Districts Covered
- ------------ ---------------------
Baltimore Baltimore, Pittsburgh, Richmond
31 Hopkins Plaza
Baltimore, MD 21201
Newark Newark, Philadelphia
Wilmington
970 Broad Street
Newark, NJ 07102
North Atlantic Region
---------------------
Brooklyn Albany, Augusta, Boston
Brooklyn, Buffalo,
35 Tillary Street Burlington, Hartford,
Brooklyn, NY 11201 Manhattan, Portsmouth
Providence
Central Region
--------------
Cincinnati Cincinnati, Cleveland,
Detroit, Indianapolis,
550 Main Street Louisville, Parkersburg
Cincinnati, OH 45202
<PAGE>
Midwest Region
--------------
Chicago Aberdeen, Chicago,
Des Moines, Fargo
230 S. Dearborn Street Helena, Milwaukee
Chicago, IL 60604 St. Paul, Springfield
Southeast Region
----------------
Key District IRS Districts Covered
- ------------ ---------------------
Atlanta Atlanta, Birmingham,
Columbia, Greensboro,
275 Peachtree Street, N.E. Jackson, Jacksonville,
Atlanta, GA 30303 Little Rock, Nashville,
New Orleans
Southwest Region
----------------
Dallas Albuquerque, Austin,
Cheyenne, Dallas, Denver,
1100 Commerce Street Houston, Oklahoma City,
Dallas, TX 75202 Phoenix, Salt Lake City,
Wichita
Western Region
--------------
Los Angeles Anchorage, Boise, Honolulu, Laguna
Niguel, Los Angeles, Portland,
300 N. Los Angeles Street Reno, Sacramento, San Francisco, San
Los Angeles, CA 90012 Jose, Seattle
<PAGE>
Internal Revenue Service Department of the Treasury
Plan Description: Prototype Standardized Profit Sharing Plan CODA Amendment
FFN: 50250523201-003 Case: 8500550k EIN: 04-2321686
BPD: 01 Plan: 003 Letter Serial No: C212558a-k
Washington, DC 20224
Scudder Fund Distributors, Inc. Person to contact: Mrs. Fleming
175 Federal Street Telephone Number: (202) 566-6421
Boston, MA 02110 Refer Reply to: OP:E:EP:Q:I
Date: 05/01/87
Dear Applicant:
In our opinion, the amendment to the form of the plan identified above to add a
cash or deferred arrangement CODA described in section 401(k) of the Internal
Revenue Code does not in and of itself adversely affect the plan's acceptability
under section 401 of the Code. This opinion relates only to the amendment to add
a CODA to the form of the plan. It is not an opinion as to the acceptability of
any other amendment or of the form of the plan as a whole, or as to the effect
of other Federal or local statutes. This letter does not consider the effect of
the Tax Reform Act of 1986 on the acceptability of this plan under section
401(a) of the Code.
Adoption by an employer of the CODA amendment will not by itself affect the
qualification of the employer's plan or the exempt status of any related trust.
Therefore, such employer may rely on this opinion letter, provided the
requirements of section 18 of Revenue Procedure 84-23, 1984-1 C.B.457, including
the appropriate Notice to Interested Parties, are met.
You must furnish a copy of this letter to each employer who adopts the CODA,
either as part of a new plan adoption or as an amendment to a prior adoption of
your existing master or prototype profit-sharing plan. You are also required to
send a copy of the approved form of the plan and related documents to each Key
District Director of Internal Revenue Service whose jurisdiction there are
adopting employers.
If you have any questions concerning the IRS processing of this case, please
call the above telephone number. If you write, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.
Please advise those adopting the plan to contact you if they have any questions
about the operation of the plan.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ [Illegible]
Chief, Employee Plans Qualification Branch
<PAGE>
Internal Revenue Service Department of the Treasury
Plan Name:
Profit Sharing Plan
FF#: 50250523201-003 Control #: 8500550
BPD#: 01 Plan: 003 Letter Serial #: C212558a
Washington, DC 20224
Scudder Fund Distributors, Inc. Person to contact: Ms. Carr
175 Federal Street Telephone Number: (202) 566-6814
Boston, MA 02110 Refer Reply to: OP:E:EP:RQ:1:4
Date: 08/05/85
E.I.N.: 04-2321685
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts the plan. You
are also required to send a copy of the approved form of the plan and related
documents to each Key District Director of Internal Revenue Service in whose
jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the Key District
Director will not issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) an employer ever maintained another qualified plan for one or
more employees who are covered by this plan, other than a specified paired plan
within the meaning of section 7 of Rev. Proc. 84-23, 1984-1 C.B. 457; or (2)
after December 31, 1985, the employer maintains a welfare benefit fund defined
in Code section 419(e), which provides postretirement medical benefits allocated
to separate accounts for key employees as defined in Code section 419A(d)(3). In
such situations, the employer should request a determination as to whether the
plan, considered with all related qualified plans and, if appropriate, welfare
benefit funds, satisfies the requirements of Code section 401(a)(16) as to
limitations on benefits and contributions in Code section 415.
If you have any questions concerning the IRS processing of this case, please
call the above telephone number. If you write, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number, Plan Number and File Folder Number shown in the heading of this letter.
Please advise those adopting the plan to contact you if they have any questions
about the operation of the plan.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ [Illegible]
Chief, Employee Plans
Rulings and Qualifications Branch
<PAGE>
SCUDDER
401(k) PROTOTYPE
PLAN DOCUMENT
- --------------------------------------------------------------------------------
SCUDDER
SERVING INVESTORS SINCE 1919
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Basic Plan Document #01 2
Section 1 Introduction ..................................... 2
Section 2 Definitions ...................................... 2
Section 3 Eligibility ...................................... 3
Section 4 Contributions .................................... 4
Section 5 Code Section 415 Limitations on Allocations ...... 5
Section 6 Time and Manner of Making Contributions .......... 6
Section 7 Vesting .......................................... 7
Section 8 Distribution upon Death .......................... 7
Section 9 Other Distributions .............................. 8
Section 10 Loans ............................................ 9
Section 11 Trust Provisions ................................. 9
Section 12 Administration ................................... 11
Section 13 Fees and Expenses ................................ 11
Section 14 Benefit Recipient Incompetent
or Difficult to Ascertain or Locate .......... 12
Section 15 Designation of Beneficiary ....................... 12
Section 16 Spendthrift Provision and Distributions
Pursuant to Qualified Domestic Relations
Orders ....................................... 12
Section 17 Necessity of Qualification ....................... 12
Section 18 Amendment and Termination ........................ 12
Section 19 Transfers ........................................ 13
Section 20 Owner-Employee Provisions ........................ 13
Section 21 Top-Heavy Provisions ............................. 13
Section 22 Special Distribution Rules ....................... 14
Section 23 Distribution Option Notice Requirements .......... 15
Section 24 Waiver of Minimum Funding Standard ............... 15
Section 25 Miscellaneous .................................... 16
Model Amendment II for Defined Contribution Plans 16
Section I Purpose and Effective Date ....................... 16
Section II Definitions ...................................... 16
Section III Provisions Relating to Leased Employees .......... 17
Section IV Limitations on Contributions and Benefits ........ 17
Section V Limitations on Employee Contributions ............ 17
Section VI Qualified Voluntary Employee
Contributions Not Permitted ................. 18
Section VII Determination of Top Heavy Status ................ 18
Section VIII Reserved ......................................... 18
Section IX Benefit Forfeitures .............................. 18
Section X Profits Not Required ............................. 18
Model Cash or Deferred Arrangement Amendment 18
Section I Purpose and Effective Date ....................... 18
Section II Definitions ...................................... 18
Section III Elective Deferrals ............................... 18
Section IV Top-Heavy Requirements ........................... 19
Section V Special Distribution Rules ....................... 19
Section VI Matching Contributions ........................... 19
Section VII Limitations on Employee Contributions
and Matching Contributions ................... 20
Footnotes ........................................................ 20
<PAGE>
SCUDDER
PROTOTYPE PLAN
Basic Plan Document 01
SECTION 1.
INTRODUCTION
The Employer has established this Plan (the "Plan") consisting of the
Adoption Agreement and the following provisions (the "Prototype Plan") for the
exclusive benefit of its Employees and their Beneficiaries.
SECTION 2.
DEFINITIONS
Where the following words and phrases appear in this Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates
a contrary meaning. The singular herein shall include the plural, and vice
versa, and the masculine gender shall include the feminine gender, and vice
versa, where the context requires.
2.01 "Account" shall mean the Trust assets held by the Trustee for the
benefit of a Participant, which shall be the sum of the Participant's Employer
Contribution Account, Nondeductible Voluntary Contribution Account, Deductible
Voluntary Contribution Account, Rollover Account, and any transfer account
established pursuant to Section 4.04 hereof with respect to funds transferred on
the Participant's behalf.
2.02 "Act" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
2.03 "Administrator" shall mean the person or persons specified in Section
12.01 hereof.
2.04 "Adoption Agreement" shall mean the agreement by which the Employer
has most recently adopted or amended the Plan.
2.05 "Beneficiary" shall mean any person or legal representative
effectively designated by the Participant as a person entitled to receive
benefits on or after the death of a Participant within the meaning of Code
Section 401(a)(9)(E) and any regulations promulgated thereunder by the Secretary
of the Treasury.
2.06 "Code" shall mean the Internal Revenue Code of 1954, as amended.
Reference to a section of the Code shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.07 "Compensation" shall mean the amount paid during the Plan Year by the
Employer to the Employee for services rendered while a Participant, as
reportable to the Federal Government for the purpose of withholding Federal
income taxes, but not including, so long as the Plan is not integrated with
Social Security, amounts attributable to any category specified in the Adoption
Agreement. If so specified in the Adoption Agreement, Compensation shall also
mean amounts paid to the Employee for services rendered for the entire Plan Year
in which an Employee became a Participant whether or not such an Employee was a
Participant for the entire Plan Year. In the case of a Self-Employed Individual,
the above determination of Compensation shall be made on the basis of the Self-
Employed Individual's Earned Income. Notwithstanding the previous sentence, for
the purposes of the limitations imposed by Section 401(a)(i)(C)(II) below,
Compensation of a Self-Employed Individual shall be determined in accordance
with the rules provided in Code Section 404(a)(8)(D).
2.08 "Current Accumulated Earnings and Profits" of an Employer other than a
sole-proprietorship or partnership shall mean the Employer's current or
accumulated earnings and profits, as determined on the basis of the Employer's
books of account in accordance with generally accepted accounting practices,
without any deductions for Employer Contributions under the Plan (or any other
qualified plan) for the current Year or for income taxes for the current Year,
and without regard to the Employer's election to be taxed as a small business
corporation, if it has so elected. If the Employer is a sole-proprietorship or
partnership, "Current or Accumulated Earnings and Profits" shall mean the net
income of such Employer before deduction for income taxes and contributions made
hereunder.
2.09 "Deductible Voluntary Contribution Account" shall mean the separate
account maintained pursuant to Section 6.03(c) hereof for the Deductible
Voluntary Contributions made by the Participant and the income, expenses, gains
and losses attributable thereto.
2.10 "Deductible Voluntary Contributions" shall mean the contributions made
by Participants in accordance with Section 4.02 hereof, which respective
contributing Participants designate as "Deductible Voluntary Contributions" at
the time of contribution, and which comply with the requirements of Code Section
219.
2.11 "Designated Investment Company" shall mean a regulated investment
company for which Scudder, Stevens & Clark, its successor or any of its
affiliates, acts as investment adviser and which is designed by Scudder Fund
Distributors, Inc. or its successors, as eligible for investment under the Plan.
2.12 "Designation of Beneficiary" or "Designation" shall mean the document
executed by a Participant under Section 15.
2.13 "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expect to result in death or last for a continuous period
of 12 months or more, as certified by a licensed physician selected by the
Participant and approved by the Employer.
2.14 "Distributee" shall mean the Beneficiary or other person entitled to
receive the undistributed portion of the Participant's Account under Section 8
because of death or under Section 14 because of incompetency or inability to
ascertain or locate such individual.
2.15 "Distributor" shall mean Scudder Fund Distributors, Inc. or its
successor.
2.16 "Earned Income" shall mean the net earnings from self employment in
the trade or business with respect to which the Plan is established, for which
personal services of the Owner-Employee or Self-Employed Individual are a
material income-producing factor. Net earnings will be determined without regard
to items not included in gross income and the deductions allocable to such
items. Net earnings are reduced by contributions by the Employer to a qualified
plan, including this Plan, to the extent deductible under Code Section 404.
2.17 "Effective Date" shall mean the date specified by the Employer in the
Adoption Agreement.
2.18 "Election Period" shall mean the period which begins of the first day
of the Plan Year in which the Participant attains age 35 and which ends on the
date of the Participant's death. If a Participant separates from service prior
to the first day of the Plan Year in which he or she attains age 35 the Election
Period with respect to his or her vested Account balance (as of his or her date
of separation) shall begin on his or her date of separation.
2.19 "Employee" shall mean an individual who performs services in the
business of the Employer in any capacity (including any individual deemed to be
an employee of the Employer under Code Section 414(n)).
2.20 "Employer" shall mean the organization or other entity named as such
in the Adoption Agreement and any successor organization or entity which adopts
the Plan.
Any two or more organizations or entities which are members of (a) a
controlled group of corporations (as defined under Code Section 414(b)), (b) a
group of trades or businesses (whether or not incorporated) which are under
common control (as defined under Code Section 414(c)), or (c) an affiliated
service group (as defined under Code Section 414(m)), will be considered to be
the Employer for the purposes of the Plan, unless the Plan is adopted as a
nonstandardized plan, the adopting Employer makes a written election to the
contrary and such written election is attached to the Adoption Agreement. Any
such attached, written election shall become part of the Adoption Agreement.
2.21 "Employer Contribution Account" shall mean the separate account
maintained pursuant to Section 6.03(a) hereof for the Employer Contributions
allocated to a Participant and the income, expenses, gains and losses
attributable thereto.
2.22 "Employer Contributions" shall mean the contributions made by the
Employer in accordance with Section 4.01 hereof.
2.23 "Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours shall be credited to
the Employee for the computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including Disability), layoff,
jury duty, military duty or leave of absence. No more than 501 Hours of Service
shall be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period). Hours under this
subsection shall be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor Relations which are incorporated herein by reference;
(c) Solely for the purpose of determining whether a One-Year Break in
Service has occurred, each hour which normally would have been credited to an
Employee (or in any case in which such house cannot be determined, eight hours
per day of such absence) but for an absence from work during a Plan Year
beginning after December 31, 1984 because of such individual's pregnancy, birth
of a child of the individual, placement of an adopted child with the individual,
or caring for an adopted or a natural child following placement or birth. Hours
of Service under this paragraph shall be credited in the Plan Year in which the
absence begins if the individual would otherwise have suffered a One-Year Break
in Service, and in all other cases, in the immediately following Plan Year. No
more than 501 Hours of Service shall be credited under this paragraph by reason
of any one placement or pregnancy. Notwithstanding any implication of this
subsection (c) to the contrary, no credit shall be give under this subsection
(c), unless the Employee makes a timely, written filing with the Administrator
which establishes valid reasons for the absence and enumerates the days for
which there was such an absence;
(d) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under subsection (a), (b) or (c), as the case
may be, and under this subsection (d). These hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award, agreement or
payment is made.
Where the Employer maintains the plan of a predecessor employer, service
for such predecessor employer shall be treated as Service of the Employer. Where
the Employer does not maintain the plan of a predecessor employer, employment by
a predecessor employer, upon the written election of the Employer made in a
uniform and non-discriminatory manner, shall be treated as Service for the
Employer, provided that the Employer may only make such an election if he has
adopted this Plan as a nonstandardized plan.
If the Employer is a member of (a) a controlled group of corporations (as
defined under Code Section 414(b)), (b) a group of trades or businesses (whether
or not incorporated) which are under common control (as defined under Code
Section 414(c)), or (c) an affiliated service group (as defined under Code
Section 414(m)), all service of an Employee for any member of such a group shall
be treated as if it were Service for the Employer for purposes of this Section
2.23.
In addition, all service for any individual who is considered a leased
employee of the Employer under Code Section 414(n) shall be treated as if it
were Service for the Employer for purposes of this Section 2.23. However,
qualified plan contributions or benefits provided by the leasing organization
which are attributable to Services performed for the Employer shall be treated
as provided by the Employer. The provisions of this paragraph shall not apply to
any leased employee if such employee is covered by a money purchase pension plan
maintained by the leasing organization providing: (a) a nonintegrated employer
contribution rate of at least 7-12% of compensation, (b) immediate
participation, and (c) full and immediate vesting. For purposes of this Section
2.23, the term "leased employee" means any person who is not an Employee and
who, pursuant to an agreement
<PAGE>
between the recipient and any other person, has performed services for the
Employer (or for the Employer and related persons determined in accordance
with Code Section 414(n)(6)) on a substantially full-time basis for a
period of at least one year and such services are of a type historically
performed by employees in the business field of the Employer.
2.24 "Integration Level" for a Plan Year shall mean the lesser of the
Social Security Wage Base or the dollar amount specified in the Adoption
Agreement.
2.25 "Integration Rate" for a Plan Year shall mean the lesser of the OASDI
Rate (as in effect on the first day of the Plan Year) or the rate specified in
the Adoption Agreement.
2.26 "Loan Trustee" shall mean the Trustee or, if the Employer has
specified otherwise in the Adoption Agreement, the individual or individuals so
appointed to act as trustees solely for the purpose of administering the
provisions of Section 10 and holding the Trust assets to the extent that they
are invested in loans pursuant to such Section.
2.27 "Nondeductible Voluntary Contributions Account" shall mean the
separate account maintained pursuant to the Section 6.03(b) hereof for
Nondeductible Voluntary Contributions made by the Participant and the income,
expenses, gains and losses attributable thereto.
2.28 "Nondeductible Voluntary Contributions" shall mean all contributions
by Participants which are not Deductible Voluntary Contributions, Rollover
Contributions, or contributions of accumulated deductible employee contributions
made pursuant to Section 4.02(b)(vi) hereof.
2.29 "Normal Retirement Date" or "Normal Retirement Age" shall mean the
earlier of (a) the date selected by the Employer in the Adoption Agreement or,
(b) if the Employer enforces a mandatory retirement age, the first day of the
month in which the Participant reaches that age.
2.30 "OASDI Rate" for a Plan Year shall mean the tax rate applicable, on
the first day of the Plan Year, to employer contributions for old age,
survivors, and disability insurance under the Social Security Act.
2.31 "One-Year Break in Service" shall mean a 12-consecutive-month period
in which an Employee does not complete more than 500 Hours of Service unless the
number of Hours of Service specified in the Adoption Agreement for purposes of
determining a Year of Service is less than 501, in which case a
12-consecutive-month period in which an Employee has fewer than that number of
Hours of Service shall be a One-Year Break in Service. The computation period
over which One-Year Breaks in Service shall be measured shall be the same
computation period over which Years of Service are measured.
2.32 "Owner-Employee" shall mean an Employee who is a sole proprietor
adopting this Plan as the Employer, or who is a partner owning more than 10% of
either the capital or profits interest of a partnership adopting this Plan as
the Employer. Solely for the purposes of Section 10 hereof, Owner-Employee shall
also mean an Employee or officer who owns (or is considered as owning within the
meaning of Code Section 318(a)(1)) on any day during the Year, more than 5% of
the Employer if the Employer is an electing small business corporation.
2.33 "Participant" shall mean an Employee who is eligible to participate in
the Plan under Section 3 (other than, if this Plan is adopted as a
non-standardized plan, a Self-Employed Individual who elects not to be a
Participant in the Plan) and who has not, since becoming a Participant, died,
retired, otherwise terminated employment with the Employer or transferred from
an eligible class to a class of Employees ineligible to participate in the Plan.
2.34 "Plan" shall mean the Prototype Plan and Adoption Agreement.
2.35 "Plan Year" shall mean the fiscal year of the Employer or a different
12-consecutive-month period as specified in the Adoption Agreement.
2.36 "Prototype Plan" shall mean these Sections 1.24.
2.37 "Qualified Election" shall mean a valid waiver of a Qualified Joint
and Survivor Annuity or Qualified Preretirement Survivor Annuity, as the case
may be. To be valid, the waiver must be in writing and Participant's Spouse must
consent to it in writing. The Spouse's consent to the waiver must be witnessed
by a Plan representative or notary public and must be a limited consent to the
provision of a benefit or benefits to a specific alternate person or persons.
Notwithstanding the foregoing consent requirement, 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, a waiver will nonetheless be deemed a Qualified Election. Any consent
necessary for a Qualified Election will be valid only with respect to the Spouse
who signs the consent, or in the event of a deemed Qualified Election, the
Spouse whose consent could not be obtained or who could not be located.
Additionally, a revocation of a prior waiver may be made by a Participant
without the consent of the Spouse at any time before the commencement of
distributions or benefits. The number of revocations shall be unlimited, but
each such revocation shall once again make the Qualified Joint and Survivor
Annuity or Qualified Preretirement Survivor Annuity applicable, as the case may
be, and the spouse must consent to any subsequent waiver in accordance with the
requirements of this Section 2.37.
2.38 "Qualified Joint and Survivor Annuity" shall mean, in the case of a
married Participant, an annuity which can be purchased with the Participant's
vested Account balance for the life of the Participant with a survivor annuity
for the life of the Spouse equal to 50% of the amount of the annuity which is
payable during the joint lives of the participant and the Spouse. In the case of
an unmarried Participant, Qualified Joint and Survivor Annuity shall mean an
annuity which can be purchased with a Participant's vested Account balance for
the life of the Participant.
2.39 "Rollover Account" shall mean the separate account maintained pursuant
to Section 6.03(d) hereof for any Rollover Contributions (as described in
Section 4.03 hereof) made by the Participant and the income, expenses, gains and
losses attributable thereto.
2.40 "Rollover Contributions" shall mean contributions made to the Trust by
Participants in accordance with Section 4.03 hereof.
2.41 "Self-Employed Individual" shall mean an Employee who has Earned
Income for the taxable year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income but for the fact
that the trade or business had no Current or Accumulated Earnings and Profits
for the taxable year.
2.42 "Service" shall mean employment by the Employer and, if the Employer
is maintaining the plan of a predecessor employer, or if the Employer is not
maintaining the plan of a predecessor employer but has so elected in the manner
described in Section 2.23 above, employment by such predecessor employer.
2.43 "Social Security Wage Base" for a Plan Year means the maximum amount
of annual earnings which may be considered wages under Code Section 3121(a)(1)
as in effect on the first day of such Plan Year.
2.44 "Sponsor" shall mean any of the organizations (a) which have requested
a favorable opinion letter from the National Office of the Internal Revenue
Service for this Plan or (b) to which a favorable opinion letter for this Plan
has been issued by the National Office of the Internal Revenue Service.
2.45 "Spouse" shall mean the spouse or surviving spouse of the Participant,
provided that a former spouse will be treated as the spouse or surviving spouse
to the extent provided under a Qualified Domestic Relations Order (as described
in Section 16.02 hereinafter).
2.46 "Trust" shall mean the trust established under Section 11 of this Plan
for investment of Trust assets.
2.47 "Trust Fund" shall mean the contributions to the Trust and any assets
into which such contributions shall be invested or reinvested in accordance with
Sections 11.01 and 11.03 of this Plan.
2.48 "Trustee" shall mean the person or persons including any successor or
successors thereto, named in the Adoption Agreement to act as trustee of the
Trust and hold the Trust assets in accordance with Section 11 hereof.
2.49 "Valuation Date" shall mean the last day of each Plan Year.
2.50 "Vesting Years" shall be measured on the 12-consecutive-month period
specified in the Adoption Agreement. A Participant will have a Vesting Year
during such computation period only if the Participant completes the number of
Hours of Service selected in the Adoption Agreement for purposes of computing a
Year of Service. However, notwithstanding the preceding sentence, if the
Employer has so specified in the Adoption Agreement, a Participant who does not
receive credit for a Vesting Year under the preceding sentence will still have a
Vesting Year for each Plan Year for which the Participant shares in the
allocation of Employer contributions for the Plan Year. However, when
determining Vesting Years, unless the Employer has otherwise specified in the
Adoption Agreement, there shall be excluded: (a) if this Plan is a continuation
of an earlier plan which would have disregarded such service, Service before the
first Plan Year to which the Act is applicable; (b) Service after five
consecutive One-Year Breaks in Service (but this exclusion shall apply only for
the purpose of computing the vested percentage of Employer Contributions made
before such five-year period); (c) Service before a period of five One-Year
Breaks in Service, if the Participant has no vested interest in his Employer
Contribution Account at the time of such break and the number of consecutive
One-Year Breaks in Service equals or exceeds the number of Vesting Years
excluded by such break without counting Vesting Years excluded by an earlier
application of this provision; (d) Service before the first Plan Year in which
the Participant attained age 18; (e) Service before the Employer maintained this
Plan or a predecessor plan; and (f) Service before January 1, 1971, unless the
Participant has completed at least three Vesting Years after December 31, 1970.
For the purposes of subsection (a), service disregarded under a prior plan
includes service credits lost because of separation or failure to complete a
required period of service within a specified period of time; such lost service
credits may have resulted in the loss of prior vesting or benefit accruals, or
the denial of eligibility to participate.
2.51 "Year" shall mean the fiscal year of the Employer.
2.52 "Year of Service" shall mean a 12-consecutive-month period, beginning
on an Employee's initial date of employment or an anniversary thereof during
which the Employee completes the number of Hours of Service specified in the
Adoption Agreement. The initial date of employment is the first day on which the
Employee performs an Hour of Service.
SECTION 3.
ELIGIBILITY
3.01 Entry. Each Employee of the Employer, who on the Effective Date of
this Plan meets the conditions specified in the Adoption Agreement, shall become
eligible to participate in the Plan commending with Effective Date. Each other
Employee of the Employer, including future Employees, shall become eligible to
participate in the Plan when the eligibility requirements specified in the
Adoption Agreement are met. For the purposes of this Plan's eligibility
requirements, the exclusion concerning Employees who are covered by collective
bargaining agreements applies to individuals who are covered by a collective
bargaining contract between the Employer and Employee Representatives if
contract negotiations considered retirement benefits in good faith and unless
such contract specifically provides for participation in the Plan. For the
purposes of this Section 3.01, "Employee Representatives" shall mean the
representatives of an employee organization which engages in collective
bargaining negotiations with the Employer, provided that owners, officers and
executives of the Employer do not comprise more than 50% of the employee
organization's membership.
3.02 Interrupted Service. All Years of Service with the Employer are
counted towards eligibility except the following:
(a) If the Employer has specified in the Adoption Agreement that more
than one Year of Service is required before becoming a Participant, and if the
individual has a One-Year Break in Service before satisfying the Plan's
eligibility requirements. Service before such break will not be taken into
account.
(b) For Plan Years beginning before January 1, 1985, in the case of a
Participant who does not
<PAGE>
have any nonforfeitable right to his or her Employer Contributions, Years
of Service before a One-Year Break in Service will not be taken into
account in computing Years of Service for purposes of eligibility if the
number of consecutive One-Year Breaks in Service equals or exceeds the
aggregate number of such Years of Service before such break. Such
aggregate number of Years of Service before such break will not include any
Years of Service disregarded under this subsection (b) by reason of a prior
break in service.
(c) For Plan Years beginning after December 31, 1984, in the case of a
Participant who does not have any nonforfeitable right to his or her Employer
Contributions, Years of Service before a period of consecutive One-Year Breaks
in Service will not be taken into account in computing Years of Service for
purposes of eligibility, if the number of consecutive One-Year Breaks in Service
in such period equals or exceeds the greater of five or the Employee's aggregate
number of such Years of Service before such break. Such aggregate number of
Years of Service before such period will not include any Years of Service
disregarded under this subsection (c) by reason of a prior period of consecutive
One-Year Breaks in Service.
3.03 Reentry. If a former Participant either (a) had a nonforfeitable right
to all or a portion of his or her Employer Contribution Account at the time of
termination from Service or (b) did not have any nonforfeitable right to his or
her Employer Contribution Account but does not have Service prior to the break
in Service disregarded by operation of Section 3.02(b) or (e) hereof, such
former Participant shall become a Participant immediately upon return to the
employ of the Employer as a member of an eligible class of Employees.
3.04 Transfer to Eligible Class. In the event an Employee is not a member
of an eligible class of Employees becomes a member of an eligible class, such
Employee shall participate immediately if such Employee has satisfied the
minimum age and Service requirements and would have previously become a
Participant had he or she been a member of an eligible class through the period
of employ with the Employer.
3.05 Determination by Administrator. Eligibility shall be determined by the
Administrator and the Administrator shall notify each Employee upon his or her
admission as a Participant in the Plan.
SECTION 4.
CONTRIBUTIONS
4.01 Employer Contributions and Allocation
(a) Profit Sharing Plan. If the Employer has adopted this Plan as a
profit sharing plan, the following provisions shall apply:
(i) Contribution.
(A) Subject to Requirements of subparagraphs (B) and (C)
below, beginning in the Plan Year in which the Plan is adopted, and for each
Plan Year thereafter, the Employer will contribute the amount determined by it,
in its discretion, for the Plan Year in question.
(B) Subject to the requirements of subparagraph (C) below,
during any Plan Year in which the Employer has elected to provide Employer
thrift matching contributions in the Adoption Agreement, the Employer shall
contribute at least the aggregate amount specified in the Adoption Agreement.
(C) During a Plan Year, the aggregate Employer Contributions
made pursuant to this Section 4.01(a)(i) may not exceed the lesser of (I) the
Employer's Current or Accumulated Earnings and Profits for the Plan Year or (II)
15% (or such larger percentage as may be permitted by the Code as a current
deduction to the Employer with respect to any Plan Year) of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid to, or accrued by the Employer for,
Participants for that Plan Year plus any unused credit carryovers from previous
Plan Years. For this purpose, a "credit carryover" is the amount by which
Employer Contributions for a previous Plan Year were less than 15% of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid or accrued by the Employer to
Participants for such Plan Year, but such unused credit carryover shall in no
event permit the Employer Contributions for a Plan Year to exceed 25% (or such
larger percentage as may be permitted by the Code as a deduction to the
Employer) of the total Compensation (disregarding any exclusions from
Compensation specified by the Employer in the Adoption Agreement) paid to, or
accrued for, Participants by the Employer for the Plan Year in question.
(ii) Allocation Under Non-Integrated, Profit Sharing Plan. If the
Employer has adopted this Plan as a profit sharing plan under which allocations
shall be made on a non-integrated basis, Employer Contributions, plus any
forfeitures under Section 7.02, for a Plan Year shall be allocated according to
the provisions of this subsection (ii) as of the Valuation Date for such Plan
Year.
(A) Subject to the terms of subparagraph (B) below, unless
the Employer has specified otherwise in the Adoption Agreement, such amount
shall be allocated among the Employer Contribution Accounts of all Participants
and former Participants who were employed by the Employer during the Plan Year.
If the Employer has specified in the Adoption Agreement that a minimum number of
Hours of Service are necessary to share in the allocation of Employer
Contributions and forfeitures for a Plan Year in which the Plan is not Top
Heavy. Participants and former Participants, as the case may be, who fail to
complete the required number of Hours of Service during such a Plan Year shall
not share in the allocation. If the Employer has so specified in the Adoption
Agreement, Employer Contributions and forfeitures shall be allocated only among
otherwise entitled Participants who are employed by the Employer on such
Valuation Date. Employer Contributions and forfeitures shall be allocated to
Participants entitled to share in the allocation of Employer Contributions and
forfeitures for that Plan Year in proportion to their Compensation for such Plan
Year.
(B) Notwithstanding the provisions of subparagraph (A) above
but nonetheless subject to the provisions of Section 21.03 below, during any
Plan Year in which the Employer has elected to provide Employer thrift matching
contributions in the Adoption Agreement and the Plan is not a Top-Heavy Plan.
Employer Contributions and forfeitures shall be allocated in proportion to the
percentage of Participants' Nondeductible Voluntary Contributions as specified
in the Adoption Agreement.
(iii) Allocation Under Integrated, Profit Sharing Plan. If the
Employer has adopted this Plan as a profit sharing plan under which allocations
shall be made on an integrated basis. Employer Contributions, plus any
forfeitures under Section 7.02, for a Plan Year shall be allocated according to
the provisions of this subsection (iii) as of the Valuation Date for such Plan
Year. Unless the Employer has specified otherwise in the Adoption Agreement,
such amount shall be allocated among all Participants and former Participants
who were employed by the Employer during the Plan Year. If the Employer has
specified in the Adoption Agreement that a minimum number of Hours of Service
are necessary to share in the allocation of Employer Contributions and
forfeitures for a Plan Year in which the Plan is not Top Heavy, Participants and
former Participants, as the case may be, who fail to complete the required
number of Hours of Service during such a Plan Year shall not share in the
allocation. If the Employer has so specified in the Adoption Agreement, Employer
Contributions and forfeitures shall be allocated only among otherwise entitled
Participants who are employed by the Employer on such Valuation Date. Employer
Contributions and forfeitures shall be allocated to Participants entitled to
share in the allocation of Employer Contributions and forfeitures for that Plan
Year as follows:
(A) First, Employer Contributions and forfeitures will be
allocated to the Employer Contribution Account of each Participant entitled to
share in the allocation of such amounts in the ratio that each such
Participant's Compensation for the Plan Year in excess of the Integration Level
bears to the Compensation in excess of the Integration Level for all such
Participants, provided that the amount so credited to any such Participant's
Employer Contribution Account for the Plan Year shall not exceed the product of
the Integration Rate times the Participant's Compensation in excess of the
Integration Level.
(B) Next, any remaining Employer Contributions or
forfeitures will be allocated to the Employer Contribution Accounts of all
Participants entitled to share in the allocation of the Employer Contributions
for the Plan Year in the ratio that each such Participant's Compensation for the
Plan Year bears to all such Participants' Compensation for that Plan Year.
(b) Money Purchase Pension Plan. If the Employer has adopted this Plan
as a money purchase pension plan, the Employer will, beginning for the Plan Year
in which the Plan is adopted, and for each Plan Year thereafter, contribute, for
allocation to the Employer Contribution Account of each Participant entitled to
share in the allocation of Employer Contributions, the amount specified in the
Adoption Agreement reduced by any forfeitures arising during the preceding Plan
Year pursuant to Section 7.02 hereafter.
(i) Unless the Employer has specified otherwise in the Adoption
Agreement, the amount of the Employer Contribution shall be calculated on the
basis of the Compensation of all Participants and former Participants who were
employed by the Employer during the Plan Year. If the Employer has specified in
the Adoption Agreement that a minimum number of Hours of Service are necessary
to receive an Employer Contribution in a Plan Year in which the Plan is not Top
Heavy, Participants and former Participants, as the case may be, who fail to
complete the required number of Hours of Service during such a Plan Year shall
not be considered when calculating the amount of the Employer Contribution. If
the Employer has so specified in the Adoption Agreement, only Participants who
are employed by the Employer on such Valuation Date and who are otherwise
entitled to receive an allocation shall be considered when calculating the
amount of the Employer Contribution. Employer Contributions shall be allocated
to the Employer Contribution Accounts of only those Participants who were
included in the calculation of the amount of the Employer Contribution.
(ii) To the extent that the Employer Contribution for a Plan Year
is reduced by forfeitures, such forfeitures shall be added to such Employer
Contribution and allocated as a part thereof.
(iii) Any excess forfeitures not allocated pursuant to this
Section 4.01(b) shall be carried over to future Plan Years.
4.02 Participant Contributions. If, in the Adoption Agreement, the Employer
has specified that Participants may make either Deductible Voluntary
Contributions or Nondeductible Voluntary Contributions, or both, a Participant
may make such permitted contributions to his or her Account; provided, however,
that a Participant's right to make such contribution(s) shall be subject to the
conditions and limitations specified below.
(a) The following conditions and limitations shall apply if the
Employer has specified that Participants may make Nondeductible Voluntary
Contributions:
(i) The aggregate amount of a Participant's Nondeductible
Voluntary Contributions, plus any nondeductible voluntary contributions he or
she makes under any other qualified retirement plan maintained by the Employer,
shall not exceed 10% of his or her Compensation (disregarding any exclusions
from Compensation specified by the Employer in the Adoption Agreement) for the
period in which he or she has been a Participant in the Plan.
(ii) The aggregate amount of a Participant's Nondeductible
Voluntary Contributions shall not cause the Annual Addition (as defined in
Section 5.05(a) hereof) to his or her Account to exceed the limitations set
forth in Section 5.
(iii) A Participant's Nondeductible Voluntary Contributions shall
be allocated to his or her Nondeductible Voluntary Contribution Account under
Section 6.03 hereof.
(iv) A Participant's Nondeductible Voluntary Contribution Account
shall be nonforfeitable and the Participant may withdraw all or a portion of his
or her Nondeductible Voluntary Contribution Account upon 30 days' written notice
to the Administrator.
(b) The following conditions and limitations shall apply if the
Employer has specified that the Participants may made Deductible Voluntary
Contributions:
(i) The aggregate amount of a Participant's Deductible Voluntary
Contributions in any calendar year may not exceed the lesser of (1) $2,000 or
(2) the Participant's compensation for calendar year for which the contribution
is made. Compensation for this purpose means all wages, salaries, earned income
and other amounts received or derived from
<PAGE>
personal services actually rendered and includible in gross income, but does not
include amounts derived from or received as earnings or profits from property or
amounts received as a pension or annuity or as deferred compensation. This
limitation applies to all the Participant's Deductible Voluntary Contributions
made for the calendar year to all qualified retirement plans maintained by the
Employer. The Administrator shall not accept any contributions in excess of this
limitation.
(ii) A Participant may not make Deductible Voluntary
Contributions for the calendar year in which he or she attains age 70-1/2 or any
calendar year thereafter.
(iii) A Deductible Voluntary Contribution will be considered
contributed for the calendar year in which it is actually made. However, if a
Participant makes a Deductible Voluntary Contribution on or before April 15, he
or she may notify the Administrator at the time the Deductible Voluntary
Contribution is made that it is made for the preceding calendar year. A
Deductible Voluntary Contribution may only be made for a calendar year in which
the Employee was a Participant, and in no event may a Deductible Voluntary
Contribution be made by an Employee after he or she has ceased to be a
Participant.
(iv) All Participant Contributions will be considered to be
Deductible Voluntary Contributions, unless the Employer has elected in the
Adoption Agreement to allow Nondeductible Voluntary Contributions and the
Participant designates before April 15 of the calendar year following the
calendar year in which the contribution was made that the contribution was a
Nondeductible Voluntary Contribution. In such a case, the contribution will be
considered to have been a Nondeductible Voluntary Contribution made during the
calendar year in which it was contributed.
(v) A Participant's Deductible Voluntary Contributions must be in
cash and shall be allocated to his or her Deductible Voluntary Contribution
Account under Section 6.03 hereof.
(vi) A Participant's right to his or her Deductible Voluntary
Contribution Account shall be nonforfeitable and the Participant may withdraw
all or a portion of his or her Deductible Voluntary Contribution Account upon
written application to the Administrator. However, if at the time the
Participant receives the withdrawal, he or she has not attained age 59-1/2 and
is not disabled, the Participant will be subject to a federal income tax penalty
unless, within 60 days of the date he or she receives it, he or she rolls over
the amount withdrawn to an individual retirement plan or, if the Participant can
satisfy the requirement contained in section 4.03(b) below, a qualified
retirement plan.
(vii) The Administrator may, in its discretion, accept
accumulated deductible employee contributions (as defined in Code Section
72(o)(5)) that were distributed from a qualified retirement plan and rolled over
pursuant to Code Sections 402(a)(5), 402(a)(7), 403(a)(4), or 408(d)(3). The
rolled over amount will be added to the Participant's Deductible Voluntary
Contribution Account, but will not be taken into account in applying the
restrictions specified in Section 4.02(b)(i) and (ii) above. In no case may the
Administrator authorize the Plan to accept rollovers of accumulated deductible
employee contributions from a qualified plan to which a contribution was made
for the Participant while the plan was a Top-Heavy Plan (as defined in Section
21.02(b) hereof and applied to such other plan) and the Participant was a Key
Employee (as defined in Section 21.02(a) hereof and applied to such other
employer).
4.03 Rollover Contributions. The Administrator may, in its discretion,
direct the Trustee to accept a Rollover Contribution upon the express request of
the Participant wishing to make such Rollover Contribution, the same to be held,
administered and distributed by the Trustee in accordance with the terms of this
Plan, provided that the Trustee consents if the contribution includes property
other than cash. A Rollover Contribution shall only be a contribution, comprised
of money and/or property, which is a "rollover amount" within the meaning of
Code Section 402(a)(5) or a "rollover contribution" within the meaning of Code
Section 408(d)(3)(A)(ii) (as modified by Code Section 408(d)(3)(C)) with respect
to which both of the following conditions are met:
(a) The transfer of such amount is being made within 60 days of its
receipt by the Participant and
(b) No part of such amount is attributable to contributions made on
behalf of the Participant while he or she was a Key Employee (as defined in
Section 21.02(a) and applied to such other employer) in a Top-Heavy Plan (as
defined in Section 21.02(b) and applied to such other plan).
All Rollover Contributions made under this Section 4.03 must be accepted by
the Trustee within the 60-day period referred to in paragraph (a) above. A
Participant's Rollover Contribution shall at no time be included in the
computation of the maximum allocation to a Participant's Account as set forth in
Section 5 hereof. Each Rollover Contribution made by a Participant shall be
allocated to his or her Rollover Account pursuant to Section 6.03(d) hereof.
Such Rollover Account shall be invested by the Trustee as part of the Trust
Fund, pursuant to Section 11 hereafter, except as it may be held in kind as
permitted above. A Participant may withdraw all or a portion of his or her
Rollover Account upon 30 days' written notice to the Administrator. However, if
the Participant is, or has been, a 5-percent owner (as defined in Code Section
416(i)(1)(B)(i)) and at the time of the withdrawal, he or she has not attained
age 59-1/2 and is not disabled, the Participant will be subject to a federal
income tax penalty unless, within 60 days of the date he or she receives it, he
or she rolls the amount withdrawn to an individual retirement plan or, if the
Participant can satisfy the requirement contained in subsection (b) above, a
qualified retirement plan.
4.04 Transfers from other Qualified Plans. The Administrator may, in its
discretion, direct the Trustee to accept the transfer of any assets held for the
Participant's benefit under a qualified retirement plan of a former employer of
such Participant. Such a transfer shall be made directly between the trustee or
custodian of the former employer's plan and the Trustee in the form of cash or
its equivalent, and shall be accompanied by written instruction showing
separately the portion of the transfer attributable to contributions by the
former employer and by the Participant respectively. Separate written
instructions delivered to the Administrator shall identify the portion of the
transferred funds, if any, attributable to any period during which the
Participant participated in a defined benefit plan, money purchase pension plan
(including a target benefit plan), stock bonus plan or profit sharing plan which
would otherwise have provided a life annuity form of payment to the Participant.
The Administrator shall be entitled to rely on all inclusions and commissions in
such written instructions with respect to character of the transferred funds. To
the extent that the amount transferred is attributable to contributions by the
former employer, it shall be maintained in a separate transfer account. To the
extent that the amount transferred is attributable to contributions by the
Participant, it shall be maintained in the Participant's Nondeductible Voluntary
Contribution Account or Deductible Voluntary Contribution Account as is
appropriate.
SECTION 5.
CODE SECTION 415
LIMITATIONS ON ALLOCATIONS
5.01 Employers Maintaining No Other Plan.
(a) If a Participant does not participate in, and has never
participated in another qualified plan or a welfare benefit fund (as defined in
Code Section 419(e)) maintaned by the Employer, the amount of the Annual
Addition which may be credited to the Participant's Account for any Limitation
Year shall not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in the Plan.
(b) If the Employer Contribution that would otherwide be allocated to
a Participant's Account would cause the Annual Addition for the Limitation Year
to exceed the Maximum Permissible Amount, the amount allocated will be reduced
so that any Excess Amount shall be eliminated and, consequently, the Annual
Addition for the Limitation Year will equal the Maximum Permissible Amount.
(i) Prior to determining the Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum Permissible
Amount for a Participant on the basis of a reasonable estimation of the
Participant's Compensation for the Limitation Year, uniformly determined for all
Participants similarly situated.
(ii) As soon as is administratively feasible after the end of
each Limitation Year, the Maximum Permissible Amount for the Limitation Year
will be determined on the basis of Participants' actual Compensation for the
Limitation Year.
(c) Any Excess Amount shall be eliminated pursuant to the following
procedure:
(i) The portion of the Excess Amount consisting of Nondeductible
Voluntary Contributions which are a part of the Annual Addition (as defined in
Section 5.05(a)) shall be returned to the Participant as soon as
administratively feasible;
(ii) If after the application of subparagraph (i) an Excess
Amount still exists and the Participant is covered by the Plan at the end of the
Limitation Year, the Excess Amount in the Participant's Account will be used to
reduce Employer Contributions (including any allocation of forfeitures) for such
Participant in the next Limitation Year, and each succeeding Limitation Year if
necessary.
(iii) If after the application of subparagraph (i) an Excess
Amount still exists and the Participant is not covered by the Plan at the end of
the Limitation Year, the Excess Amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce proportionally future
Employer Contributions (including any allocation of forfeitures) for all
remaining Participants in the next Limitation Year, and each succeeding
Limitation Year, if necessary. If a suspense account is in existence at any time
during the Limitation Year pursuant to this subparagraph, it will not
participate in the allocation of the Trust's investment gains and losses. In the
event of termination of the Plan, the suspense account shall revert to the
Employer to the extent it may not then be allocated to any Participant's
Account.
(d) Notwithstanding any other provision in subsections (a) through
(c), the Employer shall not contribute any amount that would cause an allocation
to the suspense account as of the date the contribution is allocated.
5.02 Employers Maintaining Other Master or Prototype Defined Contribution
Plans
(a) This Section 5.02 applies if, in addition to this Plan, a
Participant is covered under another qualified Master or Prototype defined
contribution plan or a welfare benefit fund (as defined in Code Section 419(e))
maintained by the Employer during any Limitation Year. The Annual Addition which
may be allocated to any Participant's Account for any such Limitation Year shall
not exceed the Maximum Permissible Amount, reduced by the sum of any portion of
the Annual Addition credited to the Participant's account under such other plans
and welfare benefit funds for the same Limitation Year.
(b) If the Annual Addition with respect to a Participant under other
defined contribution plans and welfare benefit funds maintained by the Employer
of what would be portions of the Annual Addition (if the allocations were made
under the Plan) 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 Addition for the
Limitation Year to exceed this limitation, the amount contributed or allocated
will be reduced so that the Annual Addition under all such plans and funds for
the Limitation Year will equal the Maximum Permissible Amount.
(c) If the Annual Addition with respect to the Participant under such
other defined contribution plans and welfare benefit funds in the aggregate are
equal to or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for the
Limitation Year.
(d) If an Excess Amount was allocated to a Participant under this Plan
on a date which coincides with the date an allocation was made under another
plan, the Excess Amount attributed to this Plan will be the product of,
(i) The total Excess Amount allocated as of such date, multiplied
by
(ii) the quotient obtained by dividing
(A) the portion of the Annual Addition allocated to the
Participant for the Limitation Year as of such date by
(B) the total Annual Addition allocations to the Participant
for the Limitation Year as of such date under this and all other qualified
Master or Prototype defined contribution plans maintained by the Employer.
(e) Any Excess Amount attributed to the Plan will be disposed in the
manner described in Section 5.01.
<PAGE>
5.03 Employers Maintaining Other Defined Contribution Plans. If a
Participant is covered under another qualified defined contribution plan which
is not a Master or Prototype plan, the Annual Addition credited to the
Participant's Account under this Plan for any Limitation Year will be limited in
accordance with the provisions of Section 5.02 as though the plan were a Master
or Prototype Plan, unless the Employer provides other limitations pursuant to
the Adoption Agreement.
5.04 Employers Maintaining Defined Benefit Plans. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan covering
any Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Addition which may be credited to the Participant's
Account under this Plan for any Limitation Year will be limited in accordance
with the provisions of Section 5.02, unless the Employer provides other
limitations pursuant to the Adoption Agreement.
5.05 Definitions. For purposes of this Section 5, the following terms shall
be defined as follows:
(a) Annual Addition. With respect to any Participant, the "Annual
Addition" shall be the sum of the following amounts credited to a Participant's
Account for the Limitation Year:
(i) Employer Contributions;
(ii) forfeitures; and
(iii) the lesser of
(A) one-half (1/2) the allocated Nondeductible Voluntary
Contributions or
(B) the amount of allocated Nondeductible Voluntary
Contributions in excess of 6% of the Participant's Compensation for the
Limitation Year.
Any Excess Amount applied under Section 5.01(c)(ii) or (iii) or Section
5.02(e) in a Limitation Year to reduce Employer Contributions will be considered
part of the Annual Addition for such Limitation Year. Amounts allocated, after
March 31, 1984, to an individual medical account (as defined in Code Section
415(l)(1)) which is part of a defined benefit plan maintained by the Employer,
are treated as part of the Annual Addition. Also, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee (as defined in Section
21.02(a) hereof) under a welfare benefit fund (as defined in Code Section
419(e)) maintained by the Employer, are treated as part of the Annual Addition.
(b) Compensation. For the purposes of this Section 5, a Participant's
"Compensation" shall include any earned income, wages, salaries, and fees for
professional services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the Plan
(including, but not limited to commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation
which are not includible in the Participant's gross income for the taxable year
in which contributed, or Employer contributions under a simplified employee
pension plan to the extent such contributions are deductible by the Participant,
or any distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified stock
option, or when restricted 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 received special tax benefits, or
contributions made by the Employer (whether or not under a salary-reduction
agreement) towards the purchase of an annuity described in Code Section 403(b)
(whether or not the amounts are actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this Section 5, Compensation
for a Limitation Year is the Compensation actually paid or includible in gross
income during such year.
Notwithstanding the preceding sentence, Compensation for a Participant in a
profit sharing plan who is permanently and totally disabled (as defined in Code
Section 22(e)(3)) is the Compensation such Participant would have received for
the Limitation Year if the Participant was paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such imputed
compensation for the disabled Participant may be taken into account only if the
Participant is not an officer, an owner, or highly compensated, and
contributions made on behalf of such a Participant are nonforfeitable when made.
(c) Defined Benefit Fraction. The "Defined Benefit Fraction" shall be
a fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125%
of the dollar limitation in effect for the Limitation Year under Code Section
415(b)(1)(A) or 140% of the Participant's Highest Average Compensation.
Notwithstanding the above, if the Participant was a participant in one or
more defined benefit plans maintained by the Employer which were in existence on
July 11, 1982, the denominator of this fraction will not be less than 125% of
the sum of the annual benefits under such plans which the Participant had
accrued as of the later of the end of the last Limitation Year beginning before
January 1, 1983. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the requirements of Code
Section 415 as in effect at the end of the 1982 Limitation Year. For purposes of
this paragraph, a Master or Prototype plan with an opinion letter issued before
January 1, 1983, which was adopted by the Employer on or before June 30, 1983,
is treated as a plan in existence on July 1, 1982.
(d) Defined Contribution Fraction. The "Defined Contribution Fraction"
shall be a fraction, the numerator of which is the sum of the Annual Additions
to the Participant's account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
Limitation Years, (including the Annual Additions attributable to the
Participant's nondeductible employee contributions to all defined benefit plans,
whether or not terminated, maintained by the Employer, and the Annual Additions
attributable to all welfare benefit funds (as defined in Code Section 419(e))),
and the denominator of which is the sum of the Maximum Aggregate Amounts for the
current and all prior Limitation Years of service with the Employer (regardless
of whether a defined contribution plan was maintained by the Employer). The
Maximum Aggregate Amount in any Limitation Year is the lesser of 125% of the
dollar limitation in effect under Code Section 415(c)(1)(A) or 35% of the
Participant's Compensation for such year.
If a Participant was a participant in one or more defined contribution
plans maintained by the Employer which were in existence on July 1, 1982, the
numerator of this fraction will be adjusted if the sum of this Defined
Contribution Fraction and the Defined Benefit Fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment, an amount equal to the
product of
(i) The excess of the sum of the fractions over 1.0, multiplied
by
(ii) the denominator of this Defined Contribution Fraction.
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the later of the end of the last Limitation Year beginning before
January 1, 1983 or September 30, 1983. This adjustment also will be made
if at the end of the last Limitation Year beginning before January 1, 1984,
the sum of the fractions exceeds 1.0 because of the accruals or additions
that were made before the limitations of this Section 5 became effective to
any plans of the Employer in existence on July 1, 1982. For purposes of
this paragraph, a Master or Prototype plan with an opinion letter issued
before January 1, 1983, which is adopted by the Employer on or before
September 30, 1983, is treated as a plan in existence on July 1, 1982.
(e) Employer. "Employer" means the Employer that adopts this Plan and
all members of (i) a controlled group of corporations (as defined in Code
Section 414(b) as modified by Code Section 415(h)), (ii) commonly controlled
trades or businesses (whether or not incorporated) (as defined in Code Section
414(c) as modified by Code Section 415(h)), or (iii) affiliated service groups
(as defined in Code Section 414(m)) or which the Employer is a part.
(f) Excess Amount. The "Excess Amount" is the excess of what would
otherwise by a Participant's Annual Addition for the Limitation Year over the
Maximum Permissible Amount. If at the end of a Limitation Year when the Maximum
Permissible Amount is determined on the basis of the Participant's actual
Compensation for the year, an Excess Amount results, the Excess Amount will be
deemed to consist of the portion of the Annual Addition last allocated, except
that the portion of the Annual Addition attributable to a welfare benefit fund
will be deemed to have been allocated first regardless of the actual allocation
date.
(g) Highest Average Compensation. A Participant's "Highest Average
Compensation" is his or her average Compensation for the three consecutive Years
of Service with the Employer that produces the highest average. A Year of
Service with the Employer is the 12-consecutive-month period defined in Section
2.52 of the Plan.
(h) Limitation Year. A "Limitation Year" is the Plan Year or any other
12-consecutive-month period specified by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-consecutive-month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
(i) Master or Prototype Plan. A "Master or Prototype" plan is a plan
the form of which is the subject of a favorable opinion letter from the Internal
Revenue Service.
(j) Maximum Permissible Amount. For a Limitation Year, the "Maximum
Permissible Amount" with respect to any Participant shall be the lesser of
(i) $30,000 (or beginning January 1, 1988, such larger amount
determined by the Commissioner of Internal Revenue for the Limitation Year) or
(ii) 25% of the Participant's Compensation for the Limitation
Year.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive-month period, the Maximum
Permissible Amount will not exceed the quotient determined by first multiplying
$30,000 by the number of months in the short Limitation Year and then dividing
the product by 12.
(k) Projected Annual Benefit. The "Project Annual Benefit" is the
annual retirement benefit (adjusted to an actuarilly equivalent straight life
annuity if such benefit is expressed in a form other than a straight life
annuity or qualified joint and survivor annuity) to which the Participant would
be entitled under the terms of the plan assuming:
(i) the Participant will continue employment until normal
retirement date 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.
SECTION 6.
TIME AND MANNER OF MAKING
CONTRIBUTIONS
6.01 Manner. Unless otherwise agreed to by the Trustee, contributions to
said Trustee shall be made only in cash. All contributions may be made in one or
more installments.
6.02 Time. Employer Contributions and Participant Contributions with
respect to a Plan Year shall be made before the time limit, including extensions
thereof, for filing the Employer's federal income tax returns for the Year with
or within which the particular Plan Year ends (or such later time as is
permitted by regulations authorized by the Secretary of the Treasury or
delegate). Rollover Contributions may be made at any time acceptable to the
Administrator in accordance with Section 4.0 hereof. All contributions shall be
paid to the Administrator for transfer to the Trustee, as soon as possible, or,
if acceptable to the Administrator and the Trustee, such contributions may be
paid directly to the Trustee. The Administrator shall transfer such
contributions to the Trustee as soon as possible. The
<PAGE>
Administrator may establish a payroll deduction system or other procedure to
assist the making of Participant Contributions to the Trust, and the
Administrator may from time to time adopt rules or policies governing the manner
in which such contributions may be made so that the Plan may be conveniently
administered.
6.03. Separate Accounts. For each Participant, a separate account shall be
maintained for each of the following types of contributions and the income,
expenses, gains and losses attributable thereto:
(a) Employer Contributions;
(b) Nondeductible Voluntary Contributions, if selected in the Adoption
Agreement;
(c) Deductible Voluntary Contributions, if selected in the Adoption
Agreement;
(d) Rollover Contributions, if, pursuant to Section 4.03 hereof, the
Administrator directs the Trustee to accept such contributions; and
(e) funds directly or indirectly transferred from another qualified
retirement plan pursuant to Section 4.04 hereof, if the Administrator directs
the Trustee to accept such transfers.
In addition, pursuant to Section 7.02(d) and (f) hereof, separate accounts
will be maintained for the pre-break and postbreak Employer Contributions made
on behalf of a Participant who has Service excluded from the calculations of
Vesting Years pursuant to Section 2.50(b) or (c). Notwithstanding the above, if
a Participant's rights to Employer Contributions are immediately and fully
nonforfeitable, Employer Contributions allocated on behalf of such Participant
and his or her Nondeductible Voluntary Contributions may be maintained in a
single account.
SECTION 7.
VESTING
7.01 When Vested. A Participant shall always have a fully vested and
nonforfeitable interest in his or her Nondeductible Voluntary Contribution
Account, Deductible Voluntary Contribution Account and Rollover Account, and any
transfer account established pursuant to Section 4.04 hereof on his or her
behalf. A Participant's interest in his or her Employer Contribution Account
shall be vested and nonforfeitable at Normal Retirement Date, death, Disability,
upon termination (including a complete discontinuance of Employer Contributions)
or partial termination of the Plan and otherwise only to the extent specified in
the Adoption Agreement.
7.02 Forfeitures. If a Participant's employment with the Employer is
terminated before his or her Employer Contribution Account is fully vested in
accordance with Section 7.01 hereof, this Section 7.02 shall apply.
(a) If the Participant completes a period of five consecutive One-Year
Breaks in Service before returning to employment with the Employer, dying or
becoming disabled, the portion of the Participant's Employer Contribution
Account which was not vested at the time of his or her termination shall be
forfeited and
(i) if this Plan is adopted as a profit sharing plan, allocated
exclusively as of the next Valuation Date in the same manner, and to the same
Participants' Employer Contribution Accounts as the Employer Contribution for
that Plan Year is allocated pursuant to Section 4.01 hereof, or
(ii) if this Plan is adopted as a money purchase pension plan,
applied exclusively to reduce the Employer Contributions for the next Plan Year.
(b) No forfeitures shall occur solely as a result of withdrawal of
Deductible Voluntary Contributions, Nondeductible Voluntary Contributions,
Rollover Contributions or amounts held in a transfer account.
(c) Following a forfeiture, the Participant shall be fully vested in
all funds which remain in his or her Employer Contribution Account immediately
after the forfeiture and in all Trust earnings subsequently attributed to such
funds.
(d) If the Participant is reemployed by the Employer after he or she
completes five consecutive One-Year Breaks in Service, an additional Employer
Contribution Account shall be maintained on the Participant's behalf; provided
that, at a subsequent time, the Trustee shall have the discretionary authority
to combine any number of Employer Contribution Accounts maintained for a
Participant, so long as the Participant is 100% vested in each combined account.
All subsequent Employer Contributions made on the Participant's behalf shall be
credited to the Employer Contribution Account which was established at the time
of his or her return to employment with the Employer. The extent to which the
Participant is vested in any additional Employer Contribution Accounts
established on his or her behalf shall be determined independently of any
determination of the extent to which the Participant is vested in any previously
established Employer Contribution Account(s); all such determinations shall be
made in accordance with the provisions in Section 2.50 above.
(e) If the Participant has received a distribution from his or her
Employer Contribution Account pursuant to Section 9 hereof and if the
Participant is reemployed by the Employer before he or she completes five
consecutive One-Year Breaks in Service, the portion of the Employer Contribution
Account which is then vested shall be determined by adding to the then value of
the Employer Contribution Account, the amount, if any, previously distributed
and not repaid to the Trust, applying the vesting percentage then applicable,
and then subtracting the amount previously distributed and not repaid to the
Trust.
(f) Each Employer Contribution Account established pursuant to
subsection (d) hereof (or such Employer Contribution Account into which the
Trustee has combined the accounts pursuant to all powers granted to it in
subsection (d) hereof) shall be credited with its proportionate share of Trust
earnings and losses. For the purposes of the remaining Sections of this Plan,
all Employer Contribution Accounts established in the name of a Participant
shall be treated as a single account.
SECTION 8.
DISTRIBUTION UPON DEATH
8.01 Qualified Preretirement Survivor Annuity. If this Plan is adopted as a
money purchase pension plan, unless an optional form of distribution has been
selected within the Election Period pursuant to a Qualified Election, if a
Participant's Service terminates because of death before distributions have
commenced, then the Trustee shall, upon the direction of the Administrator,
apply 50% of the Participant's vested Account balance toward the purchase of an
annuity contract for the life of the Spouse.
8.02 Other Distributions at Death. If the Participant dies after he or she
has begun to receive distributions pursuant to Section 9.01 or 9.03(b), this
Section 8.02 shall apply with respect to the Participant's entire Account. With
respect to any Account, or portion thereof, to which Section 8.01 did not apply,
if the Participant dies before he or she has begun to receive distributions
pursuant to Sections 9.01 and 9.03(b), this Section 8.02 shall apply with
respect to such Account, or portion thereof. With respect to a portion of the
Participant's Account to which Section 8.01 did apply, if the Participant made a
Qualified Election within the Election Period not to receive a Qualified
Preretirement Survivor Annuity at his or her death and the Participant's Service
terminates because of death before distributions have commenced, this Section
8.02 shall apply with respect to such portion of the Participant's Account.
(a) With respect to any Account of portion thereof to which this
Section 8.02 applies the Trustee shall, at the direction of the Administrator,
distribute the Participant's Account in accordance with the provisions of this
Section 8.02. The Administrator's direction shall include notification of the
Participant's or Beneficiary's death and the existence or non-existence of a
surviving spouse.
(b) If the Participant has validly named a Beneficiary or
Beneficiaries in the most recent Designation of Beneficiary form filed with
Trustee before the Participant's death in compliance with Section 15, his or her
Account shall be distributed to the Beneficiary or Beneficiaries so named. To
the extent that any portion of an Account of a deceased Participant is not
governed by an effective Designation of Beneficiary form which names at least
one living Beneficiary, that portion of the Account shall be distributed to the
deceased Participant's Spouse or if that is not possible, to the estate of the
deceased Participant.
(c) If the Participant has validly elected a manner of distribution
with respect to his or her Account, his or her Account shall be distributed in
accordance with such election. With respect to any portion of a deceased
Participant's Account for which the Participant has not validly elected a manner
of distribution, distribution shall be made in such manner as the Participant's
Beneficiary (or Beneficiaries) may elect, or in the absence of such an election,
in a lump sum.
(d) Distribution to the Participant's Beneficiary shall be made
according to the following provisions:
(i) If the Participant dies before benefits commence and during a
Plan Year which began after December 31, 1984, and if the Spouse is not the
Beneficiary, the Participant's entire Account balance must be distributed to the
Participant's Beneficiary either (A) within five years after the Participant's
death, or (B) in substantially equal annual or more frequent installments over a
period not exceeding the life expectancy of the Beneficiary (as determined as of
the date of the Participant's death by using the return multiples contained in
section 1.72-9 of the Treasury Regulations) provided that such distributions
commence within one year after the Participant's death.
(ii) If the Participant dies before benefits commence and during
a Plan Year which begins after December 31, 1984, and if the Spouse is the
Beneficiary, the Participant's entire Account balance must be distributed to the
Participant's Spouse either (A) within five years after the Participant's death,
or (B) in substantially annual or more frequent installments over a period not
longer than the Spouse's life expectancy (as determined as of the time
distribution is commenced and recalculated annually, by using the return
multiples contained in section 1.72-9 of the Treasury Regulations) provided that
such distribution is commenced on or before the later of the date on which the
Participant would have attained age 70-1/2 or one year after the Participant's
death.
(iii) If distributions have commenced to the Participant before
the Participant's death, distributions to the Participant's Spouse, Beneficiary
or estate shall continue over a period at least as rapid as the period selected
by the Participant.
(e) If a Participant's Beneficiary dies after the Participant and
before he or she receives full payment of the portion of the Participant's
Account balance to which he or she is entitled, the Trustee shall, upon
direction of the Administrator, distribute the funds to which the deceased
Beneficiary is entitled to the beneficiary or beneficiaries validly named on the
most recent designation of beneficiary form filed by the Beneficiary with the
Trustee before the Beneficiary's death. To the extent that any portion of the
funds to which the deceased Beneficiary was entitled are not governed by an
effective designation of beneficiary, the funds shall be distributed to the
deceased Beneficiary's surviving spouse, or if that is not possible, to the
estate of the deceased Beneficiary. The Administrator's direction shall include
notification of the Beneficiary's death and the existence or non-existence of a
surviving spouse.
(i) If distributions had commenced before the Participant's
death, distribution to the beneficiary of a deceased Beneficiary shall continue
over a period at least as rapid as the period selected by the Participant.
(ii) If the deceased Beneficiary was the surviving Spouse of the
Participant and the deceased Beneficiary had not begun to receive distributions
from the Participant's Account at the time of his or her death, the
Participant's Account shall be distributed to the deceased Beneficiary's
beneficiary according to the provisions of this Section 8.02 applied as if the
Beneficiary were the Participant. In addition, the surviving spouse's
beneficiaries shall be treated as Beneficiaries during any future application
of this Section 8.02.
(iii) If neither subparagraph (i) nor (ii) above apply, the
Participant's Account shall be distributed to the deceased Beneficiary's
beneficiary either (A) within five years after the Participant's death, or (B)
in substantially equal annual or more frequent installments over the remainder
of the life expectancy of the Beneficiary as that life expectancy was determined
at the Participant's death (by using the return multiples contained in section
1.72-9 of the Treasury Regulations) provided that distributions commence (or
commenced) within one year of the Participant's death.
(f) If a beneficiary of a Beneficiary (or a beneficiary) dies before
he or she has received full payment of the portion of the Participant's Account
balance to which he or she is entitled, the Trustee shall, after notification by
the Administrator of the beneficiary's death, distribute the funds to which the
deceased beneficiary is entitled to the beneficiary or beneficiaries validly
<PAGE>
named on the most recent designation of beneficiary form filed by the deceased
beneficiary with the Trustee before the beneficiary's death. To the extent that
any portion of the funds to which the deceased beneficiary was entitled are not
governed by an effective designation of beneficiary, the funds shall be
distributed to the deceased beneficiary's surviving spouse, or if that is not
possible, to the estate of the deceased beneficiary.
(i) If distributions had commenced before the Participant's
Death, distribution to the beneficiary of a deceased Beneficiary shall continue
over a period at least as rapid as that selected by the Participant.
(ii) In all other cases, the Participant's Account shall be
distributed to the deceased beneficiary's beneficiary either (A) within five
years after the Participant's death, or (B) in substantially equal annual or
more frequent installments over the remainder of the life expectancy of the
Beneficiary as that life expectancy was determined at the Participant's death
(by using the return multiples contained in section 1.72-9 of the Treasury
Regulations) provided that distributions commence (or commenced) within one year
of the Participant's death.
8.03 Children as Beneficiaries. For the purposes of Section 8.02, any
distribution paid to a Participant's child shall be treated as paid to the
Participant's surviving Spouse if such amount becomes payable to the surviving
Spouse when the child reaches the age of maturity.
SECTION 9
OTHER DISTRIBUTIONS
9.01 Distribution in Plan Years Beginning Before January 1, 1985. During
any Plan Year which begins before January 1, 1985, the Account of any
Participant to which Section 8 does not apply, to the extent it is vested
pursuant to Section 7.01 hereof, will be distributed in accordance with the
terms of this Section 9.01.
(a) A Participant's Account will normally be distributed in monthly
installments which must commence at or within 60 days after the end of the Plan
Year in which occurs his or her Normal Retirement Date or in which his or her
Service ceases, whichever is later, to continue over a period of 120 months;
provided, however, that in the case of a Participant who is an Owner-Employee,
monthly installments to such a Participant must commence no later than the last
day of the Participant's taxable year in which such Participant attains age 70-
1/2. The monthly amount shall normally be the vested balance of the
Participant's Account divided by the remaining number of months in such 120
months, all rounded to the nearest cent. However, the amount of each monthly
installment may be recomputed and adjusted from time to time no more frequently
than monthly as the Trustee may reasonably determine.
(b) All Participants may request and the Administrator shall have the
discretionary power to approve, subject to the requirements stated in this Plan,
any of the following variations from the normal pattern of distribution:
(i) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's attainment of age 59-1/2,
Disability, or separation from Service, if this Plan is adopted as a profit
sharing plan.
(ii) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's Disability or separation
from Service, if this Plan is adopted as a money purchase pension plan.
(iii) Distributions made or commencing after the normal time of
distribution described in Section 9.01(a); provided, however, that any such
deferred distribution must commence no later than the last day of the
Participant's taxable year in which the Participant attains age 70-1/2.
(iv) Distribution of the Participant's entire Account at one
time.
(v) Installment payments of a fixed amount, such payments to be
made until exhaustion of the Participant's Account.
(vi) Distribution in kind.
(vii) Any reasonable combination of the foregoing or any
reasonable time or manner of distribution within the above-stated limitations.
9.02 Timing of Annuity Payments and Normal Distributions in Plan Years
Beginning After December 31, 1984. Payment of benefits under the Qualified
Joint and Survivor Annuity or distributions pursuant to the normal form of
distribution discussed in Section 9.03(b), shall commence after the Participant
attains his or her Normal Retirement Date and on or before the earlier of 60
days after the close of the Plan Year, or the first April 1 after the calendar
year, in which occurs the Participant's Normal Retirement Date or in which his
or her employment ceases, whichever is later; provided, however, that in the
case of a Participant who is a 5-percent owner of the Employer (as defined in
Code Section 416(i)(1)(B)(i)), payment of benefits or monthly installments to
such a Participant must commence on or before the first April 1 after the
calendar year in which such Participant attains age 70-1/2. In the case of a
Participant who becomes a 5-percent owner of the Employer (as defined in Code
Section 416(i)(1)(B)(i)) after attaining age 70-1/2 but before termination of
employment, and during a Plan Year which began after December 31, 1984, payment
of benefits or monthly installments to such Participant must begin on or before
the first April 1 after the calendar year in which Participant becomes a 5-
percent owner.
9.03 Form of Distribution in Plan Years Beginning after December 31, 1984.
During any Plan Year which begins after December 31, 1984, the Account of a
Participant to which Section 8 does not apply, shall be distributed in a form
according to this Section 9.03.
(a) If this Plan is adopted as a money purchase pension plan, unless
the Participant elects an optional form of distribution pursuant to a Qualified
Election within 90 days before the date on which distributions under this
Section 9 would commence, a Participant's Account shall be paid in the form of a
Qualified Joint and Survivor Annuity.
(b) If the Participant was eligible to receive a Qualified Joint and
Survivor Annuity and he or she elects an optional form of distribution pursuant
to a Qualified Election within 90 days before the date on which distributions
under this Section 9 would commence or if this Plan is adopted as a profit
sharing plan and Section 9.03(a) does not apply to the Participant, a
Participant's Account will normally be distributed in monthly installments over
a period equal to the shorter of 120 months or the joint life and last survivor
expectancy of the Participant and his or her spouse (as calculated by using the
return multiples specified in Section 1.72-9 of the Treasury Regulations at the
time of the first distribution). The monthly account shall normally be the
balance of the Participant's Account divided by the remaining number of months
in such period, all rounded to the nearest cent. However, the amount of each
monthly installment may be recomputed and adjusted from time to time no more
frequently than monthly as the Trustee may reasonably determine.
(c) If this Plan is adopted as a money purchase pension plan and the
Participant elects an optional form of distribution pursuant to Qualified
Election within 90 days before the date on which distributions under this
Section 9 will commence and such optional form of distribution is not the normal
form of distribution discussed in subsection (b) or if this Plan is adopted as a
profit sharing plan and the Participant makes a written election to receive an
optional form of distribution, the Administrator shall have the discretion to
approve or disapprove such form of distribution. Pursuant to this Section
9.03(c), the Administrator shall have the discretion to approve of the following
variation from the normal pattern of distribution, provided that the
distribution shall otherwise comply with the requirements of this Plan:
(i) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's attainment of age 59-1/2,
Disability, or separation from Service, if this Plan is adopted as a profit
sharing plan.
(ii) Distributions made or commencing before the Participant's
Normal Retirement Date and following the Participant's Disability or separation
from Service, if this Plan is adopted as a money purchase pension plan.
(iii) Distributions made or commencing after the normal time of
distribution described in Section 9.02; provided, however, that any such
deferred distribution must commence no later than the first April 1 after the
calendar year in which the Participant attains age 70-1/2.
(iv) Distribution of the Participant's entire vested Account
balance at one time, provided that the Participant requests such distribution in
writing.
(v) Installment payments of a fixed amount, such payments to be
made until exhaustion of the Participant's Account.
(vi) Distribution in kind.
(vii) Any reasonable combination of the foregoing or any
reasonable time or manner of distribution within the above-stated limitations.
Notwithstanding the above, if this Plan is adopted as a money purchase
pension plan and a married Participant's vested Account Balance (exclusive of
the Participant's Rollover Account and Deductible Voluntary Contribution
Account) exceeds $3,500, no amount may be distributed to a participant unless
the Participant's Spouse consents in writing to such distribution.
9.04 Required Minimum Distributions. In the case of any Participant to
whom Section 9.01 applies, to whom Section 9.03(a) does not apply, or to whom
Section 9.03(a) applies and who elects an option form of distribution, the
annual distribution from his or her Account must equal or exceed the applicable
required minimum distribution. The minimum distribution to be made for each
calendar year beginning with the calendar year during which distribution is
required to commence pursuant to Section 9.01 or 9.03(b) or (c) shall be the
amount equal to the quotient obtained by dividing the Participant's Account
balance at the beginning of the year by the greater of the life expectancy of
the Participant or the joint life and last survivor expectancy of the
Participant and Beneficiary. For purposes of this minimum distribution rule,
life expectancy and joint life and last survivor expectancy shall be calculated
by using the return multiples specified in section 1.72-9 of the Treasury
Regulations either once, at the time of the first distribution, or in the case
of an expectancy involving only a spousal Beneficiary, annually in a consistent
manner. If the Participant's Spouse is not the Beneficiary, the method of
distribution used must ensure that at least 50% of Present Value (as defined in
Section 21.02(h) hereof) of the Participant's Account balance at the time
distributions commence is paid within the life expectancy of the Participant.
9.05 Nonconsensual Distributions. Notwithstanding any provision of this
Section 9 to the contrary, if a former Participant's vested Account balance
(exclusive of his or her Rollover Account and Deductible Voluntary Contribution
Account) equals $3,500 or less, the Administrator may direct that the entire
vested Account balance be distributed to the former Participant regardless or
whether the former Participant (or his or her Spouse, if applicable) requests or
otherwise consents to such distribution.
9.06 Special One-Time Distribution Election. Notwithstanding any Plan
provision to the contrary and subject to the requirements of Section 9.03(a)
above, distribution on behalf of any Employee, including a 5-percent owner (as
defined in Code Section 416(i)(1)(B)(i)), may be made in accordance with the
following requirements (regardless of when such distribution commences):
(a) The distribution is one which would not have disqualified the
Plan under Code Section 401(a)(9) as it was in effect prior to its amendment by
the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of distribution
designated by the Participant whose interest in the Plan is being distributed
or, if the Participant has died, by a beneficiary of such Participant.
(c) Such designation was in writing, was signed by the Participant or
the beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution designated by the Participant or the
beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant are listed in
order of priority.
(f) If the distribution is one to which the provisions of Section
9.03(a) hereof would otherwise have applied and the Participant is married, the
Participant's spouse consents to the election in a writing filed with the
Administrator.
A distribution upon death will not be covered by this section 9.06 unless
the information in the designation contains the required information
<PAGE>
described above with respect to the distributions to be made upon the death of
the Participant.
For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Participant, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirement in subsections (a) and (e) above.
If a designation is revoked, any subsequent distribution must satisfy the
requirements of Code Section 401(a)(9) as amended. Any changes in the
designation will be considered to be a revocation of the designation. However,
the mere substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a revocation of
the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, directly
or indirectly (for example, by altering the relevant measuring life).
SECTION 10.
LOANS
10.01 Availability of Loans. If, in the Adoption Agreement, the Employer
has specified that loans to Participants are permitted, the Loan Trustee shall,
upon the direction of the Administrator, make one or more loans, including any
renewal thereof, to a Participant (other than a Participant who is an Owner-
Employee). Any such loan shall be subject to such terms and conditions as the
Administrator shall determine pursuant to a uniform policy adopted by the
Administrator for this purpose, which policy shall be at least as restrictive as
required by this Section 10.
10.02 Spousal Consent Required. To obtain a loan, a Participant must
obtain the consent of his or her Spouse, if any, within the 90-day period before
the time his or her Account balance is used as security for the loan.
Furthermore, a new consent is required if an increase in the amount of the
security is necessary and any of the remaining balance of the Account is used.
A spousal consent to a loan must be in writing, witnessed by a Plan
representative or notary public, and acknowledge that as a result of a default
repayment of the loan the Spouse may be entitled to a lesser death benefit than
he or she would otherwise receive under the Plan. A Spouse shall be deemed to
consent to any loan which is outstanding at the time or his or her marriage to
the Participant.
10.03 Equivalent Basis. No such loan may be made to a disqualified person
within the meaning of Code Section 4975(e), unless such loans are available to
all Participants on a reasonably equivalent basis and are not made available to
officers, shareholders or highly paid Participants in an amount which, when
stated as a percentage of any such Participant's Account, is greater than is
available to any other Participants.
10.04 Limitation on Amount. The amount of any such loan, when added to
the outstanding balance of all other loans from the Plan (and any other
qualified retirement plans of the Employer's) to the Participant, shall not
exceed the following:
Participant's Vested Maximum Amount
Account Balance of Loan
$0 - $10,000 100% of vested Account balance
$10,000 - $20,000 $10,000
$20,000 - $100,000 50% of vested Account balance
over $100,000 $50,000
The value of the Participant's Account balance shall be as determined by
the Administrator; provided, however, that such determination shall in no event
take into account the portion of the Participant's Account attributable to the
Participant's Deductible Voluntary Contribution Account.
10.05 Maximum Term. The term of the any such loan shall not exceed 5
years; provided, however, that such limitation shall not apply to any loan used
to acquire, construct, reconstruct, or substantially rehabilitate any dwelling
unit which within a reasonable time is to be sued (determined at the time the
loan is made) as a principal residence of the Participant or a member of the
Participant's family (within the meaning of Code Section 267(c)(4)).
10.06 Promissory Note. Any such loan shall be evidenced by a promissory
note executed by the Participant and payable to the Loan Trustee, on the
earliest of (i) a fixed maturity date meeting the requirements of Section 10.05
above, but in no event later than the Participant's Normal Retirement Date, (ii)
the Participant's death, or (iii) when distribution hereunder is to be made to
the Participant (other than a withdrawal which will not reduce the value of his
or her Account to the extent that the aggregate amount owing could not be made
as a new loan within the limitation set forth in Section 10.04 above). Such
promissory note shall be secured by an assignment of the Participant's Account
to the Loan Trustee. Such promissory note shall evidence such terms as are
required by this Section 10.
10.07 Interest. Any such loan shall be subject to a reasonable rate of
interest.
10.08 Repayment. If a note is not paid when the Participant's benefits
hereunder are to be distributed, then any unpaid portion of such loan and unpaid
interest thereon shall be deducted by the Loan Trustee from the Participant's
Account before benefits are paid from or purchased out of the Account. Such
deduction shall, to the extent thereof, cancel the indebtedness of the
Participant. If a note is not paid when it otherwise becomes payable under
Section 10.05 hereof, or if at any time the Administrator determines that the
aggregate amounts owing by a Participant upon such notes exceed the vested value
of the Participant's Account, the Participant shall be promptly notified in
writing that unless such loan or excess is repaid within 30 days, action will be
taken to collect the same plus any cost of collections. Notwithstanding any
implication of the preceding sentence to the contrary, no attachment of the
Participant's Account shall occur until a distributable event occurs under
Sections 8 or 9 (or if it is otherwise applicable, Section 22) hereof.
10.09 Accounting. Loans shall be made only from the Account of the
Participant (exclusive of that portion of the account attributable to the
Participant's Deductible Voluntary Contribution Account) requesting the loan,
and shall be treated as an investment of such Account. All interest payments
made with respect to such loan shall be credited to the Participant's Account.
10.10 Precedence. This Section 10 overrides Section 16.01 below.
SECTION 11.
TRUST PROVISIONS
11.01 Manner of Investment. All contributions to the Account of a
Participant shall be held in trust by the Trustee designated in the Adoption
Agreement. Except to the extent that a Participant's Account is invested in a
loan pursuant to Section 10 hereof, the Account of a Participant may only be
invested and reinvested in shares of Designated Investment Companies, unless the
Distributor permits less than 100% of the Trust assets to be so invested. If
the Administrator or the Participant, as the case may be, has elected to have a
portion of an Account invested in other than shares of Designated Investment
Companies and the Distributor has authorized the investment of less than 100% of
Trust assets in such shares, the Trustee shall invest such amount in such
investments as it is empowered to invest in under Section 11.03 hereof. The
Designated Investment Companies available for investment may be limited by the
Employer. Investment in the shares of more than one Designated Investment
Company is not permitted unless the value of the Participant's Account and the
value of the investment in each additional Designated Investment Company exceed
amounts from time to time determined by the Distributor.
11.02 Investment Decision.
(a) The decision as to the investment of an Account shall be made by
the person designated in the Adoption Agreement, and the Trustee shall have no
responsibility for determining how an Account is to be invested or to see that
investment directions communicated to it comply with the terms of the Plan. If
the decision is made by the Participant, the Participant shall convey investment
instructions to the Administrator and the Administrator shall promptly transmit
those instructions to the Trustee. Further, if the decision is to be made by
the Participant, the right to make such a decision shall remain with the
Participant upon retirement and shall pass to the Distributee upon death.
(b) The person designated to make the decision as to the investment
of an Account may direct that the investment medium of an Account be changed
provided that no such change may be made from or to an investment other than a
Designated Investment Company except to the extent permitted under Section 11.10
above and by the terms of that other investment vehicle. If the Distributor
determines in its own judgment that there has been trading of shares of
Designated Investment Companies in the Accounts of the Participants, any
Designated Investment Company may refuse to sell its shares to such Accounts.
When an investment is being made or changed, the person designated to do so
shall specify the type of account to which the change refers.
(c) If any decision as to investments is to be made by the
Administrator, it shall be made on a uniform basis with respect to all
Participants.
(d) The Administrator and the Trustee may adopt procedures permitting
Participants to convey their investment instructions directly to the Trustee or
to the transfer agent for the Designated Investment Company or Companies or for
any other investment permitted by the Distributor.
(e) Whenever a Participant is the person designated to make the
decision as to the investment of an Account, the Administrator shall ascertain
that the Participant has received a copy of the current prospectus relating to
the shares of any Designated Investment Company in which such Account is to be
invested plus, where required by any state or federal law, the current
prospectus relating to any other investment in which the Account is to be
invested. With respect to contributions designated for investment by a
Participant, by remitting such a contribution to the Trustee, the Administrator
shall be deemed to warrant to the Trustee fro the benefit of the appropriate
Designated Investment Company or Companies and its or their principal
underwriter that the Participant has received all such prospectuses. By
remitting any other contribution to the Trustee, the Administrator shall be
deemed to warrant to the Trustee for the benefit of the appropriate Designated
Investment Company or Companies and its or their principal underwriter that the
Administrator has received a current prospectus of any Designated Investment
Company in which the contribution is to be invested, plus, where required by any
state or federal law, the current prospectus relating to any other investment in
which contributions are to be invested.
11.03 Investment Powers. To the extent that a portion of the Trust assets
are invested other than in shares of Designated Investment Companies pursuant to
Section 11.01 above, the Trustee is hereby granted full power and authority to
invest and reinvest the Trust assets in any property of any kind or nature
whatsoever (speculative or otherwise) or in any rights or interests therein, or
in any evidences or indicia thereof and whether real, personal or mixed or
whether tangible or intangible (including for illustration but not to be limited
to the following, or anything of a similar kind, character or class: common or
preferred stocks, evidences or ownership in so-called Massachusetts business
trusts, fees, beneficial interests, leaseholds, bonds, mortgages, leases, notes
or obligations, oil and gas payments, oil and gas contracts, other securities,
instruments or commodities, investments in property yielding little or no income
and shares of regulated investment companies) without regard to any rule of law
or statute of the state of the Trustee designation investments eligible for
trust funds, and without respect to any custom or practice either as to types of
investments or diversification of investments, and to hold cash uninvested at
any time and from time to time in such amounts and to such extent as the Trustee
in its own uncontrolled discretion and judgment deems advisable; provided,
however, that the Trustee is to act with the care, skill and diligence, under
the circumstances then prevailing, which would characterize the actions of a
prudent man who is acting as such a Trustee and who is familiar with the duties
of such a Trustee; further provided that the Trustee shall diversify the
investments of the Trust Fund so as to minimize the risk of large losses unless,
under the circumstances, such diversification would not be prudent; further
provided that the Trustee is not empowered to enter into any investment which
would be prohibited under the Act or otherwise by the provisions of this Plan.
Notwithstanding the above, the following restrictions on the investment of
a Participant's Account shall apply:
<PAGE>
(a) No part of a Participant's Deductible Voluntary Contribution
Account may be used to purchase life insurance.
(b) At most, less than one-half of the aggregate Employer
Contributions allocated to a Participant's Employer Contribution Account may be
used to pay premiums attributable to the purchase of ordinary life insurance
contracts (life insurance contracts with both nondecreasing death benefits and
nonincreasing premiums).
(c) No more than one-quarter of aggregate Employer Contributions
allocated to a Participant's Employer Contribution Account may be used to pay
premiums on term life insurance contracts, universal life insurance contracts,
and all other life insurance contracts which are not ordinary life insurance
contracts.
(d) One-half of the amount used to pay premiums on ordinary life
insurance contracts plus the amount used to pay premiums on all other life
insurance contracts may not exceed an amount equal to one-quarter of the
aggregate Employer Contributions allocated to a Participant's Employer
Contribution Account.
(e) No part of a Participant's Account shall be applied towards the
purchase of any insurance contract unless (i) the Trustee applies for and is the
owner of such contract, (ii) the contract provides that all contract proceeds
shall be paid to the Trustee, and (iii) the contract provides for distributions
to the Participant's Spouse, as necessary to ensure compliance with the
applicable requirements of Sections 8, 9, and 22.
If a Participant's Account is invested in one or more insurance contracts,
the Trustee is required to pay over all proceeds of the contract(s) to the
Participant's Beneficiary or Beneficiaries in accordance with the terms of this
Plan and under no circumstances shall the Trust retain any contract proceeds.
11.04 Appointment of Investment Manager. Subject to Sections 11.01 and
11.03 above, the Administrator may designate, and the Employer may contract
with, Scudder, Stevens & Clark, or its successor or any affiliate, to act as
investment manager (within the meaning of the Act), and may at any time revoke
such designation. If an investment manager is so designated, the Trustee shall
follow all investment directions given by the investment manager with respect to
the retention, investment and reinvestment of the Plan assets to the extent they
are under the control of such investment manager. If permitted by the Trustee,
the investment manager may issue orders for the purchase and sale of securities,
including orders through any affiliate of such investment manager. Such an
investment manager is specifically allowed to direct or make investments in
shares of any Designated Investment Company. The Trustee shall not be liable
for following any direction given by, or any actions of, an investment manager
so appointed.
11.05 Trustee: Number, Qualifications and Majority Action.
(a) The number of Trustees shall be one, two or three. Any natural
person and any corporation having the power under applicable law to act as a
trustee of a pension or profit sharing plan may be a Trustee. No person shall
be disqualified from being a Trustee by being employed by the Employer, by being
the Administrator, by being a trustee under any other qualified retirement plan
of the Employer or by being a Participant in this Plan or such other qualified
plan.
(b) A Trustee holding office as sole Trustee hereunder shall have all
the powers and duties herein given the Trustees. When the number of Trustees
hereunder is three, any two of them may act, but the third Trustee shall be
promptly informed of the action. There are two or three Trustees hereunder,
they may, by written instrument communicated to the Employer and the
Administrator, allocate among themselves the powers and duties herein given to
the Trustee hereunder. If such an allocation is made, to the extent permitted
by applicable law, no Trustee shall be liable either individually or as a
trustee for loss to the Plan from the acts or omissions of another Trustee with
respect to duties allocated to such other Trustee.
11.06 Change of Trustee
(a) Any Trustee may resign as Trustee upon notice in writing to the
Employer, and the Employer may remove any Trustee upon notice in writing to each
Trustee. The removal of a Trustee shall be effective immediately, except that a
corporation serving as a Trustee shall be entitled to 60 days' notice which it
may waive, and the resignation of a Trustee shall be effective immediately,
provided that, if the Trustee is the sole Trustee, neither a removal nor a
resignation of a Trustee shall be effective until a successor Trustee has been
appointed and has accepted the appointment. If within 60 days of the delivery
of the written resignation or removal of a sole Trustee another Trustee shall
not have been appointed and have accepted, the resigning or removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee or may terminate the Plan pursuant to Section 18 of the Prototype Plan.
The Trustee shall not be liable for the acts and omissions of any successor
trustee.
(b) At any time when the number of Trustees is one or two the
Employer may but need not appoint one or two additional Trustees, provided that
the number of Trustees shall not be more than three. Such an appointment and
the acceptance thereof shall be in writing, and shall take effect upon the
delivery of written notice thereof to all the Trustees and the Administrator and
such acceptance by the appointed Trustee, provided that if a corporation is a
Trustee then in the absence of its consent, such an appointment of an additional
or successor Trustee shall not become effective until 60 days after its receipt
of notice.
(c) Although any Employer adopting the Plan may choose any Trustee
who is willing to accept the Trust, the Distributor or its successor may make or
may have made tentative standard arrangements with any bank or trust company
with the expectation it will be used as the Trustee by a substantial group of
Employers. It is also contemplated that more favorable results can be obtained
with a substantial volume of business, and that it may become advisable to
remove such bank or trust company as the Trustee and substitute another Trustee.
Therefore, anything in the prior to subsections of this Section 11.06
notwithstanding, each Employer adopting this Plan hereby agrees that the
Distributor may, upon a date specified in a notice of at least 30 days to the
affect Employer and in the absence of written objection by the Employer received
by the Distributor before such date (i) remove any such Trustee and in that
case, or if such a Trustee has resigned as to a group of Employers, (ii) appoint
such a successor Trustee, provided such action is taken with respect to all
Employers similarly circumstanced of which the Distributor has knowledge, and
provided such notice is given in writing mailed postage prepaid to the Employer
at the latest address furnished to the Distributor directly or supplied to it by
such Trustee which is to be succeeded. If within 60 days after such Trustee's
resignation or removal, the Employer has not appointed a successor which has
accepted such appointment (unless the appointment of a successor Trustee is
waiting for action by the Distributor pursuant to the next preceding sentence
according to notice which has been given), the Trustee may petition an
appropriate court for the appointment of its successor. The Trustee shall not
be liable for the acts and omissions of such successor.
(d) Successor Trustees qualifying under this Section 11.06 shall have
all rights and powers and all the duties and obligations of original Trustees.
11.07 Valuation. Annually, on the Valuation Date, or more frequently in
the discretion of the Trustee, the assets of the Trust shall be revalued at fair
market value and the accounts of the Trust shall be proportionately adjusted to
reflect income, gains, losses or expenses, if the system of accounting does not
directly accomplish all such adjustments. Each account shall share in income
gains, loses, or expenses connected with an asset in which it is invested
according to the proportion which the account's investment in the asset bears to
the total amount of the Trust Fund invested in the asset. Any dividends or
credits earned on insurance contracts shall be allocated to the specific account
of the Participant from which the funds originated for investment in the
contract.
The Trust Fund shall be administered separately from, and shall not include
any assets being administered under, any other plan of an Employer. Interim
valuations, if any, shall be applied uniformly and in a non-discriminatory
manner for all Employees.
11.08 Registration. Any assets in the Trust Fund may be registered in the
name of the Trustee or any nominee designated by the Trustee.
11.09 Certifications and Instructions.
(a) Any pertinent vote or resolution of the Board of Directors of the
Employer (if it is a corporation) shall be certified to the Trustee over the
signature of the Secretary or an Assistant Secretary of the Employer and under
its corporate seal. The Employer shall promptly furnish to the Trustee
appropriate certification evidencing the appointment and termination of the
individual or individuals serving as Administrator under Section 12.01 of the
Plan.
(b) The Administrator shall furnish to the Trustee appropriate
certification of the individual or individuals authorized to give notice on
behalf of the Administrator and providing specimens of their signatures. All
requests, directions, requisitions for money and instructions by the
Administrator to the Trustee shall be in writing and signed. There may be
standing requests, directions, requisitions or instructions to the extent
acceptable to the Trustee.
11.10 Accounts and Approval
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder, and
all books and records relating thereto shall be open at all reasonable times to
inspection and audit by any person or persons designated by the Administrator or
by the Employer.
(b) Within 90 days following the close of each Plan Year the Trustee
may, and upon the request of the Employer or the Administrator shall, file with
the Administrator and the Employer a written report setting forth all securities
or other investments (including insurance contracts) purchased and sold, all
receipts, disbursements and other transactions effected by it during the period
since the date covered by the next proper report, and showing the securities and
other property held at the end of such period, and such other information about
the Trust Fund as the Administrator shall request. Unless the Employer or
Administrator, within 90 days from the date of mailing of such report, objects
to the contents of such report, the report shall be deemed approved. Any such
objections shall set forth the specific grounds on which they are based.
11.11 Taxes. The Trustee may assume that any taxes assessed on or in
respect of the Trust Fund are lawfully assessed unless the Administrator shall
in writing advise the Trustee that in the opinion of counsel fro the Employer
such taxes are not lawfully assessed. In the event that the Administrator shall
so advise the Trustee, the Trustee, if so requested by the Administrator and
suitable provision for their indemnity having made, shall contest the validity
of such taxes in any manner deemed appropriate by the Administrator or counsel
for the Employer. The word "taxes" in this Section 11 shall be deemed to
include any interest or penalties that may be levied or imposed in respect to
any taxes assessed. Any taxes, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the Trust Fund that may be
levied or assessed in respect to such assets shall, if allocable to the Accounts
of specific Participants, be charged to such Accounts, and if not so allocable,
they shall be equitably apportioned among all such Participant's Accounts.
11.12 Employment of Counsel. The Trustee may employ legal counsel (who
may be counsel for the Employer) and shall be fully protected in acting or
refraining from acting, upon such counsel's advice in respect to any legal
questions.
11.13 Compensation of Trustee. An individual Trustee who is an Employee
of the Employer shall not be compensated for services as Trustee. A
corporation, or an individual who is not an Employee of the Employer, serving as
a Trustee shall be entitled to reasonable compensation for services; such
compensation shall be paid in accordance with Section 13.
11.14 Limitation of Trustee's Liability.
(a) The Trustee shall have no duty to take any action other than as
herein specified, unless the Administrator shall furnish it with instructions in
proper form and such instructions shall have been specifically agreed to by it,
or to defend or engage in any suit unless it shall have first agreed in writing
to do so and shall have been fully indemnified to its satisfaction.
(b) The Trustee may conclusively rely upon and shall be protected in
acting in good faith upon any written representation or order from the
Administrator or any other notice, request, consent, certifi-
<PAGE>
cate or other instrument or paper believed by the Trustee to be genuine and
properly executed, or any instrument or paper if the Trustee believes the
signature thereon to be genuine.
(c) The Trustee shall not be liable for interest on any reasonable
cash balances maintained in the Trust.
(d) The Trustee shall not be obligated to, but may, in its
discretion, receive a contribution directly from a participant.
11.15 Successor Trustee. Any corporation into which a corporation acting
as a Trustee hereunder may be merged or with which it may be consolidated, or
any corporation resulting from any merger, reorganization or consolidation to
which such Trustee may be a party, shall be the successor of the Trustee
hereunder, without the necessity of any appointment or other action, provided
the Trustee does not resign and is not removed.
11.16 Enforcement of Provisions. To the extent permitted by applicable
law, the Employer and the Administrator shall have the exclusive right to
enforce any and all provisions of this Agreement on behalf of all Employees and
former Employees of the Employer or their Beneficiaries or other persons having
or claiming to have an interest in the Trust Fund or under the Plan. In any
action or proceeding affecting the Trust Fund or any property constituting a
part or all thereof, or the administration thereof or for instructions to the
Trustee, the Employer, the Administrator and the Trustee shall be the only
necessary parties and shall be solely entitled to any notice of process in
connection therewith; any judgment that may be entered in such action or
proceeding shall be binding and conclusive on all persons having or claiming to
have any interest in the Trust Fund or under the Plan.
11.17 Voting. The Trustee shall deliver, or cause to be executed and
delivered, to the Administrator all notices, prospectuses, financial statements,
proxies and proxy soliciting materials received by the Trustee relating to
securities held by the Trust. The Administrator shall deliver these to the
appropriate Participant or Beneficiary of a deceased Participant, but only if
the Employer has specified in the Adoption Agreement that investment decisions
shall be made by Participants pursuant to Section 11.02 hereof. The Trustee
shall vote securities held by the Trust in accordance with the written
instructions of the person or persons entitled to make investment decisions
pursuant to Section 11.02. If, however, the Trustee is not State Street Bank
and Trust Company and has not received instructions with respect to how to vote
given securities before five full business days prior to the meeting at which
such securities are to be voted, the Trustee may vote such securities. If the
Trustee is State Street Bank and Trust Company and it has not received
instructions with respect to how to vote given securities before two full
business days prior to the meeting at which such securities are to be voted, it
shall not vote such securities except to the extent they are shares of a
Designated Investment Company, in which case it shall vote such securities for
or against each proposal, or abstain from voting on each proposal, in the same
proportion as all other shares of such Designated Investment Company vote or
abstain from voting at the shareholder meeting either in person or by proxy. In
applying the foregoing, the Trustee is not required to vote particular shares of
a Designated Investment Company in the manner specified in the preceding
sentence, so long as all of the shares of the Designated Investment Company as
to which the Trustee has not received instructions are voted in the aggregate in
accordance with the preceding sentence. Notwithstanding the foregoing, the
Trustee shall not have the authority to vote shares of a Designated Investment
Company without instructions from the person or persons entitled to make
investment decisions unless either (a) the Securities and Exchange Commission
shall have issued an exemptive order pursuant to Section 6(c) of the Investment
Company Act of 1940, as amended, the application for which order describes the
Trustee's authorization to so vote without instructions, or (b) the Trustee has
received an opinion of its counsel that the exercise of the authority to vote
shares of a Designated Investment Company without instructions will not render
the Trustee an "affiliated person" as defined in the Investment Company Act of
1940, as amended.
11.18 Applicability to Loan Trustee. Where appropriate, the foregoing
provisions of this Section 11 shall apply to the Loan Trustee on the same basis
as if the Loan Trustee were the Trustee.
SECTION 12.
ADMINISTRATION
12.01 Appointment of Administrator. From time to time, the Employer may,
by identifying such person(s) in writing to both the Trustee and the
Participants, appoint one or more persons as Administrator (hereinafter referred
to in the singular). Such Administrator shall have all power and authority
necessary to carry out the terms of the Plan. A person appointed as
Administrator may also serve in any other fiduciary capacity, including that of
Trustee, with respect to the Plan. The Administrator may resign upon 15 days'
advance written notice to the Employer, and the Employer may at any time revoke
the appointment of the Administrator with or without cause. The Employer shall
exercise the power and fulfill the duties of the Administrator if at any time,
an Administrator has not been properly appointed in accordance with this Section
12.01 or the position is otherwise vacant.
12.02 Named Fiduciaries. The "Named Fiduciaries" within the meaning of
the Act shall be the Administrator and the Trustee.
12.03 Allocation of Responsibilities. Responsibilities under the Plan
shall be allocated among the Trustee, the Administrator, and the Employer as
follows:
(a) Trustee: The Trustee shall have exclusive responsibility to
hold, manage and invest, pursuant to instructions communicated to it in
accordance with Section 11.02 above, the funds received by it subject to the
powers granted to it under Section 11 hereof. To the extent that loans are made
to Participants in accordance with Section 10 hereof, these responsibilities
shall fall to the Loan Trustee.
(b) The Administrator: The Administrator shall have the
responsibility and authority to control the operation and administration of the
Plan in accordance with its terms including, without limiting the generality of
the foregoing, (i) any investment decisions assigned to it under the Adoption
Agreement or transmission to the Trustee of any participant investment decision
under Section 11.02; (ii) interpretation of the Plan, conclusive determination
of all questions of eligibility, status, benefits and rights under the Plan and
certification to the Trustee of all benefits payments under the Plan; (iii)
hiring of persons to provide necessary services to the Plan not provided by
Employees; (iv) preparation and filing of all statements, returns and reports
required to be filed by the Plan with any agency of Government; (v) compliance
with all disclosure requirements of all state or federal law; (vi) maintenance
and retention of all Plan records as required by law, except those required to
be maintained by the Trustee; and (vii) all functions otherwise assigned to it
under the terms of the Plan.
(c) Employer: The Employer shall be responsible for the design of
the Plan, as adopted or amended, the designation of the Administrator and
Trustee (and, if appropriate, the Loan Trustee) as provided in the Plan, the
delivery to the Administrator and the Trustee of Employee information necessary
for operation of the Plan, the timely making of the Employer Contributions
pursuant to Section 4.01 hereof, and the exercise of all functions provided in
or necessary to the Plan except those assigned in the Plan to other persons.
(d) This Section 12.03 is intended to allocate individual
responsibility for the prudent execution of the functions assigned to each of
the Trustees, the Loan Trustee, the Administrator and the Employer and none of
such responsibilities or any other responsibility shall be shared among them
unless specifically provided in the Plan. Whenever one such person is required
by the Plan to follow the directions of another, the two shall not be deemed to
share responsibility, but the person who gives the direction shall be
responsible for giving it and the responsibility of the person receiving the
direction shall be to follow it insofar as it is on its face proper under
applicable law.
12.04 More Than One Administrator. If more than one individual is
appointed as Administrator under Section 12.01, such individuals shall either
exercise the duties of the Administrator in concert, acting by a majority vote
or allocate such duties among themselves by written agreement delivered to the
Employer and the Trustee. In such a case, the Trustee may rely upon the
instruction of any one of the individuals appointed as Administrator regardless
of the allocation of duties among them.
12.05 No Compensation. The Administrator shall not be entitled to receive
any compensation from the funds held under the Plan for its services in that
capacity unless so determined by the Employer or required by law.
12.06 Record of Acts. The Administrator shall keep a record of all its
proceedings, acts and decisions, and all such records and all instruments
pertaining to Plan administration shall be subject to inspection by the Employer
at any time. The Employer shall supply, and the Administrator may rely on the
accuracy of, all Employee data and other information needed to administer the
Plan.
12.07 Bond. The Administrator shall be required to give bond for the
faithful performance of its duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
12.08 Agent for Service of Legal Process. The Administrator shall be
agent for service of legal process on the Plan.
12.09 Rules. The Administrator may adopt or amend and shall publish to
the Employees such rules and forms for the administration of the Plan, and may
employ or retain such attorneys, accountants, physicians, investment advisors,
consultants and other persons to assist in the administration of the Plan as it
deems necessary or advisable.
12.10 Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of its responsibilities hereunder and at
any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Trustee may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of all such delegates.
12.11 Claims Procedure. It is anticipated that the Administrator will
administer the Plan to provide Plan benefits without waiting for them to be
claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Participants and Beneficiaries.
(a) Manner of Making Claim. A claim for benefits by a Participant or
Beneficiary to be effective under this procedure must be made to the
Administrator and must be in writing unless the Administrator formally or by
course of conduct waives such requirements.
(b) Notice of Reason for Denial. If an effective claim is wholly or
partially denied, the Administrator shall furnish such Participant or
Beneficiary with written notice of the denial within 60 days after the original
claim was filed. This notice of denial shall set forth in a manner calculated
to be understood by the claimant (i) the reason or reasons for denial, (ii)
specific reference to pertinent plan provisions on which the denial is based,
(iii) a description of any additional information needed to perfect the claim
and an explanation of why such information is necessary, and (iv) an explanation
of the Plan's claims procedure.
(c) The Participant or Beneficiary shall have 60 days from receipt of
the denial notice in which to make written application for review by the
Administrator. The Participant or Beneficiary may request that the review be in
the nature of a hearing. The Participant or Beneficiary shall have the rights
(i) to have representation, (ii) to review pertinent documents, and (iii) to
submit comments in writing.
(d) The Administrator shall issue a decision on such review within 60
days after receipt of an application fro review, except that such period may be
extended for a period of time not to exceed an additional 60 days if the
Administrator determines that special circumstances (such as the need to hold a
hearing) requires such extension. The decision on review shall be in writing
and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based.
SECTION 13.
FEES AND EXPENSES
All reasonable fees and expenses of the Administrator or Trustee incurred
in the performance of their duties hereunder or under the Trust shall be paid by
the Employer; and to the extent not so paid by the Employer, said fees and
expenses shall be deemed to be an expense of the Trust and the Trustee is
authorized to charge the same to the Accounts of the
<PAGE>
Participants, and unless allocable to the Accounts of specific Participants,
they shall be charged against the respective accounts of all or a reasonable
group of Participants in such reasonable manner as the Trustee shall determine.
SECTION 14.
BENEFIT RECIPIENT INCOMPETENT OR
DIFFICULT TO ASCERTAIN OR LOCATE
14.01 Incompetency. If any portion of the Trust Fund becomes
distributable to a minor or to a Participant or Beneficiary who, as determined
by the sole discretion of the Administrator, is physically or mentally incapable
of handling his or her financial affairs, the Administrator may direct the
Trustee to make such distribution either to the legal representative or
custodian of, or any of the relatives and friends of, the incompetent or to
apply such distribution directly for the incompetent's support and maintenance.
Payments which are made in good faith shall completely discharge the Employer,
Administrator and Trustee from liability therefor.
14.02 Difficulty to Ascertain or Locate. If it is impossible or difficult
to ascertain the person who is entitled to receive any benefit under the Plan,
the Administrator in its discretion may direct that such benefit be (a) paid to
another person in order to carry out the Plan's purposes; or (b) retained in the
Trust; or (c) paid to a court pending judicial determination of the right
thereto.
SECTION 15.
DESIGNATION OF BENEFICIARY
Each participant and beneficiary may submit to the Trustee a properly
executed Designation of Beneficiary form. In order to be effective, such
designation (a) must have been properly executed and submitted to the Trustee
before the death of the Participant or beneficiary, as the case may be, and (b)
except in the case of the portion of a Participant's vested Account balance in a
money purchase pension plan which is not available for distribution in the form
of a Qualified Preretirement Survivor Annuity pursuant to Section 8.01 above,
fro Participants who die after August 22, 1984 leaving a surviving Spouse, must
be accompanied, or preceded, by a consent of the Participant's Spouse (unless
said Spouse is designated as the sole, primary Beneficiary). Such consent of
the Spouse must be in writing, acknowledge that the effect of such consent is
that the Spouse may receive no benefits under the Plan, be witnessed by a Plan
representative or a notary public, and be a limited consent to the payment of
death benefits to a specific person or persons. The last effective Designation
accepted by the Trustee shall be controlling, and whether or not fully
dispositive of the Participant's Account, thereupon shall revoke all
Designations (and related spousal consents) previously submitted by the
Participant or beneficiary, as the case may be. Each such executed Designation
(and related spousal consent) is hereby specifically incorporated herein by
reference and shall be construed and enforced in accordance with the laws of the
state in which the Trustee has its principal place of business.
SECTION 16.
SPENDTHRIFT PROVISION AND
DISTRIBUTIONS PURSUANT TO QUALIFIED
DOMESTIC RELATIONS ORDERS
16.01 General Spendthrift Rule. No interest of any Participant or
Beneficiary shall be assigned, anticipated or alienated in any manner nor shall
it be subject to attachment, to bankruptcy proceedings or to any other legal
process or to the interference or control of creditors or others, except (a) to
the extent that Participants may secure loans from the Trust with their Accounts
pursuant to Section 10 hereof and (b) pursuant to Section 16.02 hereof.
16.02 Account Division and Distribution Pursuant to Qualified Domestic
Relations Orders. The interest of a Participant may be assigned pursuant to a
"Qualified Domestic Relations Order" (as defined below). The Trustee shall make
distributions of such Participant's interest as are required by the order and
this Section 16.02.
(a) A "Qualified Domestic Relations Order" is any judgment, decree or
order, including the approval of a property settlement agreement (collectively
hereinafter referred to as an "order"), provided that:
(i) The order related to the provision of child support, alimony
or marital property rights and is made pursuant to state domestic relations or
community property laws;
(ii) The order creates or recognizes the existence of an
alternate payee's right to or assigns to an alternative payee rights to, receive
all or a portion of the benefits payable with respect to the Participant under
this Plan;
(iii) The order specifies the name and last known mailing
address of the Participant and each alternative payee covered by the order;
(iv) The order precisely specifies the amount or percentage of
the Participant's benefits to be paid to each alternate payee or the manner in
which the amount of percentage is to be determined;
(v) The order specifies the number of payments or the period to
which the order applies;
(vi) The order specifically names this Plan as a plan to which
the order applies;
(vii) The order does not require the Trustee to provide any form
of distribution other than those contained in Sections 8 and 9 hereof (or
Section 22 hereof, if that Section applies in the Participant's case) other than
in the form of a Qualified Joint and Survivor Annuity with respect to the
alternative payee and his or her subsequent spouse;
(viii) The order does not require the Trustee to provide
benefits at any time in excess of the Account balance;
(ix) If the order requires that distribution to the alternative
payee commence before distribution to the Participant commences, the order:
(A) specifies that, unless the Administrator otherwise
consents, distribution to the alternative payee will not commence prior to ten
years before the Participant's Normal Retirement Date; and
(B) specifies that the amount distributed is to be
calculated as if the Participant had retired on the date on which distributions
are required to commence; and
(x) The order does not require the payment of benefits to an
alternative payee which are required to be paid to another alternative payee
under a previously entered Qualified Domestic Relations Order.
(b) At the request of an alternative payee and pursuant to a
Qualified Domestic Relations Order, the Administrator may, in its discretion,
direct the Trustee to make a lump-sum distribution from a Participant's Account
to an alternative payee at any time prior to time when distribution of such
Account would otherwise occur pursuant to Section 8, 9 or 22 hereof.
(c) The Administrator may, in its discretion, provide a standard form
Qualified Domestic Relations Order to a Participant or any other person, on
request. If this form is properly completed, used without substantial
modification, and incorporated into an order which on its face appears to be
valid, the Administrator shall treat it as a Qualified Domestic Relations Order
and shall distribute named Participant's Account according to its terms. Any
manner of distribution authorized by the Administrator in such a standard form,
other than a manner of distribution specified in Section 8 and 9 hereof, shall
be authorized only as to the alternate payees by whom the standard form has been
used.
(d) The Administrator shall not treat any order entered after January
1, 1985 as a Qualified Domestic Relations Order unless it meets all of the
requirements of subsection (a). For the purposes of this subsection (d), the
Administrator shall treat a domestic relations order entered before January 1985
as a Qualified Domestic Relations Order regardless of whether it meets the
requirements of subsection (a). The Administrator and Trustee shall follow the
terms of a Qualified Domestic Relations Order regardless of whether the Plan has
been joined as a party to the litigation out of which the order arises.
Upon receipt of a domestic relations order entered after January 1, 1985,
the Administrator shall notify the Participant and alternate payee of (i) its
receipt of the order and (ii) its procedures to determine the qualified status
of the order in accordance with subsection (a). Within a reasonable period
after receipt of such order, the Administrator shall determine whether such
order is a Qualified Domestic Relations Order and notify the Participant and
each alternative payee of such determination. The alternate payee may designate
a representative to receive copies of future notices with respect to the
qualified status of the order.
(e) To the extent an order entered after January 1, 1985 calls for
the benefits to be paid to an alternate payee before the qualified nature of the
order is determined, a separate account shall be established to hold the benefit
payments affected by the order. If within 18 months, the Administrator
determines that the order (or a modification thereof) is a Qualified Domestic
Relations Order, the Administrator shall deal with the funds in the separate
account (increased by any earning and decreased by any losses thereon) in
accordance with the instructions of the Qualified Domestic Relations Order. If
within 18 months, the Administrator either (i) determines that the order is not
a Qualified Domestic Relations Order or (ii) is unable to determine whether the
order is a Qualified Domestic Relations Order, the Administrator shall return
the funds in the separate account (increased by any earnings and decreased by
any losses thereon) to the account(s) from which the funds were originally
removed. Any determination by the Administrator that an order is a Qualified
Domestic Relations Order after the expiration of the above discussed 18-month
period shall be applied on a prospective-only basis.
(f) The "alternate payee" referred to in this Section 16.02 shall be
any spouse, former spouse, child or other dependent of the Participant who is
recognized by a domestic relations order as being entitled to receive benefits
payable under the Plan with respect to the Participant. Such alternate payee
shall be considered a "beneficiary" for purposes of the reporting and disclosure
requirements of the Act.
SECTION 17.
NECESSITY OF QUALIFICATION
This Plan is established with the intent that it shall qualify under Code
Section 401(a) as that Section exists at the time the Plan is established. If
the Plan as adopted by the Employer fails to attain such qualification, the Plan
will no longer participate in this Prototype Plan and will be considered an
individually designed plan. If the Plan as adopted by the Employer fails to
attain or retain such qualification, the Employer shall promptly either amend
the Plan under Code Section 401(b) so that it does qualify, or direct the
Trustee to terminate the Trust, and distribute all the assets of the Trust
equitably among the contributors thereto in proportion to their contributions,
and the Plan and the Trust shall be considered to be rescinded and of no force
and effect.
SECTION 18.
AMENDMENT AND TERMINATION
18.01 Amendment or Termination by the Employer. The Employer may at any
time, and from time to time amend this Prototype Plan and the Adoption Agreement
(including a change in any election it has made in the Adoption Agreement), or
suspend or terminate this Plan by giving written notice to the Trustee, but the
Trust may not thereby be diverted from the exclusive benefit of the
Participants, their Beneficiaries, survivors or estates, or the administrative
expenses of the Plan, nor revert to the Employer, nor may an allocation or
contribution theretofore made be changed thereby, nor may any amendment directly
or indirectly deprive a Participant of such Participant's nonforfeitable rights
to benefits accrued to the date of the amendment.
No amendment to the Plan shall be effective to the extent that it would
have the effect of decreasing a Participant's Account balance or eliminating an
optional form of distribution. Notwithstanding the preceding sentence, a
Participant's Account balance may be reduced to the extent permitted under Code
Section 412(c)(8). Furthermore, no amendment to the Plan shall have the effect
of decreasing a Participant's vested interest determined without regard to such
amendment as of the later of the date such amendment is adopted or the date on
which it becomes effective.
The Employer may amend the Plan by adding overriding Plan language to the
Adoption Agreement where such language is necessary to satisfy Code Sections 415
or 416 because of the required aggregation of multiple plans under these Code
Sections. The Employer may also amend the Plan by adding language to allow the
Plan to operate under a waiver of the minimum funding requirement.
Any amendment by the Employer which is other than (a) a change in the
Employer's prior designation of an option in the Adoption Agreement (b) an
amendment referred in the Adoption Agreement which will allow the Plan to
satisfy the requirements of Code Section 415 or to avoid duplication of minimum
benefits or accruals under Code Section 416 because of the required aggregation
of multiple
<PAGE>
plans, or (c) an amendment which allows the Plan to operate under a waiver of
the minimum funding requirement, will constitute a substitution by the Employer
of an individually designed plan for this Prototype Plan; thereafter, the Plan
shall no longer participate in the Prototype Plan and the general amendment
procedure of the Internal Revenue Service governing individually designed plans
will be applicable.
If an amendment changing the vesting schedule is executed (including
execution of this Adoption Agreement as an amendment to an existing plan),
Participants with five or more Vesting Years before the expiration of the
election period described in the next sentence shall have the right to elect the
vesting schedule in effect on the day before the election period. The election
period shall commence on the date the amendment is adopted and end on the latest
of (a) 60 days after the amendment is adopted, (b) 60 days after the Effective
Date, or (c) 60 days after the Participant is issued written notice of the
amendment by the Administrator. Failure to so elect shall be treated as a
rejection and such election or rejection shall be final.
Nothing contained herein shall constitute an agreement or representation by
any Sponsor or the Distributor that it will continue to maintain its sponsorship
of the Plan indefinitely.
18.02 Delegation. The Employer hereby delegates to the Sponsor the
authority to amend so much of the Adoption Agreement and this Prototype Plan as
in prototype form and, to the extent to which the Employer could effect such
amendment, the Employer shall be deemed to have consented to any amendment so
made. When an election within the prototype form has been made by the Employer,
it shall be deemed to continue after amendment of the prototype form unless and
until the Employer expressly further amends the election, notwithstanding that
the provision for the election in the amended prototype form is in a different
form or place; provided, however, that if the amended from inadvertently fails
to provide means to duplicate exactly the earlier election, such earlier
election shall continue until such further amendment. The immediately preceding
sentence is subject to the qualification that each Employer hereby delegates to
the Sponsor, in the event of such an amendment of the prototype form, authority
to determine conclusively that such a continuation of an earlier election by the
Employer is not advisable and to make the election for the Employer in the
amended prototype form which in the judgment of the Sponsor most nearly
corresponds with the election made by the Employer before the amendment of the
prototype form, provided the following procedure is followed: the election for
the Employer may be made with respect to any specified Employers as to whom it
may be made applicable singly, or such election may be made with respect to all
Employers as to whom it may be made applicable as a group; and the election
shall be made as of an effective date which has been specified on a notice
mailed or delivered, at the last address(es) of the Employer(s) on the records
of the Distributor, to the Employer(s) at least 20 days before the end of the
remedial amendment period. Such notice may be mailed to Employers to whom it
cannot be applicable by reason of a previous election made by the Employer or
otherwise, but it shall be effective only as to those Employers who have
received the notice and have not themselves made a new election with respect to
that item since the amendment of the prototype form and previous to the
effective date of such election by the Sponsor. The foregoing delegations of
authority to make elections, or to make amendments, shall not impose any duty on
the Sponsor to make a given election or amendment and shall not affect the
interpretation of the Plan if any so delegated authority is not used.
18.03 Distribution of Accounts Upon Termination. Upon termination or
partial termination of the Plan or, if this Plan is adopted as a profit sharing
plan, complete discontinuance of Employer Contributions under it, the
Administrator shall determine whether to pay the interests of Participants,
former Participants and Beneficiaries immediately, to retain such interest in
the Trust and pay them in the future according to Section 8, 9 and/or 22 as
applicable, or to use what other methods the Administrator deems advisable in
order to furnish whatever benefits the Trust will provide; provided any such
distributions pursuant to this Section 18.03 shall comply with the requirements
of Section 8, 9, and/or 22 hereof.
SECTION 19.
TRANSFERS
Nothing contained herein shall prevent the merger or consolidation of the
Plan with, or transfer of assets or liabilities of the Plan to, another plan
meeting the requirements of Code Section 401(a) or the transfer to the Plan of
assets or liabilities of another such plan so qualified under the Code. Any
such merger, consolidation or transfer shall be accompanied by the transfer of
such existing records and information as may be necessary to properly allocate
such assets among Participants, including any tax or other information necessary
for the Participants or persons administering the plan which is receiving the
assets. The terms of such merger, consolidation or transfer must be such that
if this Plan is then terminated, the requirements of Section 18.01 hereof would
be satisfied and each Participant would receive a benefit immediately after the
merger, consolidation or transfer equal to or greater than the benefit he or she
would have received if the Plan had terminated immediately before the merger,
consolidation or transfer.
SECTION 20.
OWNER-EMPLOYEE PROVISIONS
20.01 Purpose of Section. This Section is intended to insure that the
Plan complies with Code Section 401(d). Any ambiguity herein will be construed
to that end, and this Section 20 will override any other provision of the Plan
with which it may be inconsistent.
20.02 Control. For purposes of this Section 20, "Control" means the
ownership directly or indirectly of more than 50% of either the capital interest
or the profits interest in a partnership or an unincorporated trade or business.
For the purposes of applying the preceding sentence, an Owner-Employee, or 2 or
more Owner-Employees shall be treated as owning any interest in a partnership
which is owned, directly or indirectly, by a partnership which such Owner-
Employee, or such 2 or more Owner-Employees, are considered to Control.
20.03 Limitations. No benefits shall be provided to an Owner-Employee
under this Plan unless:
(a) if an Owner-Employee or group of Owner-Employees Controls the
trade or business covered by this Plan and also Control as an Owner-Employee or
Owner-Employees one or more other trades or businesses, this Plan and the plans
established for such other trades or businesses, when taken together, form a
single plan which satisfies the requirements of Sections 401(a) and (d) of the
Code with respect to the Employees of all the controlled trades or businesses;
and
(b) if an Owner-Employee or group of Owner-Employees controls another
trade or business but does not control the trade or business covered by this
Plan, the employees of such other trades or business are included in a Plan
which satisfies the requirements of Sections 401(a) and (d) of the Code and
which provides contributions and benefits for such employees which are not less
favorable than those provided for Owner-Employees under this Plan; and
(c) if an Owner-Employee is covered under the qualified retirement
plans of two or more trades or businesses which he or she does not Control but
the Owner-Employee Controls a trade or business, contributions or benefits for
the employers under the plan of the trade or business which the Owner-Employee
Controls are not less favorable than those provided for the Owner-Employee in
the most favorable qualified retirement plan of the trade(s) or business(es)
which the Owner-Employee does not Control.
SECTION 21.
TOP-HEAVY PROVISIONS
21.01 Purpose of Section. This Section is intended to insure that the
Plan complies with Code Section 416. If the Plan is or becomes Top-Heavy in any
Plan Year beginning after December 31, 1983, the provisions of this Section will
supersede any conflicting provision in the Plan.
21.02 Definitions. The terms used in this Section shall have the
following meanings:
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the determination period
was (i) an officer of the Employer having an annual compensation greater than
1.5 multiplied by the amount in effect under Code Section 415(c)(1)(A) for the
Plan Year (subject to the limitation that no more than the lesser of (A) 50
Employees or (B) the greater of 3 Employees or 10% of the Employees shall be
deemed to be officers), (ii) an owner (or considered an owner under Code Section
318) or 1 of the 10 largest interest in the Employer if both such individual was
an owner of more than 5% interest in the Employer (aggregated with the Employer
for this purpose are all members of (i) a controlled group of corporations (as
defined in Code Section 414(c) as modified by Code Section 415(h)), or (iii)
affiliated service groups (as defined in Code Section 414(m)) of which the
Employer is a part) and such individual's compensation exceeds the dollar
limitation under Code Section 415(c)(1)(A), (iii) a five-percent owner of the
Employer, or (iv) a one-percent owner of the Employer who has an annual
compensation of more than $150,000. The determination period is the Plan Year
containing the Determination Date and the 4 preceding Plan Years. The
determination of who is a Key Employee will be made in accordance with Code
Section 416(i)(1) and the regulations thereunder.
(b) Top-Heavy Plan. For any Plan Year beginning after December 31,
1983, this Plan is Top-Heavy if any of the following conditions exist:
(i) If the Top-Heavy Ratio for this Plan exceeds 60% and this
Plan is not part of any Required Aggregation Group or Permissive Aggregation
Group of plans.
(ii) If this Plan is part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for
the Required Aggregation Group of plans exceeds 60%.
(iii) If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(c) Top-Heavy Ratio.
(i) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer has not maintained any defined benefit plan
which during the five-year period ending on the Determination Date(s) has or has
had accrued benefits. Top-Heavy Ratio for this Plan alone or for the Required
Aggregation Group or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account balances under all of
the plans as of the Determination Date(s) (including any part of any account
balance distributed in the five-year period ending on the Determination Date(s))
of all Key Employees who have received compensation from the Employer (other
than benefits under a qualified retirement plan) at any time during the five-
year period ending on the Determination Date(s), and the denominator of which is
the sum of all account balances as of the Determination Date(s) (including any
part of any account balance distributed in the five-year period ending on the
Determination Date(s)), of all Participants who have received compensation from
the Employer (other than benefits under a qualified retirement plan) at any time
during the five-year period ending on the Determination Date(s). Both the
numerator and denominator of the fraction shall be computed in accordance with
Code Section 416 and the Treasury Regulations promulgated thereunder. In
addition, both the numerator and denominator of the Top-Heavy Ratio shall be
adjusted to reflect any contribution which is not actually made as of the
Determination Date(s), but which is required to be taken into account on that
date under Code Section 416 and the Treasury Regulations promulgated thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer maintains or has maintained one or more defined
benefit plans which during the five-year period ending on the Determination
Date(s) has or has had accrued benefits, the Top-Heavy Ratio for any Required
Aggregation Group or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of (A) account balances under the
defined contribution plans as of the Determination Date(s) (including any part
of any account balance distributed in the five-year period ending on
<PAGE>
the Determination Date(s)) of all Key Employees who have received compensation
from the Employer (other than benefits under a qualified retirement plan) at any
time during the five-year period ending on the Determination Date(s) and (B) the
present value of accrued benefits under the defined benefit plans for all Key
Employees, who have received compensation from the Employer (other than benefits
under a qualified retirement plan) at any time during the five-year period
ending on the Determination Date(s) and the denominator of which is the sum of
(A) the account balances under the defined contribution plans as of the
Determination Date(s) (including any part of any account balance distributed in
the five-year period ending on the Determination Date(s)) of all participants
who have received compensation from the Employer (other than benefits under this
Plan) at any time during the five-year period ending on the Determination
Date(s) and (B) the present value of accrued benefits under the defined benefit
plans for all participants who have received compensation from the Employer
(other than benefits under this Plan) at any time during the five-year period
ending on the Determination Date(s). Both the numerator and denominator of the
fraction shall be computed in accordance with Code Section 416 and the Treasury
Regulations promulgated thereunder. In addition, both the numerator and
denominator of the Top-Heavy Ratio shall include aggregate distribution(s) of an
account balance or an accrued benefit made during the five-year period ending on
the Determination Date(s) and any contribution which is not actually made as of
the Determination Date(s), but which is required to be taken into account on
that date under Code Section 416 and the Treasury Regulations promulgated
thereunder.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the present value of accrued benefits will be determined as of the
most recent Valuation Date that falls within, or ends with, the 12-month period
ending on the Determination Date, except as provided in Code Section 416 and the
Treasury Regulations promulgated thereunder for the first and second plan years
of a defined benefit plan. The account balances and accrued benefits of a
Participant (A) who is not a Key Employee but who was a Key Employee in a prior
Plan Year or (B) who has not been credited with at least one Hour of Service at
any time during the five-year period ending on the Determination Date, will be
disregarded. The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will be made in
accordance with Code Section 416 and the Treasury Regulations promulgated
thereunder. Deductible Voluntary Contributions and any deductible employee
contributions under any other qualified plan maintained by the Employer will not
be taken into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall within the same
calendar year.
(d) Permissive Aggregation Group. The Required Aggregation Group of
plans plus any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group, would continue to satisfy the
requirements of Code Sections 401(a)(4) and 410.
(e) Required Aggregation Group. (i) Each qualified plan of the
Employer in which at least one Key Employee participates or participated at any
time during the determination period (regardless of whether the plan has
terminated), and (ii) any other qualified plan of the Employer which enables a
plan described in (i) to meet the requirements of Code Sections 401(a)(4) or
410.
(f) Determination Date. For any Plan Year subsequent to the first
Plan Year, the Determination Date shall be the last day of the preceding Plan
Year. For the first Plan Year of the Plan, the Determination Date shall be the
last day of that year.
(g) Valuation Date. See Section 2.49.
(h) Present Value. Present value shall be based only on the interest
rate employed as of the date in question by the Pension Benefit Guaranty
Corporation to value immediate annuities and the mortality rate specified in
Table LN at Treas. Reg. 20.2031-10, unless otherwise specified in the most
recently adopted or amended defined benefit plan maintained by the Employer.
21.03 Minimum Allocation.
(a) In any Plan Year in which this Plan is Top-Heavy, except as
otherwise provided in (d), (e) and (f) below, the Employer Contributions and
forfeitures allocated on behalf of any Participant who is not a Key Employee
shall not be less than the lesser of 3% of such Participant's Compensation or,
in the case where the Employer has no defined benefit plan which designates this
Plan to satisfy Code Section 401, the largest percentage of Employer
Contributions and forfeitures stated as a percentage of the first $200,000 of a
Key Employee's Compensation, allocated on behalf of any Key Employee for that
Plan Year. The minimum allocation is determined without regard to any Social
Security contribution by the Employer. This minimum allocation shall be made
even though, under other provisions of this Plan, the Participant would not
otherwise be entitled to receive an allocation, or would have received a lesser
allocation for the year because (i) the Participant failed to complete the
minimum number of Hours of Service specified in the Adoption Agreement for
receiving an allocation, (ii) the Participant's Compensation was less than a
stated amount, or (iii) the Participant made insufficient mandatory
contributions to receive an Employer Contribution (allocated on a thrift
matching basis) sufficient to alleviate the need a minimum allocation under this
Section 21.03.
(b) For purposes of computing the minimum allocation, "Compensation"
will have the same meaning as in Section 2.07, disregarding any exclusion from
Compensation specified by the Employer in the Adoption Agreement.
(c) During any Plan Year for which a minimum allocation is required
under subsections (a) or (f) to a plan under which allocations shall be made on
an integrated basis pursuant to Section 4.01(a)(iii) or 4.01(b) or a matching
basis pursuant to Section 4.01(a)(ii)(B), Employer Contributions and forfeitures
will be allocated to each Participant's Employer Contribution Account in the
ratio that the Participant's Compensation for the Plan Year bears to all
Participants' Compensation for the Plan Year but not in excess of 3% of such
Compensation. The provisions of this Section 21.03(c) shall take precedence
over any conflicting provisions of Section 4.01. To the extent any amount of
Employer Contributions and forfeitures remains unallocated after the application
of this subsection (c), such amount shall be allocated in accordance with the
provisions of Section 4.01 hereof.
(d) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(e) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan (other
than a plan which incorporates the Prototype Plan) or plans of the Employer, and
the Employer has provided in the Adoption Agreement that the minimum allocation
or benefit requirement applicable to Top-Heavy Plans will be met in such other
plan or plans.
(f) The provision in subsection (a) above shall not apply in the
case of a Participant who is an Employee of an Employer who has adopted both a
profit sharing plan and a money purchase pension plan which incorporate this
Prototype Plan. In such case, the aggregate total of the Employer Contributions
and forfeitures under both plans allocated to the Employer Contribution Account
of a Participant who is not a Key Employee shall not be less than 3% of such
Participant's Compensation. Unless the Employer has specified otherwise in the
Adoption Agreement and such specification is sufficient to satisfy the minimum
allocation requirement referred to in the preceding sentence, subsection (c)
above shall apply to the allocation of Employer Contributions and forfeitures
under the profit sharing plan and, only to the extent that such allocation is
insufficient to satisfy the minimum allocation requirement referred to in the
preceding sentence, the money purchase pension plan.
21.04 Nonforfeitability of Minimum Allocation. The minimum allocation
required (to the extent required to be nonforfeitable under Code Section 416(b))
may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
21.05 Limitation on Compensation. For any Plan Year in which the Plan is
Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed
by the Secretary of the Treasury or his or her delegate) of a Participant's
Compensation for the Plan Year shall be taken into account for purposes of
allocating Employer Contributions under the Plan.
21.06 Minimum Vesting Schedule. Unless the Employer has specified a more
rapid vesting schedule in the Adoption Agreement, for any Plan Year in which
this Plan is Top-Heavy, the following minimum vesting schedule shall apply:
Nonforfeitable Percentage of
Vesting Years Employer Contribution Account
1 0%
2 20
3 40
4 60
5 80
6 or more 100
The minimum vesting schedule applies to all benefits within the meaning of
Code Section 411(a)(7) attributable to Employer Contributions and forfeitures,
including benefits accrued before the effective date of Code Section 416 and
benefits accrued before the Plan became Top-Heavy. Further, no reduction in
vested benefits may occur in the event the Plan's status as Top-Heavy changes
for any Plan Year. IF conversion of the Plan into a Top-Heavy Plan has resulted
in a change of the Plan's vesting schedule to the minimum vesting schedule
discussed above, the change shall be treated as an amendment to the Plan and the
election referred to in Section 18.01 hereof shall apply. This Section 21.06
does not apply to the Employer Contribution Account balances of any former
Participant who does not have an Hour of Service after the Plan has initially
become Top-Heavy and such former Participant's vested Employer Contribution
Account balance will be determined without regard to this Section.
21.07 Effect on Code Section 415 Limitations. Notwithstanding anything to
the contrary in Section 5 above, the following provisions apply if the Plan is
Top-Heavy.
(a) In any Plan Year in which the Top-Heavy ratio exceeds 90% (and
the Plan therefore becomes super Top-Heavy) the denominators of the Defined
Benefit Fraction (as defined in Section 5.05(c) above) and the Defined
Contribution Fraction (as defined in Section 5.05(d) above) shall be computed
using 100% of the dollar limitation stated therein instead of 125%.
(b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%, but is
less than 90%, the denominators of the Defined Benefit Fraction (as defined in
Section 5.05(c) above) and the Defined Contribution Fraction (as defined in
Section 5.05(d) above) shall be computed using 100% of the dollar limitation
described therein instead of 125%, unless the Employer has specified in the
Adoption Agreement that the minimum allocation provisions of Section 21.03 above
shall be computed using 4% of a Participant's Compensation, in which case the
dollar limitations of the Defined Benefit Fraction (as defined in Section
5.05(c) above) and the Defined Contribution Fraction (as defined in Section
5.05(d) above) shall continue to be computed using 125% of the dollar
limitations.
21.08 Termination of Top-Heavy Status. If the Plan ceases to be Top-Heavy
for any Plan Year and if the Employer has not specified otherwise in the
Adoption Agreement, the minimum vesting schedule described in Section 21.06
shall continue to apply. If the Employer has specified in the Adoption
Agreement that, upon conversion of the Plan to non-Top-Heavy status,
Participants' vested benefits are to be determined according to a schedule other
than the minimum vesting schedule described in Section 21.06, such change in
vesting schedules shall be treated as an amendment, and the election referred to
in Section 18.01 hereof shall apply.
SECTION 22.
SPECIAL DISTRIBUTION RULES
22.01 Special Rule for Profit Sharing Plan Participants. If this Plan is
adopted as a profit sharing plan and (a) it is determined that this Plan is a
direct or indirect transferee (including a plan which is amended into this Plan)
of a defined benefit plan, money purchase pension plan (including a target
benefit plan), stock bonus or profit sharing plan which would otherwise provide
a life annuity form of payment with respect to such Participant, (b) the Plan is
amended so as to allow a Participant to elect to receive his or her benefits in
the form of a life annuity and Participant elects to receive his or her
<PAGE>
benefits in such form, (c) the Plan is amended to provide that absent a
Qualified Election of a Participant's surviving spouse, someone other than the
Participant's surviving spouse becomes entitled to the Participant's vested
Account balance, or (d) if someone other than the Participant's surviving spouse
is the beneficiary of any insurance purchased with funds from the Participant's
Account, the provisions of Sections 8, 9, and 15 shall apply as if this Plan
were adopted as a money purchase pension plan.
22.02 Elections for Former Participants. An opportunity to make the
applicable distribution elections discussed below in this Section 22.02 must be
given to any living former Participant who had not begun receiving benefits from
this Plan on August 23, 1984 and who would not otherwise receive the benefit
forms prescribed by Sections 8 and 9 above.
(a) In the case of a former Participant who:
(i) would have been entitled to receive his or her benefits in
the form of a life annuity had he or she completed an Hour of Service during a
Plan Year commencing after December 31, 1984,
(ii) was credited with Service under this Plan or a predecessor
plan in a plan year beginning after December 31, 1975, and
(iii) had at least ten years of vesting Service when he or she
separated from Service,
the former Participant must be given an opportunity to elect to receive his or
her benefits in accordance with the provisions of Sections 8 and 9 applied as if
this Plan were adopted as a money purchase pension plan.
(b) In the case of a former Participant:
(i) who was credited with service under this Plan or a
predecessor plan after September 1, 1974;
(ii) who was not credited with service under this plan or a
predecessor plan in a plan year beginning after December 31, 1975; and
(iii) whose benefits would have been payable in the form of a
life annuity
the Participant must be given an opportunity to elect to receive his or her
benefits in accordance with the provisions of Section 22.04.
(c) In the case of a former Participant who:
(i) satisfies the requirements of subsection (a) but does not
exercise the election made available to him or her in subsection (a), or
(ii) satisfies the requirements of subsection (a) other than the
requirement of paragraph (iii),
the former participant shall have his or her benefits distributed in accordance
with the provisions of Section 22.04.
22.03 Election Period for Certain Elections by Separated Participants.
The period during which a former Participant entitled to make an election
pursuant to Section 22.02 shall commence on August 23, 1984 and end on the
earlier of the former Participant's death or the date benefits would otherwise
commence to said former Participant.
22.04 Benefit Form for Certain Former Participants. The benefits of a
former Participant who is entitled to elect, and has elected to have his or her
benefits distributed pursuant to this Section 22.04 or a former Participant
whose benefits are required to be distributed in accordance with the provisions
of this Section 22.04 shall be distributed in accordance with the following
provisions:
(a) If benefits in the form of a life annuity become payable to a
married former 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 prior to Normal Retirement Age;
or
(iv) separates from Service on or after attaining Normal
Retirement Age (or the qualified early retirement age) after satisfying the
eligibility requirement for the payment of benefits under the Plan and
thereafter dies before beginning to receive such benefits;
then such benefits will be received under this plan in the form of a Qualified
Joint and Survivor Annuity, unless the former Participant has elected otherwise
during the election period. For this purpose, the election period must begin at
least six months before the participant attains qualified early retirement age
and end not more than 90 days before the commencement of benefit distributions.
Any election hereunder must be in writing and delivered to the Administrator;
such election may be changed by the former Participant at any time by delivery
of written notification of such change and/or a separate written election to the
Administrator.
(b) A former Participant who is employed at the start of the election
period defined below will be given the opportunity to elect, during such
election period, to have a survivor annuity payable on death. If the former
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 former Participant had retired on
the day before his or her death. Any election under this provision must be in
writing and delivered to the Administrator; such election may be changed by the
former Participant at any time by delivery of written notification of such
change and/or a separate written election to the Administrator. The election
period begins on the later of (i) the 90th day before the former Participant
attains the qualified early retirement age or (ii) the date the former
Participant terminates employment with the Employer.
(c) The qualified early retirement age referred to in this Section
22.04 shall mean the latest of:
(i) the earliest date, under the plan, on which the former
Participant may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning before the
former Participant reaches Normal Retirement Age, or
(iii) the date the former Participant began participation.
SECTION 23.
DISTRIBUTION OPTION
NOTICE REQUIREMENTS
23.01 Notice of Waivability of Qualified Preretirement Survivor Annuity.
In the case of a Participant who is scheduled to receive Qualified Preretirement
Survivor Annuity pursuant to section 8.01 hereof, the Administrator shall
provide the Participant within the period beginning on the first day of the Plan
Year in which the Participant attains age 32 and ending with the close of the
Plan Year in which the Participant attains age 35, a written explanation of: (a)
the terms and conditions of a Qualified Preretirement Survivor Annuity; (b) the
Participant's right to make, and the effect of, an election to waive Qualified
Preretirement Survivor Annuity coverage; (c) the rights of a Participant's
Spouse; and (d) the Participant's right to make, and the effect of, a revocation
of a previous election to waive Qualified Preretirement Survivor Annuity
coverage. In the case of a Participant who becomes a Participant after the
first day of the Plan Year in which the Participant attained age 32 and who is
scheduled to receive a Qualified Preretirement Survivor Annuity pursuant to
Section 8.01 hereof, the Administrator shall provide the notice required by this
Section 23.01 no later than the close of the third Plan Year subsequent to the
Participant's commencement of participation in the Plan.
23.02 Notice of Waivability of Qualified Joint and Survivor Annuity. In
the case of a Participant who is scheduled to receive a Qualified Joint and
Survivor Annuity pursuant to the provisions of Section 9.03 hereof, the
Administrator shall provide to the Participant, within a reasonable period prior
to the commencement of distributions, a written explanation of: (a) the terms
and conditions of a Qualified Joint and Survivor Annuity; (b) the Participant's
right to make, and the effect of, an election to waive distribution in the form
of a Qualified and Joint Survivor Annuity coverage; (c) the rights of the
Participant's Spouse; and (d) the Participant's right to make, and the effect
of, a revocation of a previous election to waive distribution in the form of the
Qualified and Joint Survivor Annuity.
SECTION 24.
WAIVER OF MINIMUM FUNDING STANDARD
If an Employer who has adopted this Prototype Plan as a money purchase
pension plan is unable to satisfy the minimum funding standard (as described in
Code Section 412) for a given Plan Year, it may apply to the Internal Revenue
Service for a waiver of such minimum funding standard. If the waiver is
granted, the following provisions apply:
(a) An adjusted Account balance shall be maintained for each
Participant whose actual Account balance is less than or equal to his or her
adjusted Account balance.
(i) For the Plan Year for which the first waiver is granted, the
adjusted Account balance as of the Valuation Date for each affected Participant
equals:
(A) the Participant's actual Account balance, plus
(B) the amount that such Participant would have received if
the amount waived had been contributed.
(ii) For each Plan Year following the Plan Year for which a
waiver is granted, the adjusted Account balance for each Participant affected by
such waiver (calculated as of the Valuation Date for that Plan Year) equals:
(A) the adjusted Account balance as of the Valuation Date
in the prior Plan Year, plus
(B) the amount equal to the actual investment return
credited or charged to the Participant's actual Account balance, plus
(C) the amount equal to 5% of the excess of the amount in
(A) over the Participant's actual Account balance calculated as of the same
date, plus
(D) the amount equal to such Participant's allocated share
of the required Employer Contribution (whether or not waived) for the Plan Year
(determined without regard to adjusted waiver payments and discretionary
Employer Contributions), minus
(E) the amount of the Participant's adjusted Account
balance forfeited during the Plan Year under the Plan's provisions.
(b) For a given Plan Year, the Employer is required to contribute a
certain amount in order to satisfy the minimum funding standard for such Plan
Year. For each Plan Year which follows a Plan Year for which a waiver of the
minimum funding standard was granted the amount equals:
(i) the amount due as determined under Section 4.01(b) above
without regard to this Section), plus
(ii) the adjusted waiver amount.
(c) The adjusted waiver amount for a given Plan Year equals:
(i) the sum of the amounts necessary to amortize each waived
funding deficiency over a period of fifteen Plan Years (measured from the
Valuation Date of the Plan Year for which the corresponding waiver was granted)
at 5% interest, compounded annually, minus
(ii) the sum of the amounts necessary to amortize the total of
each Plan Year's forfeitures (which have arisen since the first waiver was
granted) over a period of fifteen Plan Years (measured from the Valuation Date
of the Plan Year in which the corresponding forfeitures arose) at 5% interest,
compounded annually.
(d) An amount equal to the adjusted waiver amount must be contributed
only until each Participant's actual Account balance equals the Participant's
adjusted Account balance.
(e) Any Plan provision which provides that Employer Contributions
shall be reduced immediately by forfeitures is revoked until each Participant's
actual Account balance equals that Participant's adjusted Account balance.
(f) Discretionary Employer Contributions, which are in addition to
the amounts contributed to satisfy the minimum funding standard, can be made in
any given Plan Year. However, the total Employer Contribution for the Plan Year
cannot exceed the then remaining underfunded amount (the sum of Participants'
adjusted Account balances minus total Plan assets).
(g) The adjusted waiver payments, discretionary Employer
contributions and the forfeitures of actual Account balances for the current
Plan Year shall be allocated as of that Plan Year's Valuation Date to the actual
Account balances of the affected Participants.
(h) Each time a waiver is granted, an original waiver amount ("OWA")
will be determined for each affected Participant. The OWA equals the
Participant's portion of the amount which was waived.
(i) Commencing with the Valuation Date of the Plan Year for which a
waiver is granted, a remaining original waiver amount ("ROWA") must be
calculated for each affected Participant. As of such Valuation Date the OWA
equals the ROWA. On the Valuation Date of a succeeding Plan Year the ROWA
equals the prior Plan Year's ROWA multiplied by
<PAGE>
1.05, minus the forfeiture of amounts in the prior Plan year's ROWA incurred in
the current Plan Year. For each waiver that is granted one OWA and a
corresponding ROWA will be established for each affected Participant.
(j) The sum of the adjusted waiver payments, discretionary Employer
Contributions and forfeitures of actual Account balances for a given Plan Year
are allocated to those Participants who have ROWAs by multiplying the sum of
these three amounts by the fraction:
(i) the numerator of which equals the sum of OWAs for a
particular Participant, and
(ii) the denominator of which equals the sum of the OWAs for all
Participants.
To determine the portion of this allocation which is to be assigned to a
given ROWA, multiply the allocation by the corresponding OWA, then divide by the
sum of the OWAs for the particular Participant.
(k) If the calculation of a ROWA results in a value which is less
than zero, then
(i) the ROWA is set equal to zero,
(ii) the corresponding OWA is set equal to zero, and
(iii) the excess payments will be reallocated to the remaining
ROWAs.
(l) A distribution is determined by multiplying a Participant's
vested percentage by his or her adjusted Account balance. However,
distributions from the Plan may not exceed a Participant's actual Account
balance. If so limited, plan Participants shall receive subsequent
distributions derived from future adjusted waiver payments.
SECTION 25.
MISCELLANEOUS
25.01 Misrepresentation. Notwithstanding any other provision herein, if
an Employee misrepresents his or her age or any other fact, any benefit payable
hereunder shall be the smaller of: (a) the amount that would be payable if
no facts had been misrepresented, or (b) the amount that would be payable if the
facts were as misrepresented.
25.02 Legal or Equitable Action. If any legal or equitable action with
respect to the Plan is brought by or maintained against any person, and the
results of such action are adverse to that person, attorney's fees and all other
costs to the Employer, the Administrator or the Trust of defending or bringing
such action shall be charged against the interest, if any, of such person under
the Plan.
25.03 No Enlargement of Plan Rights. It is a condition of the Plan, and
each Participant by participating herein expressly agrees, that he or she shall
look solely to the assets of the Trust for the payment of any benefit under the
Plan.
25.04 No Enlargement of Employment Rights. Nothing appearing in or done
pursuant to the Plan shall be construed (a) to give any person a legal or
equitable right or interest in the assets of the Trust or distribution
therefrom, nor against the Employer, except as expressly provide herein or (b)
to create or modify any contract of employment between the Employer and any
Employee or obligate the Employer to continue the services of any Employee.
25.05 Written Orders. In taking or omitting to take any action under this
Plan, the Trustee may conclusively rely upon and shall be protected in acting
upon any written orders from or determinations by the Employer or the
Administrator as appropriate, or upon any other notices, requests, consents,
certificates or other instruments or papers believed by it to be genuine and to
have been properly executed, and so long as it acts in good faith, in taking or
omitting to take any other action.
25.06 No Release from Liability. Nothing in the Plan shall relieve any
person from liability for any responsibility under Part 4 of Title I of the Act.
Subject thereto, neither Trustee, Loan Trustee, Administrator nor Distributor
nor any other person shall have any liability under the Plan, except as a result
of negligence or wilful misconduct, and in any event the Employer shall fully
indemnify and save harmless all persons from any liability except that resulting
from their negligence or wilful misconduct.
25.07 Discretionary Actions. Any discretionary action, including the
granting of a loan pursuant to Section 10 hereof, to be taken by the Employer or
the Administrator under this Plan shall be non-discriminatory in nature and all
Employees similarly situated shall be treated in a uniform manner.
25.08 Headings. Headings herein are primarily for convenience of
reference, and if they conflict with the text, the text shall control.
25.09 Applicable law. This Plan shall, to the extent state law is
applicable, be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the state in which (a) if the Trustee
is a corporation, the Trustee has its principal place of business; (b) if the
Trustee is an individual, the Trustee resides; or (c) if the Trustee is
individuals, where a majority of the individuals serving as Trustee reside. The
Employer's execution of the Adoption Agreement may be acknowledged where
required by applicable law.
25.10 No Reversion. Notwithstanding any other contrary provision of the
Plan, but subject nevertheless to Sections 5 and 16, no part of the assets in
the Trust shall revert to the Employer, and no part of such assets, other than
that amount required to pay taxes or administrative expenses, shall be used for
any purpose other than exclusive benefit of Employees or their Beneficiaries.
However, the Employer may request a return, and this Section 25.10 shall not
prohibit return, of an amount to the Employer under any of the following
circumstances:
(a) if the amount was all or part of an Employer contribution which
was made as a result of a mistake of fact and the amount contributed is returned
to the Employer within one year after the date on which the mistaken payment of
the contribution was made, or
(b) if the amount was all or part of an Employer contribution which
was conditioned on deductibility under Code Section 404 and this condition is
not satisfied, and the amount is returned to the Employer within one after the
date on which the deduction is disallowed, or
(c) if the amount was all or part of an Employer contribution which
was conditioned on the initial qualification of the Plan under Code Section
401(a), this condition is not satisfied, and the amount is returned to the
Employer within one year after the date on which initial qualification is
denied, or
(d) if the amount was all or part of an Employer contribution which
was conditioned on the qualification of the Plan as amended under Code Section
401(a), this condition is not satisfied, the Plan amendment was submitted to the
Internal Revenue Service for qualification within one year after it was adopted,
and the amount is returned to the Employer within one year after the date on
which requalification is denied.
For the purposes of this Section 25.10, all Employer contributions are
conditioned on initial qualification of the Plan under Code Section 401(a),
qualification of the Plan as amended under Code Section 401(a), and
deductibility under Code Section 404.
25.11 Notices. The Employer will provide the notice to other interested
parties contemplated under Code Section 7476 before requesting a determination
by the Secretary of the Treasury or his or her delegate with respect to the
qualification of the Plan.
25.12 Conflict. In the event of any conflict between the provisions of
this Plan and the terms of any contract or agreement issued thereunder or with
respect thereto, the provisions of the Plan shall control. In particular, the
proceeds of any life insurance contract purchased by the Trustee and not
governed by an effective Designation of Beneficiary form shall be paid to the
Participant's Spouse regardless of who is named as the beneficiary or
beneficiaries in the contract.
MODEL AMENDMENT II
FOR DEFINED
CONTRIBUTION PLANS
SECTION I:
PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The purpose of this amendment is to amend the plan to comply
with those provisions of the Tax Reform Act of 1986 that are effective prior to
the first year beginning after December 31, 1988. Nothing contained in this
amendment shall permit or require Matching Employer Contributions or Employee
Contributions under the plan unless such Matching Employer Contributions or
Employee Contributions have been authorized by the employer under other
provisions of the plan or under other amendments thereto.
1.2 Effective Date. Except as otherwise provided, this amendment shall be
effective as of the first day of the first Plan Year beginning after December
31, 1986.
SECTION II:
DEFINITIONS
For the purposes of this amendment only, the following definitions shall
apply:
2.1. "Adoption Agreement Amendment" shall mean that portion of this
amendment in which the Employer makes any elections permitted under the
amendment.
2.2. "Affiliated Employer" shall mean any corporation which is a member of
a controlled group of corporations (as defined in section 414(b) of the Code)
which includes the Employer, any trade or business (whether or not incorporated)
which are under common control (as defined in section 414(c) of the Code) with
the Employer; any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in section 414(m) of the Code) which
includes the Employer; and any other entity required to aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
2.3. "Code" shall mean the Internal Revenue Code of 1986 and amendments
thereto.
2.4. "Compensation" shall mean, for purposes of section V of this
amendment, compensation paid by the Employer to the Participant during the Plan
Year which is required to be reported as wages on the Participant's Form W-2 of
which, in the case of a self-employed individual, constitutes payment for
services rendered includible in the self-employed individual's gross income and,
if the provisions of the plan other than this amendment so provide, shall also
include compensation which is not currently includible in the Participant's
gross income by reason of the application of sections 125, 402(a)(8),
402(h)(1)(B), or 403(b) of the Code.
2.5. "Employee" shall mean employees of the Employer and shall include
leased employees within the meaning of section 414(n)(2) of the Code.
Notwithstanding the foregoing, if such leased employees constitute less than
twenty percent of the Employer's nonhighly compensated workforce within the
meaning of Section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall not
include those leased employees covered by a plan described in section 414(n)(5)
of the Code unless otherwise provided by the terms of this plan other than this
amendment.
2.6. "Employee Contributions" shall mean contributions made to the plan by
a Participant during the Plan Year.
2.7. "Employer" shall mean the entity that establishes or maintains the
plan, any "Affiliated Employer" and any successor of such establishing employer.
2.8. "Family Member" shall mean an individual described in section
414(q)(6)(B) of the Code.
2.9. "Highly Compensated Employee" shall mean an employee described in
section 414(q) of the Code.
2.10. "Matching Contribution" shall mean any contribution to the plan made
by the Employer for the Plan Year and allocated to a Participant's account by
reason of the Participant's Employee Contributions or elective deferrals.
<PAGE>
2.11. "Nonhighly Compensated Employee" shall mean an Employee of the
Employer who is neither a Highly Compensated Employee nor a Family member.
2.12. "Participant" shall mean any Employee of the Employer who has met
the eligibility and participation requirements of the plan.
2.13. "Plan Year" shall mean the plan year otherwise specified in the
plan.
SECTION III:
PROVISIONS RELATING TO
LEASED EMPLOYEES
3.1. Safe-Harbor. Notwithstanding any other provisions of the plan, for
purposes of determining the number or identity of Highly Compensated Employees
or for the purposes of the pension requirements of section 414(n)(3) of the
Code, the employees of the Employer shall include individuals defined as
Employees in section 2.5 of the amendment.
3.2. Participation and Accrual. A leased employee within the meaning of
section 414(n)(2) of the Code shall become a Participant in, and accrue benefits
under, the plan based on service as a leased employee only as provided in
provisions of the plan other than this section III.
3.3. Effective Date. This section III shall be effective for services
performed after December 31, 1986.
SECTION IV:
LIMITATIONS ON CONTRIBUTIONS
AND BENEFITS
4.1. Revised Contribution Limitations under Defined Contribution Plan.
4.1(a). Definition of Annual Additions. For purposes of the plan, "Annual
Addition" shall mean the amount allocated to a Participant's account during the
Limitation Year that constitutes:
(i) Employer Contributions or Employee Contributions, including
Excess Contributions as defined in section 401(k)(8)(B) of the Code, Excess
Aggregate Contributions as defined in section 401(m)(6)(B), and Excess Deferrals
as described in section 402(g), regardless of whether such amounts are
distributed or forfeited;
(ii) Forfeitures; and
(iii) Amounts described in sections 415(l)(1) and 419A(d)(2) of the
Code.
4.1(b). Maximum Annual Addition. The maximum Annual Addition that may be
contributed or allocated to a Participant's account under the plan for any
Limitation Year shall not exceed the lesser of:
(i) the Defined Contribution Dollar Limitation, or
(ii) 25 percent of the Participant's compensation, within the meaning
of section 415(c)(3) of the Code for the Limitation Year.
4.1(c). Special Rules. The compensation limitation referred to in section
4.1(b)(ii) shall not apply to:
(i) Any contribution for medical benefits (within the meaning of
section 419A(f)(2) of the Code) after separation from service which is otherwise
treated as an Annual Addition, or
(ii) Any amount otherwise treated as an Annual Addition under section
415(l)(1) of the Code.
4.1(d). Definitions. For purposes of section 4.1, "Defined Contribution
Dollar Limitation" shall mean $30,000 or, if greater, one-fourth of the defined
benefit dollar limitation set forth in section 415(b)(1) of the Code as in
effect for the Limitation Year.
4.2. Special Rules for Plans Subject to Overall Limitations Under Code
Section 415(e).
4.2(a). Recomputation Not Required. 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.
4.2(b). Adjustment of Defined Contribution Plan Fraction. If the plan
satisfied the applicable requirements of section 415 of the Code as in effect
fro all Limitation Years beginning before January 1, 1987, an amount shall be
subtracted from the numerator of the defined contribution plan fraction (not
exceed such numerator) as prescribed by the Secretary of the Treasury so that
the sum of the defined benefit plan fraction and defined contribution plan
fraction computed under section 415(e)(1) of the Code (as revised by this
section IV) does not exceed 1.0 for such Limitation Year.
4.3. Limitation Year. For purposes of this section IV, "Limitation Year"
shall mean the limitation year specified in the plan, or if none is specified,
the calendar year.
4.4. Effective Date of Section IV Provisions. The provisions of this
section IV shall be effective for Limitation Years beginning after December 31,
1986.
4.5. For purposes of this section IV, Affiliated Employer shall also
include those employers described in section 415(h) of the Code.
SECTION V:
LIMITATIONS ON EMPLOYEE
CONTRIBUTIONS
5.1. Applicability of this Section. This section V shall apply to the
plan only if such plan permits Employee Contributions or allocates Matching
Contributions to Participants' accounts in Plan Years beginning after December
31, 1986.
5.2. Contribution Percentage.
5.2(a). The Average Contribution Percentage for Eligible Participants who
are Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are Nonhighly Compensated
Employees for the Plan Year multiplied by 1.25; or
5.2(b). The Average Contribution Percentage for Eligible Participants who
are Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are Nonhighly Compensated
Employees for the Plan Year multiplied by 2, provided that the Average
Contribution Percentage for Highly Compensated Employees does not exceed the
Average Contribution Percentage for Eligible Participants who are Nonhighly
Compensated Employees for the Plan Year by more than two (2) percentage points
or such lesser amount as the Secretary of the Treasury shall prescribe to
prevent the multiple use of this alternative limitation with respect to any
Highly Compensated Employee.
5.3. Definitions. For purposes of this section V, the following
definitions shall apply:
5.3(a). "Average Contribution Percentage" shall mean the average
(expressed as a percentage) of the Contribution Percentages of the Eligible
Participants in a group.
5.3(b). "Contribution percentage" shall mean the ratio (expressed as a
percentage) if the sum of the Employee Contributions and Matching Contributions
under the plan on behalf of the Eligible Participant for the Plan Year to the
Eligible Participant's Compensation for the Plan Year.
5.3(c). "Eligible Participant" shall mean any employee who is authorized
under the terms of the plan to have Employee Contributions or Matching
Contributions allocated to his account for the Plan Year.
5.4. Special Rules.
5.4(a). For purposes of this section V, the Contribution Percentage for
any Eligible Participant who is a Highly Compensated Employee for the Plan Year
and who is eligible to make Employee Contributions, or to have Matching
Contributions within the meaning of section 401(m)(4)(A) of the Code allocated
to his account under two or more plans described in section 401(a) of the Code
or arrangements described in section 401(k) of the Code that are maintained by
the Employer shall be determined as if the total of such Employee Contributions
and Matching Contributions was made under each plan.
5.4(b). In the event that this plan satisfies the requirements of section
410(b) of the Code only if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of section 410(b) of the Code only if
aggregated with this plan, then this section V shall be applied by determining
the Contribution Percentages of Eligible Participants as if all such plans were
a single plan.
5.4(c). For purposes of determining the Contribution Percentage of an
Eligible Participant who is a Highly Compensated Employee, the Employee
Contributions, Matching Contributions and Compensation of such Eligible
Participant shall include the Employee Contributions, Matching Contributions and
Compensation of Family Members. Family Members with respect to Highly
Compensated Employees shall be disregarded as separate employees in determining
the Contribution Percentage both for Eligible Participants who are Nonhighly
Compensated Employees and for Eligible Participants who are Highly Compensated
Employees.
5.4(d). The determination and treatment of the Contribution Percentage of
any Eligible Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
5.5. Distribution of Excess Aggregate Contributions.
5.5(a). In General. Excess Aggregate Contributions plus any income and
minus any loss allocable thereto shall be forfeited, if otherwise forfeitable
under the terms of this plan, or if not forfeitable, distributed no later than
the last day of each Plan Year beginning after December 31, 1987, to
Participants to whose accounts Employee Contributions or Matching Contributions
were allocated for the preceding Plan Year.(1) Excess Aggregate Contributions
shall be treated as Annual Additions under section 4.1(a) of this amendment.
5.5(b). Excess Aggregate Contribution. For purposes of this amendment,
"Excess Aggregate Contribution" shall mean the amount described in section
401(m)(6)(B) of the Code.
5.5(c). Determination of Income or Loss. The Excess Aggregate
Contributions to be forfeited, if otherwise forfeitable under the terms of the
plan, or if not forfeitable, distributed to the Participant shall be adjusted
for income or loss. The income or loss allocable to Excess Aggregate
Contributions shall be determined by multiplying the income or loss allocable to
the Participant's Employee Contributions and Matching Contributions for the Plan
Year by a fraction, the numerator of which is the Excess Aggregate Contributions
on behalf of the Participant for the preceding Plan Year and the denominator of
which is the sum of the Participant's account balances attributable to Employee
Contributions and Matching Contributions on the last day of the preceding Plan
Year.
5.5(d). Accounting for Excess Aggregate Contributions. Excess Aggregate
Contributions shall be distributed from the Participant's Employee Contribution
account, and forfeited if otherwise forfeitable under the terms of the plan (or,
if not forfeitable, distributed) from the Participant's Matching Contribution
account in proportion to the Participant's Employee Contributions and Matching
Contributions for the Plan Year.
5.5(e). Allocation of Forfeitures. Amounts forfeited by Highly
Compensated Employees under this section V shall be:
(i) Treated as Annual Additions under section 4.1(a) of this
amendment and either;
(ii) Applied to reduce Employer contributions if forfeitures of
matching Contributions under the plan are applied to reduce Employer
contributions; or
(iii) Allocated, after all other forfeitures under the plan, and
subject to section 5.4(f) of this amendment, to the same Participants and in the
same manner as such other forfeitures of Matching Contributions are allocated to
other Participants under the plan.
5.5(f). Notwithstanding the foregoing, no forfeitures arising under this
section V shall be allocated to the account of any Highly Compensated Employee.
- ------------------
(1) If Excess Aggregate Contributions plus any income and minus any loss
allocable thereto are forfeited (if forfeitable) or distributed more than 2-1/2
months after the last day of the Plan Year in which such Excess Aggregate
Contributions arose, then section 4979 of the Code imposes a ten (10) percent
excise tax on the employer maintaining the plan with respect to such amounts.
<PAGE>
SECTION VI:
QUALIFIED VOLUNTARY EMPLOYEE
CONTRIBUTIONS NOT PERMITTED
6.1. The plan shall accept no Employee Contributions designated by the
Participant as deductible employee contributions (within the meaning of section
72(o)(5)(A) of the Code) for a taxable year of the Participant beginning after
December 31, 1986.
SECTION VII:
DETERMINATION OF TOP HEAVY STATUS
7.1. Solely for the purpose of determining if the plan or any other plan
included in a required aggregation group of which this plan is a part, is top-
heavy (within the meaning of section 416(g) of the Code) the accrued benefit in
a defined benefit plan of an Employee other than a Key Employee (within the
meaning of section 416(i)(1) of the Code) shall be determined under (a) the
method, of any, that uniformly applies for accrual purposes under all plans
maintained by the Employer, or (b) if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of section 411(b)(1)(C) of the Code.
SECTION VIII:
RESERVED
SECTION IX:
BENEFIT FORFEITURES
9.1. Applicability of this Section. This section IX shall apply to the
plan only if such plan is a money purchase pension plan, other than a target
benefit plan, and the Employer elects in the Adoption Agreement Amendment to
have this section apply.
9.2. Allocation of Forfeitures. Notwithstanding any other provision of
the plan, forfeitures occurring in Plan Years specified in the Adoption
Agreement Amendment shall be allocated to Participants entitled to an allocation
of Employer contributions for the Plan Year in which the forfeiture occurs in
proportion to their compensation. The plan shall continue to be designed to
qualify as a money purchase pension plan for purposes of section 401(a), 402,
412 and 417 of the Code.
9.3. Forfeitures. For purposes of this section IX, "forfeitures" shall
mean those nonvested amounts allocated to Participants' accounts that, under the
terms of the plan immediately prior to the adoption of this amendment, would
have been applied, if forfeited to reduce employer contributions under the plan.
SECTION X:
PROFITS NOT REQUIRED
10.1. Applicability of this Section. This section X shall apply to the
plan only if such plan is a profit-sharing plan and the Employer elects in the
Adoption Agreement to have this section apply.
10.2. Employer Contributions. Notwithstanding any other provision of the
plan, Employer Contributions for Plan Years specified in the Adoption Agreement
Amendment shall be made to the plan without regard to current or accumulated
earnings and profits for the taxable year or years ending with or within such
Plan Year. The plan shall continue to be designed to qualify as a profit-
sharing plan for purposes of sections 401(a), 402, 412 and 417 of the Code.
MODEL CASH OR
DEFERRED
ARRANGEMENT
AMENDMENT
SECTION I:
PURPOSE AND EFFECTIVE DATE
1.1. Purpose. If so elected in the cash or deferred arrangement (CODA)
adoption agreement, it is the intention of the Employer to incorporate a CODA,
which satisfies the requirements of section 401(k) of the Code, as part of its
profit-sharing plan.
1.2. Effective Date. The CODA is effective upon adoption by the adopting
employer subject to the limitations specified in section XI of the CODA adoption
agreement.
SECTION II:
DEFINITIONS
The following definitions shall apply for purposes of this amendment only:
2.1. "Actual Deferral Percentage" shall mean the ratio (expressed as a
percentage) of Elective Deferrals, Qualified Matching Contributions (to the
extent taken into account in section 3.6 of the CODA, pursuant to section 3.4(A)
of the CODA adoption agreement) and Qualified Non-elective Contributions on
behalf of a Participant for the Plan Year to the Participant's Compensation for
the Plan Year. The Actual Deferral Percentage of an Employee who is eligible to,
but does not make an Elective Deferral and who does not receive an allocation of
a Qualified Matching Contribution or a Qualified Non-elective Contribution, is
zero.
2.1(a). Qualified Matching Contributions (to the extent taken into account
in section 3.6 of the CODA) shall be treated as Qualified Non-elective
Contributions for the purposes of this section, as well as sections 2.11,
3.7(a), 3.7(b), 3.7(c), 3.8, 3.8(a), 3.8(b), 3.10, 3.11, 5.1 and 5.2 of the CODA
and section 7.1 of the CODA adoption agreement. Also, to the extent that
Qualified Matching Contributions are taken into account in section 3.6 of the
CODA, then any earnings that are attributable to such Qualified Matching
Contributions must be allocated to a Participant's Qualified Non-elective
Contribution accounts under section 3.10 of the CODA.
2.2. "Adjustment Factor" shall mean the cost of living factor prescribed
by the Secretary of the Treasury under section 415(d) of the Code for years
beginning after December 31, 1987, as applied to such items and in such manner
as the Secretary shall provide.
2.3. "Affiliated Employer" shall mean any corporation which is a member of
a controlled group of corporations (as defined in section 414(b) of the Code)
which includes the Employer; any trade or business (whether or not incorporated)
which is under common control (as defined in section 414(c) of the Code) with
the Employer; any organization (whether or not incorporated) which is a member
of an affiliated service group (as defined in section 414(m) of the Code) which
includes the Employer; and any other entity required to aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.
2.4. "Average Actual Deferral Percentage" shall mean the average
(expressed as a percentage) of the Actual Deferral Percentages of the
Participants in a group.
2.5. "Code" shall mean the Internal Revenue Code of 1986.
2.6. "Compensation" shall mean, unless otherwise elected in the CODA
adoption agreement, compensation paid by the Employer to the Participant during
the Plan Year which is required to be reported as wages on the Participant's
Form W-2, or which, in the case of a self-employed individual, constitutes
payment for services includible in the self-employed individual's gross income.
This definition shall apply solely for purposes of determining the Actual
Deferral Percentage under section 3.6 and the Contribution Percentage under
section 7.1.
2.7. "Elective Deferrals" shall mean contributions made to the plan during
the Plan Year by the Employer, at the election of the Participant, in lieu of
cash compensation and shall include contributions that are made pursuant to a
salary reduction agreement. Such contributions must be nonforfeitable when made
and distributable only as specified in section 5.1 below.
2.8. "Employee" shall mean employees of the Employer and shall include
leased employees within the meaning of section 414(n)(2) of the Code.
Notwithstanding the foregoing, if such leased employees constitute less than
twenty (20) percent of the Employer's Non-highly Compensated work force within
the meaning of section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall
not include those leased employees covered by a plan described in section
414(n)(5)(B) of the Code unless otherwise provided by the terms of this plan
other than this amendment.
2.9. "Employee Contributions" shall mean contributions made to the plan by
a Participant during the Plan Year.
2.10. "Employer" shall mean the entity that establishes or maintains the
plan, any successor to such entity, and any Affiliated Employer.
2.11. "Excess Contributions" shall mean, with respect to any Plan Year,
the aggregate amount of Elective Deferrals and Qualified Non-elective
Contributions actually paid over to the trust on behalf of Highly Compensated
Employees for such Plan Year over the maximum amount of such contributions
permitted under section 3.6 below.
2.12. "Excess Elective Deferrals" shall mean the amount of Elective
Deferrals for a calendar year that the Participant allocates to this plan
pursuant to the claim procedure set froth in section 3.5(a)(1).
2.13. "Family Member" shall mean an individual described in section
414(q)(6)(B) of the Code.
2.14. "Highly Compensated Employee" shall mean an Employee described in
section 414(q) of the Code.
2.15. "Matching Contribution" shall mean any contribution to the plan made
by the Employer for the Plan Year and allocated to a Participant's account by
reason of the Participant's Employee Contributions or Elective Deferrals.
Matching Contributions are subject to the distribution provisions applicable to
Employer contributions in the underlying plan document.
2.16. "Non-highly Compensated Employee" shall mean an Employee of the
Employer who is neither a Highly Compensated Employee nor a Family Member.
2.17. "Participant" shall mean any Employee of the Employer who has met
the eligibility and participation requirements of the Plan.
2.18. "Plan Year" shall mean the plan year otherwise specified in the
plan.
2.19. "Qualified Non-elective Contributions" shall mean contributions
(other than Matching Contributions) made by the Employer and allocated to
Participants' accounts that the Participants may not elect to receive in cash
until distributed from the plan; that are nonforfeitable when made; and that are
distributable only as specified in section 5.1.
2.20. "Qualified Matching Contributions" shall mean any contributions to
the plan made by the Employer for the Plan Year and allocated to a Participant's
account by reason of Elective Deferrals, that are non-forfeitable when made, and
that are distributable only as specified in section 5.1.
SECTION III:
ELECTIVE DEFERRALS
3.1. Allocation of Deferrals. The Employer shall contribute and allocate
to each Participant's Elective Deferral account an amount equal to the amount of
a Participant's Elective Deferrals.
3.2. Elective Deferrals Pursuant to a Salary Reduction Agreement. To the
extent provided in the CODA adoption agreement, a Participant may elect to have
Elective Deferrals made under this plan. Elective Deferrals shall include
single-sum and continuing contributions made pursuant to a salary reduction
agreement.
3.2(a). Commencement of Elective Deferrals. A Participant shall be
afforded a reasonable period at least once each calendar year, as specified in
section 2.1(a) of the CODA adoption agreement, to elect to commence Elective
Deferrals. Such election shall not become effective before the time specified
in section 2.1(a) of the CODA adoption agreement.
3.2(b). Modification and Termination of Elective Deferrals. A
Participant's election to commence Elective Deferrals shall remain in effect
until modified or terminated. A Participant shall be afforded a reasonable
period at least once each calendar year, as specified in section 2.1(b) of the
CODA adoption agreement, to modify the amount or frequency of his or her
Elective Deferrals. A Participant may terminate his or her election to make
Elective Deferrals at any time.
3.3. Cash bonuses. To the extent provided in section 2.2 of the CODA
adoption agreement, a Participant may also base Elective Deferrals on cash
bonuses that, at the Participant's election, may be contributed to the CODA or
received by the Participant in cash.
<PAGE>
3.3(a). Time and Manner of Election. A Participant shall be afforded a
reasonable period, as provided in section 2.2 of the CODA adoption agreement, to
elect to defer amounts described in section 3.3 above to the CODA. Such
election shall not become effective before the time specified in section 2.2(a)
of the CODA adoption agreement.
3.4. Maximum Amount of Elective Deferrals. A Participant's Elective
Deferrals are subject to any limitations imposed in Section 2.1 of the CODA
adoption agreement and any further limitations under the plan. No Participant
shall be permitted to have Elective Deferrals made under this plan during any
calendar year in excess of $7,000, multiplied by the Adjustment Factor.
3.5. Distribution of Excess Elective Deferrals. Notwithstanding any other
provision of the plan, Excess Elective Deferrals, plus any income and minus any
loss allocable thereto, shall be distributed no later than April 15, 1988, and
each April 15 thereafter, to Participants to whose accounts Excess Elective
Deferrals were allocated for the preceding calendar year and who claim Excess
Elective Deferrals for such calendar year. Excess Elective Deferrals shall be
treated as Annual Additions under the plan.
3.5(a)(1). The Participant's claim shall be in writing; shall be submitted
to the plan administrator not later than the date elected in section 8.1 of the
CODA adoption agreement; shall specify the amount of the Participant's Excess
Elective Deferral for the preceding calendar year; and shall be accompanied by
the Participant's written statement that if such amounts are not distributed,
such Excess Elective Deferrals, when added to amounts deferred under other plans
or arrangements described in sections 401(k), 408(k), or 403(b) of the Code,
will exceed the limit imposed on the Participant by section 402(g) of the Code
for the year in which the deferral occurred.
3.5(a)(2). Determinations of Income or Loss. The Excess Elective Deferral
shall be adjusted for income or loss. The income or loss allocable to Excess
Elective Deferrals shall be determined by multiplying the income or loss
allocable to Participant's Elective Deferrals for the Plan Year by a fraction,
the numerator of which is the Excess Elective Deferral on behalf of the
Participant for the preceding Plan Year and the denominator of which is the
Participant's account balance attributable to Elective Deferrals on the last
date of the preceding Plan Year.
3.6. Average Actual Deferral Percentage. The Average Actual Deferral
Percentage for Highly Compensated Employees for each Plan Year and the Average
Actual Deferral Percentage for Non-highly Compensated Employees for the same
Plan Year must satisfy one of the following tests: (a) The Average Actual
Deferral Percentage for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the Average Actual Deferral Percentage for
Participants who are Non-highly Compensated Employees for the Plan Year
multiplied by 1.25; or (b) The Average Actual Deferral Percentage for
Participants who are Highly Compensated Employees for the Plan Year shall not
exceed the Average Actual Deferral Percentage for Participants who are Non-
highly Compensated Employees for the Plan Year multiplied by 2.0, provided that
the Average Actual Deferral Percentage for Participants who are Highly
Compensated Employees does not exceed the Average Actual Deferral Percentage for
Participants who are Non-highly Compensated Employees by more than two (2)
percentage points or such lesser amount as the Secretary of the Treasury shall
prescribe to prevent the multiple use of this alternative limitation with
respect to any Highly Compensated Employee.
3.7. Special Rules.
3.7(a). The Actual Deferral Percentage for any Participant who is a Highly
Compensated Employee for the Plan year and who is eligible to have Elective
Deferrals or Qualified Non-elective Contributions allocated to his or her
account under two or more arrangements described in section 401(k) of the Code
that are maintained by the Employer shall be determined as if such Elective
Deferrals and Qualified Non-elective Contributions were made under a single
arrangement.
3.7(b). For purposes of determining the Actual Deferral Percentage of a
Participant who is a Highly Compensated Employee, the Elective Deferrals,
Qualified Non-elective Contributions and Compensation of such Participant shall
include the Elective Deferrals, Qualified Non-elective Contributions, and
Compensation of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate Employees in determining
the Actual Deferral Percentage both for Participants who are Non-highly
Compensated Employees and for Participants who are Highly Compensated Employees.
3.7(c). The determination and treatment of the Elective Deferrals,
Qualified Non-elective Contributions, and Actual Deferral Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
3.8. Distribution of Excess Contributions. Notwithstanding any other
provision of the plan, except section 3.9(b) herein, Excess Contributions plus
any income and minus any loss allocable thereto, shall be distributed no later
than the last day of each Plan Year beginning after December 31, 1987, to
Participants to whose accounts Elective Deferrals and Qualified Non-elective
Contributions were allocated for the preceding Plan Year. Excess Contributions
shall be treated as Annual Additions under the plan.
3.8(a). Determination of Income or Loss. The Excess Contributions shall
be adjusted for income or loss. The income or loss allocable to Excess
Contributions shall be determined by multiplying the income or loss allocable to
a Participant's Elective Deferrals and Qualified Non-elective Contributions for
the Plan Year by a fraction, the numerator of which is the Excess Contribution
on behalf of the Participant for the preceding Plan Year and the denominator of
which is the sum of the Participant's account balances attributable Elective
Deferrals and Qualified Non-elective Contributions on the last day of the
preceding Plan Year.
3.8(b). Accounting for Excess Contributions. Amounts distributed under
this section shall be made from the Participant's Elective Deferral account and
Qualified Non-elective Contribution account in proportion to the Participant's
Elective Deferrals and Qualified Non-elective Contributions for the Plan Year.
3.9. Qualified Non-elective Contributions.
3.9(a). The Employer may elect to make Qualified Non-elective
Contributions under the plan on behalf of Employees as provided in sections 3.1
and 4.1 of the CODA adoption agreement.
3.9(b). Special Qualified Non-elective Contributions. In lieu of
distributing Excess Contributions as provided in sections 3.8(a)-(b) above, and
to the extent provided in sections 3.1 and 4.2 of the CODA adoption agreement,
the Employer may make special Qualified Non-elective Contributions on behalf of
Non-highly Compensated Employees that are sufficient to satisfy either of the
Average Actual Deferral Percentage tests. Allocations of Qualified Non-elective
Contributions to each Non-highly Compensated Employee's account shall be made in
accordance with section 4.2 of the CODA adoption agreement.
3.10. Separate Accounts. A separate account shall be maintained for that
portion of a Participant's accrued benefit that is attributable to Elective
Deferrals and a separate account shall be maintained for that portion of a
Participant's accrued benefit that is attributable to Qualified Non-elective
Contributions. Each separate account shall be credited with the applicable
contributions, earnings and losses, distributions, and other adjustments.
3.11. Under no circumstances may Elective Deferrals and Qualified Non-
elective Contributions be contributed and allocated to the trust under the plan
later than thirty (30) days after the close of the Plan Year for which the
contributions are deemed to be made, or such other time as provided in
applicable regulations under the Code.
SECTION IV:
TOP-HEAVY REQUIREMENTS
4.1. If the underlying plan document does not designate another plan to
satisfy the top-heavy requirements of section 416 of the Code, or if the
underlying plan document allocates less than three (3) percent of each Non-key
Employee's top-heavy compensation under the plan to such Participant's account
for a Plan Year, then the minimum top-heavy allocation under the plan shall be
allocated on behalf of Non-key Employees in accordance with section 416 of the
Code. Such allocation shall not be less than the lesser of three (3) percent of
such Participant's compensation or, in the case where the Employer has no
defined benefit plan which designates this plan to satisfy section 401 of the
Code, the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the Key Employee's compensation, allocated
on behalf of any Key Employee for that year.
4.2. For purposes of determining whether a plan is top-heavy under section
416 of the Code, Elective Deferrals are considered Employer contributions.
SECTION V:
SPECIAL DISTRIBUTION RULES
5.1. Except as provided in section 7.1 of the CODA adoption agreement,
Elective Deferrals, Qualified Non-elective Contributions and income allocable
thereto are not distributable to the Participant, or the Participant's
beneficiary or beneficiaries, in accordance with the Participant's or
beneficiary's election, earlier than upon separation from service, death, or
disability, as defined in the underlying plan document.
5.2. Distribution on Account of Financial Hardship.
5.2(a). If elected by the Employer in section 7.1(e) of the CODA adoption
agreement, distributions of Elective Deferrals and Qualified Non-elective
Contributions under the CODA may be made on account of financial hardship if the
distribution is necessary in light of the immediate and heavy financial needs of
the Participant. Such a distribution shall not exceed the amount required to
meet the immediate financial need created by the hardship and may not be made to
the extent that other financial resources of the Participant are reasonably
available.
5.2(b). The determination of the existence of financial hardship, and the
amount required to be distributed to meet the need created by the hardship,
shall be made by a person or persons designated by the Employer (unless a
different person or persons are given authority elsewhere in the plan to approve
hardship distributions).
5.2(c). All determinations regarding financial hardship shall be made in
accordance with written procedures that are established by the person or persons
described in section 5.2(b) above, and applied in a uniform and
nondiscriminatory manner. Such written procedures shall specify the
requirements for requesting and receiving distributions on account of hardship,
including what forms must be submitted and to whom. All determinations
regarding financial hardship must be made in accordance with objective criteria
set forth in section 7.2(a) through (c) of the CODA adoption agreement. Such
determinations must also comply with applicable regulations under the Code.
5.2(d). Processing of applications and distributions of amounts under this
section, on account of a bona fide financial hardship, must be made as soon as
administratively feasible.
SECTION VI:
MATCHING CONTRIBUTIONS
6.1. If elected by the Employer in the CODA adoption agreement, the
Employer will made Matching Contributions to the plan. The amount of such
Matching Contributions shall be calculated by reference to the Participant's
Elective Deferrals as specified by the Employer in the adoption agreement.
6.2. Separate Account. A separate account shall be maintained for that
portion of a Participant's accrued benefit that is attributable to Matching
Contributions. Such separate account shall be credited with the applicable
contributions, earnings and losses, distributions, and other adjustments.
6.3. Vesting. Matching Contributions will be vested in accordance with
the Employer's election in section 6.3 of the CODA adoption agreement.
6.4. Forfeitures. Forfeitures of Matching Contributions other than Excess
Aggregate Contributions shall be made in accordance with the forfeiture
provisions otherwise applicable to Employer contributions in the underlying plan
document.
<PAGE>
6.5. Qualified Matching Contributions.
6.5(a). If elected by the Employer in section 3.1(A) of the CODA adoption
agreement, the Employer will make Qualified Matching Contributions to the plan.
The amount of such Qualified Matching Contributions shall be calculated by
reference to the Participant's Elective Deferrals as specified in the CODA
adoption agreement.
SECTION VII:
LIMITATIONS ON EMPLOYEE
CONTRIBUTIONS AND MATCHING
CONTRIBUTIONS
7.1. Contribution Percentage.
7.1(a). The Average Contribution Percentage for Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are Non-highly Compensated
Employees for the Plan Year multiplied by 1.25; or
7.1(b). The Average Contribution Percentage for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Participants who are Non-highly Compensated
Employees for the Plan Year multiplied by two (2), provided that the Average
Contribution Percentage for Participants who are Highly Compensated Employees
does not exceed the Average Contribution Percentage for Participants who are
Non- highly Compensated Employees by more than two (2) percentage points or such
lesser amount as the Secretary of the Treasury shall prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
7.2. Definitions. For purposes of this section, the following definitions
shall apply:
7.2(a). "Average Contribution Percentage" shall mean the average
(expressed as a percentage) of the Contribution Percentages of the Participants
in a group.
7.2(b). "Contribution Percentage" shall mean the ratio (expressed as a
percentage) if the sum of the Employee Contributions, Matching Contributions and
Qualified Matching Contributions (to the extent not taken into account in
Section 3.6 of the CODA) under the plan on behalf of the Participant for the
Plan Year to the Participant's Compensation for the Plan Year.
7.2(b)(1). Qualified Matching Contributions (to the extent not taken into
account in Section 3.6 of the CODA) shall be treated as Matching Contributions
for the purposes of this section and sections 7.3(a), 7.3(b), 7.4(a), 7.4(b),
and 7.4(d) of the CODA.
7.2(c). "Excess Aggregate Contributions" shall mean the amount described
in 401(m)(6)(B) of the Code.
7.3. Special Rules.
7.3(a). For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible to make
Employee Contributions, or to have Matching Contributions allocated to his or
her account under two or more plans described in section 401(a) of the Code, or
arrangements described in section 401(k) of the Code, that are maintained by
the Employer, shall be determined as if the total of such Employee Contributions
and Matching Contributions was made under each plan.
7.3(b). In the event that this plan satisfies the requirements of section
410(b) of the Code only if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of section 410(b) of the Code only if
aggregated with this plan, then this section shall be applied by determining the
Contribution Percentages of Participants as if all such plans were a single
plan.
7.3(c). For purposes of determining the Contribution Percentage of a
Participant who is a Highly Compensated Employee, the Employee Contributions,
Matching Contributions and Compensation of such Participant shall include the
Employee Contributions, Matching Contributions and Compensation of Family
Members. Family Members with respect to Highly Compensated Employees shall be
disregarded as separate employees in determining the Actual Deferral Percentage
both for Participants who are Non-highly Compensated Employees and for
Participants who are Highly Compensated Employees.
7.3(d). 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.
7.4. Distribution of Excess Aggregate Contributions.
7.4(a). General Rule. Notwithstanding any other provision of this plan,
Excess Aggregate Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year beginning after December 31, 1987,
to Participants to whose accounts Employee Contributions or Matching
Contributions were allocated for the preceding Plan Year. Excess Aggregate
Contributions shall be treated as Annual Additions under the plan.
7.4(b). Determination of Income or Loss. The Excess Aggregate
Contributions shall be adjusted for income or loss. The income or loss
allocable to Excess Aggregate Contributions shall be determined by multiplying
the income or loss allocable to the Participant's Employee Contributions and
Matching Contributions for the Plan Year by a fraction, the numerator of which
is the Excess Aggregate Contributions on behalf of the Participant for the
preceding Plan Year and the denominator of which is the sum of the Participant's
account balances attributable to Employee Contributions and Matching
Contributions on the last day of the preceding Plan Year.
7.4(c). Treatment of Forfeitures. Forfeitures of Excess Aggregate
Contributions may either serve to reduce Employer contributions or may be
reallocated to the accounts of Non-highly Compensated Employees, as elected by
the Employer in section 9.1 of the CODA adoption agreement. Amounts forfeited
by Highly Compensated Employees under this section shall be treated as Annual
Additions under the plan. The allocation of such forfeitures shall be made
pursuant to section 9.1 of the Adoption Agreement. However, no forfeitures
arising under this section shall be allocated to the account of any Highly
Compensated Employee.
7.4(d). Accounting for Excess Aggregate Contributions. Excess Aggregate
Contributions shall be distributed from the Participant's Employee Contribution
account, and forfeited if otherwise forfeitable under the terms of the plan (or,
if not forfeitable, distributed) from the Participant's Matching Contribution
account in proportion to the Participant's Employee Contributions and Matching
Contributions for the Plan Year.
7.4(e). The determination of the Excess Aggregate Contributions shall be
made after first determining the Excess Elective Deferrals, and then determining
the Excess Contributions.
FOOTNOTES: The following provisions of the model CODA warrant additional
explanation:
1. 2.8 and 2.13. Leased employees that are defined as Employees in
section 2.8 of the amendment to the basic plan document must be considered for
purposes of determining the identity and number of Highly Compensated Employees.
2. 3.5. Excess Elective Deferrals that are distributed after April 15
are not only includible in the Participant's gross income in the taxable year
when made, but are also includible in the Participant's gross income again in
the year when distributed.
3. 3.8 and 7.4(a). The model CODA permits a plan to distribute Excess
Contributions and Excess Aggregate Contributions on or before the last day of
the Plan Year after the Plan Year in which such excess amounts arose.
Distribution of such amounts or other corrective action, is required under
sections 401(k)(8) and 401(m)(6) of the Code if the plan is to maintain its tax-
qualified status. However, if such excess amounts, plus any income and minus
any loss allocable thereto, are distributed more than 2-1/2 months after the
last day of the Plan Year in which such excess amounts arose, then section 4979
of the Code imposes a ten (10) percent excise tax on the Employer maintaining
the plan with respect to such amounts.
4. 3.9. Any additional contributions that are allocated pursuant to this
section shall be subject to the limitations under section 415(c) of the Code.
5. 8.1. If section 8 is not adopted, Employer contributions, including
Elective Deferrals, are limited to accumulated earnings or profits for the
taxable year or years ending within the Plan Year.
Exhibit 16
SCUDDER GOLD FUND
REINVESTMENT SERIES, ADJUSTMENT NAV AND PERFORMANCE
<TABLE>
<CAPTION>
CAPITAL CAPITAL CAPITAL CAPITAL INCOME
REINVESTMENT CAPITAL ADJUSTED MONTHLY QTRLY YEAR TO ANNUAL & CAPGAIN SHARES TOTAL
DATE NAV PRICE AMOUNT SHARES # SERIES CAP NAV RETURN RETURN DATE RETURN AMOUNT # SERIES
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/22/88 12.00 1.00000 12.00000 1.00000
888 12.00 1.00000 12.00000 0.0000 1.00000
988 11.43 1.00000 11.43000 -4.7500 1.00000
1088 11.65 1.00000 11.65000 1.9248 1.00000
1188 11.54 1.00000 11.54000 -0.9442 -3.8333 1.00000
1288 11.04 1.00000 11.04000 -4.3328 -3.4121 1.00000
189 11.27 1.00000 11.27000 2.0833 -3.2618 2.0833 1.00000
289 11.30 1.00000 11.30000 0.2662 -2.0797 2.3551 1.00000
389 11.11 1.00000 11.11000 -1.6814 0.6341 0.6341 1.00000
489 10.73 1.00000 10.73000 -3.4206 -4.7915 -2.8080 1.00000
589 10.26 1.00000 10.26000 -4.3802 -9.2035 -7.0652 1.00000
689 10.58 1.00000 10.58000 3.1189 -4.7705 -4.1667 1.00000
<CAPTION>
TOTAL CAPTIAL DIFF
TOTAL TOTAL TOTAL TOTAL AGGREG ANNUALZ RETURN RETURN TOTAL -
TOTAL ADJUSTED MONTHLY QTRLY YEAR TO ANNUAL INCEP INCEP YRS BEGIN AT BEGIN AT CAPITAL
DATE SERIES TOTAL NAV RETURN RETURN DATE RETURN 1000 1000
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/22/88 1.00000 12.00000 1000.00 1000.00 0
888 1.00000 12.00000 0.0000 0.0208 1000.00 1000.00 0
988 1.00000 11.43000 -4.7500 -4.75 -37.325 0.1042 952.50 952.50 0
1088 1.00000 11.65000 1.9248 -2.916 -14.604 0.1875 970.83 970.83 0
1188 1.00000 11.54000 -0.9442 -3.8333 -3.833 -13.440 0.2708 961.67 961.67 0
1288 1.00000 11.04000 -4.3328 -3.4121 -8.000 -20.978 0.3542 920.00 920.00 0
189 1.00000 11.27000 2.0833 -3.2618 2.0833 -6.083 -13.365 0.4375 939.17 939.17 0
289 1.00000 11.30000 0.2662 -2.0797 2.3551 -5.833 -10.899 0.5208 941.67 941.67 0
389 1.00000 11.11000 -1.6814 0.6341 0.6341 -7.416 -11.975 0.6041 925.83 925.83 0
489 1.00000 10.73000 -3.4206 -4.7915 -2.8080 -10.58 -15.017 0.6875 894.17 894.17 0
589 1.00000 10.26000 -4.3802 -9.2035 -7.0652 -14.5 -18.391 0.7708 855.00 855.00 0
689 1.00000 10.58000 3.1189 -4.7705 -4.1667 -11.83 -13.709 0.8541 881.67 881.67 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE>6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Gold Fund Annual Report for the fiscal year ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER>1
<NAME>Scudder Gold fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 173,118,449
<INVESTMENTS-AT-VALUE> 160,779,301
<RECEIVABLES> 8,567,779
<ASSETS-OTHER> 209,456
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 169,556,536
<PAYABLE-FOR-SECURITIES> 3,702,143
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,921,582
<TOTAL-LIABILITIES> 5,623,725
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 195,654,747
<SHARES-COMMON-STOCK> 15,622,172
<SHARES-COMMON-PRIOR> 11,273,441
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (13,939,198)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (5,433,894)
<ACCUM-APPREC-OR-DEPREC> (12,348,844)
<NET-ASSETS> 163,932,811
<DIVIDEND-INCOME> 976,437
<INTEREST-INCOME> 922,521
<OTHER-INCOME> 0
<EXPENSES-NET> 3,112,383
<NET-INVESTMENT-INCOME> (1,213,425)
<REALIZED-GAINS-CURRENT> 8,272,276
<APPREC-INCREASE-CURRENT> (46,971,575)
<NET-CHANGE-FROM-OPS> (39,912,724)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (32,213,271)
<DISTRIBUTIONS-OF-GAINS> (3,509,513)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,365,516
<NUMBER-OF-SHARES-REDEEMED> (32,418,488)
<SHARES-REINVESTED> 2,401,703
<NET-CHANGE-IN-ASSETS> (8,947,633)
<ACCUMULATED-NII-PRIOR> 4,078,347
<ACCUMULATED-GAINS-PRIOR> 1,707,488
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,948,814
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 194,406,319
<PER-SHARE-NAV-BEGIN> 15.34
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> (2.12)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.65)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.49
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
