<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1997
Securities Act registration no. 33-54822
Investment Company Act file no. 811-7360
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
____________________________
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-effective amendment no. 9 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment no. 10 [X]
____________________________
MONETTA TRUST
(Registrant)
776-A South Naperville Road, Suite 207
Wheaton, Illinois 60187-8133 Telephone number: 630/462-9800
____________________________
Robert S. Bacarella Janet D. Olsen
Monetta Trust Bell, Boyd & Lloyd
1776-A South Naperville Road, #207 Three First National Plaza, #3300
Wheaton, Illinois 60187-8133 Chicago, Illinois 60602
(Agents for service)
____________________________
Amending Parts A, B, and C and filing Exhibits.
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to rule 485(b)
X
____ on February 3, 1997 pursuant to rule 485(b)
____ 60 days after filing pursuant to rule 485(a)(1)
____ on _________________ pursuant to rule 485(a)(1)
____ 75 days after filing pursuant to rule 485(a)(2)
____ on _________________ pursuant to rule 485(a)(2)
Registrant has previously elected to register under the Securities Act of 1933
an indefinite number of its shares of beneficial interest, without par value, of
each of the following series: Mid-Cap Equity Fund; Monetta Large-Cap Equity
Fund; Monetta Balanced Fund; Monetta Intermediate Bond Fund; and Monetta
Government Money Market Fund; and Monetta Small-Cap Equity Fund. Registrant's
Rule 24f-2 Notice for its fiscal year ended December 31, 1996 will be filed on
or before February 28, 1997.
<PAGE>
MONETTA TRUST
Cross-reference sheet pursuant to rule 495(a) of Regulation C
<TABLE>
<CAPTION>
Item Location or caption*
- ------------ ----------------------------
<C> <S>
Part A (Prospectus)
-------------------
1(a)-(b) Front Cover
2(a) Fund Expenses
(b)-(c) Summary
3(a) Financial Highlights
(b) Not Applicable
(c) Investment Return
4(a)(i) Other Information
(a)(ii)&(b) Investment Objectives and Policies; Risks and Investment
Considerations; Investment Restrictions
(c) Investment Objectives and Policies; Risks and Investment Considerations
5(a) Management of the Funds
(b) Management of the Funds; Rear Cover; Fund Expenses
(c) Management of the Funds
(d) Not Applicable
(e) How To Purchase Shares; How To Redeem Shares; Other Information
(f) Management of the Fund; Fund Expenses
(g) Management of the Funds
5A The information required is included in registrant's annual
report to shareholders
6(a) Other Information
(b) Not Applicable
(c)-(d) Not Applicable
(e) Other Information
(f)-(g) Dividends, Distributions and Federal Taxes
(h) Not Applicable
7 How to Purchase Shares
(a) Management of the Funds
(b) How to Purchase Shares; Determination of Net Asset Value
(c)-(d) How to Purchase Shares; Shareholder Services
(e)-(f) Management of the Funds
8(a)-(d) How to Redeem Shares
9 Not Applicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Item Location or caption*
- --------- ----------------------------
<C> <S>
Part B (Statement of Additional Information)
--------------------------------------------
10(a)-(b) Front Cover
11 Table of Contents
12 Not Applicable
13(a)-(c) Investment Objectives and Policies; Risks and Investment
Considerations; Investment Restrictions
(d) Portfolio Transactions
14(a)-(b) Directors/Trustees and Officers
(c) Not Applicable
15(a)-(c) Directors/Trustees and Officers
16(a) Investment Adviser; Directors/Trustees and Officers
(b) Investment Adviser
(c)-(e) Not Applicable
(f) Service and Distribution Plan
(g) Not Applicable
(h) Custodian; Independent Auditors
(i) Not Applicable
17(a)-(d) Portfolio Transactions; Investment Adviser
(e) Not Applicable
18(a)-(b) Not Applicable
19(a)-(c) Purchasing and Redeeming Shares; More Information About Net
Asset Value
20 Tax Status
21(a) Distributor
(b) Not Applicable
(c) Distributor
22(a)-(b) Performance Information
23 Front Cover
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Item Location or caption/*/
- -------- ---------------------------------
<C> <S>
Part C (Other Information)
--------------------------
24 Financial statements and exhibits
25 Persons controlled by or under common control with
registrant
26 Number of holders of securities
27 Indemnification
28 Business and other connections of investment advisor
29 Principal underwriters
30 Location of accounts and records
31 Management services
32 Undertakings
</TABLE>
- -----------------------------
/*/ References are to captions within the part of the registration statement
to which the particular item relates except as otherwise indicated.
iii
<PAGE>
PROSPECTUS
February 3, 1997
Monetta
NO SALES LOAD FUNDS
NO REDEMPTION FEE
- --------------------------------------------------------------------------------
1776-A SOUTH NAPERVILLE ROAD, SUITE 207 . WHEATON, IL 60187 . 1-800-MONETTA
- --------------------------------------------------------------------------------
. MONETTA FUND, INC.
. MONETTA SMALL-CAP EQUITY FUND
. MONETTA MID-CAP EQUITY FUND
. MONETTA LARGE-CAP EQUITY FUND
Each seeks long-term capital growth by investing in common stocks believed to
have above average growth potential. The Funds differ from each other with
respect to the (i) market capitalizations of the companies in which they invest
and (ii) relative importance placed on investing for current income.
. MONETTA BALANCED FUND
Seeks a favorable total rate of return through capital appreciation and current
income consistent with preservation of capital, derived from investing in a
portfolio of equity and fixed income securities.
. MONETTA INTERMEDIATE BOND FUND
Seeks high current income consistent with the preservation of capital by
investing primarily in marketable debt securities.
. MONETTA GOVERNMENT MONEY MARKET FUND
Seeks maximum current income consistent with safety of capital and maintenance
of liquidity. The Fund invests in U.S. Government Securities maturing in
thirteen months or less from the date of purchase and repurchase agreements for
U.S. Government Securities. U.S. Government Securities include securities
issued or guaranteed by the U.S. Government or by its agencies or
instrumentalities.
GOVERNMENT MONEY MARKET FUND IS A "NO-LOAD" MONEY MARKET FUND AND ATTEMPTS TO
MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE. SHARES OF THIS FUND ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT
MONETTA GOVERNMENT MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE $1.00 PER
SHARE NET ASSET VALUE.
Monetta Small-Cap Equity Fund, Monetta Mid-Cap Equity Fund, Monetta Large-Cap
Equity Fund, Monetta Balanced Fund, Monetta Intermediate Bond Fund and Monetta
Government Money Market Fund are series of Monetta Trust. Each Fund is a "no-
load" fund, and there are no sales or redemption charges. Each series of the
Trust has a 12b-1 plan.
MINIMUM INVESTMENT:
Initial Investment (General Account) $1,000
Initial investment for:
UGMA accounts $250
UTMA accounts $250
Automatic Investment Plan accounts $250
Individual Retirement Account $250
Subsequent Investments $50
Your initial investment may be divided among the Funds, but an investment in any
single Fund may not be less than $250.
PLANS AVAILABLE:
Automatic Investment Plan
Individual Retirement Account
SIMPLE-IRA
Profit Sharing
401(k)
403(b)
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. An investor should read this
Prospectus and retain it for future reference. A Statement of Additional
Information about the Funds (which bears the same date as this Prospectus and
together with any supplement to it is incorporated by reference) has been filed
with the Securities and Exchange Commission. That statement is available without
charge by writing or calling the Funds at the address and telephone number
printed above or may be retrieved electronically for free from
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
<PAGE>
SUMMARY
Monetta Small-Cap Equity Fund, ("Small-Cap Fund") , Monetta Mid-Cap Equity Fund
("Mid-Cap Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta
Balanced Fund ("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate
Bond Fund") and Monetta Government Money Market Fund ("Government Money Market
Fund") are series of Monetta Trust (the "Trust"). Monetta Fund, Inc. ("Monetta
Fund") and each of the Trust series are collectively referred to as the "Funds."
Each of the Funds is a "no-load" fund and there are no sales or redemption
charges. Each series of the Trust has a 12b-1 plan.
INVESTMENT OBJECTIVES
MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND and LARGE-CAP FUND each seek long-
term capital growth by investing in common stocks believed to have above average
growth potential. The Funds differ from each other with respect to the (i)
market capitalizations of the companies in which they invest and (ii) relative
importance placed on investing for current income.
MONETTA FUND generally invests in smaller and medium-sized companies with
market capitalizations ranging from $50 million to $1 billion. Monetta Fund's
primary investment objective is to provide shareholders with capital
appreciation by investing at least 70% of the Fund's assets in equity
securities. A secondary objective of the Fund is to seek to provide its
shareholders with income by investing in dividend-paying equity securities or
fixed income securities.
SMALL-CAP FUND typically invests in small-sized companies with market
capitalization less than $1 billion ("small-cap companies"). Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of small-cap companies.
MID-CAP FUND typically invests in medium-sized companies with market
capitalizations of $1 billion to $5 billion ("mid-cap companies"). Under
normal market conditions, the Fund invests at least 65% of its total assets in
common stocks of mid-cap companies.
LARGE-CAP FUND typically invests in large companies with market
capitalizations in excess of $5 billion ("large-cap companies"). Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of large-cap companies.
BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income.
INTERMEDIATE BOND FUND seeks high current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.
GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety
of capital and maintenance of liquidity. The Fund invests in securities issued
or guaranteed by the U. S. Government or by its agencies or instrumentalities
("U. S. Government Securities") maturing in thirteen months or less from the
date of purchase and repurchase agreements for U. S. Government Securities
regardless of the maturities of such securities.
There can be no assurance that any Fund will achieve its investment objective.
Page 2
<PAGE>
INVESTMENT RISKS
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. Monetta Fund, Small-Cap Fund, Mid-Cap Fund and
Large-Cap Fund are designed for long-term investors who can accept the
fluctuations in portfolio value and other risks associated with seeking long-
term capital growth through investments in common stocks. Balanced Fund is
designed for long-term investors who can accept asset value fluctuations from
interest rate changes and credit risks associated with fixed income investments,
and other risks associated with investments in common stocks. Intermediate Bond
Fund is designed for investors who seek high income with less net asset value
fluctuation from interest rate changes than with a longer-term fund but more net
asset value fluctuation than with a shorter-term fund, and who can accept the
credit and other risks associated with securities that are high and upper-medium
quality. Government Money Market Fund is designed for investors who seek income
with minimum risk (including the risk of principal loss) other than the risk of
changes in yield caused by fluctuations in prevailing levels of interest rates.
Because Government Money Market Fund may invest in U. S. Government Securities
that are not backed by the full faith and credit of the U. S. Treasury,
investment in that Fund might involve risks that are different in some respects
from an investment in a fund that invests only in securities that are backed by
the full faith and credit of the U. S. Treasury. See "Risks and Investment
Considerations" for a more complete description of the risks of investing in
each of the Funds.
DIVIDENDS AND CAPITAL GAINS
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each pay income
dividends, if any, at least annually; Balanced Fund pays income dividends, if
any, quarterly; and Intermediate Bond Fund and Government Money Market Fund pay
income dividends monthly. Capital gains, if any, are distributed by each Fund at
least annually. Distributions are automatically reinvested in additional shares
of that Fund at net asset value unless payment in cash is requested. See
"Dividends, Distributions and Federal Taxes."
PURCHASES AND REDEMPTIONS
The minimum initial investment in the Monetta Funds is $1,000, which may be
allocated among the Funds so long as at least $250 is invested in each Fund in
which you choose to invest. The minimum initial investment for Uniform
Gifts/Transfers to Minors Act ("UGMA") accounts, Automatic Investment Plan
accounts and individual retirement accounts is $250. Additional investments in
ANY Fund must be at least $50. Each Fund has a minimum account balance of $250.
MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995, HOWEVER, WILL BE ALLOWED TO
MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND.
There are no sales charges. See "How to Purchase Shares." Shares will be
redeemed at current net asset value. There are no redemption charges. See "How
to Redeem Shares."
ADVISER AND FEES
Monetta Financial Services, Inc. (the "Adviser") is investment adviser to the
Funds. For a description of the Adviser and the advisory fees paid by the Funds,
see "Management of the Funds." Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund,
Balanced Fund, Intermediate Bond Fund and Government Money Market Fund have a
Service and Distribution Plan adopted pursuant to rule 12b-1 under the
Investment Company Act of 1940. See "Management of the Funds."
Page 3
<PAGE>
FUND EXPENSES
The purpose of the table below is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly in an investment in
a Fund.
<TABLE>
<CAPTION>
Government
Monetta Small-Cap Mid-Cap Large-Cap Balanced Intermediate Bond Money Market
Fund Fund Fund Fund Fund Fund Fund
------- --------- ------- --------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales load on
purchases NONE NONE NONE NONE NONE NONE NONE
Maximum sales load on
reinvested dividends NONE NONE NONE NONE NONE NONE NONE
Deferred sales load NONE NONE NONE NONE NONE NONE NONE
Redemption fee (a) NONE NONE NONE NONE NONE NONE NONE
Telephone exchange fee $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management fees (b) 1.00% .75% .75% .75% .40% .05%(d) .00%(d)
12b-1 fees (c) NONE .25% .25% .25% .25% .25% .00%(d)
Other Expenses .38% .25%* .23% .51% .75% .25% .31%(d)
----- ----- ----- ----- ----- ----- -----
Total fund operating
expenses 1.38% 1.25% 1.23% 1.51% 1.40% .55%(d) .31%(d)
----- ----- ----- ----- ----- ----- -----
*Estimated.
=============================================================================================================================
</TABLE>
(a) If you request payment of redemption proceeds by wire, you must pay the cost
of the wire (currently $12.00).
(b) The Adviser pays all of the ordinary operating expenses of each Fund, except
the fees and expenses of the Fund's transfer agent and custodian, the non-
interested board members and the 12b-1 fees. Ordinary operating expenses do
not include taxes or interest, if any, or costs relating to purchases and
sales of portfolio securities, including brokerage commissions. See
"Management of the Funds."
(c) The 12b-1 fee is not based on historical data but is expected to equal the
maximum amount allowed under the plan. See "Service and Distribution Plan."
(d) In 1996, the Adviser voluntarily waived part or all of its management fee
for both the Intermediate Bond Fund and the Government Money Market Fund.
Additionally, the Adviser absorbed some of the custodial fees for the
Government Money Market Fund. If the Adviser had not waived or absorbed
these fees and expenses, the "Total Fund Operating Expenses" which would
have been paid by the Intermediate Bond Fund in 1996 would have been .85% of
Average Net Assets (Management fees would have been .35%). The "Total Fund
Operating Expenses" which would have been paid by the Government Money
Market Fund would have been .67% of Average Net Assets in 1996 (Management
fees would have been .25%, 12b-1 fees would have been .10% and other
expenses would have been .32%). As of the date of the Prospectus, the waiver
of management fees for the Intermediate Bond Fund and the Government Money
Market Fund continues in effect, subject to review and possible termination
by the Adviser at the beginning of each quarter.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (i) a 5%
annual return as required by the Securities and Exchange Commission for purposes
of this example; (ii) the percentage amounts listed under Annual Fund Operating
Expenses above remain the same in each of the periods; (iii) all income,
dividends and capital gain distributions are reinvested in additional shares of
the Funds; and (iv) redemption at the end of each period:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Monetta Fund, Inc. $14 $45 $78 $170
Monetta Small-Cap Equity Fund 13 39 n/a n/a
Monetta Mid-Cap Equity Fund 12 38 66 146
Monetta Large-Cap Equity Fund 15 47 81 176
Monetta Balanced Fund 14 44 75 164
Monetta Intermediate Bond Fund 6 17 30 67
Monetta Government Money Market Fund 3 10 17 38
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor might incur. This example is not necessarily
indicative of past or future expenses, and actual expenses may be greater or
lesser than those shown. Although information such as that shown above is useful
in reviewing the Funds' projected expenses and in providing some basis for
comparison with other investment alternatives, it should not be used for
comparison with other investments using different assumptions or time periods.
Because Small-Cap Fund, Large-Cap Fund and Balanced Fund are new, the above
amounts are estimates and are projected only for the first three years of
operations. See "Management of the Funds."
Page 4
<PAGE>
FINANCIAL HIGHLIGHTS
The following information for a share outstanding throughout each period through
1996 has been audited by KPMG Peat Marwick LLP, independent auditors. The
audited financial statements for 1996 of Monetta Fund are contained in its 1996
annual report to shareholders which may be obtained upon request at no charge.
MONETTA FUND
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $15.591 $14.515 $15.539 $15.992 $15.731 $10.963 $10.441 $ 9.933 $ 9.649 $9.670
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment
income (loss) (0.079) 0.029 (0.026) (0.028) 0.006 0.081 0.103 0.219 0.106 0.113
Net realized and
unrealized gain
(loss) on
investments 0.330 4.075 (0.938) 0.105 0.855 6.037 1.106 1.274 2.158 0.016
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment
operations: 0.251 4.104 (0.964) 0.077 0.861 6.118 1.209 1.493 2.264 0.129
Less:
Distributions from
net investment
income 0.000 (0.028) 0.000 0.000 (0.006) (0.081) (0.103) (0.219) (0.106) (0.150)
Distributions in
excess of net
investment income 0.000 (3.000) (0.060) (0.475) (0.594) (1.208) (0.584) (0.766) (1.874) 0.000
Distributions from
net realized gains
on securities 0.000 0.000 0.000 (0.055) 0.000 (0.061) 0.000 0.000 0.000 0.000
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions 0.000 (3.028) (0.060) (0.530) (0.600) (1.350) (0.687) (0.985) (1.980) (0.150)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value
at end of period $15.842 $15.591 $14.515 $15.539 $15.992 $15.731 $10.963 $10.441 $ 9.933 $9.649
- ------------------------------------------------------------------------------------------------------------------------------------
Total return 1.60% 28.02% (6.21)% 0.49% 5.49% 55.90% 11.37% 15.20% 23.07% 1.54%
Ratio to average
net assets:
Expenses* 1.38% 1.36% 1.35% 1.38% 1.45% 1.42% 1.50% 1.57%* 1.50% 2.31%
Net investment
income* (0.51)% 0.18% (0.15)% (0.19)% 0.16% 0.93% 1.09% 2.18%* 0.96% 1.33%
Average Comm. Paid (a) $0.063 -- -- -- -- -- -- -- -- --
Portfolio turnover 204.8% 272.0% 191.3% 226.9% 126.6% 153.8% 206.5% 258.4% 170.4% 333.5%
Net assets
(in millions) $211.5 $ 362.7 $ 364.9 $ 524.3 $ 408.0 $ 57.1 $ 6.1 $ 3.5 $ 2.6 $ 2.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* If certain expenses had not been assumed by the investment advisor in 1989,
the ratios of expenses and net investment income to average net assets would
have been 1.83% and 1.92%, respectively.
(a) Represents the average commissions per share paid on equity transactions
entered into during the period on which commissions were paid. This
disclosure is not applicable for periods prior to 1996.
The per share ratios are calculated using the weighted average number of shares
outstanding during the period.
Page 5
<PAGE>
FINANCIAL HIGHLIGHTS
The following information for a share outstanding throughout each period through
1996 has been audited by KPMG Peat Marwick LLP, independent auditors. The
audited financial statements for 1996 of Mid-Cap Fund, Large-Cap Fund, Balanced
Fund, Intermediate Bond Fund and Government Money Market fund are contained in
its 1996 annual report to shareholders which may be obtained upon request at no
charge.
MONETTA TRUST
<TABLE>
<CAPTION>
LARGE-CAP
MID-CAP EQUITY FUND EQUITY FUND BALANCED FUND
---------------------------------------------------------------------------------------------------
Year Year Year 3/1/93 Year 9/1/95 Year 9/1/95
Ended Ended Ended Through Ended Through Ended Through
12/31/96 12/31/95 12/31/94 12/31/93 12/31/96 12/31/95 12/31/96 12/31/95
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period* $11.962 $12.199 $12.537 $10.000 $10.571 $10.000 $10.605 $10.000
- ------------------------------------------------------------------------------------------------------------------------
Net investment
income 0.044 0.059 0.071 0.006 0.023 0.005 0.132 0.009
Net realized and
unrealized gain
(loss) on
investments 2.852 2.874 0.193 3.531 2.928 0.570 2.598 0.602
- ------------------------------------------------------------------------------------------------------------------------
Total from
investment
operations 2.896 2.933 0.264 3.537 2.951 0.575 2.730 0.611
Less:
Distributions
from net
investment
income (0.044) (0.050) (0.069) (0.006) (0.023) (0.004) (0.132) (0.004)
Distributions in
excess of net
investment
income 0.000 (2.990) (0.533) (0.994) (1.188) 0.000 (0.560) (0.002)
Distributions
from net
realized gains
on securities 0.000 (0.130) 0.000 0.000 (0.045) 0.000 (0.000) 0.000
- ------------------------------------------------------------------------------------------------------------------------
Total
distributions (0.044) (3.170) (0.602) (1.000) (1.256) (0.004) (0.692) (0.006)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value
at end of period $14.814 $11.962 $12.199 $12.537 $12.266 $10.571 $12.643 $10.605
- ------------------------------------------------------------------------------------------------------------------------
Total return* 24.20% 24.54% 2.17% 35.40% 28.20% 5.74% 25.94% 6.16%
Ratios to
average net
assets:
Expenses** 1.23% 1.25% 1.30% 1.12% 1.51% 0.69% 1.40% 0.91%
Net investment
income** 0.32% 0.44% 0.57% 0.07% 0.31% 0.05% 1.54% 0.08%
Average Comm.
Paid (a) $0.066 -- -- -- $ 0.051 -- $ 0.056 --
Portfolio
turnover 93.3% 254.4% 210.0% 128.1% 152.7% 38.2% 117.8% 54.8%
Net assets (in
thousands) $17,338 $14,216 $11,736 $ 9,841 $ 2,288 $ 1,072 $ 2,336 $ 410
</TABLE>
* Ratios and total return for the year of inception are calculated from the
date of inception to the end of the period.
** If certain investment advisory fees and charges of the Trust's custodian and
transfer agent had not been assumed by the investment advisor, the ratios of
expenses and net income to average net assets would be as follows: for the
Intermediate Bond Fund, expenses would have been 0.85%, 0.75%, 0.88% and
0.75% for the years ended 1996, 1995 and 1994 and the period ended December
31, 1993, respectively. For the Government Money Market Fund, expenses would
have been 0.67%, 0.59%, 0.66% and 0.69% for the years ended 1996, 1995 and
1994 and the period ended December 31, 1993, respectively. For the
Intermediate Bond Fund, net investment income would have been 5.45%, 5.46%,
5.34% and 3.66% for the years ended 1996, 1995 and 1994 and the period ended
December 31, 1993, respectively. For the Government Money Market Fund, the
investment income would have been 4.59%, 5.17%, 3.39% and 1.66% for the
years ended 1996, 1995 and 1994 and the period ended December 31, 1993,
respectively.
(a) Represents the average commissions per share paid on equity transactions
during the period on which commissions were paid. This disclosure is not
applicable to periods prior to 1996.
The per share ratios are calculated using the weighted average number of shares
outstanding during the period.
Page 6
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND GOVERNMENT MONEY MARKET FUND
--------------------------------------------------------------------------------------------------
Year Year Year 3/5/93 Year Year Year 3/1/93
Ended Ended Ended Through Ended Ended Ended Through
12/31/96 12/31/95 12/31/94 12/31/93 12/31/96 12/31/95 12/31/94 12/31/93
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period* $10.244 $ 9.624 $10.345 $10.000 $1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.612 0.655 0.589 0.357 0.049 0.059 0.040 0.023
Net realized and unrealized
gain (loss) on investments 0.019 0.740 (0.690) 0.447 0.000 0.000 0.000 0.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.631 1.395 (0.101) 0.804 0.049 0.059 0.040 0.023
Less:
Distributions from net
investment income (0.612) (0.655) (0.580) (0.357) (0.049) (0.059) (0.040) (0.023)
Distributions in excess
of net investment income (0.055) (0.120) (0.040) (0.102) 0.000 0.000 0.000 0.000
Distributions from net
realized gains on securities 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.667) (0.775) (0.620) (0.459) (0.049) (0.059) (0.040) (0.023)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at
end of period $10.208 $10.244 $ 9.624 $10.345 $1.000 $ 1.000 $ 1.000 $ 1.000
- ----------------------------------------------------------------------------------------------------------------------------------
Total return* 6.46% 14.84% (1.04)% 8.17% 5.06% 5.87% 4.04% 2.21%
Ratios to average net assets:
Expenses** 0.55% 0.27% 0.28% 0.28% 0.31% 0.07% 0.00% 0.03%
Net investment income** 5.75% 5.94% 5.94% 4.13% 4.95% 5.69% 4.04% 2.32%
Average Comm. Paid (a) N/A N/A N/A N/A N/A N/A N/A N/A
Portfolio turnover 28.9% 75.1% 94.5% 32.3% N/A N/A N/A N/A
Net assets (in thousands) $ 2,769 $ 3,589 $ 3,010 $ 2,959 $6,232 $ 4,393 $ 3,315 $ 1,859
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES
The Funds' investment objectives differ principally in the types of securities
selected for investment and the relative importance each Fund places on growth
potential, current income and preservation of capital as considerations in
selecting investments.
. MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND AND LARGE-CAP FUND
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each seek long-
term capital growth by investing in common stocks believed to have above average
growth potential. The Funds differ from each other with respect to the (i)
market capitalizations of the companies in which they invest and (ii) relative
importance placed on investing for current income.
Each Fund's investment approach emphasizes a competitive return in rising
markets and preservation of capital in declining markets in an attempt to
generate long-term capital growth over a complete business cycle (approximately
3 to 5 years) when compared to the broader stock market indices. The Adviser's
emphasis will be on common stocks with improving earnings per share growth, a
history of growth and sound management, and a strong balance sheet. The Adviser
may invest up to 20% of Monetta Fund's assets and 25% of the assets of Small-Cap
Fund, Mid-Cap Fund and Large-Cap Fund's assets in securities not meeting the
above criteria but believed by the Adviser to be undervalued based on a
company's current price-earnings ratio relative to its estimated earnings growth
rate. No Fund intends to invest more than 5% of its assets in derivative
securities (options and futures).
The securities in which each Fund invests will be listed on a national
securities exchange or traded on an over-the-counter market.
Monetta Fund, Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund and Balanced Fund (in
its investments in equity securities, as discussed below) each pursue a selling
discipline to preserve capital gains and limit losses. At the time a security is
purchased, the Adviser determines approximate prices (on both the upside and the
downside) at which a given security will be sold, if such prices are reached. A
security will generally be sold if it appreciates or depreciates to the sell
points, it becomes less attractive compared to a new stock idea, or company
fundamentals deteriorate with little perceived prospect for improvement within a
reasonable time frame. The actual timing of the sale of a security may be
affected by liquidity constraints or other factors affecting the market for that
security. This selling discipline may result in higher than average portfolio
turnover.
MONETTA FUND'S primary investment objective is to provide its shareholders with
capital appreciation by investing at least 70% of the Fund's assets in equity
securities believed to have growth potential. A secondary objective of Monetta
Fund is to provide its shareholders with income, in part by investing the
balance of the Fund's assets in dividend paying equity securities or in long-
term (greater than one year) debt securities. The Fund's investments in long-
term debt securities will consist of United States Treasury Notes and Treasury
Bonds of various maturities and investment grade securities rated at least A or
better by either Moody's Investor Services, Inc. ("Moody's") or Standard and
Poor's Corporation ("S&P"). A complete description of the ratings is contained
in an appendix to the Statement of Additional Information.
Monetta Fund generally invests in smaller companies with aggregate market
capitalizations ranging from $50 million to $1 billion. See "Risks and
Investment Considerations--Equity Securities."
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<PAGE>
SMALL-CAP FUND typically invests in smaller companies with market capitalization
of less than $1 billion. See "Risks and Investment Considerations--Equity
Securities." Under normal market conditions, the Fund invests at least 65% of
its total assets in common stocks of small-cap companies.
MID-CAP FUND typically invests in medium-sized companies with market
capitalizations of $1 billion to $5 billion. See "Risks and Investment
Considerations--Equity Securities." Under normal market conditions, the Fund
invests at least 65% of its total assets in common stocks of mid-cap
companies.
LARGE-CAP FUND typically invests in large companies with market capitalizations
in excess of $5 billion. See "Risks and Investment Considerations--Equity
Securities." Under normal market conditions, the Fund invests 65% of its total
assets in common stocks of large-cap companies.
. BALANCED FUND
BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income securities.
The investment approach for Balanced Fund combines the equity growth strategy
used for Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund and the
income strategy employed by Intermediate Bond Fund, as discussed below.
The Fund may emphasize fixed income securities or equity securities or hold
equal amounts of both, depending upon the Adviser's analysis of market,
financial and economic conditions. Under normal circumstances, the Fund invests
at least 80% of its total assets in fixed income and equity securities. At least
25% of the Fund's assets invested in fixed income securities will consist of
corporate bonds and debentures rated A or better and securities issued or
guaranteed as to principal and interest by the U.S. Government and its agencies
and instrumentalities. The Fund does not presently intend to invest more than
10% of its assets in securities rated below investment grade (commonly called
"junk bonds") or, if unrated, determined by the Adviser to be of comparable
credit quality. See "Risks and Investment Considerations--Debt Securities."
. INTERMEDIATE BOND FUND
INTERMEDIATE BOND FUND seeks a high level of current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.
Under normal market conditions, Intermediate Bond Fund invests at least 70% of
the value of its total assets (taken at market value at the time of investment)
in the following:
(1) Marketable straight-debt securities of domestic issuers, and of foreign
issuers payable in U. S. dollars, rated at the time of purchase within the
three highest grades assigned by Moody's or by S&P;
(2) Securities issued or guaranteed by the U. S. Government or by its agencies
or instrumentalities;
(3) Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of purchase,
or, if unrated, issued or guaranteed by a corporation with any outstanding
debt rated A or better by Moody's or by S&P;
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<PAGE>
(4) Variable rate demand notes, if unrated, determined by the Adviser to be of
credit quality comparable to the commercial paper in which the Fund may
invest; or
(5) Bank obligations, including repurchase agreements,/*/ of banks having total
assets in excess of $500 million.
Under normal market condition, the Fund invests at least 65% of its total assets
in bonds and debentures, and at least 75% of its assets in securities with an
average life of less than 15 years, and expects that the dollar-weighted average
life of its portfolio will be between 3 and 10 years. Average life is the
weighted average period over which the Adviser expects the principal to be paid,
and differs from stated maturity in that it includes the estimated effect of
maturity-shortening devices, such as calls, refundings or redemption provisions
of which the Adviser believes it is probable that the issuer will take
advantage. With respect to GNMA securities and other mortgage-backed securities,
average life is likely to be substantially less than the stated maturity of the
mortgages in the underlying pools. With respect to obligations with call
provisions, average life is typically the next call date on which the Adviser
believes it is probable that the obligation will be called. Securities without
prepayment or call provisions generally have an average life equal to their
stated maturity. During periods of rising interest rates, the average life of
mortgage-backed securities and callable obligations may increase substantially
because they are not likely to be prepaid, which may result in greater net asset
value fluctuation.
The Fund also may invest in other debt securities (including those convertible
into or carrying warrants to purchase common stocks or other equity interests,
and privately placed debt securities), preferred stocks, and marketable common
stocks that the Adviser considers likely to yield relatively high income in
relation to cost. Equity securities acquired by conversion or exercise of a
warrant may be held by the Fund for a sufficient time to permit orderly
disposition or to establish a long-term holding period for tax purposes. If,
after purchase by the Fund, the rating of a portfolio security is lost or
reduced, the Fund would not be required to sell the security, but the Adviser
would consider such a change in deciding whether the Fund should retain the
security in its portfolio. See "Risks and Investment Considerations--Debt
Securities." Intermediate Bond Fund will not invest more than 20% of its assets
in debt securities rated below investment grade or, if unrated, determined by
the Adviser to be of comparable credit quality.
. GOVERNMENT MONEY MARKET FUND
GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with safety
of capital and maintenance of liquidity. The Fund invests in U.S. Government
Securities maturing in thirteen months or less from the date of purchase and
repurchase agreements for U.S. Government Securities.
U.S. Government Securities include:
(1) Securities issued by the U.S. Treasury;
(2) Securities issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government that are backed by the full faith
and credit guarantee of the U.S. Government;
- -----------------------------
/*/ A repurchase agreement is a sale of securities to a Fund in which the
seller (a bank or broker-dealer believed by the Adviser to be financially
sound) agrees to repurchase the securities at a higher price, which
includes an amount representing interest on the purchase price, within a
specified time.
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<PAGE>
(3) Securities issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government that are not backed by the full
faith and credit guarantee of the U.S. Government; and
(4) Repurchase agreements for securities listed in (1), (2), and (3) above,
regardless of the maturities of such underlying securities.
The Fund is a money market fund and follows procedures, described in the
Statement of Additional Information, designed to stabilize its net asset value
per share at $1.00. The Fund maintains a dollar-weighted average portfolio
maturity appropriate to its objective of maintaining a stable net asset value
per share and, in any case, not in excess of 90 days.
The U.S. Government Securities in which the Fund is permitted to invest include:
(i) bills, notes, bonds, and other debt securities, differing as to maturity and
rates of interest, that are issued by and are direct obligations of the U.S.
Treasury; and (ii) other securities that are issued or guaranteed as to
principal and interest by agencies or instrumentalities of the U.S. Government
and that include, but are not limited to, Federal Farm Credit Banks, Federal
Home Loan Banks, Government National Mortgage Association, Farmers Home
Administration, Federal Home Loan Mortgage Corporation and Federal National
Mortgage Association. The Fund also invests in repurchase agreements for U.S.
Government Securities. See "Risks and Investment Considerations."
RISKS AND INVESTMENT CONSIDERATIONS
RISKS
All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. The risks inherent in each Fund depend primarily
upon the types of securities in the Fund's portfolio, as well as on market
conditions. There can be no guarantee that a Fund will achieve its objective.
MONETTA FUND, SMALL-CAP FUND, MID-CAP FUND and LARGE-CAP FUND are designed for
long-term investors who can accept the fluctuations in portfolio value and other
risks associated with seeking capital growth through investment in common
stocks.
BALANCED FUND is appropriate for long-term investors who can accept asset value
fluctuations from interest rate changes and credit risks associated with fixed
income investments, and other risks associated with investments in common
stocks.
INTERMEDIATE BOND FUND is appropriate for investors who seek high income with
less net asset value fluctuation from interest rate changes than that of a
longer-term fund but more net asset value fluctuation than with a shorter-term
fund, and who can accept the credit and others risks associated with securities
that are high and upper-medium quality. A longer-term bond fund will usually
provide a higher yield than an intermediate term fund like Intermediate Bond
Fund; conversely, an intermediate term fund usually has less net asset value
fluctuation, although there can be no guarantee that this will be the case.
GOVERNMENT MONEY MARKET FUND is designed for investors who seek income with
minimum risk (including the risk of principal loss) other than the risk of
changes in yield caused by fluctuation in prevailing levels of interest rates.
Because Government Money Market Fund's investment policy permits it to invest in
U. S. Government Securities that are not backed by the full faith and credit of
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<PAGE>
the U. S. Government, investment in that Fund may involve risks that are
different in some respects from an investment in a fund that invests only in
securities that are backed by the full faith and credit of the U. S. Government.
Such risks may include a greater risk of loss of principal and interest on the
securities in the Fund's portfolio that are supported only by the issuing or
guaranteeing U. S. Government agency or instrumentality since the Fund must look
principally or solely to that entity for ultimate repayment. There can be no
guarantee that Government Money Market Fund will be able at all times to
maintain its net asset value per share at $1.00.
INVESTMENT CONSIDERATIONS
EQUITY SECURITIES. Common stocks represent an equity interest in a corporation.
Although common stocks have a history of long-term growth in value, their prices
tend to fluctuate in the short term. The securities of smaller companies, as a
class, have had periods of favorable results and other periods of less favorable
results compared to the securities of larger companies as a class. Stocks of
small to mid-size companies tend to be more volatile and less liquid than stocks
of large companies. Smaller companies, as compared to larger companies, may have
a shorter history of operations, may not have as great an ability to raise
additional capital, may have a less diversified product line making them
susceptible to market pressure, and may have a smaller public market for their
shares.
DEBT SECURITIES. Bonds and other debt instruments are methods for an issuer to
borrow money from investors. Debt securities have varying levels of sensitivity
to interest rate changes and varying degrees of quality. A decline in prevailing
levels of interest rates generally increases the value of debt securities, while
an increase in rates usually reduces the value of those securities. As a result,
interest rate fluctuations will affect a Fund's net asset value, but not the
income received by a Fund from its portfolio securities. (Because yields on debt
securities available for purchase by a Fund vary over time, no specific yield on
shares of a Fund can be assured.) In addition, if the bonds in a Fund's
portfolio contain call, prepayment or redemption provisions, during a period of
declining interest rates, these securities are likely to be redeemed, and the
Fund will probably be unable to replace them with securities having a comparable
yield. There can be no assurance that payments of interest and principal on
portfolio securities will be made when due.
"Investment grade" debt securities are those rated within the four highest
ratings categories of Moody's or S&P or, if unrated, determined by the Adviser
to be of comparable quality. Bonds rated Baa or BBB have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity of their issuers to make principal
and interest payments than is the case with higher grade bonds. Lower-rated debt
securities (commonly called "junk bonds") on balance, are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation and therefore carry
greater investment risk, including the possibility of issuer default and
bankruptcy; they are likely to be less marketable and more adversely affected by
economic downturns than higher-quality debt securities. Convertible debt
securities are frequently unrated or, if rated, are below investment grade. For
more information, see discussion of debt securities in the Fund's Statement of
Additional Information.
SHORT-TERM INVESTMENT. The Funds (other than Government Money Market Fund) may
make short-term investments without limitation in periods when the Adviser
determines that a temporary defensive position is warranted. Such investments
may be in U. S. Government Securities of the type in which Government Money
Market Fund may invest; certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of at least $500 million and
which are regulated by the U. S. Government, its agencies or instrumentalities;
commercial paper rated in the
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<PAGE>
highest category by a recognized rating agency; and demand notes comparable in
quality, in the Adviser's judgment, to commercial paper rated in the highest
category.
LOANS OF PORTFOLIO SECURITIES. Subject to certain restrictions, Balanced Fund
and Intermediate Bond Fund may lend their portfolio securities to broker-dealers
and banks. Any such loan must be continuously secured by collateral in cash or
cash equivalents maintained on a current basis in an amount at least equal to
the market value of the securities loaned by the Fund. The Fund would continue
to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned, and would also receive an additional return that may be in
the form of a fixed fee or a percentage of the collateral. The Fund would have
the right to call the loan and obtain the securities loaned at any time on
notice of not more than five business days. In the event of bankruptcy or other
default of the borrower, the Fund could experience both delays in liquidating
the loan collateral or recovering the loaned securities and losses including (a)
possible decline in the value of the collateral or in the value of the
securities loaned during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Balanced Fund, Intermediate Bond
Fund and Government Money Market Fund may invest in securities purchased on a
when-issued or delayed-delivery basis. Although the payment and interest terms
of these securities are established at the time the purchaser enters into the
commitment, the securities may be delivered and paid for a month or more after
the date of purchase, when their value may have changed. A Fund makes such
commitments only with the intention of actually acquiring the securities, but
may sell the securities before settlement date if the Adviser deems it advisable
for investment reasons. Government Money Market Fund may purchase securities on
a standby commitment basis, which is a delayed-delivery agreement in which the
Fund binds itself to accept delivery of a security at the option of the other
party to the agreement. When a Fund commits to purchase securities on a when-
issued or delayed-delivery basis, the Fund segregates assets to secure its
ability to perform and to avoid the creation of leverage.
REPURCHASE AGREEMENTS. Balanced Fund, Intermediate Bond Fund and Government
Money Market Fund may enter into repurchase agreements. In the event of a
bankruptcy or other default of a seller of a repurchase agreement, a Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) possible decline in the value of the collateral during the period
while the Fund seeks to enforce its rights thereto; (b) possible subnormal
levels of income and lack of access to income during this period; and (c)
expenses of enforcing its rights.
OPTIONS AND FUTURES. Consistent with their objectives, Balanced Fund and
Intermediate Bond Fund may each purchase and write both call options and put
options on securities and on indexes, and enter into interest rate and index
futures contracts and options on such futures contracts (such put and call
options, futures contracts, and options on futures contracts are referred to as
"derivative products") in order to provide additional revenue, or to hedge
against changes in security prices or interest rates. The Fund may write a call
or put option only if the option is covered. The Fund will limit its use of
futures contracts and options on futures contacts to hedging transactions to the
extent required to do so by regulatory agencies. There are several risks
associated with the use of derivative products. As the writer of a covered call
option, the Fund foregoes, during the option's life, the opportunity to profit
from increases in market value of the security covering the call option. Because
of low margin deposits required, the use of futures contracts involves a high
degree of leverage, and may result in losses in excess of the amount of the
margin deposit. Since there can be no assurance that a liquid market will exist
when the Fund seeks to close out a derivative product position, these risks may
become magnified. Because of these and other risks, successful use of
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<PAGE>
derivative products depends on the Adviser's ability to predict correctly
changes in the level and the direction of stock prices, interest rates, and
other market factors, but even a well-conceived transaction may be unsuccessful
because of an imperfect correlation between the securities and derivative
product markets. When either Balanced Fund or Intermediate Bond Fund enter into
a futures contract, it segregates assets to secure its ability to perform and to
avoid the creation of leverage. For additional information, please refer to the
Fund's Statement of Additional Information.
PORTFOLIO TURNOVER. Monetta Fund and Small-Cap Fund engage in an above-average
number of portfolio transactions. Their annual portfolio turnover rates are
likely to exceed 100%, and in some years may exceed 200% (excluding Treasury
Bills and other short-term money market instruments which mature in less than
one year). Mid-Cap Fund, Large-Cap Fund and Balanced Fund may also engage in an
above-average number of portfolio transactions and have an annual portfolio
turnover rate exceeding 100%, although that rate is not expected to exceed 200%
annually under normal market conditions. A high portfolio turnover rate
increases aggregate brokerage commission expenses and taxes which must be borne
directly by a Fund and ultimately by its shareholders. These portfolio turnover
rates and the resulting commission expenses and taxes are higher on a relative
basis than those of mutual funds which may not trade as frequently, including
those with a policy of capital appreciation. Substantial trading involves
substantial risk and may be speculative. Investors should not consider purchase
of a Fund's shares as a complete investment program.
INVESTMENT RESTRICTIONS
The Funds' investment restrictions, noted below, and investment objectives
cannot be changed without shareholder approval. All investment restrictions for
each Fund are described in the Funds' Statement of Additional Information.
. MONETTA FUND
In pursuing its investment objective, Monetta Fund will not:
(1) Invest more than 5% of its assets in the securities of any one issuer
(except obligations issued or guaranteed by the United States Government,
its agencies or instrumentalities);
(2) Buy more than 10% of any class of securities of any one issuer; or
(3) Borrow money in excess of 5% of the value of its total assets, or pledge,
mortgage, or hypothecate its assets taken at market value, to an extent
greater than 10% of the Fund's total assets taken at cost (and no borrowing
may be undertaken except from banks as a temporary measure for extraordinary
or emergency purposes).
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<PAGE>
. SMALL-CAP FUND
. MID-CAP FUND
. LARGE-CAP FUND
. BALANCED FUND
. INTERMEDIATE BOND FUND
. GOVERNMENT MONEY MARKET FUND
In pursuing its investment objective, each Fund will not:
(1) Invest more than 5% of its total assets (valued at the time of investment)
in the securities of any one issuer, except U. S. Government Securities and
repurchase agreements (this restriction applies to only 75% of the total
assets of all Funds except Government Money Market Fund);
(2) Acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any issuer; or
(3) Borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then the aggregate borrowings at any one time may not exceed
10% of its assets (at market value). A Fund will not purchase additional
securities when its borrowings exceed 5% of total assets.
INVESTMENT RETURN
"Average Annual Total Return" for a given period may be computed by finding the
average annual compounded rate that would equate a hypothetical initial $1,000
investment to the value of that investment that could be redeemed at the end of
the period, assuming reinvestment of all dividends and distributions.
Balanced Fund and Intermediate Bond Fund may quote their yield, calculated by
dividing net investment income per share (a hypothetical figure as defined in
the SEC rules) during a 30-day period by the net asset value per share on the
last day of the period. The yield formula provides for semi-annual compounding,
which assumes that net investment income is earned and reinvested at a constant
rate and annualized at the end of a six-month period.
Because Government Money Market Fund strives to maintain a $1.00 per share
value, its return is usually quoted either as a current seven-day yield,
calculated by adding the dividends on a Fund share for the previous seven days
and restating that yield as an annual rate, or as an effective yield, calculated
by adjusting the current yield to assume daily compounding. To obtain current
yield information, call 1-800-MONETTA (1-800-666-3882) or write to the address
shown on the back cover. Government Money Market Fund may also quote its Total
Return or Average Annual Total Return.
In advertising and sales literature, a Fund's performance may be compared to
market indexes and to the performance of other mutual funds. A Fund may also
publicize its comparative performance as computed in rankings or ratings
determined by independent services or publications including Lipper Analytical
Services, Inc., Morningstar, Inc. and others.
More information about a Fund's performance is included in its 1996 annual
report to shareholders, a copy of which may be obtained upon request at no
charge.
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<PAGE>
HOW TO PURCHASE SHARES
You may purchase shares of any of the Funds by check, by wire (into an existing
account only) or by exchange from your account with another Fund. Your initial
investment in the Monetta Funds must be at least $1,000, which may be allocated
among the Funds so long as at least $250 is invested in each Fund in which you
choose to invest. The minimum initial investment for UGMA or UTMA accounts,
Automatic Investment Plan accounts and individual retirement accounts is $250.
Additional investments in ANY Fund must be at least $50. Each Fund has a minimum
account balance of $250. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995,
HOWEVER, WILL BE ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT
FUND. If you are purchasing shares to be held by a tax-sheltered retirement plan
sponsored by the Adviser, you must use special application forms which you
can obtain by calling the Funds at 1-800-MONETTA. (See "Shareholder Services-
Tax-Sheltered Retirement Plans.") Your purchase order must be received by the
Funds' Transfer Agent before the close of regular session trading on the New
York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the net
asset value calculated on that day. See "Purchase Price of Shares" below.
PURCHASES BY AN INDIVIDUAL SHAREHOLDER CANNOT BE MADE BY TELEPHONING OR FAXING
AN APPLICATION TO THE FUNDS OR THE TRANSFER AGENT.
PURCHASE BY CHECK
To purchase shares of a Fund by check, complete and sign the Share Purchase
Application included in this Prospectus and return it, with a check or other
negotiable bank draft made payable to MONETTA FUNDS, to: MONETTA, C/O FIRSTAR
TRUST COMPANY, P. O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. IF YOU INTEND TO
USE AN OVERNIGHT DELIVERY SERVICE, THE APPLICATION AND CHECK SHOULD BE SENT TO:
FIRSTAR TRUST COMPANY, MUTUAL FUND DIVISION, 615 EAST MICHIGAN STREET, 3RD
FLOOR, MILWAUKEE, WISCONSIN 53202-5207. If a phone number is requested, use: 1-
414-765-4124. Applications will not be accepted unless accompanied by payment.
Additional purchases (minimum $50 for any Fund) may be made at any time by
mailing a check payable to MONETTA FUNDS, to the address above, together with
the detachable form from a prior account statement or a letter indicating the
account number to which the subsequent purchase is to be credited and the
name(s) of the registered owner(s).
Purchases must be made in U. S. dollars and checks must be drawn on U. S. banks.
No cash or third party checks will be accepted. If your order to purchase shares
is canceled because your check does not clear, you will be responsible for a
$20.00 return item fee and any resulting loss incurred by the Fund.
PURCHASES BY WIRE
Shares may also be purchased by wire transfer of funds INTO AN EXISTING ACCOUNT
ONLY. Before wiring funds call Firstar Trust Company at 1-800-241-9772 to ensure
prompt and accurate handling of your account. Then, instruct your bank to wire
the purchase amount to: Firstar Bank-Milwaukee N. A., 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, ABA number 0750-00022, credit Firstar Trust Company,
account number 112-952-137, further credit Monetta Funds, (shareholder name and
account number). Your bank may charge you a fee for sending the wire. The Funds
will not be responsible for the consequences of any delays, including delays in
the banking or Federal Reserve wire systems.
PURCHASES BY EXCHANGE
You may purchase shares by exchange of shares from another existing Fund account
either by phone (if you have not declined the Telephone Exchange Privilege on
the account form which the exchange is being made) or by mail. Restrictions
apply; please review the information under "How to Redeem Shares--By Exchange."
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PURCHASES THROUGH INTERMEDIARIES
You may also purchase (and redeem) shares through investment dealers, banks or
other institutions. The Funds may enter into an arrangement with such an
institution allowing the institution to process purchase orders or redemption
requests for its customers with the Funds on an expedited basis, including
requesting share purchases and redemptions by telephone. If you purchase shares
through an investment dealer, the dealer will be responsible for promptly
forwarding your order to the Fund's transfer agent. Although these arrangements
might permit you to effect a purchase or redemption of Fund shares through the
institution more quickly than would otherwise be possible, the institution may
impose charges for its services. Such fees may constitute a substantial portion
of a smaller account and may not be in your best interest. You should check with
the investment dealer, bank or other institution through which you purchased
Fund shares to determine if that institution offers telephone redemptions. You
may purchase or redeem shares directly from the Funds without any charges other
than those described in this Prospectus. In some cases, the Funds and the
Adviser may enter into arrangements with such intermediaries by which a Fund may
pay to such an intermediary up to 0.25% of the value of shares purchased through
that intermediary, to compensate the intermediary for the services provided to
those Fund shareholders and the intermediary's distribution-related services.
Any payments by a Fund would be pursuant to its Service and Distribution Plan.
Any such payments by a Fund are borne by all Fund shareholders, not just those
purchasing shares through such intermediaries. See "Management of the Funds-
Service and Distribution Plan." The Adviser may pay additional amounts to such
intermediaries from the Adviser's own resources.
PURCHASE PRICE OF SHARES
The price paid for shares is the net asset value per share of a Fund next
determined after receipt of your purchase order in proper form by Firstar Trust
Company (the "Transfer Agent") or an authorized sub-transfer agent. (See
"Determination of Net Asset Value.") Money sent to purchase additional shares
for existing accounts must be accompanied by the shareholder's account number.
Money sent to open a new account must be preceded or accompanied by a completed
application form.
CONDITIONS OF PURCHASE
All of your income dividends and capital gain distributions will be reinvested
in additional shares of the Fund paying the dividend or distribution unless you
elect to have distributions paid to you in cash. (See "Dividends, Distributions
and Taxes.") Each Fund reserves the right to reinvest the proceeds and future
distributions in additional Fund shares at the current net asset values if
checks mailed to you for distributions are returned as undeliverable or are not
presented for payment within six months.
A purchase order is considered to have been placed when it is received in proper
form by the Transfer Agent or by an authorized sub-transfer agent. Once your
purchase order has been accepted, you may not cancel or revoke it; however, you
may redeem the shares. The Funds reserve the right not to accept any purchase
order that it determines not to be in the best interest of the Fund or of a
Fund's shareholders. Election of the Telephone Exchange Privilege authorizes the
Funds and the Transfer Agent to tape-record instructions to purchase. Reasonable
procedures are used to confirm that instructions received by telephone are
genuine, such as requesting personal identification information that appears on
your application and requiring permission to record the conversation. You will
bear the risk of loss due to unauthorized or fraudulent instructions regarding
your account, although the Funds may have a risk of such loss if reasonable
procedures were not used. The Funds also reserve the right to waive or change
the investment minimums for any reason. Monetta Fund and the Trust do not issue
certificates for Fund shares because of the availability of the telephone
exchange and redemption privileges.
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HOW TO REDEEM SHARES
FOR CASH
In Writing. You may redeem all or part of the shares in your account without
charge by sending a written redemption request "in good order" to the Transfer
Agent, Firstar Trust Company, P. O. Box 701, Attention: Monetta Funds,
Milwaukee, Wisconsin 53201-0701. If you intend to use an overnight delivery
service, please send to: Firstar Trust Company, Mutual Fund Division, 615 East
Michigan Street, 3rd Floor, Milwaukee, Wisconsin 53202-5207. A redemption
request will be considered to have been received in good order if the following
conditions are satisfied:
(1) The request must be in writing, indicating the Fund, the number of shares or
dollar amount to be redeemed, and the shareholder's account number;
(2) The request must be signed by the shareholder(s) exactly as the shares are
registered;
(3) The signature(s) on the written redemption request must be guaranteed if the
shares to be redeemed have a value of $50,000 or more or the redemption
proceeds are to be sent to an address other than your address of record (see
"Signature Guarantee" below).
(4) Corporations and associations must submit with each request a form of
acceptable resolution; and
(5) Other supporting legal documents may be required from organizations,
executors, administrators, trustees, or others acting on accounts not
registered in their names.
SHARES MAY NOT BE REDEEMED BY FACSIMILE.
Signature Guarantee. The signature on your redemption request must be guaranteed
if the redemption proceeds are $50,000 or more, when the proceeds are to be
mailed to an address other than your address of record or if a change of address
request has been received by the Fund or transfer agent within the last 15 days.
The guarantor must be a bank, member firm of a national securities exchange,
savings and loan association, credit union, or other entity authorized by state
law to guarantee signatures. A notary public may not guarantee signatures. The
signature guarantee must appear on the written redemption request (the guarantor
must use the phrase "signature guaranteed" and must include the name of the
guarantor bank or firm and an authorized signature).
By Telephone. You may redeem shares having a value up to $50,000 by calling
Firstar at 1-800-241-9772, if telephone redemption is available for your
account. For new accounts started after February 2, 1997, telephone redemptions
can be authorized on the account application. Telephone redemption is
automatically available for accounts which existed prior to February 2, 1997. To
terminate your option to redeem, please call 1-800-Monetta for the appropriate
forms. Reasonable procedures are used to confirm that instructions received by
telephone are genuine, such as requesting personal identification information
that appears on the purchase application and recording the conversation. The
shareholder bears the risk of any loss that might result from a fraudulent
instruction, although a Fund may bear such risk if reasonable procedures were
not used. To reduce the risk of a fraudulent instruction, proceeds of telephone
redemptions may be sent only to the shareholder's address of record or to a bank
or brokerage account designated by the shareholder, in writing, on the purchase
application or in a letter with the signature(s) guaranteed. The Funds reserve
the right to record all telephone redemption requests. See "General Redemption
Policies," below.
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For Information on how to redeem shares through intermidiaries see "How to
Purchase Shares - Purchases Through Intermidiaries"
BY EXCHANGE
By writing (without charge) to, or by telephoning (for a fee) the Transfer
Agent, you may exchange all or any portion of your shares of any of the Monetta
Funds for shares of another Fund offered by Monetta for sale in your state. A
signed, properly completed Share Purchase Application must be on file. AN
EXCHANGE TRANSACTION IS A SALE AND PURCHASE OF SHARES FOR FEDERAL INCOME TAX
PURPOSES AND MAY RESULT IN CAPITAL GAIN OR LOSS. The registration of the account
to which you are making an exchange must be exactly the same as that of the Fund
account from which the exchange is made and the amount you exchange must meet
any applicable minimum investment of the Fund being purchased. Unless you have
elected to receive your dividends in cash, on an exchange of all shares, any
accrued unpaid dividends will be invested in the Fund to which you exchange on
the next business day. An exchange may be made by following the redemption
procedure described above and indicating the Fund to be purchased, except that a
signature guarantee normally is not required.
To use the Telephone Exchange Privilege to exchange between your Monetta
accounts in the amount of $250 or more, call 1-800-241-9772 before 3:00 p. m.,
Central time. The Funds' Transfer Agent imposes a charge (currently $5.00) for
each Telephone Exchange. The general redemption policies apply to redemption of
shares of Telephone Exchange. See "General Redemption Policies" below. The Funds
reserve the right at any time without prior notice to suspend or terminate the
use of the Telephone Exchange Privilege by any person or class of persons, or to
terminate the Privilege in its entirety. Because such a step would be taken only
if their respective Boards believe it would be in the best interests of the
Funds, the Funds expect to provide shareholders with prior written notice of any
such action unless it appears that the resulting delay in the suspension,
limitation, modification, or termination of the Telephone Exchange Privilege
would adversely affect the Funds. If the Funds were to suspend, limit, modify,
or terminate the Telephone Exchange Privilege, a shareholder expecting to make a
Telephone Exchange might find that an exchange could not be processed or that
there might be a delay in the implementation of the exchange.
BY CHECKWRITING - GOVERNMENT MONEY MARKET FUND ONLY
An investor in the Government Money Market Fund may request on the Share
Purchase Application that the Government Money Market Fund provide redemption
checks drawn on the Fund. Checks may be in amounts of $500 up to $50,000. The
shares redeemed by check will continue earning dividends until the check has
cleared. Checks will not be returned. If selected on the Application Form, a
book of 10 checks and 2 deposit forms will be sent to the shareholder.
Additional checks and deposit forms will be sent to the shareholder upon request
for a fee of $5.00 per book. This amount will be deducted from the shareholder's
account. In order to establish this checkwriting privilege after an account has
been opened, the shareholder must send a written request to the Government Money
Market Fund, P. O. Box 701, Attention: Monetta Funds, Milwaukee, Wisconsin
53201-0701. A fee of $20 will be charged for each stop payment request. If there
are insufficient shares in the shareholder's account to cover the amount of the
redemption by check, the check will be returned marked "insufficient funds," and
a fee of $20 will be charged to the shareholder's account. Because dividends on
the Fund accrue daily, checks may not be used to close an account, as a small
balance is likely to result. The Checkwriting Privilege is only available to
Government Money Market Fund shareholders. The Checkwriting Privilege is not
available for IRAs or other retirement accounts.
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REDEMPTION PRICE
The redemption price will be the net asset value (see "Determination of Net
Asset Value") per share of the Fund next determined after receipt by the
Transfer Agent of a redemption request in good order. This means that your
redemption request (including a telephone exchange request) must be received in
good order by the Transfer Agent before the close of regular session trading on
the New York Stock Exchange (ordinarily 3:00 p. m., Central time) to receive the
net asset value calculated that day. The principal value and return on your
investment will fluctuate and on redemption your shares may be worth more or
less than your original cost.
GENERAL REDEMPTION POLICIES
You may not cancel or revoke your redemption request once instructions have been
received and accepted. The Funds cannot accept a redemption request that
specifies a particular date or price for redemption or any special conditions.
Please telephone the Funds if you have any question about requirements for a
redemption before submitting your request. If you wish to redeem shares held by
one of the tax-sheltered retirement plans sponsored by the Adviser, special
procedures of those plans apply. (See "Tax-Sheltered Retirement Plans.") If you
request payment of redemption proceeds by wire, you must pay the cost of the
wire (currently $12.00).
YOUR REDEMPTION REQUEST MUST BE SENT TO THE TRANSFER AGENT AT ITS ADDRESS IN
MILWAUKEE SHOWN ON THE BACK COVER. IF A REDEMPTION REQUEST IS SENT DIRECTLY TO
THE FUNDS, IT WILL BE FORWARDED TO THE TRANSFER AGENT AND WILL RECEIVE THE
REDEMPTION PRICE NEXT CALCULATED AFTER RECEIPT BY THE TRANSFER AGENT. If you
redeem shares through an investment dealer, the dealer will be responsible for
promptly forwarding your request to the Fund's transfer agent. The Funds do not
consider the U. S. Postal Service or other independent delivery services to be
its agents. Deposit in the mail or with such services or receipt of redemption
requests at Firstar Trust Company's Post Office Box does not constitute receipt
by Firstar Trust Company or the Funds. CORRESPONDENCE BY OVERNIGHT COURIER
SHOULD BE SENT TO FIRSTAR TRUST COMPANY, 615 EAST MICHIGAN STREET, 3RD FLOOR,
MILWAUKEE, WISCONSIN 53202-5207. The Funds generally pay proceeds of a
redemption no later than seven days after proper instructions are received. If
you attempt to redeem shares within 15 days after they have been purchased by
check, a Fund may delay payment of the redemption proceeds to you until it can
verify that payment for the purchase of those shares has been (or will be)
collected.
During periods of volatile economic and market conditions, you may have
difficulty placing your redemption or exchange by telephone which might delay
implementation of the redemption or exchange. Use of the Telephone Redemption or
Exchange Privilege authorizes the Funds and the Transfer Agent to tape-record
all instructions to redeem shares. Reasonable procedures are used to confirm
that instructions received by telephone are genuine, such as requesting personal
identification information that appears on your application and requiring
permission to record the conversation. You will bear the risk of loss due to
unauthorized or fraudulent instructions regarding your account, although the
Funds may have a risk of such loss if reasonable procedures were not used.
Because of the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to redeem shares in any account with a balance of less than
$250 in share value. Prior to any such redemption, a Fund will give the
shareholder thirty days' written notice during which time the shareholder may
increase his investment to avoid having his shares redeemed. The $250 minimum
balance will be waived if the account balance drops below the required minimum
due to market erosion. MONETTA FUND SHAREHOLDERS AS OF AUGUST 31, 1995 WILL BE
ALLOWED TO MAINTAIN A MINIMUM ACCOUNT BALANCE OF $100 IN THAT FUND.
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DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund declare and pay
income dividends, if any, at least annually. Balanced Fund pays income
dividends, if any, quarterly. Intermediate Bond Fund declares and pays income
dividends monthly. Income dividends of Government Money Market Fund are declared
daily and paid monthly. Capital gains, if any, are distributed by each Fund at
least annually. Distributions of a Fund are automatically reinvested in
additional shares of that Fund unless you elect payment in cash. Cash dividends
can be sent to you by check or deposited directly into your bank account. Call
the Transfer Agent at 1-800-241-9772 for more information and forms to sign up
for direct deposit.
Each Fund is a separate entity for Federal income tax purposes. Each Fund
intends to continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code, and thus not be subject to Federal
income taxes on amounts it distributes to shareholders.
Each Fund will distribute all of its net income and gains to shareholders.
Dividends from investment income and net short-term capital gains are taxable as
ordinary income. Distributions of long-term capital gains are taxable as long-
term gains regardless of the length of time you have held your shares in a Fund.
Distributions will be taxable to you whether received in cash or reinvested in
shares of a Fund. You will be advised annually as to the source of your
distributions for tax purposes. If you are not subject to income taxation, you
will not be required to pay tax on amounts distributed to you. If you purchase
shares shortly before a record date for a distribution you will, in effect,
receive a return of a portion of your investment, but the distribution will be
taxable to you even if the net asset value of your shares is reduced below your
cost. However, for Federal income tax purposes your original cost would continue
as your tax basis.
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Funds may be required to withhold
Federal income tax, currently at the rate of 31% ("backup withholding"), from
dividend, capital gain and redemption payments to you. Your dividend and capital
gain payments may also be subject to backup withholding if you fail to certify
properly that you are not subject to backup withholding due to the under-
reporting of certain income. These certifications are contained in the Share
Purchase Application, which you should complete and return when you make your
initial investment.
DETERMINATION OF NET ASSET VALUE
The purchase and redemption price of each Fund's shares is its net asset value
per share. The net asset value of a share of each Fund is determined as of the
close of trading on the New York Stock Exchange (currently 3:00 p. m., Central
time) by dividing the difference between the values of the Fund's assets and
liabilities by the number of shares outstanding. This is referred to as "net
asset value per share", which is determined as of the close of regular session
trading at the New York Stock Exchange on each day on which that exchange is
open for trading. A security listed or traded on a national securities exchange
or traded on the Nasdaq National Market is valued at its last quoted sales price
on the day the valuations are made. Listed securities and securities traded on
the over-the-counter market that do not trade on a particular day are valued at
the mean between the quoted bid and asked price.
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VALUATION
Securities for which market quotations are readily available at the time of
valuation are valued on that basis. Each security traded on a national stock
exchange is valued at its last sale price on that exchange on the day of
valuation or, if there are no sales that day, at the mean of the latest bid and
asked quotations. Each over-the-counter security for which the last sale price
on the day of valuation is available from the Nasdaq National Market is valued
at that price. All other over-the-counter securities for which reliable
quotations are available are valued at the mean of the latest bid and asked
quotations. Long-term straight-debt securities for which market quotations are
not readily available are valued at a fair value based on valuations provided by
pricing services approved by the respective Boards, which may employ electronic
data processing techniques, including a matrix system, to determine valuations.
Short-term debt securities for which market quotations are not readily available
are valued by use of a matrix prepared by the Adviser based on quotations for
comparable securities. Other assets and securities held by a Fund for which
these valuation methods do not produce a fair value are valued by a method that
the Board believes will determine a fair value.
VALUATION OF GOVERNMENT MONEY MARKET FUND
Government Money Market Fund attempts to maintain its net asset value at $1.00
per share. Portfolio securities are valued based on their amortized cost, which
does not take into account unrealized gains or losses. Other assets and
securities of the Fund for which this valuation method does not produce a fair
value are valued at a fair value determined by the Board. The extent of any
deviation between the Fund's asset value based upon market quotations or
equivalents and $1.00 per share based on amortized cost will be examined by the
Board of Trustees. If such deviation were to exceed 1/2 of 1%, the Board would
consider what action, if any, should be taken, including selling portfolio
instruments, increasing, reducing or suspending distributions, or redeeming
shares in kind.
SHAREHOLDER SERVICES
REPORTING TO SHAREHOLDERS
You will receive a confirmation statement reflecting each of your purchases and
redemptions of shares of a Fund, as well as periodic statements detailing
distributions made by each Fund of which you are a shareholder. You may elect to
receive a combined statement for all Funds for which you are a shareholder. In
addition, you will receive semi-annual and annual reports showing the portfolio
holdings of each Fund and annual tax information.
CERTAIN ACCOUNT CHANGES
Investors who wish to make a change in their address of record, a change in
investments made through an automatic investment plan or a change in the manner
in which dividends are received may do so by calling the transfer agent at
1-800-241-9772.
AUTOMATIC INVESTMENT PLAN
The Funds have an Automatic Investment Plan which permits an existing
shareholder to purchase additional shares of any Fund (minimum $50 per
transaction) at regular intervals. Under the Automatic Investment Plan, shares
are purchased by transferring funds from a shareholder's checking, bank money
market, NOW account, or savings account in an amount of $50 or more
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designated by the shareholder. At your option, the account designated will be
debited and shares will be purchased on the date elected by the shareholder.
Payroll deduction is available for certain qualifying employers, please call 1-
800-MONETTA for further information. There must be a minimum of seven days
between automatic purchases. If the date elected by the shareholder is not a
business day, funds will be transferred the next business day thereafter. Only
an account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. To establish an Automatic Investment
Account, complete and sign Section 7 of the Shareholder Purchase Application
included in this Prospectus and send it to the Transfer Agent. You may cancel
this privilege or change the amount of purchase at any time by calling 1-800-
241-9772 or by mailing written notification to: MONETTA, C/O FIRSTAR TRUST
COMPANY, P.O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701. The change will be
effective five business days following receipt of your notification by the
Transfer Agent. A Fund may modify or terminate this privilege at any time or
charge a service fee, although no such fee currently is contemplated. However, a
$20.00 fee will be imposed by Firstar Trust Company if sufficient funds are not
available in the shareholder's account at the time of the automatic
transaction.
SYSTEMATIC EXCHANGE PLAN
The Funds offer a Systematic Exchange Plan whereby a shareholder may
automatically exchange shares (in increments of $250 or more) of one Monetta
Fund into another on any day, either monthly or quarterly, the shareholder
chooses. For additional information and a Systematic Exchange Plan form, please
call Firstar Trust Company at 1-800-241-9772. Before participating in the
Systematic Exchange Plan, an investor should consult a tax or other financial
adviser to determine the tax consequences of participation.
SYSTEMATIC WITHDRAWAL PLAN
The Funds offer a Systematic Withdrawal Plan for shareholders who own shares of
any Fund worth at least $10,000 at current net asset value. Under the Systematic
Withdrawal Plan, a fixed sum (minimum $500) will be distributed at regular
intervals (on any day, either monthly or quarterly). In electing to participate
in the Systematic Withdrawal Plan, investors should realize that within any
given period the appreciation of their investment in a particular Fund may not
be as great as the amount withdrawn. A shareholder may vary the amount or
frequency of withdrawal payments or temporarily discontinue them by notifying
Firstar Trust Company at 1-800-241-9772. The Systematic Withdrawal Plan does not
apply to shares of any Fund held in Individual Retirement Accounts or defined
contribution retirement plans. For additional information or to request an
application please call Firstar Trust Company at 1-800-241-9772.
TAX-SHELTERED RETIREMENT PLANS
The Adviser offers prototype tax-sheltered retirement plans for individuals,
businesses and nonprofit organizations. Please call 1-800-MONETTA for booklets
describing the following programs and the forms needed to establish them:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs) for employed individuals and their non-
employed spouses.
MONEY PURCHASE PENSION AND PROFIT SHARING PLANS, including salary deferral
(401(k)) plans, for self-employed individuals, partnerships and corporations.
403(b) RETIREMENT PLANS for nonprofit organizations.
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SAVINGS INCENTIVE MATCH PLANS (SIMPLE-IRAs) permitting employers to provide
retirement benefits, including salary deferral, to their employees using IRAs
and minimizing administration and reporting requirements.
MANAGEMENT OF THE FUNDS
The Board of Directors of Monetta Fund and the Board of Trustees of the
Trust have overall responsibility for the conduct of the affairs of their
respective Funds.
INVESTMENT ADVISER
Each Fund's investments are managed by the investment adviser, MONETTA
FINANCIAL SERVICES, INC. (the "Adviser"). Subject to the overall authority of
the respective Boards, the Adviser manages the business and investments of the
Funds under investment advisory agreements. The Adviser also furnishes all
office space, equipment and personnel used by it in performing its duties and
pays all of each Fund's ordinary operating expenses except the fees of the
custodian and transfer agent, fees and expenses of the non-interested board
members and payments under a Fund's Service and Distribution Plan. The Adviser
is controlled by Robert S. Bacarella, the President and Founder of Monetta Fund
and the Trust, whose principal occupation has been in the field of money
management since 1972. The Adviser's address is 1776-A S. Naperville Road, Suite
207, Wheaton, IL 60187.
The Adviser employs a team approach to management of the Fund. The
management team is comprised of the lead portfolio manager, other Adviser
portfolio managers and research analysts. Team members share responsibility for
providing ideas, information, knowledge and expertise in managing the Fund. Each
team member has one or more areas of expertise that is applied to the management
of the Fund. Daily decisions on portfolio selection rest with the lead portfolio
manager who utilizes the input and advice of the management team in making
purchase and sale determinations.
Effective November 8, 1996, Robert S. Bacarella and Kevin D. Moore are co-
managers of Mid-Cap Fund, Large Cap Fund, Balanced Fund, Intermediate Bond Fund
and Government Money Market Fund.
Mr. Bacarella has been Chairman and CEO since October, 1996, Director since
1984 and President of the Adviser from 1984 to 1996. He has served as the
portfolio manager of Monetta Fund since it began operations. Mr. Bacarella was
Director - Pension Fund Investments, for Borg-Warner Corporation until 1989.
Mr. Moore joined the Adviser as senior analyst in October 1995. He has
served as the co-manager of Large-Cap Fund and Balanced Fund since May, 1996.
Mr. Moore was a senior portfolio manager and Vice President of First of America
Investment Corporation from 1992 to 1995. He was directly responsible for
managing over $450 million in assets.
In return for its services, and for the assumption of each Fund's ordinary
operating expenses except the fees and expenses of the custodian, transfer
agent, the fees and expenses of the non-interested directors and trustees and
payments under a Fund's Service and Distribution Plan, the Adviser receives a
monthly fee from each Fund based on that Fund's average net assets, computed and
accrued daily. The annualized rate of fee for Monetta Fund is 1% of average net
assets, for each of Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund is .75 of 1%
of average net assets; that of
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Balanced Fund is .40 of 1% of average net assets; that of Intermediate Bond Fund
is .35 of 1% of average net assets; and that of Government Money Market Fund is
.25 of 1% of average net assets.
Monetta Fund, the Trust and the Funds use "Monetta" in their names by
license from the Adviser and would be required to stop using those names if
Monetta Financial Services ceased to be the Adviser. The Adviser has the right
to use the name for other enterprises, including other investment companies.
The Adviser seeks the best combination of net price and execution in
selecting broker-dealers to execute portfolio transactions for the Funds.
Subject to that overriding consideration, and consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., the Adviser
may consider sales of Fund shares, or recommendations that clients purchase Fund
shares, as a factor in the selection of broker-dealers to execute transactions
for the Funds. Brokerage transactions for the Funds may be executed through
Monetta Investment Services, L.L.C., a registered broker-dealer and an
affiliate of the Adviser.
At December 31, 1996, the Adviser owned 29.8% of the outstanding shares of the
Balanced Fund, 8.3% of the outstanding shares of the Government Money Market
Fund, 27.3% of the outstanding shares of the Intermediate Bond Fund, 5.9% of
the outstanding shares of the Large-Cap Fund and less than 1% of the Mid-Cap
Fund. Ownership of greater than 25% of the outstanding shares of the Balanced
Fund and the Intermediate Bond Fund gives the Advisor presumed control over the
outcome of any matter requiring approval of the shareholders of either the
Balanced Fund or the Intermediate Bond Fund. Ownership of a significant
percentage of the outstanding shares of the Trust reduces the number of other
shares that must be voted in accordance with the Adviser's vote to approve or
disapprove any proposal requiring the approval of the shareholders of the
Trust.
DISTRIBUTOR
Shares of each Fund are distributed by Funds Distributor, Inc., 60 State Street,
Boston, Massachusetts 02109.
DISTRIBUTION AND SERVICE PLAN
Pursuant to a Service and Distribution Plan (the "Plan") adopted by each series
of the Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940 as
amended (the "Act"), each series of the Trust may compensate service
organizations for their accounting, shareholder services and distribution
services in amounts up to .25 of 1% for Small-Cap Fund, Mid-Cap Fund, Large-Cap
Fund, Balanced Fund and Intermediate Bond Fund and .10 of 1% for Government
Money Market Fund per annum of the values of accounts of shareholders purchasing
through such organizations. In addition, each Fund may pay for other services
relating to distribution of Fund shares, including the fees and expenses of the
distributor, the registration fees payable to the states and other jurisdictions
in which Fund shares are offered for sale, and the cost of printing prospectuses
and shareholder reports used for marketing purposes. The maximum amounts payable
by a Fund under the Plan, for service fees and other distribution related
expenses, are .10 of 1% of the average net assets of Government Money Market
Fund and .25 of 1% of the average net assets of each of Small-Cap Fund, Mid-Cap
Fund, Large-Cap Fund, Balanced Fund and Intermediate Bond Fund. Additional
service fees and additional amounts for other distribution-related expenses may
be paid by the Adviser from its own resources.
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OTHER INFORMATION
All shareholder inquiries and instructions concerning Fund accounts should be
directed to: MONETTA, c/o Firstar Trust Company, P. O. Box 701, Milwaukee,
Wisconsin 53201-0701.
In approving the use of a single combined Prospectus, the Board of Directors of
Monetta Fund and the Board of Trustees of the Trust considered the possibility
that one Fund might be liable for misstatements in the Prospectus regarding
information concerning another Fund.
. MONETTA FUND
Monetta Fund is an open-end diversified management investment company
incorporated under the laws of the State of Maryland on October 16, 1985.
The Fund has one class of capital stock, $0.01 par value. Each full share is
entitled to one vote and to participate equally in dividends and distributions
declared by the Fund (fractional shares have the same rights, proportionally, as
full shares). Fund shares are fully paid and non-assessable when issued and have
no preemptive, conversion or exchange rights. The obligations and liabilities
associated with ownership or shares in the Fund are limited to the extent of a
shareholder's investment in the Fund.
Voting rights are non-cumulative, so that the holders of more than 50% of the
shares voting in any election can, if they choose to do so, elect all of the
directors of the Fund.
As a Maryland corporation registered under the Investment Company Act of 1940,
the Fund is not required to hold routine annual meetings of shareholders and
does not expect to do so. Maryland law permits shareholders to remove directors
and requires the Fund to assist in shareholder communication under certain
circumstances.
. THE TRUST
Small-Cap Fund, Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond
Fund and Government Money Market Fund are each a series of Monetta Trust, which
was organized as a Massachusetts business trust on October 20, 1992 and is an
open-end diversified management investment company.
Under the terms of the Trust's agreement and declaration of trust ("Declaration
of Trust"), the trustees may issue an unlimited number of shares of beneficial
interest without par value for each series of shares authorized by the trustees.
All shares issued are fully paid and non-assessable when issued and have no pre-
emptive, conversion or exchange rights.
Each Fund's shares are entitled to participate pro rata in any dividends and
other distributions declared by the Board of Trustees with respect to shares of
that Fund. All shares of a Fund have equal rights in the event of liquidation of
that Fund.
Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Declaration of Trust disclaims liability of the shareholders, trustees, and
officers of the Trust for acts or obligations of any Fund, which are binding
only on the assets and property of that Fund. The Declaration of Trust requires
that notice of such disclaimer be given in each agreement, obligation, or
contract entered into or executed by the Trust or the Board of Trustees. The
Declaration of Trust provides for indemnification out of a Fund's assets
Page 26
<PAGE>
of all losses and expenses of any Fund shareholder held personally liable for
the Fund's obligations. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is remote, since it is limited to
circumstances in which the disclaimer is inoperative and the Fund itself is
unable to meet its obligations. The risk of a particular Fund incurring
financial loss on account of an unsatisfied liability of another Fund of the
Trust is also believed to be remote, because it would be limited to claims to
which the disclaimer did not apply and to circumstances in which the other Fund
was unable to meet its obligations.
Each share has one vote and fractional shares have fractional votes. As a
business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as electing or
removing trustees, changing fundamental policies or approving an investment
advisory agreement. On any matters submitted to a vote of shareholders, shares
are voted by individual series and not in the aggregate, except when voting in
the aggregate is required by the 1940 Act of other applicable law. Shares of a
Fund are not entitled to vote on any matter not affecting that Fund. All shares
of the Trust vote together in the election of trustees.
The trustees serve indefinite terms of unlimited duration. The trustees appoint
their own successors, provided that at least two-thirds of the trustees, after
any such appointment, have been elected by the shareholders. Shareholders may
remove a trustee, with or without cause, upon the declaration in writing or vote
of two-thirds of the outstanding shares of the Trust, respectively. A trustee
may be removed with or without cause upon the written declaration of a majority
of the trustees.
Page 27
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary 2
Fund Expenses 4
Financial Highlights 5
Investment Objectives and Policies 8
Risks and Investment Considerations 11
Investment Restrictions 14
Investment Return 15
How to Purchase Shares 16
How to Redeem Shares 18
Dividends, Distributions and Federal Taxes 21
Determination of Net Asset Value 21
Shareholder Services 22
Tax-Sheltered Retirement Plans 23
Management of The Funds 24
Other Information 26
</TABLE>
SHAREHOLDERS NOTE:
SEND ALL SHARE PURCHASE APPLICATIONS, CHANGES OF ADDRESS, REQUESTS FOR ACCOUNT
INFORMATION AND REDEMPTION REQUESTS TO THE TRANSFER AGENT
Firstar Trust Company
P. O. Box 701
Milwaukee, WI 53201-0701
1-800-241-9772
Hearing Impaired Services
TDD 1-800-684-3416
INVESTMENT ADVISER:
Monetta Financial Services, Inc.
ADDRESS OF FUNDS AND ADVISER:
1776-A South Naperville Road
Suite 207
Wheaton, Illinois 60187-8133
DISTRIBUTOR:
Funds Distributor, Inc.
Boston, Massachusetts 02109
AUDITORS:
KPMG Peat Marwick LLP
Chicago, Illinois 60601
LEGAL COUNSEL:
Bell, Boyd & Lloyd
Chicago, Illinois 60602
[LOGO OF MONETTA]
Monetta Fund, Inc.
Monetta Small-Cap Equity Fund
Monetta Mid-Cap Equity Fund
Monetta Large-Cap Equity Fund
Monetta Balanced Fund
Monetta Intermediate Bond Fund
Monetta Government Money Market Fund
No-Load Mutual Funds
No Redemption Fees
PROSPECTUS
FEBRUARY 3, 1997
<PAGE>
SHARE PURCHASE APPLICATION
Mail Completed Application to: Overnight Express Mail to:
Monetta Monetta
Mutual Fund Services Mutual Fund Services, 3rd Floor
P.O.Box 701 615 East Michigan Street
Milwaukee, WI 53201-0701 Milwaukee, WI 53202
1-800-MONETTA
Use this form for individual, custodial, trust, profit sharing or
pension plan accounts. Do not use this form for Monetta Funds-sponsored IRA,
Defined Contribution (401(k) or 403(b)) plans which require forms available from
Monetta Funds. For information please call 1-800-666-3882.
===============================================================================
A. ACCOUNT REGISTRATION
[_] Individual
Name
---------------------------------------------------------------------------
Social Security Number Citizen of [_] US [_] Other
===========================================================================
[_] Joint Owner*
Name
---------------------------------------------------------------------------
Social Security Number Citizen of [_] US [_] Other
===========================================================================
[_] Gift to Minor
Custodian
---------------------------------------------------------------------------
Minor Minor's Birthdate
---------------------------------------------------------------------------
Minor's Social Security Number Citizen of [_] US [_] Other
===========================================================================
[_] Corporation, Partnership or Other Entity
Name of Entity
---------------------------------------------------------------------------
Taxpayer Identification Number
---------------------------------------------------------------------------
. A corporate resolution form or certificate is required for corporate
accounts.
===========================================================================
[_] Trust, Estate or Guardianship
Name
---------------------------------------------------------------------------
Name of Fiduciary(s)
---------------------------------------------------------------------------
Taxpayer Identification Number Date of Trust
===========================================================================
. Additional documentation and certification may be requested.
* Registration will be Joint Tenants with Rights of Survivorship (JTWROS)
unless otherwise specified
===============================================================================
B. MAILING ADDRESS [_] Send Duplicate Confirmations To:
- --------------------------------- ------------------------------------
Street, Apt. Name
- --------------------------------- ------------------------------------
City, State, Zip Code Street, Apt.
- --------------------------------- ------------------------------------
Daytime Phone Number City, State, Zip Code
================================================================================
C. INVESTMENT CHOICES
The minimum initial investment is $1,000 for shares in any of the Monetta
Funds which may be allocated among the Funds so long as at least $250 is
invested in each Fund in which you choose to invest (For UGMA, AIP, or IRA the
minimum initial investment is $250). Subsequent investment to any Fund is $50
(also $50 for the Automatic Investment Plan).
DISTRIBUTION OPTIONS
Capital Gains and Dividends
Amount Reinvested Cash
[_] Monetta Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Small-Cap Equity Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Mid-Cap Equity Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Large-Cap Equity Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Balanced Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Intermediate Bond Fund $ [_] [_]
- --------------------------------------------------------------------------------
[_] Monetta Government Money Market Fund $ [_] [_]
- --------------------------------------------------------------------------------
Total Investment $ (If no distribution
============ option is checked,
dividends and capital
gains will be
reinvested.)
================================================================================
D. TELEPHONE OPTIONS Your signed Application must be received at least 15
business days prior to initial transaction. An unsigned voided check (for
Checking accounts) or a Savings account deposit slip is required with your
application
[_] Telephone Redemption. The proceeds will be mailed to the address in Section
C or deposited (via wire payment) to your bank account. Complete bank
account information below. A $12.00 fee will be charged to your account for
each wire transfer.
[_] Telephone Exchange. Permits the exchange of shares between identical
registered accounts.
------------------------------------------------
Name(s) on Bank Account
------------------------------------------------
Bank Name Account Number
------------------------------------------------
Bank Address
To ensure proper crediting of your bank account,
please attach a voided check or a deposit slip.
================================================================================
E. CHECKWRITING (Monetta Government Money Market Fund Only. Not available for
IRA or other retirement accounts.)
[_] Check this box if you would like to establish check redemption privileges
for the Monetta Government Money Market Fund and have 10 checks and 2
deposits forms printed. Each additional book of checks and deposit forms
will be $5.00. This amount will be deducted from your account. Check
redemption privileges are subject to the conditions on the reverse side.
---------------------------------------------
---------------------------------------------
---------------------------------------------
Account Number (For Bank Use Only)
----------------------------------------------------------------------------
Name on Monetta Government Money Market Fund Account (must be the same as
Account Registration-please print)
----------------------------------------------------------------------------
Authorized Signature(s) (For joint accounts, all owners must sign.)
For a corporate, trust, or other entity, or a joint account, how many
authorized signatures are required?
================================================================================
<PAGE>
F. BACKUP WITHHOLDING
[_] Check this box only if the IRS has notified you that you are subject to
backup withholding.
================================================================================
G. AUTOMATIC INVESTMENT PLAN (AIP) Your signed Application must be received
at least 15 business days prior to initial transaction. An unsigned voided check
from your checking account or a savings account deposit slip is required with
your application.
In many cases, the key to achieving long-term investment objectives is a
periodic and consistent investment program. The Funds' Automatic Investment Plan
will provide you with an easy and systematic approach to investing. Based on
your instructions, Firstar Trust Company, the transfer agent for Monetta Funds,
will automatically transfer money directly from your checking, bank money
market, NOW account or savings account named below on the day of each month or
funds will be transferred the next business day thereafter. If you have any
questions, call 1-800-MONETTA. Your Monetta account must be established with a
$250 minimum deposit before the plan goes into effect.
Please start my AIP as described in the Prospectus beginning: Month __________
Year ______. I hereby instruct Firstar Trust Company, transfer agent for Monetta
Funds, to automatically transfer $_________ (minimum $50) directly from my
checking, Now or savings account named below on the ______ day of each month or
the first business day thereafter into my _______________________ account. I
understand that I will be assessed a $20 fee if the automatic purchase cannot be
made due to insufficient funds, stop payment, or for any other reason.
Name(s) on Bank Account
--------------------------------------------------------
Bank Name Account Number
--------------------------- ---------------------------
Bank Address
-------------------------------------------------------------------
- ------------------------------------ -----------------------------------------
Signature of Bank Account Owner Signature of Joint Owner
. Termination must be in writing or by calling Firstar Trust Company. Allow 5
business days to become effective. Your participation in the Plan will
terminate automatically if you redeem all your Monetta Fund shares.
. IRA contributions apply as a current year purchase (purchases may not be used
for prior year contributions).
================================================================================
H. SIGNATURE & CERTIFICATION Your signed Application must be received at least
15 business days prior to initial transaction. An unsigned voided check from
your checking account or a savings account deposit slip is required with your
application.
I affirm that I have received a current prospectus of the Funds and agree
to be bound by its terms. I certify that I have full authority and legal
capacity to purchase shares of the Fund(s) and to establish and use any related
privileges, and agree that such privileges and their terms and conditions shall
be governed by Illinois law. If I have not provided a social security or other
tax identification number in Part 1 of the Application, by signing the
Application, I: (i) certify, under penalties of perjury, that I have not been
issued a number, but have applied (or soon will apply for one); and (ii)
understand that if I do not provide the Funds or their transfer agent with a
certified number within 60 days, they will be required to withhold 31% from all
dividend, capital gain, and redemption payments from my account(s) until I
provide them with a certified number.
I understand that the Telephone Exchange Privilege will apply to my account
unless I have specifically declined the privilege in Part 6, above. I understand
that by signing this application unless the Privilege is declined, I agree that
neither the Funds nor their transfer agent, their agents, officers, trustees or
employees will be liable for any loss, liability, cost or expense for acting
instructions given under the Privilege, placing the risk of any loss on me. See
"How to Redeem Shares--By Exchange" in the prospectus.
I agree that any of the Funds and their transfer agent may redeem shares
and retain the proceeds from any of my account(s) with any Fund(s) up to a total
of (a) any IRS penalties attributable to my failure to provide any of the Funds
or their transfer agent with correct and complete information requested by
either, and (b) any tax not withheld from distributions to me which should have
been withheld by them.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER
OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
BECAUSE I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATION IN THIS PARAGRAPH REQUIRED TO AVOID BACKUP
WITHHOLDING. (Note: you must check the box in Part 5 of this Application if the
IRS has notified you that you are subject to backup withholding due to your
failure to report such income.)
- ---------- ------------------------------ -----------------------------------
Date Signature* Signature of Co-Owner, if any
*If shares are to be registered in the name of (1) two persons jointly, both
persons must sign, (2) a custodian for a minor, the custodian must sign, (3) a
trust, the trustee(s) must sign, or (4) a corporation or other entity, an
officer must sign and print name and title on space provided below.
- --------------------------------------------------------------------------------
Print name and title of officer signing for a corporation or other entity
================================================================================
I. Dealer Information Please be sure to complete representative's first name and
middle initial
- -------------------------------- -------------------------------------------
Dealer Name Representative's Last Name First Name MI
DEALER HEAD OFFICE REPRESENTATIVE'S BRANCH OFFICE
- -------------------------------- -------------------------------------------
Address Address
- -------------------------------- -------------------------------------------
City, State Zip City, State Zip
- -------------------------------- -------------------------------------------
Telephone Number Telephone Number
-------------------------------------------
Rep's A.E. Number
================================================================================
CONDITION OF REDEMPTION OPTION
Checks may not be for less than $500 or such other minimum amounts as may
from time to time be established by the Monetta Government Money Market Fund
upon prior written notice to its shareholders. Maximum amount for withdrawal is
$50,000. Shares purchased by check, (including certified or cashier's check)
will not be redeemed by check-writing or any other method of redemption until
the transfer agent is reasonably satisfied that the check has been collected,
which could take up to 7 days from the purchase date.
By signing this card, I appoint the Firstar Bank Milwaukee, NA my agent to
present checks drawn on this account to the transfer agent, Firstar Trust
Company, as requests to redeem shares and I authorize the Monetta Government
Money Market Fund and Firstar Trust Company to honor such requests and redeem
shares in an amount equal to the amount of the check. I agree to be subject to
the rules pertaining to the check redemption privileges as amended from time to
time. The Monetta Government Money Market Fund or Firstar Trust Company may
reserve the right to modify or terminate this account and authorization at any
time.
B.N. 0
------------ ------------ ------------ -----------
Internal Use Only
<PAGE>
MONETTA FUND, INC. STATEMENT OF ADDITIONAL INFORMATION
MONETTA SMALL-CAP EQUITY FUND
MONETTA MID-CAP EQUITY FUND FEBRUARY 3, 1997
MONETTA LARGE-CAP EQUITY FUND
MONETTA BALANCED FUND MONETTA FUND, INC.
MONETTA INTERMEDIATE BOND FUND MONETTA TRUST
MONETTA GOVERNMENT MONEY MARKET FUND NO-LOAD FUNDS
1776-A SOUTH NAPERVILLE ROAD, SUITE 207
WHEATON, IL 60187
1-800-MONETTA
(1-800-666-3882)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Other Fund Information............................................B-1
Investment Objectives and Policies................................B-1
Risks and Investment Considerations...............................B-5
Investment Restrictions...........................................B-11
Performance Information...........................................B-14
Investment Adviser................................................B-19
Service and Distribution Plan.....................................B-20
Directors/Trustees and Officers...................................B-21
Purchasing and Redeeming Shares...................................B-25
More Information About Net Asset Value............................B-25
Tax Status........................................................B-27
Portfolio Transactions............................................B-27
Distributor.......................................................B-30
Custodian.........................................................B-30
Independent Auditors..............................................B-30
Appendix - Ratings................................................B-32
</TABLE>
This Statement of Additional Information is not a prospectus, but provides
additional information that should be read in conjunction with the Funds'
prospectus dated February 3, 1997 and any supplement thereto. The prospectus
and additional copies of the annual and semi-annual reports may be obtained
without charge by writing or telephoning the Funds at the address or telephone
number shown on the previous page.
<PAGE>
OTHER FUND INFORMATION
Monetta Fund, Inc. ("Monetta Fund") is an open-end diversified management
investment company organized under the laws of the State of Maryland. Monetta
Small-Cap Equity Fund ("Small-Cap Fund"), Monetta Mid-Cap Equity Fund ("Mid-Cap
Fund"), Monetta Large-Cap Equity Fund ("Large-Cap Fund"), Monetta Balanced Fund
("Balanced Fund"), Monetta Intermediate Bond Fund ("Intermediate Bond Fund") and
Monetta Government Money Market Fund ("Government Money Market Fund") are series
of Monetta Trust (the "Trust"), a Massachusetts business trust (the "Trust").
Monetta Fund and each of the Trust series are collectively referred to as the
"Funds."
The 1996 annual report of Monetta Fund and the Trust, a copy of which
accompanies this Statement of Additional Information, contains financial
statements, notes thereto, and the report of independent auditors, all of which
(but no other part of the annual report) are incorporated herein by reference.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Funds'
investment objectives and policies in the prospectus. In pursuing its
objective, each Fund will invest as described below and in the prospectus. Each
Fund's investment objective is a fundamental policy, which may not be changed
without the approval of a "majority of the outstanding voting securities" of
that Fund./1/
The Funds' investment objectives differ principally in the types of
securities selected for investment and the relative importance each Fund places
on growth potential, current income and preservation of capital as
considerations in selecting investments.
In pursuing the investment objectives of each of Small-Cap Fund, Mid-Cap
Fund, Large-Cap Fund and Balanced Fund, the Adviser pursues an active and
disciplined trading strategy. Those selling disciplines result in a higher than
average rate of portfolio turnover, as discussed in the prospectus. In
addition, it may be necessary for a Fund to sell short against the box rather
than sell outright a security it wants to sell, to control the timing of the
disposition of that security for federal income tax purposes. In a short sale
against the box, the Fund sells short a security it owns and enters into an
arrangement with the broker/dealer through which the short sale is executed to
receive income from the proceeds of the short sale for as long as the short
position remains open. The Fund incurs transaction costs in connection with
short sales that are
- -------------
/1/ A "majority of the outstanding voting securities" means the approval of the
lesser of (i) 67% of the Fund's shares present at a meeting if more than
50% of the shares outstanding are present or (ii) more than 50% of the
Fund's outstanding shares.
B-1
<PAGE>
likely to exceed the transaction costs that would be incurred in an outright
sale. See "Risks and Investment Considerations." The Funds have no present
intention to sell short securities comprising 5% or more of its total assets.
. Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund
Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund each seek
long-term capital growth by investing in common stocks believed to have above
average growth potential. The Funds differ from each other with respect to the
(i) market capitalizations of the companies in which they invest and (ii)
relative importance placed on investing for current income.
Each Fund's investment approach emphasizes a competitive return in rising
markets and preservation of capital in declining markets in an attempt to
generate long-term capital growth over a complete business cycle (approximately
3 to 5 years) when compared to the broader stock market indices. The Adviser's
emphasis is on common stocks with improving earnings per share growth, a history
of growth and sound management, and a strong balance sheet. The Adviser may
invest up to 20% of Monetta Fund's assets and 25% of Small-Cap Fund, Mid-Cap
Fund and Large-Cap Fund's assets in securities not meeting the above criteria
but believed by the Adviser to be undervalued based on a company's current
price-earnings ratio relative to its estimated earnings growth rate.
The securities in which each Fund invests will be listed on a national
securities exchange or traded on an over-the-counter market.
MONETTA FUND'S primary investment objective is to provide its shareholders
with capital appreciation by investing at least 70% of the Fund's assets in
equity securities believed to have growth potential. A secondary objective of
Monetta Fund is to provide its shareholders with income, in part by investing
the balance of the Fund's assets in dividend paying equity securities or in
long-term (greater than one year) debt securities. The Fund's investments in
long-term debt securities will consist of United States Treasury Notes and
Treasury Bonds of various maturities and investment grade securities rated at
least A or better by either Moody's Investor Services, Inc. ("Moody's") or
Standard and Poor's Corporation ("S&P").
Monetta Fund generally invests in smaller companies with aggregate market
capitalizations ranging from $50 million to $1 billion.
SMALL-CAP FUND typically invests in small-sized companies with market
capitalization of less than $1 billion ("small-cap companies"). Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of small-cap companies.
MID-CAP FUND typically invests in medium-sized companies with market
capitalizations of $1 billion to $5 billion ("mid-cap companies"). Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of mid-cap companies.
B-2
<PAGE>
LARGE-CAP FUND typically invests in large companies with market
capitalizations in excess of $5 billion ("large-cap companies"). Under normal
market conditions, the Fund invests at least 65% of its total assets in common
stocks of large-cap companies.
. BALANCED FUND
BALANCED FUND seeks a favorable total rate of return through capital
appreciation and current income consistent with preservation of capital, derived
from investing in a portfolio of equity and fixed income securities.
The investment approach for Balanced Fund combines the equity growth
strategy used for Monetta Fund, Small-Cap Fund, Mid-Cap Fund and Large-Cap Fund
and the income strategy employed by Intermediate Bond Fund, as discussed below.
The Fund may emphasize fixed income securities or equity securities or hold
equal amounts of both, depending upon the Adviser's analysis of market,
financial and economic conditions. Under normal circumstances, the Fund invests
at least 80% of its net assets in fixed income and equity securities. At least
25% of the Fund's assets invested in fixed income securities will consist of
corporate bonds and debentures rated A or better and securities issued or
guaranteed as to principal and interest by the U.S. Government and its agencies
and instrumentalities. The Fund does not presently intend to invest more than
10% of its assets in securities rated below investment grade or, if unrated,
determined by the Adviser to be of comparable credit quality.
. INTERMEDIATE BOND FUND
INTERMEDIATE BOND FUND seeks high current income, consistent with the
preservation of capital, by investing primarily in marketable debt securities.
Under normal market conditions, Intermediate Bond Fund invests at least 65%
of the value of its total assets in bonds and debentures and at least 70% of the
value of its total assets (taken at market value at the time of investment) in
the following:
1. Marketable straight-debt securities of domestic issuers, and of
foreign issuers payable in U.S. dollars, rated at time of purchase
within the three highest grades assigned by Moody's or S&P; 2.
Securities issued or guaranteed by the U.S. Government or by its
agencies or instrumentalities;
3. Commercial paper rated Prime-1 by Moody's or A-1 by S&P at time of
purchase, or, if unrated, issued or guaranteed by a corporation with
any outstanding debt rated A or better by Moody's or S&P;
4. Variable rate demand notes, if unrated, determined by the Adviser to
be of credit quality comparable to the commercial paper in which the
Fund may invest; or
B-3
<PAGE>
5. Bank obligations, including repurchase agreements,/2/ of banks having
total assets in excess of $500 million.
. GOVERNMENT MONEY MARKET FUND
GOVERNMENT MONEY MARKET FUND seeks maximum current income consistent with
safety of capital and maintenance of liquidity. The Fund invests in U.S.
Government Securities maturing in 13 months or less from the date of purchase.
U.S. Government Securities include:
1. Securities issued by the U.S. Treasury;
2. Securities issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government that are backed
by the full faith and credit guarantee of the U.S. Government;
3. Securities issued or guaranteed as to principal and interest by
agencies or instrumentalities of the U.S. Government that are not
backed by the full faith and credit guarantee of the U.S. Government;
and
4. Repurchase agreements for securities listed in (1), (2), and (3)
above, regardless of the maturities of such underlying securities.
U.S. Government Securities include: (i) bills, notes, bonds and other debt
securities, differing as to maturity and rates of interest, that are issued by
and are direct obligations of the U.S. Treasury; and (ii) other securities that
are issued or guaranteed as to principal and interest by agencies or
instrumentalities of the U.S. Government and that include, but are not limited
to, Federal Farm Credit Banks, Federal Home Loan Banks, Government National
Mortgage Association, Farmers Home Administration, Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association.
Because the Fund's investment policy permits it to invest in U.S.
Government Securities that are not backed by the full faith and credit of the
U.S. Treasury, investment in the Fund may involve risks that are different in
some respects from an investment in a fund that invests only in securities that
are backed by the full faith and credit of the U.S. Treasury. Such risks may
include a greater risk of loss of principal and interest in the securities in
the Fund's portfolio that are supported only by the issuing or guaranteeing
agency or instrumentality and, accordingly, the Fund must look principally or
solely to that entity for ultimate repayment.
- -------------
/2/ A repurchase agreement is a sale of securities to a Fund in which the
seller (a bank or broker-dealer believed by the Adviser to be financially
sound) agrees to repurchase the securities at a higher price, which
includes an amount representing interest on the purchase price, within a
specified time.
B-4
<PAGE>
The Fund will not enter into a repurchase agreement maturing in more than
seven days if as a result thereof more than 10% of its net assets (taken at
market value at the time of investment) would be invested in illiquid
securities, including repurchase agreements maturing in more than seven days:
however, there is otherwise no limitation on the percentage of the Fund's assets
that may be invested in repurchase agreements. The Fund will enter into
repurchase agreements only where (i) the underlying securities are U.S.
Government Securities and (ii) the seller agrees that the value of the
underlying U.S. Government Securities, including accrued interest (if
purchased), will at all times be equal to or exceed the value of the repurchase
agreement.
The Fund maintains a dollar-weighted average portfolio maturity appropriate
to its objective of maintaining a stable net asset value per share, and, in any
case, not in excess of 90 days.
It is the Fund's intention, in general, to hold securities to maturity.
However, the Fund may attempt, from time to time, to increase its yield by
trading to take advantage of variations in the markets for U.S. Government
Securities. In addition, redemptions of the Fund's shares could necessitate the
sale of portfolio securities, and such sales may occur at times when sales would
not otherwise be desirable. An increase in prevailing interest rates will
generally reduce the value of the Fund's portfolio investments, and a decline in
prevailing interest rates will generally increase the market value of the Fund's
portfolio investments.
RISKS AND INVESTMENT CONSIDERATIONS
Equity Securities. Common stocks represent an equity interest in a
corporation. Although common stocks have a history of long-term growth in value,
their prices tend to fluctuate in the short term. The securities of smaller
companies, as a class, have had periods of favorable results and other periods
of less favorable results compared to the securities of larger companies as a
class. Stocks of small to mid-size companies tend to be more volatile and less
liquid than stocks of large companies. Smaller companies, as compared to larger
companies, may have a shorter history of operations, may not have as great an
ability to raise additional capital, may have a less diversified product line
making them susceptible to market pressure, and may have a smaller public market
for their shares.
Debt Securities. In pursuing its investment objective, each Fund may invest
in debt securities of corporate and governmental issuers. The risks inherent in
debt securities depend primarily on the term and quality of the obligations in a
Fund's portfolio as well as on market conditions. A decline in the prevailing
levels of interest rates generally increases the value of debt securities, while
an increase in rates usually reduces the value of those securities. As a result,
interest rate fluctuations will affect a Fund's net asset value, but not the
income received by a Fund from its portfolio securities. (Because yields on debt
securities available for purchase by a Fund vary over time, no specific yield on
shares of a Fund can be assured.) In addition, if the bonds in a Fund's
portfolio contain call, prepayment or redemption provisions, during a period of
declining interest rates, these securities are likely to be redeemed, and a Fund
will
B-5
<PAGE>
probably be unable to replace them with securities having a comparable yield.
There can be no assurance that payments of interest and principal on portfolio
securities will be made when due.
Convertible Securities. Convertible securities include any corporate debt
security or preferred stock that may be converted into underlying shares of
common stock. The common stock underlying convertible securities may be issued
by a different entity than the issuer of the convertible securities. Convertible
securities entitle the holder to receive interest payments paid on corporate
debt securities or the dividend preference on a preferred stock until such time
as the convertible security matures or is redeemed or until the holder elects to
exercise the conversion privilege.
The value of convertible securities is influenced by both the yield of non-
convertible securities of comparable issuers and by the value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its investment value. The
investment value of the convertible security will typically fluctuate inversely
with changes in prevailing interest rates. However, at the same time, the
convertible security will be influenced by its 'conversion value,' which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock.
By investing in convertible securities, a Fund obtains the right to benefit
from the capital appreciation potential in the underlying stock upon exercise of
the conversion right, while earning higher current income than would be
available if the stock were purchased directly. In determining whether to
purchase a convertible security, the Adviser will consider substantially the
same criteria that would be considered in purchasing the underlying stock.
Convertible securities purchased by a Fund are frequently rated investment
grade. Convertible securities rated below investment grade (a) tend to be more
sensitive to interest rate and economic changes, (b) may be obligations of
issuers who are less creditworthy than issuers of higher quality convertible
securities, and (c) may be more thinly traded due to such securities being less
well known to investors than either common stock or conventional debt
securities.
Lending of Portfolio Securities. Subject to certain restrictions under
"Investment Restrictions" in this statement of additional information, Balanced
Fund and Intermediate Bond Fund may lend their portfolio securities to broker-
dealers and banks. Any such loan must be continuously secured by collateral in
cash or cash equivalents maintained on a current basis in an amount at least
equal to the market value of the securities loaned by the Fund. The Fund would
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned, and also would receive an additional return
that may be in the form of a fixed fee or a percentage of the collateral. The
Fund would have the right to call the loan and obtain the securities loaned at
any time on notice of not more than five business days. The Fund would not have
the right to vote the securities during the existence of the loan but would call
the loan to permit voting of the securities if, in the Adviser's judgment, a
material event requiring a shareholder vote would otherwise occur before the
loan was repaid. In the event of bankruptcy or other default of the borrower,
the Fund could experience both delays in liquidating the loan collateral or
recovering the loaned securities and losses, including (a) possible decline in
the
B-6
<PAGE>
value of the collateral or in the value of the securities loaned during the
period while the Fund seeks to enforce its rights thereto, (b) possible
subnormal levels of income and lack of access to income during this period, and
(c) expenses of enforcing its rights.
When-Issued and Delayed Delivery Securities. Balanced Fund, Intermediate
Bond Fund and Government Money Market Fund may purchase securities on a when-
issued or delayed-delivery basis. Although the payment and interest terms of
these securities are established at the time a Fund enters into the commitment,
the securities may be delivered and paid for a month or more after the date of
purchase, when their value may have changed. A Fund makes such commitments only
with the intention of actually acquiring the securities, but may sell the
securities before settlement date if the Adviser deems it advisable for
investment reasons. At the time a Fund enters into a binding obligation to
purchase securities on a when-issued or delayed-delivery basis, assets of the
Fund having a value at least as great as the purchase price of the securities to
be purchased will be segregated on the books of the Fund and held by the
custodian throughout the period of the obligation. The use of this investment
strategy may increase net asset value fluctuation.
Repurchase Agreements. A repurchase agreement is a sale of securities to a
Fund in which the seller (a bank or broker-dealer believed by the Adviser to be
financially sound) agrees to repurchase the securities at a higher price, which
includes an amount representing interest on the purchase price, within a
specified time. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund could experience both delays in liquidating the
underlying securities and losses, including: (a) possible decline in the value
of the collateral during the period while the Fund seeks to enforce its rights
thereto; (b) possible below normal levels of income and lack of access to income
during this period; and (c) expenses of enforcing its rights.
Options on Securities and Indexes. Balanced Fund and Intermediate Bond Fund
may purchase and sell put options and call options on securities and on indexes
and enter into interest rate and index futures contracts and options on futures
contracts.
An option on a security (or index) is a contract that gives the purchaser
(holder) of the option, in return for a premium, the right to buy from (call) or
sell to (put) the seller (writer) of the option the security underlying the
option (or the cash value of the index) at a specified exercise price at any
time during the term of the option (normally not exceeding nine months). The
writer of an option on an individual security has the obligation upon exercise
of the option to deliver the underlying security upon payment of the exercise
price or to pay the exercise price upon delivery of the underlying security or
foreign currency. Upon exercise, the writer of an option on an index is
obligated to pay the difference between the cash value of the index and the
exercise price multiplied by the specified multiplier for the index option. (An
index is designed to reflect specified facets of a particular financial or
securities market, a specific group of financial instruments or securities, or
certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
For example, in the case of a call option on a security, the option is "covered"
if a Fund owns the security
B-7
<PAGE>
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, assets having a value at least equal to that amount
are held in a segregated account by its custodian) upon conversion or exchange
of other securities held in its portfolio.
If an option written by a Fund expires, the Fund realizes a capital gain
equal to the premium received at the time the option was written. If an option
purchased by the Fund expires, the Fund realizes a capital loss equal to the
premium paid.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security or index, exercise price, and expiration). There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when a Fund desires.
A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.
A put or call option purchased by a Fund is an asset of the Fund, valued
initially at the premium paid for the option. The premium received for an option
written by a Fund is recorded as a deferred credit. The value of an option
purchased or written is marked-to-market daily and is valued at the closing
price on the exchange on which it is traded or, if not traded on an exchange or
no closing price is available, at the mean between the last bid and asked
prices.
There are several risks associated with transactions in options. For
example, there are significant differences between the securities markets, the
currency markets, and the options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use options involves
the exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or expected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option would expire and become worthless. If
a Fund were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, a Fund foregoes,
during the option's life, the opportunity to profit from increases in the market
value of the security covering the call option above the sum of the premium and
the exercise price of the call.
B-8
<PAGE>
If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option. If restrictions on exercise
were imposed, the Fund might be unable to exercise an option it has purchased.
Futures Contracts and Options on Futures Contracts. A Fund may use interest
rate futures contracts, index futures contracts, and options on such futures
contracts. An interest rate, index or option on a futures contract provides for
the future sale by one party and purchase by another party of a specified
quantity of a financial instrument or the cash value of an index/3/ at a
specified price and time. A public market exists in futures contracts covering a
number of indexes (including, but not limited to: the S&P 500 Index, the Value
Line Composite Index, and the New York Stock Exchange Composite Index) as well
as financial instruments (including, but not limited to: U.S. Treasury bonds,
U.S. Treasury notes, Eurodollar certificates of deposit, and foreign
currencies). Other index and financial instrument futures contracts are
available and it is expected that additional futures contracts will be developed
and traded.
A Fund may purchase and write call and put futures options. Futures options
possess many of the same characteristics as options on securities and indexes
(discussed above). A futures option gives the holder the right, in return for
the premium paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price at any time during the period of
the option. Upon exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. A Fund might, for example,
use futures contracts to hedge against or gain exposure to fluctuations in the
general level of stock prices, anticipated changes in interest rates or currency
fluctuations that might adversely affect either the value of the Fund's
securities or the price of the securities that the Fund intends to purchase.
Although other techniques could be used to reduce or increase a Fund's exposure
to stock price, interest rate and currency fluctuations, a Fund may be able to
achieve its exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.
A Fund will only enter into futures contracts and futures options that are
standardized and traded on an exchange, board of trade, or similar entity, or
quoted on an automated quotation system.
There are several risks associated with the use of futures contracts and
futures options. A purchase or sale of a futures contract may result in losses
in excess of the amount invested in the futures contract. In trying to increase
or reduce market exposure, there can be no guarantee that
- --------------------
/3/ A futures contract on an index is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
Although the value of a securities index is a function of the value of certain
specified securities, no physical delivery of those securities is made.
B-9
<PAGE>
there will be a correlation between price movements in the futures contract and
in the portfolio exposure sought. In addition, there are significant differences
between the securities and futures markets that could result in an imperfect
correlation between the markets, causing a given transaction not to achieve its
objectives. The degree of imperfection of correlation depends on circumstances
such as: variations in speculative market demand for futures, futures options
and the related securities, including technical influences in futures and
futures options trading and differences between the securities market and the
securities underlying the standard contracts available for trading. For example,
in the case of index futures contracts, the composition of the index, including
the issuers and the weighting of each issue, may differ from the composition of
a Fund's portfolio, and, in the case of interest rate futures contracts, the
interest rate levels, maturities, and creditworthiness of the issues underlying
the futures contract may differ from the financial instruments held in a Fund's
portfolio. A decision as to whether, when and how to use futures contracts
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected stock price or interest rate trends.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position. A Fund would
be exposed to possible loss on the position during the interval of inability to
close, and would continue to be required to meet margin requirements until the
position is closed. In addition, many of the contracts discussed above are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
Short Sales. Each Fund may make short sales "against the box." In a short
sale, a Fund sells a borrowed security and is required to return the identical
security to the lender. A short sale "against the box" involves the sale of a
security with respect to which the Fund already owns an equivalent security in
kind and amount. A short sale "against the box" enables the Fund to obtain the
current market price of a security which it desires to sell but is unavailable
for settlement or to control the timing of recognition of a gain or loss for tax
purposes.
Portfolio Turnover. Monetta Fund and Small-Cap Fund engage in an above-
average number of portfolio transactions. Their annual portfolio turnover rates
are likely to exceed 100%, and in some years may exceed 200% (excluding Treasury
Bills and other short-term
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<PAGE>
money market instruments which mature in less than one year). Mid-Cap Fund,
Large-Cap Fund and Balanced Fund may also engage in an above-average number of
portfolio transactions and an annual portfolio turnover rate exceeding 100%,
although that rate is not expected to exceed 200% annually under normal market
conditions. A high portfolio turnover rate increases aggregate brokerage
commission expenses and taxes which must be borne directly by a Fund and
ultimately by its shareholders. These portfolio turnover rates and the resulting
commission expenses and taxes are higher on a relative basis than those of
mutual funds which may not trade as frequently, including those with a policy of
capital appreciation. Substantial trading involves substantial risk and may be
speculative. Investors should not consider purchase of a Fund's shares as a
complete investment program.
INVESTMENT RESTRICTIONS
MONETTA FUND operates under the following investment restrictions:
1. The Fund will not issue any senior securities;
2. The Fund will not (i) sell securities short (unless the Fund owns an
equal amount of such securities or owns securities that are
convertible or exchangeable, without payment of further consideration,
into an equal amount of such securities), (ii) purchase securities on
margin, or (iii) write put and call options;
3. The Fund will not borrow money in excess of 5% of the value of its
total assets, or pledge, mortgage or hypothecate its assets taken at
market value to an extent greater than 10% of the Fund's total assets
taken at cost (and no borrowing may be undertaken except from banks
as a temporary measure for extraordinary or emergency purposes);
4. The Fund will not invest more than 5% of its total assets in the
securities of any one issuer (except that this limitation shall not
apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities);
5. The Fund will not purchase the securities of companies in a particular
industry if thereafter more than 25% of the Fund's total assets would
consist of securities issued by companies in that industry (except
that this limitation shall not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities);
6. The Fund will not acquire more than 10% of the outstanding voting
securities, or 10% of all of the securities, of any one issuer;
7. The Fund will not purchase the securities of any other investment
company;
8. The Fund will not purchase securities of any company with a record of
less than 3 years continuous operation (including that of predecessor
companies) if such
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<PAGE>
purchase would cause the Fund's investments in all such companies
taken at cost to exceed 5% of the value of the Fund's total assets;
9. The Fund will not purchase or retain the securities of any issuer if
the officers and directors of the Fund or its Investment Adviser own
individually more than 1/2 of 1% of the securities of such issuer or
together own more than 5% of the securities of such issuer;
10. The Fund will not act as securities underwriter, except to the extent
necessary in connection with the disposition of Fund shares, or invest
in real estate (although it may purchase shares of a real estate
investment trust),/4/ or invest in commodities, commodities contracts
or financial futures contracts;
11. The Fund will not invest in companies for the purpose of exercising
control or management of such company.
12. The Fund will not invest in securities commonly called "restricted
securities", or repurchase agreements which mature in more than seven
days, which it would be required to register under the Securities Act
of 1933 before the securities could be resold to the public;
13. The Fund will not purchase shares which are not readily marketable;
and
14. The Fund will not make loans other than in accordance with the Fund's
investment objectives, including for the purchase of a portion of an
issue of publicly distributed bonds, debentures, or other securities
whether or not the purchase was made upon the original issuance of the
securities.
Each of the restrictions noted above is "fundamental" which means that it
cannot be changed without the approval of a majority of the Fund's outstanding
voting securities.
THE TRUST AND EACH OF ITS FUNDS operate under the following investment
restrictions. A Fund may not:
1. [for all Funds except Government Money Market Fund] With respect to
75% of the value of a Fund's total assets, invest more than 5% of its
total assets (valued at the time of investment) in securities of a
single issuer, except that this restriction does not apply to U.S.
Government Securities;
[for Government Money Market Fund] Invest more than 5% of its total
assets (valued at the time of investment) in securities of a single
issuer, except that this
- --------------
/4/ Monetta Fund has not invested in real estate investment trusts and does not
currently intend to do so.
B-12
<PAGE>
restriction does not apply to (i) U.S. Government Securities or (ii)
repurchase agreements;
2. Acquire securities of any one issuer that at the time of investment
represent more than 10% of the outstanding voting securities of the
issuer;
3. Invest more than 25% of its total assets (valued at the time of
investment) in securities of companies in any one industry, except
that this restriction does not apply to U.S. Government Securities or
[for Government Money Market Fund only] to repurchase agreements;
4. Make loans, but this restriction shall not prevent the Fund from:
[for all Funds except Government Money Market Fund] (a) buying bonds,
debentures, or other debt obligations that are publicly distributed or
a type privately placed with financial institutions, (b) investing in
repurchase agreements, or (c) lending portfolio securities, provided
that it may not lend securities if, as a result, the aggregate value
of all securities loaned would exceed 33% of its total assets (taken
at market value at the time of such loan);/5/ [for Government Money
Market Fund] (a) purchasing U.S. Government Securities or (b) entering
into repurchase agreements;
5. Borrow money except (a) from banks for temporary or emergency purposes
in amounts not exceeding 10% of the value of the Fund's total assets
at the time of borrowing, provided that the Fund will not purchase
additional securities when its borrowings exceed 5% of total assets
and (b) [for Balanced Fund and Intermediate Bond Fund only] in
connection with transactions in options, futures and options on
futures;
6. Underwrite the distribution of securities of other issuers except
insofar as it may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933 on disposition of securities subject to legal
or contractual restrictions on resale;/6/
7. Purchase and sell real estate or interests in real estate, although it
may invest in marketable securities of enterprises that invest in real
estate or interests in real estate;
- ------------
/5/ Although they have the power to do so, the Balanced Fund and Intermediate
Bond Fund do not intend to lend portfolio securities.
/6/ The Funds do not currently intend to invest in restricted securities.
B-13
<PAGE>
8. Purchase and sell commodities or commodity contracts, except [for
Balanced Fund and Intermediate Bond Fund only] that it may enter into
futures and options on futures;
9. Make margin purchases of securities, except for use of such short-term
credits as are needed for clearance of transactions and [for Balanced
Fund and Intermediate Bond Fund only] except in connection with
transactions in options, futures and options on futures;
10. Sell securities short or maintain a short position, except securities
that the Fund owns or has the right to acquire without payment of
additional consideration; and
11. Issue any senior security except to the extent permitted under the
Investment Company Act of 1940.
Restrictions 1 through 11 above are "fundamental." In addition, Small-Cap
Fund, Mid-Cap Fund, Large-Cap Fund, Balanced Fund, Intermediate Bond Fund and
Government Money Market Fund are subject to a number of restrictions that may be
changed by the Board of Trustees of the Trust without shareholder approval.
Under those non-fundamental restrictions, a Fund will not:
a. Invest in companies for the purpose of management or the exercise of
control;
b. Invest more than 5% of its total assets (valued at time of investment)
in securities of issuers with less than three years' operation
(including predecessors);
c. Acquire securities of other registered investment companies except in
compliance with the Investment Company Act of 1940 and applicable
state law;
d. Invest more than 10% of its net assets (valued at the time of each
investment) in illiquid securities, including repurchase agreements
maturing in more than seven days.
PERFORMANCE INFORMATION
Yield. Balanced Fund and Intermediate Bond Fund may quote yield figures
from time to time. "Yield" is computed by dividing the net investment income
per share earned during a 30-day period (using the average number of shares
entitled to receive dividends) by the net asset value per share on the last day
of the period. The Yield formula provides for semiannual compounding which
assumes that net investment income is earned and reinvested at a constant rate
and annualized at the end of a six-month period.
B-14
<PAGE>
The Yield formula is as follows:
YIELD = 2[((a-b/cd) + 1)/6/ - 1]
Where: a = dividends and interest earned during the period. (For
this purpose, the Fund will recalculate the yield to
maturity based on market value of each portfolio
security on each business day on which net asset value
is calculated.)
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the net asset value of the Fund.
Intermediate Bond Fund's yield for the 30 days ended December 31, 1996 was
5.65%.
Current or Effective Yield. Government Money Market Fund may quote a
"Current Yield" or "Effective Yield" or both from time to time. The Current
Yield is an annualized yield based on the actual total return for a seven-day
period. The Effective Yield is an annualized yield based on a daily compounding
of the Current Yield. These yields are each computed by first determining the
"Net Change in Account Value" for a hypothetical account having a share balance
of one share at the beginning of a seven-day period ("Beginning Account Value"),
excluding capital changes. The Net Change in Account Value will always equal
the total dividends declared with respect to the account, assuming a constant
net asset value of $1.00.
The Yields are then computed as follows:
Current Yield = Net Change in Account Value x 365
--------------------------- ---
Beginning Account Value 7
Effective Yield = [1 + Net Change in Account Value]/365/7/- 1
---------------------------------
Beginning Account Value
In addition to fluctuations reflecting changes in net income of the Fund
resulting from changes in income earned on its portfolio securities and in its
expenses, the Fund's yield also would be affected if the Fund were to restrict
or supplement its dividends in order to maintain its net asset value at $1.00.
(See "Net Asset Value" in the Prospectus and " Additional Information on the
Determination of Net Asset Value" herein.) Portfolio changes resulting from net
purchases or net redemptions of Fund shares may affect yield. Accordingly, the
Fund's yield may vary from day to day and the yield stated for a particular past
period is not a representation
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<PAGE>
as to its future yield. The Fund's yield is not assured, and its principal is
not insured; however, the Fund will attempt to maintain its net asset value per
share at $1.00.
For the seven days ended December 31, 1996 the Government Money Market
Fund's current 7 day yield was 5.12% and the effective yield was 5.20%.
Total Return. From time to time, each Fund may give information about its
performance by quoting figures in advertisements and sales literature. "Average
Annual Total Return" is the average annual compounded rate of change in value
represented by the total return percentage for the period.
Average Annual Total Return is computed as follows:
ERV = P(1+T)/n/
Where: P = the amount of an assumed initial investment in Fund shares
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
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<PAGE>
The following table shows each Fund's Average Annual Total Return for the
following periods: the year ended December 31, 1996; for Monetta Fund, the five-
year period ended December 31, 1996 and the ten-year period ended December 31,
1996; and for all other Funds, the commencement of operations through December
31, 1996.
<TABLE>
<CAPTION>
Commencement of
operations
Year ended Five years ended Ten years ended through
December 31, 1996 December 31, 1996 December 31, 1996 December 31, 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Monetta Fund 1.6% 5.3% 12.4% N/A
Mid-Cap Fund 24.2% N/A N/A 22.0%
Large-CapFund 28.2% N/A N/A 25.6%
Balanced Fund 25.9% N/A N/A 24.3%
Intermediate Bond Fund 6.5% N/A N/A 7.3%
Government Money
Market Fund 5.1% N/A N/A 4.5%
</TABLE>
The commencement of operations for each of the Funds is as follows: Monetta
Fund, May 6, 1986; Mid-Cap Fund, March 1, 1993; Large-Cap Fund, September 1,
1995; Balanced Fund, September 1, 1995; Intermediate Bond Fund, March 5, 1993;
and Government Money Market Fund March 1, 1993.
General. Investment performance figures assume reinvestment of all
dividends and distributions, and do not take into account any Federal, state or
local income taxes which shareholders must pay on a current basis. They are not
necessarily indicative of future results.
In advertising and sales literature, a Fund may compare its yield and
performance with that of other mutual funds, indexes or averages of other mutual
funds, indexes of related financial
B-17
<PAGE>
assets or data and other competing investment and deposit products available
from or through other financial institutions. The composition of these indexes
or averages differs from that of the Funds. Comparison of a Fund to an
alternative investment should be made with consideration of differences in
features and expected performance.
All of the indexes and averages used will be obtained from the indicated
sources or reporting services, which the Funds believe to be generally accurate.
A Fund may also note its mention in newspapers, magazines or other media from
time to time. However, the Funds assume no responsibility for the accuracy of
such data. Newspapers and magazines which might mention a Fund include, but are
not limited to, the following:
Business Week Los Angeles Times
Changing Times Money
Chicago Tribune Mutual Fund Letter
Chicago Sun-Times Morningstar
Crain's Chicago Business Newsweek
Consumer Reports The New York Times
Consumer Digest Pensions and Investment
Financial World Personal Investor
Forbes Stanger Reports
Fortune Time
Investor's Daily USA Today
Kiplinger's U.S. News and World Report
L/G No-Load Fund Analyst The Wall Street Journal
When a newspaper, magazine or other publication mentions the Fund, such
mention may include: (i) listings of some or all of the Fund's holdings, (ii)
descriptions of characteristics of some or all of the securities held by the
Fund, including price-earnings ratios, earnings, growth rates and other
statistical information, and comparisons of that information to similar
statistics for the securities comprising any of the indexes or averages listed
above; and (iii) descriptions of the Fund's or a portfolio manager's economic
and market outlook.
A Fund's performance is a result of conditions in the securities markets,
portfolio management, and operating expenses. Although information such as that
described above may be useful in reviewing a Fund's performance and in providing
some basis for comparison with other investment alternatives, it is not
necessarily indicative of future performance and should not be used for
comparison with other investments using different reinvestment assumptions or
time periods.
The Funds may also compare their performances to various stock indices
(groups of unmanaged common stocks), including Standard & Poor's 500 Stock
Index, the Value Line Composite Average, the Russell Indixes, the Nasdaq
Composite Index and the Dow Jones Industrial Average, or to the Consumer Price
Index or groups of comparable mutual funds, including rankings determined by
Lipper Analytical Services, Inc., an independent service that
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<PAGE>
monitors the performance of over 1,000 mutual funds, Morningstar, Inc., or that
of another service.
The Funds may also cite its ranking, recognition, or other mention by
Morningstar. Morningstar's ranking system is based on risk-adjusted total return
performance and is expressed in a star-rated format. The risk-adjusted number is
computed by subtracting a fund's risk score (which is a function of the fund's
monthly return less the 3-month Treasury bill return) from the fund's load-
adjusted total return score. This numerical score is then translated into
ranking categories, with the top 10% labeled five star, the next 22.5% labeled
four star, the next 35% labeled three star, and next 22.5% labeled two star, and
the bottom 10% one star. A high ranking reflects either above-average
performance or below average risk or both.
INVESTMENT ADVISER
The investment adviser for Monetta Fund and the Trust is Monetta Financial
Services, Inc. ("MFSI" or the "Adviser"). The Adviser furnishes continuing
investment supervision to the Funds and is responsible for overall management of
the Trust's business affairs pursuant to investment advisory agreements dated
November 10, 1988 and February 1, 1997, respectively. The Adviser furnishes
office space, equipment and personnel to the Funds and assumes all of the Funds'
ordinary operating expenses except the charges of the custodian, transfer agent
and fees paid to non-interested trustees.
Please refer to the description of the Adviser, investment agreement and
advisory fees under "Management of the Funds" in the Prospectus, which is
incorporated herein by reference. For the years ended December 31, 1996, 1995
and 1994, the Monetta Fund paid the following aggregate advisory fees to the
Adviser: $2,946,088, $3,648,564 and $4,403,137. For the years ended December 31,
1996, 1995 and 1994 the following Funds paid aggregate advisory fees to the
Adviser: Mid-Cap Fund - $162,014, $134,677, and $112,433; Intermediate Bond
Fund - $19,829, $19,834 and $17,439; and Government Money Market Fund -
$20,637, $12,563 and $7,857. For the years ended December 31, 1996 and for
the period ended December 31, 1995, the following Funds paid aggregate advisory
fees to the Adviser: Large-Cap Fund $14,030 and $2,844; Balanced Fund -
$5,316 and $570.
Investment advisory fees waived for the years ended December 31, 1996, 1995
and 1994 for the Intermediate Bond Fund were $9,915, $17,132 and $17,439,
respectively, on total fees of $19,829, $19,834 and $17,439. Investment advisory
fees waived for the years ended December 31, 1996, 1995 and 1994 for the
Government Money Market Fund were $20,637, $12,563 and $7,857, respectively, on
total fees of $20,637, $12,563 and $7,857. Custodian and Transfer Agent charges
of $800 and $6,111 for the period ended December 31, 1996 and the year ended
December 31, 1995 for the Government Money Market Fund were absorbed by the
Adviser.
Robert S. Bacarella, president and a director of the Monetta Fund and
president and a trustee of the Trust, owns 71% of the outstanding voting
securities of the Adviser. Paul W. Henry and John W. Bakos, directors of Monetta
Fund, each own 2% of the outstanding voting
B-19
<PAGE>
securities of the Adviser. The Adviser's address is 1776-A South Naperville
Road, Wheaton, Illinois 60187.
The Adviser owns a 99% interest in Monetta Investment Services, L.L.C.
("MIS"), a registered broker-dealer. Mr. Bacarella, due to his ownership
interest in the Adviser, has a beneficial ownership interest in MIS of 71%. The
investment advisory agreements authorize MIS to act as broker for a Fund in
connection with the purchase or sale of securities by or to the Fund in
conformity with SEC rules. See "Portfolio Transactions."
SERVICE AND DISTRIBUTION PLAN
Pursuant to a Service and Distribution Plan (the "Plan") adopted pursuant
to Rule 12b-1 under the 1940 Act effective February 1, 1997, each series of the
Trust may compensate service organizations for their accounting, shareholder
services and distribution services in amounts up to .10 of 1% for Government
Money Market Fund and .25 of 1% for each other series of the Trust, per annum of
the values of accounts of shareholders purchasing through such organizations.
Servicing activities provided by service organizations to their customers
investing in the Funds may include, among other things, one or more of the
following: establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; answering customer inquiries
regarding the Fund; assisting customers in changing dividend options; account
designations and addresses; performing sub-accounting; investing customer cash
account balances automatically in Fund shares; providing periodic statements
showing a customer's account balance and integrating such statements with those
of other transactions and balances in the customer's other accounts serviced by
the service agent; arranging for bank wires; and distribution and such other
services as the Fund may request, to the extent the service agent is permitted
by applicable statute, rule or regulation.
In addition, each Fund pays other costs and expenses in connection with
advertising and marketing shares of that Fund, including but not limited to:
advertising, direct mail, and promotional expenses; compensation to a
distributor and its employees; fulfillment expenses, including the costs of
printing and distributing prospectuses, statements of additional information,
and reports for other than existing shareholders; the costs of preparing,
printing and distributing sales literature and advertising materials; and the
costs of registration or notification under state securities laws.
The maximum aggregate amount a Fund may pay for service fees and other
distribution-related expenses is .10 of 1% of the average net assets of
Government Money Market Fund and .25 of 1% of the average net assets of each
other Fund of the Trust. Additional service fees and additional amounts for
other distribution-related expenses may be paid by the Adviser from its own
resources.
B-20
<PAGE>
The Plan will continue in effect only so long as it is approved at least
annually, and any material amendment or agreement related thereto is approved,
by the Trust's board of trustees, including those trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan
("Qualified Trustees"), acting in person at a meeting called for that purpose,
unless terminated by vote of a majority of the Qualified Trustees, or by vote of
a majority of the outstanding voting securities of a Fund.
It is the opinion of the board of trustees that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions and to encourage sales of
shares to permit the Funds to reach an economically viable size. Redemptions of
mutual fund shares are inevitable. If redemptions are not offset by
subscriptions, a fund shrinks in size and its ability to maintain quality
shareholder services declines. Eventually, redemptions could cause a fund to
become uneconomic. Furthermore, an extended period of significant net
redemptions may be detrimental to orderly management of the portfolio. The
offsetting of redemptions through sales efforts benefits shareholders by
maintaining the viability of a fund. Additional benefits may accrue from net
sales of shares relative to portfolio management and increased shareholder
servicing capability. Increased assets enable a fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. In addition, increased assets enable the establishment and
maintenance of a better shareholder servicing staff which can respond more
effectively and promptly to shareholder inquiries and needs.
DIRECTORS/TRUSTEES AND OFFICERS
The ages at December 31, 1996 and principal business activities during the
past five years of the directors/trustees and officers of Monetta Fund and the
Trust are:
<TABLE>
<CAPTION>
POSITION(S) POSITION(S)
HELD HELD PRINCIPAL OCCUPATIONS
Name AGE WITH FUND WITH TRUST AND OTHER AFFILIATIONS
____ --- ----------- ----------- ------------------------------------
<S> <C> <S> <S> <S>
Robert S. Bacarella+* 47 Director and Trustee and Chairman, Chief Executive Officer
President President and Director, MFSI, since October 1,
1996; President and Director, MFSI,
1984 to September 1996; Secretary,
Treasurer and Director, Monetta
Investment Services, L.L.C., since 1987;
President and Director, Monetta
Fund, Inc., (registered investment
company) since 1985; President and
Director, Monetta Trust (registered
investment company) since 1993.
John W. Bakos+* 49 Director Trustee Division Placement Manager, Sears,
Roebuck & Co., since 1969; Director
and Vice President, MFSI, 1984-1991.
</TABLE>
B-21
<PAGE>
<TABLE>
Position(s) Position(s)
Held Held Principal Occupations
Name Age With Fund With Trust and other Affiliations
- ---- --- ----------- ----------- ----------------------
<S> <C> <C> <C> <C>
John L. Guy Jr. 44 n/a Trustee President, Heller First Capital
Corporation, since May 1995; Senior
Vice President and Treasurer, Heller
Financial Inc., (August 1992-May
1995); Senior Vice President,
Director Internal Audit (November
1989-August 1992).
Paul W. Henry+ 54 Director n/a Manager, Financial Systems,
Signature Group (Telemarketing)
since August 1994; Manager,
Computer Systems, Bann
International, (Computer Software)
December 1993 to June 1994;
Manager, Special Projects, Waste
Management, Inc. (waste collection
of hazardous and chemical waste
materials), 1987 to December 1993;
Director, MFSI, 1984 - 1996, and
Vice President, 1984-1991.
Mark F. Ogan 54 Director Trustee President, DuPage Capital Management,
Ltd., April 1995 to present;
President and Secretary, Salida
Corp. (formerly Pollenex Corp.),
February 1993 to April 1995; Vice President,
Sunbeam-Oster Corp. May 1992 to
December 1992; President,
Sunbeam-Oster Household Products
Group, May 1991 to May 1992;
Vice President, Business
Development and Corporate
Strategy, Sunbeam-Oster Co.,
October 1990 - May 1991.
Richard D. Russo 44 Director Trustee Attorney at law-Richard Russo & Associates;
President of Associated Legal Services Chartered,
a Professional Corporation 1985 to Present.
William M. Valiant* 71 n/a Trustee Retired; Director, MFSI, since February, 91;
Director, MIS, since 1988; Vice
President and Treasurer, Borg-
Warner Corporation, until July 1990.
Albert A. Pisterzi* 56 Vice Trustee President, MFSI, since October 1, 1996;
President and Vice Director, MFSI, since January 1995; Vice
President President, MFSI, January 1995 to September
1996; prior thereto, Director of
Marketing, Harris Associates L.P.,
September 1988 to January 1995.
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Position(s) Position(s)
Held Held Principal Occupations
Name Age with Fund with Trust and other Affiliations
- ---- --- --------- ---------- ----------------------
<S> <C> <C> <C> <C>
John P. Rozinsky 58 Vice Vice Vice President, MFSI, since May
President President 1991; Director, MFSI, May 1991
to February 1994; Secretary, MFSI,
1991-1996; Treasurer, MFSI,
1991-1994; Vice President,
Monetta Trust, since 1993; Trustee,
Monetta Trust, 1993 to November 1996;
Vice President and Director, MIS, since
January 1990; Vice President, Monetta Fund,
Inc., since 1985; Director, Monetta Fund,
Inc., 1985 to November 1996.
Maria Cesario DeNicolo 47 Treasurer Secretary Secretary, MFSI, since October, 1996;
and Assistant and Treasurer, MFSI, since February 1994;
Secretary Treasurer Controller, MFSI, since June 1992;
Secretary, Monetta Trust, since 1993;
Treasurer, Monetta Trust, since 1994;
Treasurer, Monetta Fund, Since 1993;
Chief Financial Officer, MIS, since 1995;
Sole proprietor, Cesario DeNicolo C.P.A.
and Associates, May 1990 to June 1993.
Valerie A. LeFevre 61 Secretary Assistant Secretary, Monetta Fund, since January
Treasurer 1986; Secretary and Treasurer; MFSI,
1987-1992.
</TABLE>
+ Messrs. Bacarella, Bakos, and Henry are "interested persons" of Monetta
Fund, as defined in the Investment Company Act of 1940 (the "1940 Act"), for the
following reasons: Mr. Bacarella - as an officer of Monetta Fund and as a
shareholder, officer and director of MFSI; and Messrs. Bakos and Henry - as
shareholders of MFSI.
* Messrs. Bacarella, Bakos, Pisterzi and Valiant are "interested persons"
of the Trust, as defined in the 1940 Act, as officers of the Trust and as
officers and directors (and, in the case of Messrs. Bacarella, Bakos and
Pisterzi, as shareholders) of MFSI.
The address of Messrs. Bacarella, Bakos, Guy, Henry, Ogan, Pisterzi,
Rozinsky, Russo and Valiant and of Ms. DeNicolo and Ms. LeFevre is 1776-A South
Naperville Road, Suite 207, Wheaton, Illinois 60187.
At December 31, 1996, the Adviser owned beneficially less than 1% and the
directors and officers of Monetta Fund as a group owned beneficially less than
1% of the issued and outstanding shares of common stock of Monetta Fund. No
person was known by Monetta Fund to own beneficially 5% or more of the
outstanding shares of the Fund at that date.
B-23
<PAGE>
Shares of the Trust owned by the Adviser, trustees and officers at December
31, 1996 were as follows:
<TABLE>
<CAPTION>
Adviser Trustees & Officers(1)
--------------- -------------------
% of % of
Shares Fund Shares Fund
--------- ---- ------ ----
<S> <C> <C> <C> <C>
Mid-Cap Fund 7,368 0.6% 52,375 4.5%
Large-Cap Fund 11,048 5.9% 14,754 7.9%
Balanced Fund 55,061 29.8% 60,007 32.5%
Intermediate Bond Fund 74,014 27.3% 77,517 28.6%
Government Money Market Fund 515,735 8.3% 801,367 12.9%
</TABLE>
Note 1 The share ownership for the trustees and officers as a group includes
the following shares owned by the Adviser over which Mr. Bacarella
exercises voting control: 7,368 shares of Mid-Cap Fund; 11,048 shares
of Large-Cap Fund; 55,061 shares of Balanced Fund; 74,014 shares of
Intermediate Bond Fund; and 515,735 shares of Government Money
Market Fund. The share ownership for the trustees and officers as a
group include the following shares held in a 401(k) Plan for the
employees of MFSI for which Mr. Bacarella is the Trustee of the plan
and has voting control: 21,627 shares of Mid-Cap Fund; 1,511 shares of
Large-Cap Fund; 1,243 shares of Balanced Fund; 3,503 shares of
Intermediate Bond Fund; and 23,195 shares of Government Money Market
Fund.
Ownership of a significant percentage of the outstanding shares of the
Balanced Fund and the Intermediate Bond Fund reduces the number of other shares
that must be voted in accordance with the Adviser's vote to approve or
disapprove any proposal requiring the approval of the shareholders of the Trust
or of the Funds.
Mr. Bacarella and Mr. Russo serve as members of the Executive Committee of
Monetta Fund and Monetta Trust. The Executive Committees, which meet between
regular meetings of the respective boards, are authorized to exercise all of the
powers of the boards.
The following table sets forth compensation paid by Monetta Fund and the
Trust to their respective directors and trustees during 1996.
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION COMPENSATION
RECEIVED FROM RECEIVED FROM RECEIVED FROM
THE FUND THE TRUST FUND COMPLEX (2)
NAME OF PERSON ------------- ------------- -------------
- --------------
<S> <C> <C> <C>
Robert S. Bacarella(1) $ 0 $ 0 $ 0
John W. Bakos(1) 0 0 0
John L. Guy, Jr. 0 1,350 1,350
Paul W. Henry(1) 0 0 0
Mark F. Ogan 2,000 1,450 3,450
Richard Russo 500 1,100 1,600
William Valiant(1) 0 0 0
</TABLE>
(1) Directors and/or trustees who are interested persons, including all
employees of MFSI, receive no compensation from Monetta Fund or the Trust.
(2) The Monetta Fund Complex consists of Monetta Fund and the series of the
Trust. Neither Monetta Fund nor the Trust offers any retirement or deferred
compensation plan to Board Members.
B-24
<PAGE>
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Funds' Prospectus under the
headings "How to Purchase Shares," "How to Redeem Shares" and "Determination of
Net Asset Value." All of that information is incorporated herein by reference.
The Prospectus discloses that you may purchase (or redeem) shares through
investment dealers, banks or other institutions.
The Funds reserves the right to suspend or postpone redemptions of shares
of any Fund during any period when: (a) trading on the New York Stock Exchange
("NYSE") is restricted, as determined by the Securities and Exchange Commission,
or the NYSE is closed for other than customary weekend and holiday closings; (b)
the Securities and Exchange Commission has by order permitted such suspension;
or (c) an emergency, as determined by the Securities and Exchange Commission,
exists, making disposal of portfolio securities or valuation of net assets of
such Fund not reasonably practicable.
Monetta Fund and the Trust have each elected to be governed by Rule 18f-1
under the 1940 Act, pursuant to which it is obligated to redeem shares of each
Fund solely in cash up to the lesser of $250,000 or 1% of the net asset value of
that Fund during any 90-day period for any one shareholder. Redemptions in
excess of the above amounts will normally be paid in cash, but may be paid
wholly or partly by a distribution of securities in kind.
More Information About Net Asset Value
Each Fund's net asset value is determined on days on which the New York
Stock Exchange ("NYSE") is open for trading. The NYSE is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in February, Good
Friday, the last Monday in May, Independence Day, Labor Day, Thanksgiving and
Christmas. If one of these holidays falls on a Saturday or Sunday, the Exchange
will be closed on the preceding Friday or the following Monday, respectively.
For purposes of calculating the net asset value per share, the assets of
the Fund are valued as follows:
Valuation. Securities for which market quotations are readily available at
the time of valuation are valued on that basis. Each security traded on a
national stock exchange or on the Nasdaq National Market is valued at its last
sale price on that day or, if there are no sales that day, at the mean of the
latest bid and asked quotations. All other over-the-counter securities for which
reliable quotations are available are valued at the mean of the latest bid and
asked quotations. Long-term straight-debt securities for which market quotations
are not readily available are valued at a fair value based on valuations
provided by pricing services approved by the Board, which may employ electronic
data processing techniques, including a matrix system, to determine valuations.
Short-term debt securities for which market quotations are not readily available
are valued by use of a matrix prepared by the Adviser based on quotations for
comparable securities. Other assets and securities held by a Fund for which
these valuation methods do not produce a fair value are valued by a method that
the Board believes will determine a fair value.
B-25
<PAGE>
Valuation of Government Money Market Fund. Government Money Market Fund
values its portfolio by the "amortized cost method" by which it attempts to
maintain its net asset value at $1.00 per share. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Although this method
provides certainty in valuation, it may result in periods during which value as
determined by amortized cost is higher or lower than the price the Fund would
receive if it sold the instrument. Other assets are valued at a fair value
determined in good faith by the board of trustees.
In connection with the Government Money Market Fund's use of amortized cost
and the maintenance of the Fund's per share net asset value of $1.00, the Trust
has agreed (i) to seek to maintain a dollar-weighted average portfolio maturity
appropriate to the Fund's objective of maintaining relative stability of
principal and not in excess of 90 days; (ii) not to purchase a portfolio
instrument with a remaining maturity of greater than thirteen months; and (iii)
to limit its purchase of portfolio instruments to those instruments that are
denominated in U.S. dollars which the Board of Trustees determines present
minimal credit risks and that are of eligible quality as determined by any major
rating service as defined under SEC Rule 2a-7 or, in the case of any instrument
that is not rated, of comparable quality as determined by the Board.
The Trust has established procedures reasonably designed to stabilize the
Fund's price per share as computed for the purpose of sales and redemptions at
$1.00. Those procedures include review of the Fund's portfolio holdings by the
Board of Trustees, at such intervals as it deems appropriate to determine
whether the Fund's net asset values calculated by using available market
quotations or market equivalents deviate from $1.00 per share based on amortized
cost. Calculations are made to compare the value of its investments valued at
amortized cost with market value. Market values are obtained by using actual
quotations provided by market makers, estimates of market value, values from
yield data obtained from the Adviser's matrix, or values obtained from an
independent pricing service. Any such service might value the Fund's investments
based on methods which include consideration of: yields or prices of securities
of comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The service may also employ electronic
data processing techniques, a matrix system or both to determine valuations.
In connection with the Fund's use of the amortized cost method of portfolio
valuation to maintain its net asset value at $1.00 per share, the Fund might
incur or anticipate an unusual expense, loss, depreciation, gain or appreciation
that would affect its net asset value per share or income for a particular
period. The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share based
on amortized cost will be examined by the Board of Trustees as it deems
appropriate. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, should be initiated. In the event the
Board of Trustees determines that a deviation exists that may result in material
dilution or other unfair results to investors or existing shareholders, it will
take such action as it considers appropriate to eliminate or reduce to the
extent reasonably practicable such dilution or unfair results. Actions which the
Board might take include: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average
B-26
<PAGE>
portfolio maturity; increasing, reducing or suspending dividends or
distributions from capital or capital gains; or redeeming shares in kind. The
board might also establish a net asset value per share by using market values,
as a result of which the net asset value might deviate from $1.00 per share.
Tax Status
Each Fund intends to continue to qualify to be taxed as a regulated
investment company under the Internal Revenue Code of 1986, as amended, so as to
be relieved of federal income tax on its capital gains and net investment income
currently distributed to shareholders.
Portfolio Transactions
The Adviser has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Adviser and to select the markets in
which such transactions are to be executed. The primary responsibility regarding
portfolio transactions is to seek the best combination of net price and
execution for the Funds. When executing transactions for the Funds, the Adviser
will consider all factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission.
Transactions of the Funds in the over-the-counter market are executed with
primary market makers acting as principal except where it is believed that
better prices and execution may be obtained otherwise.
In selecting brokers or dealers to execute particular transactions and in
evaluating the best net price and execution available, the adviser is authorized
to consider "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934), statistical quotations,
specifically the quotations necessary to determine the Funds' asset values, and
other information provided to the Funds or the Adviser. The Adviser is also
authorized to cause the Funds to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Adviser must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Adviser exercises investment discretion. It is possible that certain of the
services received by the Adviser attributable to a particular transaction will
benefit one or more other accounts for which investment discretion is exercised
by the Adviser.
In valuing research services, the Adviser makes a judgment of the
usefulness of research and other information provided by a broker to the Adviser
in managing the Funds' investment portfolios. In some cases, the information,
e.g., data or recommendations concerning particular securities, relates to the
specific transaction placed with the broker, but for the greater part, the
research consists of a wide variety of information concerning companies,
industries, investment strategy and economic, financial and political conditions
and prospects, useful to the Adviser in advising the Funds.
B-27
<PAGE>
The Adviser is the principal source of information and advice to the Funds
and is responsible for making and initiating the execution of investment
decisions by the Funds. However, the respective boards recognize that it is
important for the Adviser, in performing its responsibilities to the Funds, to
continue to receive and evaluate the broad spectrum of economic and financial
information that many securities brokers have customarily furnished in
connection with brokerage transactions, and that in compensating brokers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds. The extent, if
any, to which the obtaining of such information may reduce the expenses of the
Adviser in providing management services to the Funds is not determinable. In
addition, it is understood by the respective board that other clients of the
Adviser might also benefit from the information obtained for the Funds, in the
same manner that the Funds might also benefit from the information obtained by
the Adviser in performing services for others.
Although investment decisions for the Funds are made independently from
those for other investment advisory clients of the Adviser, it may develop that
the same investment decision is made for a Fund and one or more other advisory
clients. If a Fund and other clients purchase or sell the same class of
securities on the same day, the transactions will be allocated as to amount and
price in a manner considered equitable to each.
The board of directors of Monetta Fund and the board of trustees of the
Trust have each determined that portfolio brokerage transactions for their
respective Funds may be executed through Monetta Investment Services, L.L.C.
("MIS") if, in the judgment of the Adviser, the use of MIS is likely to result
in prices and execution at least as favorable to the Fund as those available
from other qualified brokers and, if, in such transaction, MIS charges the Fund
commission rates consistent with those charged by MIS to comparable unaffiliated
customers in similar transactions. The board of directors of Monetta Fund,
including a majority of the directors who are not "interested" directors, and
the board of trustees of the Trust, including a majority of the trustees who are
not "interested" trustees, have each adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to MIS
are consistent with the foregoing standard. The Funds will not effect principal
transactions with MIS.
Brokerage commissions incurred by Monetta Fund for the years ended December
31, 1996, 1995 and 1994 aggregated $839,203, $1,449,063 and $1,974,854,
respectively, not including the gross underwriting spread on securities
purchased in underwritten public offerings. Of these amounts, the Fund paid
brokerage commissions aggregating $641,348, $1,034,235 and $1,290,759,
respectively, in connection with portfolio transactions involving purchases and
sales aggregating $246,355,924, $366,529,232 and $512,538,346, respectively, to
brokers who furnished investment research services to the Fund.
Brokerage commissions incurred by Mid-Cap Fund for the years ended December
31, 1996, 1995 and 1994 aggregated $41,223, $85,201 and $69,865, respectively,
not including the gross underwriting spread on securities purchased in
underwritten public offerings. Of this amount, Mid-Cap Fund paid brokerage
commissions of $35,370, $78,743 and $50,407, respectively, in connection with
portfolio
B-28
<PAGE>
transactions involving purchases and sales aggregating $14,991,561, $33,625,853
and $20,848,618, respectively, to brokers who furnished research services to the
Fund.
Brokerage commissions incurred by Large-Cap Fund for the year ended
December 31, 1996 and the period September 1, 1995 through December 31, 1995
aggregated $3,499 and $1,507, respectively, not including the gross underwriting
spread on securities purchased in underwritten public offerings. Of this amount,
Large-Cap Fund paid brokerage commissions of $1,467 and $1,316, respectively, in
connection with portfolio transactions involving purchases and sales aggregating
$935,048 and $1,082,682, respectively, to brokers who furnished research
services to the Fund.
Brokerage commissions incurred by Balanced Fund for the year ended December
31, 1996 and the period September 1, 1995 through December 31, 1995 aggregated
$2,540 and $350, respectively, not including the gross underwriting spread on
securities purchased in underwritten public offerings. Of this amount, Balanced
Fund paid brokerage commissions of $1,537 and $301, respectively, in connection
with portfolio transactions involving purchases and sales aggregating $636,211
and $182,600, respectively, to brokers who furnished research services to the
Fund.
Of the aggregate brokerage commissions paid by Monetta Fund for the years
ended December 31, 1996, 1995 and 1994 an aggregate amount of $32,700, $70,235
and $170,815, respectively, was paid to MIS. This aggregate amount represented
3.9%, 4.8% and 8.7%, respectively, of all commissions paid by Monetta Fund on
transactions aggregating 4.6%, 6.4% and 10.3%, respectively, of the aggregate
dollar amount of transactions involving the payment of commissions.
Of the aggregate brokerage commissions paid by Mid-Cap Fund for the years
ended December 31, 1996, 1995 and 1994 an aggregate amount of $0, $0 and $4,125,
respectively, was paid to MIS. This aggregate amount represented 0.0%, 0.0% and
5.9%, respectively, of all commissions paid by Mid-Cap Fund on transactions
aggregating 0.0%, 0.0% and 10.6%, respectively, of the aggregate dollar amount
of transactions involving the payment of commissions.
All securities transactions of Intermediate Bond Fund and Government Money
Market Fund in 1996, 1995 and 1994 were executed on a principal basis.
The portfolio turnover rates of Monetta Fund for 1996, 1995 and 1994 were
204.8%, 272.0% and 191.3%, respectively. The Fund's portfolio turnover rate
may vary greatly from year to year, and is likely to be greater than 100% and in
some years may exceed 200%. Greater portfolio activity increases the Fund's
transaction costs, including brokerage commissions.
The portfolio turnover rates of the Intermediate Bond Fund for 1996, 1995
and 1994 were 28.9%, 75.1% and 94.5%, and is expected to be less than 100%
annually. The portfolio turnover rates of Mid-Cap Fund were 93.3%, 254.4% and
210.0% for 1996, 1995 and 1994, and may continue to be greater than
B-29
<PAGE>
100%. Net redemptions for both the Mid-Cap Fund and the Intermediate Bond Fund
were lower in 1995 and 1994 compared to 1996 which difference resulted in lower
portfolio turnover rates in 1996 for both funds. The portfolio turnover rates
for Large-Cap Fund for 1996 and 1995 were 152.7%, 38.2% and the portfolio
turnover rates for Balanced Fund for 1995 were 117.8%, 54.8%. Greater portfolio
activity increases a Fund's transaction costs, including brokerage commissions.
DISTRIBUTOR
The shares of each Fund are offered for sale on a continuous basis through
Funds Distributor, Inc. ("Distributor") pursuant to written Distribution
Agreements with Monetta Fund and the Trust. Those agreements continue from year
to year, provided such continuance is approved annually (i) by a majority of the
board members or by a majority of the outstanding voting securities of the
affected Funds and (ii) by a majority of the board members who are not parties
to the Agreements or interested persons of any such party. There are no sales
commissions or charges directly to shareholders of the Funds. The fees and
expenses of the Distributor are paid (i) by each Fund of Monetta Trust to the
extent it is able to do so within the limits of its Distribution and Service
Plan, and (ii) to the extent Fund assets are not available under the Plan, by
the Adviser. The Adviser pays all the fees and expenses of the Distributor for
Monetta Fund.
As agent, the Distributor offers shares of each Fund to investors at net
asset value, without sales commissions or other sales load. The Distributor
offers the Funds' shares only on a best-efforts basis.
The Distributor or another broker affiliated with the Distributor may
receive brokerage commissions on purchases and sales of portfolio securities by
a Fund. Those amounts, if any, are described under "Portfolio Transactions."
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, 3rd Floor, Milwaukee,
Wisconsin 53202 is the custodian for the Funds. It is responsible for holding
all securities and cash of the Funds, receiving and paying for securities
purchased, delivering against payment securities sold, receiving and collecting
income from investments, making all payments covering expenses of the Funds, and
performing other administrative duties, all as directed by authorized persons of
the Funds. The custodian does not exercise any supervisory function in such
matters as purchase and sale of portfolio securities, payment of dividends, or
payment of expenses of the Funds. The Funds have authorized the custodian to
deposit certain portfolio securities in central depository systems as permitted
under federal law. The Funds may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
INDEPENDENT AUDITORS
The independent auditors for the Funds are KPMG Peat Marwick LLP, 303 East
Wacker Drive, Chicago, Illinois 60601. The independent auditors audit and
report on the Funds' annual financial statements, review certain regulatory
reports and the Fund's income tax returns, and
B-30
<PAGE>
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Funds.
B-31
<PAGE>
APPENDIX - RATINGS
- ------------------
RATINGS IN GENERAL
- ------------------
A rating by a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general
and are not absolute standards of quality or guarantees as to the credit-
worthiness of an issuer. Consequently, the Adviser believes that the quality of
debt securities in which the Fund invests should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase,
sell, or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating should be evaluated independently.
Ratings are based on current information furnished by the issuer or obtained by
the rating services from other sources which they consider reliable. Ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information, or for other reasons.
The following is a description of the characteristics of ratings used by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("S&P").
BOND RATINGS
RATINGS BY MOODY'S:
Aaa. Bonds 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 an exceptionally stable margin and
principal is secure. Although 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 bonds.
Aa. Bonds 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 protections
may not be as large as in the Aaa Bonds, 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 bonds.
A. Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds 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
B-32
<PAGE>
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba. Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B. Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest. NOTE: Moody's applies numerical modifiers 1, 2, and 3 in each of
these generic rating classifications in its corporate bond rating systems. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category.
RATINGS BY STANDARD AND POOR'S:
AAA. Debt rated AAA has the highest rating. Capacity to pay interest and
repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A. Debt rated A has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB-B-CC. Bonds rated BB, B and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
NOTE: These ratings may be modified by the addition of a plus(+) or
minus(-) sign to show relative standing within the major rating categories.
COMMERCIAL PAPER RATINGS
Ratings by Moody's:
B-33
<PAGE>
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. These factors are all
considered in determining whether the commercial paper is rated P-2 or P-3.
RATINGS BY STANDARD & POOR'S:
The rating A-1+ is the highest, and A-1 the second highest, commercial
paper rating assigned by S&P. Paper rated A-1+ must have either the direct
credit support of an issuer or guarantor that possesses excellent long-term
operating and financial strengths combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit quality
characteristics which would warrant a senior bond rating of AA or higher), or
the direct credit support of an issuer or guarantor that possesses above average
long-term fundamental operating and financing capabilities combined with ongoing
excellent liquidity characteristics. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash requirements, long-
term senior debt is rated A or better, the issuer has access to at least two
additional channels of borrowing, and basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry and the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-2 or A-3.
B-34
<PAGE>
PART C -- OTHER INFORMATION
---------------------------
Item 24. Financial Statement and Exhibits
- ------- --------------------------------
(a) Financial statements:
(1) Financial statements included in Part A of this registration
statement:
None
(2) Financial statements included in Part B of this registration
statement:
Monetta Mid-Cap Equity Fund, Monetta Intermediate Bond Fund and
---------------------------------------------------------------
Monetta Government Money Market Fund
---------------------------------------------------------------
The following financial statements, but no other part of the
report, are incorporated by reference to the following portions of
Registrant's annual report to shareholders for the year ended
December 31, 1996:
- Schedules of Investments at December 31, 1996
- Statements of Assets and Liabilities at December 31, 1996
- Statements of Operations for the year ended December 31, 1996
- Statements of Changes in Net Assets for the year ended December
31, 1996 and the year ended December 31, 1995
C-1
<PAGE>
- Notes to financial statements
- Independent Auditors' Report
Note: The following schedules have been omitted for the
following reasons:
Schedule I - The required information is presented
in the schedules of investments at December 31, 1996.
Schedule II, III, IV and V - the required information
is not present.
Monetta Large-Cap Equity Fund and Monetta Balanced Fund
-------------------------------------------------------
The following financial statements, but no other part of the
report, are incorporated by reference to the following portions of
Registrant's annual report to shareholders for the period ended
December 31, 1996:
- Schedules of Investments at December 31, 1996
- Statements of Assets and Liabilities at December 31, 1996
- Statements of Operations for the period ended December 31, 1996
- Statements of Changes in Net Assets for the year ended
December 31, 1996 and the period ended December 31, 1995
C-2
<PAGE>
- Notes to financial statements
- Independent Auditors' Report
Note: The following schedules have been omitted for the
following reasons:
Schedule I - The required information is presented
in the schedules of investments at December 31, 1996.
Schedule II, III, IV and V - the required information
is not present.
(b) Exhibits:
1 Agreement and declaration of trust (1)
2 Bylaws (1)
3 None
4 None
5 Investment Advisory Agreement with Monetta Financial Services, Inc.
6 Distribution Agreement with Funds Distributor, Inc.
7 None
8.1 Custody agreement with Firstar Trust Company (1)
8.2 Addendum to Custody Agreement with Firstar Trust Company adding
Monetta Large-Cap Fund and Monetta Balanced Fund to Custody
Agreement (1)
8.3 Addendum to Custody Agreement with Firstar Trust Company
adding Monetta Small-Cap Fund to Custody Agreement
9.1 Transfer agency agreement with Firstar Trust Company (1)
9.2 Addendum to Transfer Agency Agreement with Firstar Trust Company
adding Monetta Large-Cap Fund and Monetta Balanced Fund to Transfer
Agency Agreement (1)
9.3 Addendum to Transfer Agency Agreement with Firstar Trust Company
adding Monetta Small-Cap Fund to Transfer Agency Agreement
10.1 Opinion of Bell, Boyd & Lloyd dated January 18, 1993 (1)
10.2 Opinion of Bell, Boyd & Lloyd with respect to Monetta Large-Cap Equity
Fund and Monetta Balanced Fund dated August 1, 1995 (1)
10.3 Opinion of Bell, Boyd & Lloyd with respect to Monetta Small-Cap Equity
Fund dated January 30, 1997
C-3
<PAGE>
10.4 Opinion of Ropes & Gray with Respect to Monetta Large-Cap Equity Fund
and Monetta Balanced Fund dated August 1, 1995 (1)
10.5 Opinion of Ropes & Gray with respect to Monetta Small-Cap Equity Fund
dated January 27, 1997
11 Consent of independent auditors
12 None
13 Subscription agreement (1)
14.1 Monetta Funds Individual Retirement Account Prototype Plan,
disclosure statement and application
14.2 Monetta prototype defined contribution retirement plan
14.3 Monetta prototype section 403(b)(7) retirement plan
15 Service and Distribution Plan (1)
16 Schedule of performance quotations (2)
17 Financial Data Schedule
- ---------
(1) Incorporated by reference to the exhibits of the same number filed with
post-effective amendment no. 8 to Registrant's registration statement on
Form N-1A no. 33-54823
(2) Incorporated by reference to the exhibit of the same number filed with pre-
effective amendment no. 2 to Registrant's registration statement on
form N-1A no. 33-54823
Item 25. Persons Controlled By or Under Common Control with Registrant
- ------- -------------------------------------------------------------
The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the caption "Management of the Fund" and in the Statement of Additional
Information under the captions "Investment Adviser" and "Directors/Trustees and
Officers" is incorporated by reference.
C-4
<PAGE>
Item 26. Number of Holders of Securities
- ------- -------------------------------
At December 31, 1996, Registrant had the following number of record
holders of its securities, in the series indicated:
<TABLE>
<CAPTION>
Number of
Series Record Holders
------ --------------
<S> <C>
Mid-Cap Equity Fund 1,775
Large-Cap Growth Fund 429
Balanced Fund 400
Intermediate Bond Fund 194
Government Money Market Fund 665
Small-Cap Equity Fund 0
</TABLE>
Item 27. Indemnification
- ------- ---------------
Article VIII of the agreement and declaration of trust of registrant
(exhibit 1 to this registration statement, which is incorporated herein by
reference) provides in effect that registrant shall provide certain
indemnification of its trustees and officers. In accordance with Section 17(h)
of the Investment Company Act, that provision shall not protect any person
against any liability to the registrant or its shareholders 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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- ------- ----------------------------------------------------
Monetta Financial Services, Inc. ("MFSI"), registrant's investment
adviser, also acts as investment adviser to Monetta Fund, Inc. and to individual
and institutional clients. The directors and officers of MFSI are: Robert S.
Bacarella, Chairman and Director; Albert A. Pisterzi, President and Director;
William M. Valiant, Director; John P. Rozinsky, Vice President; and Maria C.
DeNicolo, Controller, Secretary and Treasurer. The information in the Statement
of Additional Information under the heading "Directors/Trustees and Officers"
describing the principal occupations and other affiliations of Mr. Bacarella,
Mr. Pisterzi, Mr. Valiant, Mr. Rozinsky and Ms. DeNicolo is incorporated herein
by reference. Mr. Valiant, who is now retired, was Vice President and Treasurer,
Borg-Warner Corporation, until July 1990.
C-5
<PAGE>
Item 29. Principal Underwriters
- ------- ----------------------
(a) Funds Distributor, Inc. (the "Distributor") also acts as
principal underwriter for the following investment companies:
BJB Investment Funds
Burridge Funds
Foreign Fund, Inc.
Fremont Mutual Funds Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
The JPM Advisor Funds
The JPM Institutional Funds
The JPM Pierpont Funds
LKCM Fund
The Munder Funds Trust
The Munder Funds, Inc.
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
St. Clair Money Market Fund
Skyline Funds
Waterhouse Investors Cash Management Fund, Inc.
Funds Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Funds Distributor is an indirect
wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The information required by this Item 29(b) with respect to each
director, officer, or partner of Funds Distributor is incorporated by
reference to Schedule A of Form BD filed by Funds Distributor with the
Securities and Exchange Commission pursuant to the Securities Act of
1934 (File No. 8-20518).
(c) Not applicable
Item 30. Location of Accounts and Records
- ------- --------------------------------
Maria C. DeNicolo
Monetta Financial Services, Inc.
1776-A South Naperville Road, Suite 207
Wheaton, Illinois 60187-8133
C-6
<PAGE>
Item 31. Management Services
- ------- -------------------
None
Item 32. Undertakings
- ------- ------------
(a) Not applicable
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to
six months after effectiveness of the first post-effective
amendment to Registrant's registration statement containing a
prospectus and statement of additional information relating to
Registrant's series designated Monetta Small-Cap Fund.
(c) Registrant undertakes to furnish each person to whom a prospectus
is delivered, upon request and without charge, a copy of
Registrant's most recent annual report to shareholders.
(d) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or
trustees when requested to do so by the holders of at least 10%
of Registrant's outstanding shares of beneficial interest, and in
connection with such meeting to comply with the provisions of
section 16(c) of the Investment Company Act of 1940.
C-7
<PAGE>
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 registration statement pursuant to
rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to the registration statment to be signed on its behalf by the undersigned duly
authorized Officer.
MONETTA TRUST
By: /s/ Robert S. Bacarella
--------------------------------------
Robert S. Bacarella, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Robert S. Bacarella Trustee and Chairman )
- --------------------------- (principal executive officer) )
Robert S. Bacarella )
)
)
/s/ John W. Bakos Trustee )
- --------------------------- )
John W. Bakos )
)
)
/s/ John L. Guy, Jr. Trustee )
- --------------------------- )
John L. Guy, Jr. )
)
/s/ Mark F. Ogan )
- --------------------------- Trustee )
Mark F. Ogan ) January 28, 1997
)
/s/ Albert A. Pisterzi Vice President and )
- -------------------------- Trustee )
Albert A. Pisterzi )
)
/s/ Richard D. Russo Trustee )
- -------------------------- )
Richard D. Russo )
)
)
/s/ William Valiant Trustee )
- -------------------------- )
William Valiant )
)
/s/ Maria Cesario De Nicolo )
- --------------------------- Treasurer )
Maria Cesario De Nicolo (principal financial officer) )
<PAGE>
Index of Exhibits Filed With this Amendment
-------------------------------------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page
- -------- --------------------------- ----
<C> <S> <C>
5 Investment Advisory Agreement with Monetta Financial Services, Inc.
6 Distribution Agreement with Funds Distributor, Inc.
8.3 Addendum to Custody Agreement with Firstar Trust Company adding Monetta Small-Cap Fund
to Custody Agreement
9.3 Addendum to Transfer Agency Agreement with Firstar Trust Company adding Monetta
Small-Cap Fund to Transfer Agency Agreement
10.3 Opinion of Bell, Boyd & Lloyd with respect to Monetta Small-Cap Equity Fund dated
January 30, 1997
10.5 Opinion of Ropes & Gray with respect to Monetta Small-Cap Equity Fund dated January
27, 1997
11 Consent of Independent Auditors
14.1 Monetta Funds Individual Retirement Account Prototype Plan, disclosure statement and
application
14.2 Monetta prototype defined contribution retirement plan
14.3 Monetta prototype section 403(b)(7) retirement plan
17 Financial Data Schedule
</TABLE>
<PAGE>
MONETTA TRUST
INVESTMENT ADVISORY AGREEMENT
This investment advisory agreement is made as of the 1st day of February,
1997, between MONETTA TRUST, a Massachusetts business trust registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end diversified
management investment company (the "Trust"), and MONETTA FINANCIAL SERVICES,
INC., a Delaware corporation registered under the Investment Advisers Act of
1940 as an investment adviser (the "Adviser").
The Trust is authorized to issue shares of beneficial interest in separate
series with each such series representing interests in a separate portfolio of
securities and other assets.
The Trust is now authorized to offer shares in six series: Monetta Small-
Cap Equity Fund, Monetta Mid-Cap Equity Fund, Monetta Large Cap Equity Fund,
Monetta Balanced Fund, Monetta Intermediate Bond Fund and Monetta Government
Money Market Fund, which are referred to in this Agreement individually as a
"Fund" and together as the "Funds". The term "Funds" also means the Funds and
any other series of the Trust that has become a "Fund" under paragraph 1(b) of
this Agreement.
The Trust and the Adviser agree:
1. Appointment of Adviser. (a) The Trust appoints the Adviser to act as
manager and investment adviser to the Funds for the period and on the terms
provided in this Agreement. The Adviser accepts that appointment and agrees to
provide the services described in this Agreement, for the compensation provided
in paragraph 6.
(b) If the Trust establishes one or more series of shares other than
the Funds with respect to which it wants to appoint the Adviser as manager and
investment adviser under this Agreement, it shall notify the Adviser in writing,
indicating the advisory fee which will be payable with respect to the additional
series of shares. If the Adviser is willing to accept that appointment, it
shall notify the Trust in writing, whereupon such series of shares shall become
a Fund hereunder.
2. Services of Adviser. (a) The Adviser shall manage the investment and
reinvestment of the assets of each Fund and the general business affairs of each
Fund and of the Trust, subject to the supervision of the board of trustees of
the Trust. The Adviser shall give due consideration to the investment policies
and restrictions and the other statements concerning each Fund in the Trust's
Agreement and Declaration of Trust, bylaws and registration statements under the
1940 Act and the Securities Act of 1933 (the "1933 Act"), and to the provisions
of the Internal Revenue Code applicable to the Trust as a regulated investment
company. The Adviser shall be deemed for all purposes to be an independent
contractor and not an agent of the Trust or the Funds, and unless otherwise
expressly provided or authorized, shall have no authority to act or represent
the Trust or the Funds in any way.
<PAGE>
(b) The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with brokers or dealers
selected by the Adviser, although each Fund will pay the brokerage commissions
on its portfolio transactions in accordance with Paragraph 4. In executing
portfolio transactions and selecting brokers or dealers, the Adviser will use
its best efforts to seek on behalf of each Fund the best overall terms available
for any transaction. The Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any (for the specific transaction and
on a continuing basis).
(c) To the extent contemplated by the Trust's registration statement
under the 1933 Act, in evaluating the best overall terms available, and in
selecting the broker or dealer to execute a particular transaction, the Adviser
may also consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Adviser or an affiliate of the Adviser
exercises investment discretion. The Adviser is authorized to pay to a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for any Fund which is in excess of the amount
of commission another broker or dealer would have charged for effecting that
transaction if, but only if, the Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of that particular
transaction or in terms of all of the accounts over which investment discretion
is so exercised. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking the most
favorable combination of net price and execution available, the Adviser may
consider sales of shares of a Fund as a factor in the selection of broker-
dealers to execute portfolio transactions for that Fund.
3. Services other than as Adviser. The Adviser (or an affiliate of the
Adviser) may act as broker for a Fund in connection with the purchase or sale of
securities by or to a Fund if and to the extent permitted by procedures adopted
from time to time by the board of trustees of the Trust. Such brokerage
services are not within the scope of the duties of the Adviser under this
agreement, and, within the limits permitted by law and the trustees, the Adviser
(or an affiliate of the Adviser) may receive brokerage commissions, fees or
other remuneration from a Fund or the Trust for such services in addition to its
fee for services as Adviser. Within the limits permitted by law, the Adviser
may receive compensation from the Trust for other services performed by or for
the Trust which are not within the scope of the duties of the Adviser under this
agreement.
4. Expenses to be paid by Adviser. The Adviser shall furnish to the
Trust, at its own expense, all office space, facilities, equipment and personnel
necessary to provide the services set forth in paragraph 2 above. The Adviser
shall also assume and pay all other expenses incurred by it in connection with
managing the assets of the Funds, all expenses of marketing shares of the Funds
under the 1933 Act and of qualifying and maintaining qualification or
notification of shares of the Funds under the securities laws of such United
States jurisdictions as the Funds may from time to time reasonably designate,
except to the extent such expenses are paid by a
2
<PAGE>
Fund pursuant to any plan as in effect from time to time pursuant to rule 12b-1
under the 1940 Act; all expenses in determination of daily price computations,
placement of securities orders and related bookkeeping; and all other expenses
of the Funds not allocated to the Trust pursuant to section 5.
5. Expenses to be paid by the Trust. The Trust shall pay the fees of the
Adviser pursuant to section 6; all expenses pursuant to any plan as in effect
from time to time adopted pursuant to rule 12b-1 under the 1940 Act; all charges
of depositories, custodians and other agencies for the safekeeping and servicing
of cash, securities and other property of the Funds and of their transfer agents
and registrars and their dividend disbursing and redemption agents, if any; all
compensation of trustees other than those affiliated with the Adviser and all
expenses incurred in connection with their services to the Trust; all taxes and
corporate fees payable to federal, state or other governmental agencies,
domestic or foreign; all stamp or other transfer taxes; all expenses of printing
and mailing certificates for shares of the Funds, if any; all costs of borrowing
money by the Funds; and all extraordinary expenses, including litigation
expenses, not incurred in the ordinary course of the Funds' operations. In
addition to the payment of expenses, the Trust shall also pay all brokers'
commissions and other charges relative to the purchase and sale of portfolio
securities of the Funds.
6. Compensation of Adviser. (a) For the services to be provided and the
expenses to be assumed and to be paid by the Adviser hereunder, the Trust shall
pay to the Adviser, solely out of assets of each Fund, a monthly fee, based upon
the average net assets of each Fund, which shall be computed as of the close of
business each day and accrued daily, at the annual rate set forth below:
<TABLE>
<CAPTION>
ADVISORY FEE SCHEDULE
Fee Rate as a Percentage of Average Net Assets
----------------------------------------------
<S> <C>
Monetta Small-Cap Equity Fund 0.75%
Monetta Mid-Cap Equity Fund 0.75%
Monetta Large Cap Fund 0.75%
Monetta Balanced Fund 0.40%
Monetta Intermediate Bond Fund 0.35%
Monetta Government Money Market Fund 0.20%
</TABLE>
7. Limitation of expenses of any Fund. The Adviser may, from time to time,
undertake to limit the expenses of a Fund by agreeing for a stated period of
time (which may be a period containing until terminated by the Adviser on not
less than [60] days' notice to the Trust) to reimburse such Fund for sums
expended for expenses in excess of a stated amount or percentage of assets, or
assuming for a stated period of time (which may be a period containing until
terminated by the Adviser on not less than [60] days' notice to the Trust) an
obligation to pay an expense that would otherwise be paid by the Trust pursuant
to paragraph 5 of this Agreement. Any such undertaking shall be in writing and
shall be considered a part of this Agreement.
3
<PAGE>
8. Services of Adviser not Exclusive. The services of the Adviser to the
Trust hereunder are not exclusive, and the Adviser is free to provide similar
services to others so long as its services under this agreement are not impaired
by such other activities.
9. Liability of Adviser. The Adviser shall not be liable to the Trust or
its shareholders for any loss suffered by the Trust or its shareholders from or
as a consequence of any act or omission of the Adviser, or of any of the
partners, employees or agents of the Adviser, in connection with or pursuant to
this agreement, except by reason of willful misfeasance, bad faith or gross
negligence on the part of the Adviser in the performance of its duties or by
reason of reckless disregard by the Adviser of its obligations and duties under
this agreement.
10. Liability of Trust. The obligations of the Trust hereunder shall not
be binding upon any of the trustees, shareholders, nominees, officers, agents or
employees of the Trust, personally, but shall bind only the assets and property
of the Trust as provided in the Agreement and Declaration of Trust of the Trust.
11. Use of Adviser's name. The Trust and the Funds may use the name
"Monetta Trust" or any other name derived from the name "Monetta" 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 the business of the Adviser as investment adviser. At such time as
this agreement or any extension, renewal or amendment hereof, or such other
similar agreement shall no longer be in effect, the Trust will (by amendment of
its Agreement and Declaration of Trust, if necessary) cease to use, in its name
and in the names of the Funds, any name derived from the name "Monetta", any
name similar thereto or any other name indicating that it is advised by or
otherwise connected with the Adviser, or with any organization which shall have
succeeded to the Adviser's business as investment adviser. The consent of the
Adviser to the use of such names by the Trust shall not prevent the Adviser's
permitting any other enterprise, including another investment company, to use
such name or names.
12. Duration and renewal. (a) Unless terminated as provided in section
13, this agreement shall become effective with respect to the Initial Funds on
the date hereof and, with respect to any additional Fund, on the date of receipt
by the Trust of notice from the Adviser in accordance with Paragraph 1 (b)
hereof that the Adviser is willing to serve as Adviser with respect to such
Fund. Unless terminated as herein provided, this Agreement shall remain in
full force and effect until February 1, 1999, with respect to the Funds and
shall continue in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to any such Fund
is approved at least annually (i) by either the trustees or by vote of a
majority of the outstanding voting shares (as defined in the 1940 Act) of such
Fund, and (ii) in either event by the vote of a majority of the trustees who are
not parties to this Agreement or "interested persons" (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
(b) Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of any Fund shall be effective
to continue this
4
<PAGE>
Agreement with respect to any such Fund notwithstanding (i) that this Agreement
has not been approved by the holders of a majority of the outstanding shares of
any other Fund affected thereby, and (ii) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Trust,
unless such approval shall be required by any other applicable law or otherwise.
13. Termination. This Agreement may be terminated with respect to a Fund
at any time, without payment of any penalty, by vote of the trustees or by vote
of a majority of the outstanding shares (as defined in the 1940 Act) of that
Fund, or by the Adviser on sixty (60) days' written notice to the other party.
This Agreement shall automatically and immediately terminate in the event of its
assignment (as defined in section 2(a)(4) of the 1940 Act).
14. Amendment. This agreement may not be amended as to a Fund without the
affirmative vote (a) of a majority of those trustees who are not "interested
persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Trust and (b)
of the holders of a majority of the outstanding shares of that Fund.
MONETTA TRUST
By: /s/ Robert S. Bacarella
-----------------------------------------
Robert S. Bacarella
President
MONETTA FINANCIAL SERVICES, INC.
By: /s/ Albert A. Pisterzi
-----------------------------------------
Albert A. Pisterzi
President
5
<PAGE>
DISTRIBUTION AGREEMENT
MONETTA TRUST
1776-A SOUTH NAPERVILLE ROAD
SUITE 207
WHEATON, ILLINOIS 60187
February 1, 1997
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of (a) shares of
each Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series are set forth
on such Exhibit, shares of the Fund. For purposes of this agreement the term
"Shares" shall mean the authorized shares of the relevant Series, if any, and
otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and
in accordance with, the registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended and the National
Association of Securities Dealers, Inc.'s (the "NASD") Rules of Fair Practice
and By-Laws. You represent and warrant that you are a broker-dealer registered
with the Securities and Exchange Commission and that you are registered with the
relevant securities
<PAGE>
regulatory agencies in all fifty states, the District of Columbia and Puerto
Rico. You also represent and warrant that you are a member of the NASD.
1.4 You shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and/or state securities administrators.
1.5 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by the parties hereto to render sales of a Fund's Shares not in the best
interest of the Fund, the parties hereto may decline to accept any orders for,
or make any sales of, any Shares until such time as those parties deem it
advisable to accept such orders and to make such sales and each party shall
advise promptly the other party of any such determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided however, that
the Fund shall not pay any of the costs of advertising or promotion for the sale
of Shares.
1.7 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
1.8 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you upon request with: (a) semi-annual reports and annual audited reports of the
Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
each Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.9 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the
2
<PAGE>
Shares have been carefully prepared in conformity with the requirements of said
Acts and rules and regulations of the Securities and Exchange Commission
thereunder. As used in this agreement the terms "registration statement" and
"prospectus" shall mean any registration statement and prospectus, including the
statement of additional information incorporated by reference therein, filed
with the Securities and Exchange Commission and any amendments and supplements
thereto which at any time shall have been filed with said Commission. The Fund
represents and warrants to you that any registration statement and prospectus,
when such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with said Acts and the rules and
regulations of said Commission; that all statements of fact contained in any
such registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Fund may, but shall not be obligated to, propose from time
to time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Fund's counsel, be necessary or
advisable. If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Fund of a
written request from you to do so, you may, at your option, terminate this
agreement or decline to make offers of the Fund's securities until such
amendments are made. The Fund shall not file any amendment to any registration
statement or supplement to any prospectus without giving you reasonable notice
thereof in advance; provided, however, that nothing contained in this agreement
shall in any way limit the Fund's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Fund may deem advisable, such right being in all respects
absolute and unconditional.
1.10 The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form furnished by the Fund
in connection with the sale of Shares. The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any person who controls you
within the meaning of Section 15 of the Securities Act of 1933, as amended, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the reasonable cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or common law or otherwise, arising
out of or on the basis of any untrue statement, or alleged untrue statement, of
a material fact required to be stated in either any registration statement or
any prospectus or any statement of additional information, or arising out of or
based upon any omission, or alleged omission, to state a material fact required
to be stated in any registration statement, any prospectus or any statement of
additional information or necessary to make the statements in any of them not
misleading, except that the Fund's agreement to indemnify you, your officers or
directors, and any such controlling person will not be deemed to cover any such
claim, demand, liability or expense to the extent that it arises out of or is
based upon any such untrue statement, alleged untrue statement, omission or
alleged omission made in any registration statement, any prospectus or any
statement of additional information in reliance upon information furnished by
you, your officers, directors or any such controlling person to the Fund or its
representatives for
3
<PAGE>
use in the preparation thereof, and except that the Fund's agreement to
indemnify you and the Fund's representations and warranties set out in paragraph
1.9 of this Agreement will not be deemed to cover any liability to the Funds or
their shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement ("Disqualifying Conduct"). The Fund's agreement to indemnify you, your
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against you, your officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to the
Fund at its address set forth above within a reasonable period of time after the
summons or other first legal process shall have been served. The failure so to
notify the Fund of any such action shall not relieve the Fund from any liability
which the Fund may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Fund's indemnity agreement contained
in this paragraph 1.10. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Fund
and approved by you. In the event the Fund elects to assume the defense of any
such suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not elect to assume
the defense of any such suit, the Fund will reimburse you, your officers and
directors, or the controlling person or persons named as defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
you or them. The Fund's indemnification agreement contained in this paragraph
1.10 and the Fund's representations and warranties in this Agreement shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of you, your officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to your benefit, to the benefit of your several
officers and directors, and their respective estates, and to the benefit of any
controlling persons and their successors. The Fund agrees promptly to notify you
of the commencement of any litigation or proceedings against the Fund or any of
its officers or Board members in connection with the issue and sale of Shares.
1.11 You agree to indemnify, defend and hold the Fund, its several officers
and Board members, and any person who controls the Fund within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
reasonable cost of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in connection therewith)
which the Fund, its officers or Board members, or any such controlling person,
may incur under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its officers or
Board members, or such controlling person resulting from such claims or demands,
(a) shall arise out of or be based upon any unauthorized sales literature,
advertisements, information, statements or representations or any Disqualifying
Conduct in connection with the offering and sale of any Shares, or (b) shall
arise out of or be based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by you to the Fund
specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements
4
<PAGE>
made in the prospectus or statement of additional information, or shall arise
out of or be based upon any omission, or alleged omission, to state a material
fact in connection with such information furnished in writing by you to the Fund
and required to be stated in such answers or necessary to make such information
not misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set forth
above within a reasonable period of time after the summons or other first legal
process shall have been served. You shall have the right to control the defense
of such action, with counsel of your own choosing, satisfactory to the Fund, if
such action is based solely upon such alleged misstatement or omission on your
part, and in any other event the Fund, its officers or Board members, or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability which you may have to
the Fund, its officers or Board members, or to such controlling person by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of your indemnity agreement contained in
this paragraph 1.11. This agreement of indemnity will inure exclusively to the
Fund's benefit, to the benefit of the Fund's officers and Board members, and
their respective estates, and to the benefit of any controlling persons and
their successors. You agree promptly to notify the Fund of the commencement of
any litigation or proceedings against you or any of your officers or directors
in connection with the issue and sale of Shares.
1.12 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.12 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.13 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement of
a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
5
<PAGE>
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you at shall be offered
at a price per share (the "offering price") approximately equal to (a) the net
asset value (determined in the manner set forth in the Fund's charter documents)
plus (b) a sales charge, if any and except to those persons set forth in the
then-current prospectus, which shall be the percentage of the offering price of
such Shares as set forth in the Fund's then-current prospectus. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. In addition, Shares of any class of the Fund offered for sale by you may
be subject to a contingent deferred sales charge as set forth in the Fund's
then-current prospectus. You shall be entitled to receive any sales charge or
contingent deferred sales charge in respect of the Shares. Any payments to
dealers shall be governed by a separate agreement between you and such dealer
and the Fund's then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial two one-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to a Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Trustees, by vote of a majority
of the outstanding voting securities of such Fund, or by you. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the Investment Company Act of 1940). You agree to notify
the Fund immediately upon the event of your expulsion or suspension by the NASD.
This Agreement will automatically and immediately terminate in the event of your
expulsion or suspension by the NASD.
4. Miscellaneous
4.1 The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, your directors, officers and employees may from time to time
serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
6
<PAGE>
4.3 This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
4.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding Agreement between us.
Very truly yours,
MONETTA TRUST
By: /s/ Robert S. Bacarella
-----------------------------
Name: Robert S. Bacarella
---------------------------
Title: President
--------------------------
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/ Marie E. Connolly
-------------------------------
Name: Marie E. Connolly
-----------------------------
Title: President and CEO
-----------------------------
7
<PAGE>
Addendum to Custody Agreement
WHEREAS MONETTA TRUST (the "Trust") and FIRSTAR TRUST COMPANY ("Firstar")
have entered into a Custody Agreement dated January 1, 1993 (the "Agreement");
WHEREAS the Trust has issued an additional class of beneficial interest
representing interests in an investment portfolio designated Monetta Small-Cap
Equity Fund.
NOW, THEREFORE, the Trust and Firstar agree as follows:
In accordance with Section 2 of the Agreement, Monetta Small-Cap Equity
Fund is hereinafter covered by the terms and conditions of the Agreement.
MONETTA TRUST FIRSTAR TRUST COMPANY
By: /s/ Robert S. Bacarella By: /s/ James C. Tyler
------------------------------- ----------------------------
Attest: /s/ Maria Cesario DeNicolo Attest: /s/ Gail M. Zess
-------------------------- ------------------------
<PAGE>
Addendum to Transfer Agent Agreement
WHEREAS MONETTA TRUST (the "Trust") and FIRSTAR TRUST COMPANY ("Firstar")
have entered into a Transfer Agent Agreement dated February 1, 1993 (the
"Agreement");
WHEREAS the Trust has issued an additional class of beneficial interest
representing interests in an investment portfolio designated Monetta Small-Cap
Equity Fund.
NOW, THEREFORE, the Trust and Firstar agree as follows:
In accordance with Section 9 of the Agreement, Monetta Small-Cap Equity
Fund is hereinafter covered by the terms and conditions of the Agreement.
MONETTA TRUST FIRSTAR TRUST COMPANY
By: /s/ Robert S. Bacarella By: /s/ James C. Tyler
----------------------- ---------------------
Attest: /s/ Maria Cesario De Nicolo Attest: Gail M. Zess
---------------------------- -----------------
<PAGE>
BELL, BOYD & LLOYD
Three First National Plaza
70 West Madison Street,
Chicago, IL 60602-4207
Suite 330
312-372-1121
Fax 312-372-2098
January 30, 1997
Monetta Trust
1776-A South Naperville Road
Wheaton, Illinois 60187
Ladies and Gentlemen:
Shares of Beneficial Interest
Without Par Value
-----------------
We have acted as counsel for Monetta Trust (the "Trust") in connection
with the registration under the Securities Act of 1933 (the "Act") of an
indefinite number of shares of beneficial interest, without par value, of the
series of the Trust designated Monetta Small-Cap Equity Fund (the "Series") in
post-effective amendment no. 8 to the registration statement of the Trust no.
33-54822 on form N-1A (the "Registration Statement").
In this connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, records,
certificates and other papers as we deemed it necessary to examine for the
purpose of this opinion, including the Agreement and Declaration of Trust (the
"Trust Agreement") and bylaws of the Trust, and actions of the board of trustees
of the Trust authorizing the issuance of shares of the Series and the
Registration Statement.
Based on the foregoing examination, we are of the opinion that, upon
the issuance and delivery of the shares of the Series after the post-effective
amendment to the Registration Statement has been declared effective and in
accordance with the Trust Agreement and the actions of the board of trustees
authorizing the issuance of such shares, and the receipt by the Trust of the
authorized consideration therefor (which will at least equal the net asset value
of the shares), the shares so issued will be validly issued, fully paid and
nonassessable (although shareholders of a Series may be subject to liability
under certain circumstances as described in the prospectus of the Trust included
as Part A of the Registration Statement under the caption "Other Information").
In giving this opinion we have relied upon the opinion of Ropes & Gray
to us dated January 27, 1997 and have made no independent inquiry with respect
to any matter covered by such opinion.
<PAGE>
Monetta Trust
January 30, 1997
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of person whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Bell, Boyd, & Lloyd
<PAGE>
[ROPES & GRAY LETTERHEAD]
One International Plaza
Boston, Massachusetts 02110-2624
(617) 951-7000
Fax: (617) 951-7050
January 27, 1997
Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, IL 60602
Ladies and Gentlemen:
We are furnishing this opinion in connection with the proposed offer and
sale from time to time by Monetta Small-Cap Equity Fund, a series of Monetta
Trust (the "Trust") of an indefinite number of shares of beneficial interest,
without par value (the "Shares"), pursuant to a post-effective amendment to the
Trust's Registration Statement on Form N-1A (No. 33-54822) under the Securities
Act of 1933, as amended.
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's records of
Trustee action, its By-Laws and its Agreement and Declaration of Trust, as
amended to date. We have examined such other documents as we deem necessary for
the purposes of this opinion.
We assume that, upon sale of the Shares, the Trust will receive authorized
consideration therefor, which will at least equal the net asset value of the
Shares.
We assume that appropriate action has been taken to register or qualify the
sale of the Shares under any applicable state laws regulating offerings and
sales of securities.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares
are issued and sold after the post-effective amendment to the Registration
Statement has been declared effective and the authorized consideration therefor
is received by the Trust, they will be validly issued, fully paid and
nonassessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust or any
series of the Trust (a "Series"). However, the Agreement and Declaration of
Trust disclaims shareholder liability for acts or obligations of the Trust or
any Series and requires that notice of such disclaimer be given in
<PAGE>
Bell, Boyd & Lloyd -2- November 13, 1996
every note, bond, contract or other undertaking issued by or on behalf of the
Trust. The Agreement and Declaration of Trust provides for indemnification out
of property of the Trust or a particular Series for all loss and expense of any
shareholders held personally liable for the obligations of the Trust or that
particular Series. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
or the particular Series itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the aforesaid
post-effective amendment to the Trust's Registration Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
[KPMG PEAT MARWICK LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
of Monetta Trust:
We consent to the use of our report which is incorporated by reference into the
Statement of Additional Information and to the reference to our Firm under the
headings "Financial Highlights" in the Prospectus and "Independent Auditors" in
the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
January 30, 1997
<PAGE>
MONETTA FUNDS IRA PLAN
January 1, 1997
- ------------------------------------------------------------------------------
1776-A S. Naperville Road, Suite 207 . Wheaton, Illinois 60187-8133 .
1-800-MONETTA
- ------------------------------------------------------------------------------
HOW TO OPEN A MONETTA IRA ACCOUNT
Fill out the application and beneficiary form at the back of this booklet and
mail it, together with your check, to Firstar Trust Company at the address shown
on the application.
If you and your spouse are each setting up an IRA, two separate accounts will
be required even if your spouse's contribution to his or her IRA is based on
your compensation (see below). Have your spouse fill out the extra application
and beneficiary form, and return it along with yours to Firstar Trust Company.
If you intend to make an IRA contribution for more than one year at this time,
please indicate the years and the amount for each year.
MINIMUM CONTRIBUTION
The initial contribution must be at least $250, which initial contribution may
be divided among the Funds as long as at least $250 is invested in any Fund.
Subsequent investments must be at least $50. However, you are not required to
make a contribution every year.
CUSTODIAN FEES
<TABLE>
<CAPTION>
<S> <C>
Acceptance fee.......................................... no charge
Transfer to Successor Trustee........................... $15.00
Transfer from Prior Trustee............................. no charge
Annual maintenance fee.................................. $12.50
Distribution(s) to a Participant
(single annual charge for any number of distributions). $15.00
Refund of Excess Contribution........................... $15.00
Systematic Withdrawal Plan Distributions................ no charge
Telephone Exchanges (unless declined)................... $5.00 per exchange
</TABLE>
Note: Each IRA account is subject to the above fees, including accounts for
spouses and each of multiple accounts for the same participant except
that there is a $25.00 maximum fee per participant.
The $12.50 annual maintenance fee will be charged to each account if not paid
before October 15th. No maintenance fee will be charged the first year if the
account is opened between November 1st and December 31st of that year.
This booklet is authorized for distribution only when
preceded or accompanied by a current Monetta Trust and
Monetta Fund, Inc. prospectus.
<PAGE>
REGULAR IRA
Who qualifies? You qualify in any year when you have earnings from employment or
self-employment. You qualify even if you are also covered by a retirement
program of your employer or a Keogh plan. However, if you and/or your spouse are
active participants in such a plan, your deduction for your IRA contribution may
be reduced or eliminated depending on your income. See the Disclosure Statement,
Section (2), "Deductible Contributions" and "Nondeductible Contributions."
You may contribute up to $2,000 or 100% of your earned income, whichever is
less. Alimony and separate maintenance payments are treated as earned income for
this purpose.
You may not contribute to your regular IRA for any year if you are over age
70-1/2 before the end of the year.
If your spouse has less than $2,000 in earned income and you file a joint
return, you may jointly contribute up to the lesser of $4,000 or 100% of your
combined earned income. The contribution may be divided between your IRA and
your spouse's IRA in any way you decide, so long as the portion allocated to
either one does not exceed $2,000. (If you are making a contribution for 1996,
the combined limit is the lesser of $2,250 or your earned income.)
SEP-IRA
Your employer may set up a simplified employee pension plan (SEP) and contribute
to your IRA and the IRA of each other eligible employee up to $30,000 or 15% of
compensation, whichever is less. The employer contribution must be based on a
written formula, which cannot discriminate in favor of officers, shareholders or
self-employed or highly compensated individuals.
You can have a Regular IRA, even if you have a SEP-IRA, too. See Disclosure
Statement Section 1(c), "SEP-IRAs" for more details.
SIMPLE-IRA
Up until 1997, employers with up to 25 employees could allow eligible employees
to elect to have a portion of their pay withheld and contributed to a special
type of SEP-IRA called a "salary reduction SEP", or SAR-SEP. Beginning in 1997,
SAR-SEPs have been abolished, and a new type of IRA, called a SIMPLE-IRA, has
been established in their place for employers with up to 100 employees. In a
SIMPLE-IRA, you can elect to have up to $6,000 of your compensation in any year
withheld and deposited in an IRA, and your employer must generally make an
additional contribution to your account as well. SIMPLE-IRAs are otherwise very
similar to SEP-IRAs. See Disclosure Statement, Section 1(d), "SIMPLE-IRAs" for
more details.
The Monetta Funds IRA Application and form of IRA custody account included with
these materials cannot be used to open a SIMPLE-IRA. If you or your employer are
interested in a SIMPLE-IRA, call 1-800-MONETTA for the necessary forms.
ROLLOVER IRA
If you receive a distribution from the qualified retirement plan of a former
employer, you may be eligible to roll over the distribution to an IRA free of
tax. You may under certain circumstances make a rollover again to the profit
sharing or pension plan of a new employer. If you want to have that right,
however, your rollover IRA derived from an employer's qualified plan must be
kept separate from any other IRA you may have. Qualified retirement plans are
required to withhold 20% of most distributions to you for payment of income
taxes unless your plan balance is transferred directly to an IRA or another
qualified plan. This means that a direct transfer may be preferable to a
rollover for moving your qualified plan balance to a Monetta IRA. See "Transfer
From a Qualified Retirement Plan to a Monetta IRA," below.
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<PAGE>
You may also make a rollover to a Monetta IRA from another IRA. However, a
rollover of the same funds from one IRA to another may be made no more than once
during a 12-month period. An amount withdrawn from a SIMPLE-IRA during the first
two years of participation may only be rolled over into another SIMPLE-IRA.
Any rollover must be made within 60 days after receipt of the distribution from
your employer's qualified plan or your previous IRA. Otherwise, the
distribution will be subject to tax for the year you receive it.
See Disclosure Statement, Section 1(b), "Rollover IRAs."
TRANSFER FROM A QUALIFIED RETIREMENT PLAN TO A MONETTA IRA
You may also make a direct transfer of funds from your employer's qualified
retirement plan to a Monetta IRA. Retirement plans are required to transfer
distributions directly to an IRA if the employee directs, and are also required
to withhold 20% of the distribution for taxes if a distribution is not
transferred directly to an IRA or another plan. Generally speaking, these rules
regarding direct transfers apply to any distribution that could be rolled over
into an IRA.
The procedure for making a direct transfer from a retirement plan into a Monetta
IRA is the same as the procedure for a direct transfer from another IRA,
discussed below.
TRANSFER TO A MONETTA IRA FROM ANOTHER IRA
You may also make a direct transfer of funds from another IRA to a Monetta IRA.
The 12-month restriction on IRA rollovers does not apply to direct transfers.
The transfer must be direct from your existing IRA to a Monetta IRA without your
having physical contact with the funds transferred. To make a transfer:
1) Follow the procedure for opening an account.
2) Complete the attached Transfer Form to instruct your present custodian or
trustee to transfer the assets of your present account to Firstar Trust Company
as successor custodian. Have your signature guaranteed if required by your
present custodian.
3) Send the completed transfer form, along with the Monetta IRA application and
beneficiary form, to Firstar Trust Company.
4) Firstar Trust Company and your present custodian or trustee will complete
the details of transferring your funds to your Monetta IRA.
TELEPHONE EXCHANGE PLAN
Contributions to your IRA are invested at your election in Monetta Fund, Monetta
Small-Cap Equity Fund, Monetta Mid-Cap Equity Fund, Monetta Large-Cap Equity
Fund, Monetta Balanced Fund, Monetta Intermediate Bond Fund or Monetta
Government Money Market Fund. A telephone exchange privilege is available among
these funds by making your election on the IRA application.
3
<PAGE>
TAX BENEFITS
You may be able to deduct part or all of the yearly contributions to your IRA
from your gross income, depending on whether you and/or your spouse are active
participants in a retirement program of your employer or a Keogh plan, and
depending on your income. See the Disclosure Statement, Section (2), "Deductible
Contributions." You may claim such a deduction even if you do not itemize your
deductions. The Monetta IRA is in the form of IRS Form 5305-A, which is
automatically deemed acceptable by the Internal Revenue Service. The approval by
the IRS relates only to the form of the account and not to the merits of using
the account as a retirement plan.
WHEN CAN AN ACCOUNT BE OPENED?
You can open your account and make a contribution for any year at any time up to
the due date of your federal income tax return for that year (excluding
extensions). Rollovers and direct transfers from other IRAs or retirement plans
can be made at any time during the year, so long as a rollover contribution is
made within 60 days after the distribution from the other IRA or retirement plan
is received by you. A distribution from a qualified plan may be subject to
income tax even if the distribution is rolled over to an IRA. See "Rollover IRA"
and "Transfer From a Qualified Plan to a Monetta IRA," above.
DO I PAY TAX ON DIVIDENDS AND DISTRIBUTIONS?
No, all dividends and distributions accumulate tax-free. Tax is paid when you
(or your beneficiary) withdraw your retirement benefits. See the Disclosure
Statement, Section (5), "Income and Penalty Taxes."
WHEN MAY I MAKE WITHDRAWALS?
Withdrawals can start after age 59-1/2, and must start by April 1 after the end
of the year in which you (or your spouse, in the case of a spousal account)
reach age 70-1/2. Withdrawals can be made in a lump sum or in installments. The
Internal Revenue Code imposes complex limits on the length of time over which
withdrawals from an IRA can be made. See the Disclosure Statement, Section (4),
"Distributions from your IRA." Withdrawals are subject to tax as ordinary
income, except for any portion rolled over to another IRA or considered to be a
return of nondeductible contributions. See Disclosure Statement, Section (5),
"Income and Penalty Taxes."
WHAT IF I MAKE A WITHDRAWAL BEFORE AGE 59-1/2?
A withdrawal can be made without penalty before age 59-1/2 only in case of death
or permanent disability, in the case of certain periodic payments, or to pay
certain medical expenses (including medical insurance premiums if you are
unemployed). Otherwise, a withdrawal before age 59-1/2 is a premature withdrawal
and is subject to a penalty tax of 10% of the portion that is included in your
income, in addition to the regular income tax. But neither the regular income
tax nor the 10% penalty tax applies to any portion rolled over to another IRA or
considered as a return of your nondeductible contributions. If you make a
withdrawal from a SIMPLE-IRA during the first two years of your participation,
the penalty tax is 25% instead of 10%.
4
<PAGE>
HOW ARE DISTRIBUTIONS MADE AFTER MY DEATH?
If you die on or after April 1 of the year after you reach age 70 1/2, the
remaining balance of your IRA will continue to be distributed to your designated
beneficiary at least as rapidly as under the method of distribution in effect
before your death.
If you die before April 1 of the year after you reach age 70 1/2, the entire
balance of your IRA account must be distributed by December 31 of the year in
which the 5th anniversary of your death occurs.
However, distribution need not be made within this 5-year period if your
beneficiary receives payments over a period measured by his or her life or the
life expectancy beginning no later than December 31 of the year following the
year in which you die.
If the beneficiary is your spouse, those installment payments don't have to
begin until the later of December 31 of the year following the year in which you
die or December 31 of the year in which you would have reached age 70 1/2.
In addition, a distribution need not be made within 5 years of your death if
your spouse is your beneficiary and he or she elects to treat the entire
interest in the IRA (or the remaining part of such interest if distribution has
already begun) as his or her own IRA subject to the regular IRA distribution
requirements. In such a case, your spouse will be considered to be the covered
individual under the IRA.
If you die before the entire IRA has been distributed to you and your spouse is
not your beneficiary, no additional cash contributions or rollover contributions
may be accepted by the IRA.
If distributions are made from your IRA to your surviving spouse (or to a trust
of which your surviving spouse is the income beneficiary), the amount which your
surviving spouse or the trust is entitled to receive in each year must be at
least equal to the income of your IRA (or of the portion of your IRA which
benefits your surviving spouse or the trust) for that year.
You have the right to elect the manner in which your life
expectancy and the life expectancy of your beneficiary will be calculated. This
election must generally be made by the April 1 of the year following the year in
which you reach age 70 1/2, and can have a significant effect on your tax and
estate planning. If you have a substantial balance in your IRA, you should
consult a qualified tax advisor before deciding how to calculate life
expectancies.
____________________
The Monetta IRA Plan is sponsored by Monetta Fund and Monetta Trust. This brief
outline of the Plan is not intended as a full explanation of the Individual
Retirement Plan, but we hope that we have answered some of the questions that
occur to you.
WE URGE YOU TO READ THE ENCLOSED MATERIAL THOROUGHLY.
5
<PAGE>
MONETTA FUNDS INDIVIDUAL RETIREMENT ACCOUNT
Disclosure Statement
--------------------
(January 1, 1997)
This Disclosure Statement is being given to you to assure that you are
informed and understand the nature of an Individual Retirement Account ("IRA").
This disclosure statement explains the rules governing IRAs.
Your Right to Revoke this IRA. You may revoke this IRA at any time
within seven days after the later of the date you received this Disclosure
Statement or the day you established this IRA. For purposes of revocation, it
will be assumed that you received the Disclosure Statement no later than the
date of your check or transfer direction with which you opened your IRA. To
revoke the IRA, you must either mail or deliver a notice of revocation to the
following address:
Firstar Trust Company, Custodian
Monetta Funds
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
If a notice of revocation is mailed, it will be deemed mailed on the
date of the postmark (or if sent by certified or registered mail, the date of
certification or registration) if it is deposited in the mail in the United
States, first class postage prepaid and properly addressed. If you revoke your
IRA, you are entitled to a return of the entire amount contributed.
(1) TYPES OF INDIVIDUAL RETIREMENT ACCOUNTS; ELIGIBILITY
In General. There are several types of IRAs. For example, there is a
"Regular IRA" to which you may make contributions for yourself or for your
spouse. There is a "Rollover IRA" which you can set up to receive assets from a
qualified plan, annuity or another IRA. There is a SEP-IRA (which is also known
as a Simplified Employee Pension Plan) which your employer can establish for
you. Finally, there is a SIMPLE-IRA (also known as a Salary Incentive Match Plan
IRA) which an employer can use for a salary reduction plan. Following is a
general description of the rules which apply to each of these types of IRAs and
who is eligible to establish them.
(a) REGULAR IRA. You may contribute up to the lesser of $2,000 or 100%
of your compensation if you have not reached age 70 1/2 during the taxable year.
You may make this contribution even if you or your spouse is an active
participant in a qualified employer plan. However, as explained below, the
amount of the contribution which you may deduct may be limited. Compensation
includes wages, salary, commissions, bonuses, tips, etc. but does not include
income from interest, dividends or other earnings or profits from property, or
amounts not includible in your gross income.
If your spouse's compensation in a year is less than $2,000, your
spouse may still be able to make a contribution to an IRA if you file a joint
income tax return for the year. Under such an arrangement, you and your spouse
may qualify for a total contribution equal to the lesser of $4,000 (beginning in
1997) or 100% of your combined compensation for the taxable year. You can
determine how to divide the contribution between the two accounts but you cannot
contribute more than $2,000 annually into either one. While you cannot
contribute to your IRA in the taxable year in which you reach 70 1/2, you can
still contribute to your spouse's IRA if he or she has not reached 70 1/2. A
spousal IRA does not involve the creation of a joint account. The account of
each spouse is separately owned and treated independently from the account of
the other spouse.
For years prior to 1997, the maximum combined contribution to your IRA
and your spouse's IRA is $2,250, and a spousal IRA can be established only if
your spouse either had no earned income for the year, or elects to be treated as
having no earned income for this purpose. Your spouse's election for years prior
to 1997 is made by claiming a spousal IRA deduction on your tax return.
(b) ROLLOVER IRAs. All or a portion of certain distributions from
qualified retirement plans, annuities and other IRAs may be "rolled over" tax-
free without regard to the limits on annual contributions to a Regular IRA, but
no deduction is allowed with respect to such a contribution. There are three
basic types of rollovers: rollovers from a qualified pension or profit-sharing
plan, rollovers from another IRA, and rollovers from a tax-sheltered annuity.
All distributions must be rolled over within 60 days after you receive the
distribution to receive tax-free treatment.
From a Qualified Plan. In general, you may roll over any portion of a
distribution that you receive from a qualified employer-sponsored pension or
profit-sharing plan (including a 401(k) plan), except that you cannot roll over
(1) one of a series of substantially equal periodic payments (such as an
annuity), (2) a minimum distribution required to be made after you reach the age
of 70 1/2, or (3) the portion of a distribution that represents the return of
your own after-tax contributions. If you receive a distribution of property
rather than cash, you can sell the property and roll over the sale proceeds, as
long as you complete the rollover within 60 days from the original date of
distribution.
If you make a rollover from a qualified employer plan to an IRA, you
may in turn, under certain circumstances, make a rollover from the IRA into the
qualified plan of a subsequent employer. To preserve that right, however, you
must keep the rollover IRA separate from any other IRA you may have, since you
cannot make a rollover to an employer plan from an IRA to which you have made
yearly contributions.
Instead of receiving a distribution from a qualified plan and rolling
it over, you may also direct the trustee or custodian of any qualified
retirement plan to transfer a distribution from the plan directly to an IRA. If
a distribution from a plan can be rolled over, the plan is required by law to
transfer the distribution directly to an IRA, or another employer's plan, if you
so direct. If you do not direct the distribution to be transferred directly to
an IRA or another plan, the plan making the distribution will be required to
withhold 20% of the distribution for the payment of income taxes, even if you
subsequently roll over the distribution.
Rollover amounts you receive from a qualified employer plan may not be
deposited in your spouse's IRA, but if you should die while still a participant
in a qualified plan, in certain cases your spouse may be allowed to make a tax-
free rollover to an IRA. The amount of the death payout rolled over by a spouse
into an IRA may not subsequently be rolled over into another employer's
qualified plan or annuity. Beneficiaries other than your spouse are not allowed
to roll over distributions they receive after your death.
From Another IRA. In general, any distribution or withdrawal that you
receive from an IRA can be rolled over into another IRA within 60 days, except
that (1) you cannot roll over the minimum distributions you are required to
receive after age 70 1/2, (2) you can only make a rollover from one IRA to
another once in any twelve-month period, and (3) a distribution from a SIMPLE-
IRA that is made within the first two years after you first begin to participate
in the SIMPLE-IRA can only be rolled over to another SIMPLE-IRA. You may also
request the trustee or custodian of an IRA to make a direct transfer to the
trustee or custodian of another IRA. Such direct transfers are not limited to
one in a twelve month period. Unlike the trustees of qualified retirement plans,
trustees of IRAs are not legally required to make direct transfers, but most of
them do. Your spouse may generally roll over distributions that he or she
receives from your IRA after your death, but no beneficiaries other than your
spouse may do so.
Tax Sheltered Annuities. Tax-sheltered annuity plans, sometimes
called "403(b) plans", are a retirement benefit offered by certain governmental
and not-for-profit employers, such as schools and hospitals. If you receive a
distribution from a tax sheltered annuity plan other than in the form of an
annuity, it may generally be rolled over to an IRA under rules similar to those
that apply to distributions from qualified employer plans, as described above.
As with a rollover distribution from an employer plan, you should keep a
rollover from a tax sheltered annuity plan in a separate IRA account and not
make any other contributions to it (including rollovers from other types of
plans) if you wish to preserve the right to roll over to another tax sheltered
annuity plan in the future. Distributions from other types of governmental
retirement plans may or may not be eligible for a rollover depending on whether
the employer has chosen to comply with IRS guidelines. Distributions from
voluntary deferred compensation plans maintained by government and
not-for-profit employers, sometimes known as "Section 457 plans", are not
eligible for a rollover to an IRA.
6
<PAGE>
Strict requirements must be met to qualify for tax-free rollover
treatment. You should consult your personal tax advisor in connection with
rollovers to and from your IRA.
(c) SIMPLIFIED EMPLOYEE PENSION PLAN (SEP-IRA). An employer may adopt
a SEP-IRA and contribute to your SEP-IRA even if you are covered by another
retirement plan. The Code permits an employer to contribute to your SEP-IRA up
to 15% of your compensation (computed without regard to the contribution) or
$30,000 (or such other amount as may be prescribed by the Secretary of the
Treasury), whichever is less. The contributions are deductible by the employer
and are generally not includible in your income until you receive distributions.
Employer contributions must be made under a written allocation formula which
cannot discriminate in favor of so-called "highly compensated employees" (as
defined in the Code). Employer contributions are considered discriminatory
unless they bear a uniform relationship to the first $160,000 of each
participant's compensation.
An employer must cover each employee who has attained age 21 and has
performed service for the employer during at least three of the immediately
preceding five calendar years, but employees who earn less than $300 in the year
in question, employees covered by certain collective bargaining agreements and
certain nonresident aliens may be excluded. "Leased employees" (i.e., those
individuals who are not the employer's employees, who are hired through a
"leasing organization", are under the primary direction or control of the
employer, and who provide services on a substantially full-time basis for more
than a year) must be treated as regular employees for the purposes of making
SEP-IRA contributions, unless the leasing organization provides prescribed
minimum pension benefits to the leased employees. Any SEP-IRA contribution made
by the leasing organization attributable to services performed for the employer
may be used to reduce the employer's contribution to a leased employee's
SEP-IRA.
Generally, if the employer does not maintain an integrated plan at any
time during the taxable year, Old Age and Survivor Disability Insurance
("OASDI") contributions may be taken into account as contributions by the
employer to the employee's SEP-IRA but only if such OASDI contributions are
taken into account with respect to each employee maintaining a SEP-IRA. If the
SEP-IRA is part of a top-heavy plan as defined in the Code, the employer must
make a minimum contribution to each non-key employee's SEP-IRA for each year
that the plan is top-heavy. Generally, a plan is top-heavy if the aggregate of
the accounts of key employees as defined in Code Section 416 (i.e., certain
officers, owners and highly compensated individuals) exceeds 60% of the
aggregate of the accounts of all employees. If the employer maintains more than
one plan, such plans may, or under certain circumstances must, be aggregated for
purposes of determining whether the SEP-IRA is top-heavy. Generally, the minimum
contribution required to be made to the SEP-IRA of each non-key employee in a
top-heavy year is 3% of the employee's compensation.
(d) SIMPLE-IRAs. Up until 1997, employers with up to 25 eligible
employees could allow employees to elect to have a portion of their pay withheld
and contributed to a special type of SEP-IRA, called a "salary reduction SEP",
or SAR-SEP. Beginning in 1997, SAR-SEPs have been abolished, and a new type of
IRA, called a SIMPLE-IRA, has been established instead. Although new SAR-SEPs
cannot be established after 1996, SAR-SEPs that were in existence on December
31, 1996, can remain in existence and continue to receive contributions in
future years, including contributions for new employees. Beginning in 1997,
employers with up to 100 eligible employees can establish SIMPLE-IRAs. In a
SIMPLE-IRA, you can elect to have up to $6,000 of your compensation in any year
withheld and deposited in an IRA, and your employer must generally make an
additional contribution to match the amount that you have withheld up to a
maximum of 3% of your compensation. The employer may elect to lower the maximum
matching contribution to as low as 1% in some years, but may not lower the
maximum match in more than two years out of every five. The employer may also
elect to make a contribution equal to 2% of compensation for all eligible
employees in any year instead of making matching contributions. All employees
who have been paid at least $5,000 in two prior years and expect to be paid
$5,000 in the current year must eligible to participate (excluding nonresident
aliens and union workers whose collective bargaining agreement does not provide
for them to participate). SIMPLE-IRAs are otherwise very similar to
SEP-IRAs.
Although SEP-IRAs and SIMPLE-IRAs are primarily intended to be adopted
by employers for the benefit of their employees, these types of IRAs can also be
established by a self-employed person for his own benefit, which may enable him
to make a larger deductible contribution than would be permitted using a Regular
IRA.
The rules governing SEP-IRAs and SIMPLE-IRAs are complex. We suggest
that you discuss them with your tax advisor.
You may contribute to a Regular IRA even if you participate in a SEP-
IRA or SIMPLE-IRA (although the deductibility of your contribution may be
limited as described below). Except as otherwise noted, your SEP-IRA or SIMPLE-
IRA generally is subject to the rules governing a Regular IRA. Your rights to
withdraw amounts held in a SEP-IRA or SIMPLE-IRA cannot be restricted by your
employer.
(2) CONTRIBUTIONS
In General. As explained in this part, the amount of your IRA
contributions which you can deduct is subject to limits. All contributions and
transfers to your Monetta IRA must be in cash, except that a rollover
contribution may be made either in cash or in shares of the Monetta Funds.
Contributions to your or your spouse's Regular IRA may be made up to the due
date for filing your tax return for the taxable year (excluding extensions
thereof) even if you file before the due date. In making contributions, you must
indicate the tax year to which the contribution applies. If no tax year is
designated, the custodian will assume that the contribution is intended to apply
to the calendar year in which it is received. The time limit for designating the
applicable tax year is April 15.
Contributions made by an employer to your SEP-IRA or SIMPLE-IRA for a
calendar year may be made no later than the due date of your employer's tax
return (including extensions). In making a SEP-IRA or SIMPLE-IRA contribution,
the tax year to which the contribution relates must also be specified or it will
be deemed to relate to the calendar year in which it is received. In a SEP-IRA
or SIMPLE-IRA, this designation of the tax year of a contribution must be made
by the due date for contributions described above.
Deductible Contributions. If you are single and are not an "active
participant" in a retirement plan maintained by your employer, you can deduct
the full amount of your IRA contribution up to the lesser of $2,000 or 100% of
your compensation for the year. If you are married, you can deduct the full
amount of your IRA contribution so long as neither you nor your spouse is an
"active participant" in a retirement plan maintained by your respective
employers. These plans include qualified pension, profit-sharing, stock bonus or
money purchase plans, 401(k) plans, SEP-IRAs, SIMPLE-IRAs, qualified annuity
plans, tax-sheltered annuities and pension or retirement plans of governmental
agencies (but not voluntary deferred compensation plans known as "Section 457
plans"). In general, you are considered to be an active participant in a plan if
an employer contribution or forfeiture was credited to your account during the
year in the case of a defined contribution plan or, in the case of a defined
benefit plan, you are eligible to participate even if you choose not to. You are
considered to be an active participant in a plan if you make a contribution to
the plan during a year even if your employer does not. For active participation,
it does not matter whether any interest you have in a plan is vested or
unvested.
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If you or your spouse is an active participant in a plan, the amount
of the deduction you can claim for an IRA contribution is reduced or totally
denied depending upon the amount by which your adjusted gross income for the
year exceeds the "applicable dollar amount." The applicable dollar amount is
$25,000 for single people and $40,000 for married individuals filing a joint tax
return. If you are married but are filing separate tax returns, your applicable
dollar amount is $0.
If your adjusted gross income exceeds your applicable dollar amount by
more than $10,000, you may not deduct any portion of your IRA contribution.
However, if it is between $0 and $10,000 more than your applicable dollar
amount, you can claim a tax deduction for your contribution. To determine the
amount of the deduction, follow these steps. First, determine the amount of the
contribution you can make. If, for example, you have compensation in excess of
$2,000 you could make a $2,000 contribution to your Regular IRA. Next, subtract
the applicable dollar amount from your adjusted gross income. If you are single
and your adjusted gross income is $30,000, the difference would be $5,000. Next,
divide this difference by $10,000. In the example $5,000/$10,000 equals 1/2.
Accordingly, you may deduct 1/2 of your contribution. If the deduction
limitation is not a multiple of $10, round the deduction to the next $10. If
your adjusted gross income does not exceed $35,000 and you are single or $50,000
and you are married, you can deduct $200 regardless of how the computation comes
out.
Married persons who file separate returns are treated as unmarried for
purposes of these rules if they did not live together at any time during the
year.
Nondeductible Contributions. Even though you may not be entitled to
claim a deduction for contributions to your IRA, you are still allowed to make
the contributions to the extent described in "Types of IRAs" above. To the
extent that the amount of your contribution exceeds the deduction limit, it is
considered a nondeductible contribution. Earnings on these contributions are not
taxed until distributed, just like the earnings on deductible contributions. It
may therefore be worthwhile making nondeductible contributions.
You are required to report the amount of your nondeductible
contributions on Form 8606 and attach it to your income tax return. If you
overstate this amount, you may be liable for a tax penalty of $100 per
overstatement.
(3) INVESTMENT AND HOLDING OF CONTRIBUTIONS
Contributions to your IRA, and the earnings thereon, are invested in
shares of Monetta Fund, Monetta Small-Cap, Monetta Mid-Cap Equity Fund, Monetta
Large-Cap Equity Fund, Monetta Balanced Fund, Monetta Intermediate Bond Fund or
Monetta Government Money Market Fund (collectively "the Funds") according to the
directions you give the Custodian.
The assets in your account are held in a custodial account exclusively
for your benefit and the benefit of such beneficiaries as you may designate in
writing delivered to the Custodian. The balance in your IRA represents a
separate account which is clearly identified as your property and generally may
not be combined for investment with the property of another individual. Your
right to the entire balance in your account is nonforfeitable. No part of the
assets of your account may be invested in life insurance contracts or in
collectibles such as works of art, antiques, coins, stamps, etc.
(4) DISTRIBUTIONS FROM YOUR IRA
Distribution During Your Life. The law permits distributions to be
made from an IRA at any time after you attain age 59 1/2 without penalty, and
requires that distributions commence no later than April 1 following the
calendar year in which you attain age 70 1/2. Distributions may be in the form
of a single payment or, in accordance with regulations, in substantially equal
monthly, quarterly or annual payments over your life or the joint lives of you
and your designated beneficiary, or over a period certain not extending beyond
your life expectancy or the joint and last survivor life expectancy of you and
your designated beneficiary. However, if your beneficiary is not your spouse,
the law imposes an additional requirement called the minimum distribution
incidental benefit requirement. In general, this requirement puts a further
limit on the maximum payout period. This further limit is based on a table in
the income tax regulations, and if this limit applies to you, you should consult
your tax advisor to determine your minimum distribution.
If you direct distributions over your life or the joint lives of you
and your designated beneficiary, the Custodian will use your IRA balance to
purchase an immediate annuity contract from an insurance company you choose and
your payments will be made under the annuity. You must provide a completed
annuity application from the insurance company of your choosing.
Any distribution instruction must specify the reason for the
distribution. Examples of such reasons are: premature distributions (i.e.,
distributions before age 59 1/2), rollovers, disability, death, normal (59 1/2
or over), excess contribution returns and other.
Distributions After Your Death. If you die after the April 1 after you
reach age 70 1/2, but before the entire amount of your IRA has been distributed
to you, the balance of your IRA must be distributed to your designated
beneficiary at least as rapidly as under the method of distribution in effect
before your death.
If you die before the April 1 following the year in which you reach
age 70 1/2, the entire balance of the account must be distributed by December 31
of the year in which the 5th anniversary of your death occurs. However,
distribution need not be made within this 5-year period if your beneficiary
receives payments over a period measured by his or her life or the life
expectancy beginning no later than December 31 of the year following the year in
which you die. If the beneficiary is your spouse, those installment payments
don't have to begin until the later of December 31 of the year following the
year in which you die or December 31 of the year in which you would have reached
age 70 1/2. In addition, a distribution need not be made within 5 years of your
death if your spouse is your beneficiary and he or she elects to treat the
entire interest in the IRA (or the remaining part of such interest if
distribution has already begun) as his or her own IRA subject to the regular IRA
distribution requirements. In such a case, your spouse will be considered to be
the covered individual under the IRA. If you die before the entire IRA has been
distributed to you and your spouse is not your beneficiary, no additional cash
contributions or rollover contributions may be accepted by the IRA.
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If distributions are made from your IRA to your surviving spouse (or
to a trust of which your surviving spouse is the income beneficiary), the amount
which your surviving spouse or the trust is entitled to receive in each year
must be at least equal to the income of your IRA (or of the portion of your IRA
which benefits your surviving spouse or the trust) for that year.
Calculations of Life Expectancy. As discussed above, the minimum
amount that you or your beneficiary must withdraw from your IRA is in many
cases determined by your life expectancy or your beneficiary's life expectancy.
In general, life expectancies are determined based on actuarial tables issued by
the IRS in the year, and are recalculated in each year in which you or your
beneficiary is required to receive a distribution. If you die before reaching
age 70 1/2 and your beneficiary is your surviving spouse, your spouse will also
generally redetermine his or her life expectancy for each year. Since life
expectancies go up as people get older, recalculating your or your spouse's life
expectancy each year will ordinarily result in a lower required annual
distribution. However, it can also result in an acceleration of the amount that
must be distributed, and the tax that must be paid, when you or you and your
primary beneficiary die. To avoid this, you (or your surviving spouse) may elect
instead to calculate your life expectancy at the time that you are required to
begin receiving mandatory distributions. This election must be made before the
date on which mandatory distributions must begin, and can't be changed after
that date. Accordingly if you have a substantial balance in your account, it is
very important that you consult a qualified tax advisor before you are required
to begin receiving distributions.
(5) INCOME AND PENALTY TAXES
Income Tax Treatment. Income tax on deductible IRA contributions and
earnings on both deductible and nondeductible IRA contributions is generally
deferred until you receive distributions. If you have made both deductible and
nondeductible contributions to IRAs you maintain, a portion of each distribution
you receive from any IRA (whether or not it is the one to which you made
nondeductible contributions) will be considered to be a return of nondeductible
contributions and therefore not included in your income for tax purposes. The
balance of each distribution will be taxed as ordinary income regardless of its
original source. The amount of any distribution which is considered to be a
return of nondeductible contributions (and therefore not taxed) is determined by
multiplying the amount of the distribution by a fraction. The numerator of the
fraction is the aggregate amount of nondeductible contributions you have made to
all of your IRAs over the years and the denominator is the balance in all your
IRAs at the end of the year (after adding back any distributions you received
during the year). The aggregate amount which can be excluded from income for all
years cannot exceed the amount of nondeductible contributions that you made in
those years.
Taxable distributions from your account are taxed as ordinary income
regardless of their original source. They are not eligible for special tax
treatment that may apply to lump sum distributions from qualified employer
plans.
Penalty Tax for Premature Distributions. Your IRA is intended to
provide income for you upon retirement. Accordingly, the law generally imposes a
penalty on premature distributions. If you receive a taxable distribution from
the IRA before reaching age 59 1/2 and do not roll it over, a nondeductible 10%
penalty will be imposed on the portion of the distribution which is included in
your gross income. (If you withdraw funds from a SIMPLE-IRA within the first two
years after you begin to participate, the penalty is 25% rather than 10%). This
penalty is in addition to any income tax you must pay on the distribution
itself. The penalty does not apply to the extent that the distribution is
considered a return of nondeductible contributions or a return of an excess
contribution which is permitted tax-free (see below). The penalty also will not
apply if the distribution is made due to your permanent disability or death or
if the distribution is one of a series of substantially equal periodic payments
made over your life (or life expectancy) or over the joint lives (or life
expectancies) of you and your beneficiary. Beginning in 1997, the penalty does
not apply to certain withdrawals used to pay medical insurance premiums after
you have unemployed for at least 12 weeks, or certain larger medical bills.
Penalty Tax for Excess Contributions. Contributions to an IRA above
the permissible limits are nondeductible and are subject to an annual
nondeductible excise tax of 6% of the amount of such excess contributions for
each year that the excess is not withdrawn or eliminated. The tax is paid by the
person to whom a deduction is allowed or in the case of a Rollover IRA, by the
person for whose benefit it is established. If the person who contributed the
excess takes no deduction for it and withdraws the excess amount plus the net
earnings attributable to such excess on or before the due date (including
extensions) for filing the Federal income tax return for the year for which the
contribution was made, the 6% excise tax will not be applied but the 10% tax on
premature distributions will be applied to the amount of net earnings.
Generally, if the excess is withdrawn after the due date (including extensions)
for filing the tax return for the year for which the contribution was made, not
only will the excess contribution be subject to the 6% excise tax, but the
amount of such excess and the net income attributable to it will also be
includible in income; and if you have not attained the age of 59 1/2, or are not
disabled, you will also be subject to the previously mentioned 10% penalty tax
on premature distributions. The law provides, however, that if an individual has
made a contribution to an IRA for a year which does not exceed $2,000 (excluding
rollover amounts), all or part of which is an excess contribution for which he
did not claim a deduction, and he does not correct the excess contribution
before the due date (including extensions) for filing his tax return for the
year, he nevertheless may withdraw the excess amount contributed (without the
net income attributable thereto) at any time without incurring the 10% penalty
tax on premature distributions or being required to include the amount withdrawn
in income. The 6% excise tax will be imposed even in this special situation for
the year of the excess contribution and each subsequent year until the excess is
withdrawn or eliminated.
The rules discussed above generally apply to SEP-IRAs and SIMPLE-IRAs
as well. The law also allows you to withdraw tax-free and without penalty an
excess contribution, regardless of the amount, made with respect to a rollover
contribution (including an attempted rollover contribution), if the excess
contribution occurred because you reasonably relied on erroneous information
required to be supplied by the plan, trust or institution making the
distribution that was the subject of the rollover.
As an alternative to withdrawing excess contributions made to an IRA,
such amounts may be eliminated by making reduced contributions; however, you
will be required to pay the 6% excise tax on the amount of the excess for the
year of the contribution and for each subsequent year until the amount of the
excess is deducted in a later year for which you have not contributed the
maximum deductible amount. If a contribution is made to your account in an
amount less than the permissible limit in order to correct an excess
contribution for a previous year for which you did not claim a deduction, you
may under certain circumstances, taking into account the limits on
contributions, be allowed to treat the amount of the reduction in the current
year's contribution as an additional contribution for the current taxable year.
Penalty Tax for Under-Distribution. If after April 1 following the
year in which you attain age 70 1/2, the amount distributed is less than the
minimum amount required by law to be distributed, a 50% excise tax may be
imposed on any such deficiency. The minimum amount required by law to be
distributed is generally based on your life expectancy or the joint and survivor
life expectancy of you and your beneficiary. However, if your beneficiary is not
your spouse, the law imposes an additional requirement which is called the
minimum distribution incidental benefit requirement. In general, this
requirement is designed to prevent you from naming a beneficiary who is much
younger than yourself in order to extend your payout period. You should consult
your tax advisor to determine your maximum distribution.
The Internal Revenue Service may waive the penalty tax for under-
distribution if the deficiency was due to reasonable error and reasonable steps
are being taken to correct the deficiency.
Penalty Tax for Excess Distributions and Accumulations. A 15% penalty
tax is generally imposed on annual distributions from retirement arrangements
(including IRAs) to the extent that such distributions in a year are considered
"excess distributions." A distribution is an "excess distribution" if it exceeds
$160,000 (or such higher amount as may be specified by the IRS) during any
calendar year. In addition, upon your death, your estate may be subject to a tax
of 15% of the excess of the balance in all such retirement arrangements over an
amount equal to the present value of an annuity of $160,000 per year. The tax on
excess distributions (but not the additional estate tax on excess accumulations)
has been suspended for distributions received during 1997, 1998 and 1999. You
should discuss how these rules apply to you with your tax advisor.
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Prohibited Transactions and Pledging Account Assets. If during any
taxable year you engage in a so-called "prohibited transaction" with respect to
your IRA, the account will lose its tax-exempt status. In this event, the fair
market value of all account assets, valued as of the first day of such taxable
year, will be deemed distributed to you and includible in your gross income.
These prohibited transactions would include borrowing money from your account.
If you pledge your account or any portion thereof as security for a loan, such
pledged portion will be deemed distributed to you and, to the extent that it
does not represent a return of nondeductible contributions, includible in your
gross income. If you have not yet attained age 59 1/2, the 10% or 25% penalty
tax on premature distributions discussed above will also apply. If your spouse
engages in a prohibited transaction with respect to his or her account, the
results will be the same.
(6) MISCELLANEOUS
Federal Income Tax Withholding. Distributions from an IRA to the
covered individual or to a beneficiary are subject to Federal income tax
withholding unless the covered individual or beneficiary elects to have no
withholding apply. The current withholding rate required by the Internal Revenue
Code is 10%. Additional information concerning withholding and election forms
will be available no later than at the time a distribution is requested.
Federal Estate and Gift Taxes. Generally, your IRA will be included in
your estate for Federal estate tax purposes. If your spouse is your beneficiary,
your IRA may qualify for a deduction for purposes of that tax. An election under
an IRA to have a distribution payable to a beneficiary on the death of the
covered individual will not be treated as a gift subject to Federal gift tax.
Reports to the Internal Revenue Service. You are not required to file
Form 5329 with the IRS unless you owe one of the IRA penalty taxes. These are
the taxes on excess contributions, premature distributions, prohibited
transactions and underdistributions after age 70 1/2.
Financial Information. The growth in value of the mutual fund shares
held in your account can neither be guaranteed nor projected.
Plan Sponsor. Monetta Fund and Monetta Trust are the sponsors of the
Monetta IRA and perform most of the ministerial functions in connection with the
maintenance of the accounts established under the Monetta IRA.
Custodian Fees. Firstar Trust Company as the Custodian of your IRA
currently charges an annual maintenance fee of $12.50 per account, per fund in
which you have an investment. You should refer to the fee schedule for other
fees which may be applicable. Note that IRAs for spouses require separate
accounts, even if only one spouse makes the contributions. Each spouse's account
is subject to the above fees.
The $12.50 annual maintenance fee will be deducted from your account
if not paid before October 15th. No maintenance fee will be charged the first
year if the account is opened between November 1st and December 31st of that
year.
The Custodian may change any of the above fees from time to time.
Requirements for Tax Qualification. In order to qualify for tax-exempt
status an IRA must be a trust or custodial account created in the United States
for the exclusive benefit of the depositor and his beneficiaries, and the trust
or custodial agreement must meet the following requirements: (1) annual
contributions must be limited as described above; (2) the trustee or custodian
must either be a bank, or another financial institution that has been approved
by the IRS; (3) no part of the IRA can be invested in life insurance contracts;
(4) the interest of the depositor must be nonforfeitable; (5) the assets of the
IRA cannot be commingled with other property except in a common trust fund or
common investment fund; and (6) the IRA must satify the minimum distribution
requirements summarized above. The Monetta IRA is in the form of IRS Form
5305-A, which is automatically deemed acceptable by the IRS as to form. The
approval by the IRS relates only to the form of the account and not to the
merits of using the account as a retirement plan.
Additional Information. You may obtain additional information
regarding the taxation of IRAs from any district office of the Internal Revenue
Service.
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Form 5305-A
(Rev. October, 1992)
Department of the Treasury
Internal Revenue Service
MONETTA FUNDS INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
(Under Section 408(a) of the Internal Revenue Code)
(January 1, 1997)
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section 1.401(a)(9)-
2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70 1/2). By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has irrevocably
commenced, distributions are treated as having begun on the Depositor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in the
account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire Interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and
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designated beneficiary as of their birthdays in the year the Depositor reaches
age 70 1/2. In the case of a distribution in accordance with paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section 408(i)
and Regulations section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Definitions.
"Investment Company" shall mean an investment company as defined in
Internal Revenue Code Section 851(a), shares of which Monetta Fund or Monetta
Trust have agreed to offer for investment under this Account. "Investment
Company Shares" or "Shares" shall mean shares of beneficial interest or capital
stock of the Investment Company.
2. Investment of Account Assets.
(a) Each contribution forwarded by the Depositor to the Custodian shall
identify the Depositor's account number and be accompanied by a statement signed
by the Depositor identifying the Investment Company Shares in which that
contribution is to be invested. The Custodian may return to the Depositor,
without liability for interest thereon, any contributions which are not
accompanied by adequate account identification or an appropriate signed
statement directing investment of those contributions.
(b) Contributions shall be invested in whole and fractional Investment
Company Shares at the price and in the manner in which such shares are then
being publicly offered by the Investment Company. All distributions received on
Investment Company Shares held in the Custodial Account shall be reinvested in
like Shares and credited to such Account. If any distribution of Investment
Company Shares may be received at the election of the shareholder in additional
like Shares or in cash or other property, the Custodian shall elect to receive
such distribution in additional like Investment Company Shares.
(c) All Investment Company Shares acquired by the Custodian shall be
registered in the name of the Custodian or its registered nominee. The Depositor
shall be the beneficial owner of all Investment Company Shares held in the
Custodial Account and the Custodian shall not vote any of such shares, except
upon written direction of the Depositor. The Custodian agrees to forward to
every Depositor a then current Prospectus, reports, notices, proxies and related
proxy soliciting materials applicable to Investment Company Shares received by
the Custodian.
(d) The Depositor may at any time, by a manually signed direction
delivered to the Custodian, redeem any number of Investment Company Shares held
for his account and reinvest the proceeds in the Shares of any other Investment
Company. Telephone redemptions and reinvestments shall be done at the price and
in the manner in which such Shares are then being redeemed or offered by the
respective Investment Companies.
3. Amendment and Termination.
(a) Monetta Trust may, with the written approval of the Custodian, amend
the Custodial Account in whole or in part (including retroactive amendments) by
delivering to the Depositor written notice of such amendment setting forth the
substance and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendments not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that no
amendment shall cause or permit any part of the assets of the Custodial Account
to be diverted to purposes other than for the exclusive benefit of the Depositor
or his beneficiaries, nor shall any amendment be made except in accordance with
the applicable law and regulations affecting this Custodial Account.
(b) The Depositor may at any time terminate the Custodial Account by
delivering to the Custodian a written notice of such termination setting forth
the effective date thereof, together with any required withholding information.
(c) The Custodial Account created by this Agreement shall automatically
terminate upon distribution to the Depositor or the beneficiary designated under
Paragraph 6 of Article VIII hereof of the entire balance in the Custodial
Account.
(d) The Custodian may be removed by the Depositor at any time upon thirty
(30) days written notice to the Custodian. The Custodian may elect to terminate
the Custodial Account upon thirty (30) days written notice to the Depositor.
(e) In the event that the assets of any Investment Company in which the
Custodian Account is invested are transferred to or acquired by any other
investment company or other commingled investment fund which is a permissible
investment for an individual retirement account, by merger or otherwise, the
Custodian may make such amendments to this Agreement, or take such other action,
as it may determine to be necessary or appropriate to accomplish such
transaction and the exchange of Investment Company Shares for shares or other
appropriate units of ownership in such successor fund. The consent of the
Depositor shall not be required for any such amendment or action, but the
Depositor shall be promptly notified thereof, and shall have the right to
withdraw the funds in the Custodian Account without fee, charge, load of penalty
of any kind.
4. Taxes and Custodial Fees. Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon or in respect of the assets of
the Custodial Account, or the income arising therefrom, any transfer taxes
incurred, all other administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to the
Custodian, and the Custodian's compensation, shall be paid from the Custodial
Account. Unusual administrative responsibilities not contemplated by the fee
schedule will result in such additional charges as will reasonably compensate
the Custodian for the services performed.
The custodian fee listed in the fee schedule will be deducted by the
Custodian from the initial contribution received from the Depositor. The annual
maintenance fee will be deducted on the last business day in September for each
year and enough fund shares will be redeemed to cover this fee. Fees as listed
on the fee schedule will be deducted from the refund or redemption proceeds at
the time of distribution or redemption and the remaining balance will be
remitted to the Depositor in the case of distribution, or will be reinvested in
accordance with the Depositor's instructions.
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5. Reports and Notices.
-------------------
(a) The Custodian shall keep adequate records of transactions it is
required to perform hereunder. No later than sixty (60) days after the close of
each calendar year, or after the Custodian's resignation or removal pursuant to
Article VIII, Paragraph 3, the Custodian shall render to Depositor a written
report or reports reflecting the transactions effected by it during such period
and the assets and liabilities of the Custodial Account at the close of the
period.
(b) All communications or notices required or permitted to be given herein
shall be deemed to be given upon receipt by the Custodian at P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, the Investment Company and Monetta Fund and/or
Monetta Trust at P.O. Box 701, Milwaukee, Wisconsin 53201-0701, or the Depositor
at his most recent address shown in the Custodian's records. The Depositor
agrees to advise the Custodian promptly, in writing, of any change of address.
6. Designation of Beneficiary. The Depositor shall have the right, by
--------------------------
written notice to the Custodian, to designate a beneficiary or beneficiaries,
primary and contingent, to receive any benefit to which such Depositor may be
entitled in the event of his death prior to the complete distribution of such
benefit. In the event the Depositor has not designated any beneficiaries, or if
all beneficiaries shall predecease the Depositor, the following persons shall
take in the order named:
(a) Spouse of the Depositor;
(b) If the spouse shall predecease the Depositor, then in equal shares to
any children surviving the Depositor and to the descendants then living of a
deceased child, by the right of representation, or
(c) If the Depositor shall leave neither spouse nor descendants surviving,
then to the personal representative of the Depositor's estate.
The determination of the Custodian as to the person entitled to receive any
distribution from the Custodial Account following the death of the Depositor, if
made in good faith, shall be conclusive and binding on all persons claiming an
interest in the Depository Account; provided that nothing provided herein shall
be construed to preclude the Custodian from filing an action in the nature of
interpleader or other appropriate proceeding in a court of competent
jurisdiction to determine the person entitled to receive such distribution. Any
expenses incurred by the Custodian in determining the person entitled to receive
a distribution from a Custodial Account, including without limitation attorneys
fees in any such action, shall be reimbursed from the Custodial Account.
7. Inalienability of Benefits. The benefits provided hereunder shall not
--------------------------
be subject to alienation, assignment, garnishment, attachment, execution or levy
of any kind of any attempt to cause such benefits to be so subjected shall not
be recognized except to the extent as may be required by law.
8. Rollover Contributions. The Custodian may receive rollover
----------------------
contributions as described in section 408(d)(3) or any other applicable
provisions of the Code, and regulations promulgated thereunder. If any property
is transferred to the Custodian as a rollover contribution, such property shall
be sold by the Custodian and the proceeds reinvested as provided in section 2 of
this Article VIII. The Custodian reserves the right to refuse to accept any
contributions which are not in the form of cash.
9. Conflict in Provisions. To the extent that any of the provisions of
----------------------
Article VIII shall conflict with the provisions of Articles IV, V, or VII, the
provisions of Article VIII shall prevail.
10. Status of Depositors. Neither the Depositor nor any other person shall
--------------------
have any legal or equitable right against the Custodian or the Investment
Company except as provided herein. The Depositor agrees to indemnify and hold
the Custodian harmless from and against any liability that the Custodian may
incur in the administration of the Account unless arising from the Custodian's
own negligence or misconduct.
11. Loss of Exemption. If the Custodian receives notice that the
-----------------
Depositor's Account has lost its tax-exempt status under section 408 of the Code
for any reason, including by reason of a transaction prohibited by section 4975
of the Code, the Custodian shall distribute to the Depositor the entire balance
in the Account, in cash or in kind, in the sole discretion of the Custodian no
later than 90 days after the date the Custodian receives such notice.
12. Applicable State Law. This Custodial Account shall be construed,
--------------------
administered and enforced according to the laws of the State of Wisconsin except
to the extent Federal law supersedes Wisconsin law.
13. Distributions to Surviving Spouse. If distributions from the Custodial
---------------------------------
Account are to be made to the Depositor's surviving spouse, or to a trust of
which the Depositor's surviving spouse is the income beneficiary, the amount
which the surviving spouse (or such trust) is entitled to receive in each year
shall not be less than the income of the Custodial Account (or of the portion of
the Custodial Account with respect to which the surviving spouse or such trust
is the beneficiary) for such year, as determined under section 2056(b)(7) of the
Code.
14. Minimum Distributions; Election not to Recalculate Life Expectancies.
--------------------------------------------------------------------
The following provisions supplement the provisions of Article IV with respect to
minimum required distributions, and shall control over the provisions of Article
IV in the event of any inconsistency. All paragraph references in this paragraph
14 are to paragraphs of Article IV unless otherwise provided.
(a) If the Depositor fails to withdraw the entire balance in the Custodial
Account by the April 1 of the year following the year in which he attains age
70 1/2, he shall be deemed to have elected to receive payments under paragraph
3(d) or, if he has a designated beneficiary (as determined under Part D of
Proposed Regulations section 1.401(a)(9)-1) under paragraph 3(e). A beneficiary
shall be deemed to have elected the method described in paragraph 4(b)(ii) if
either he withdraws the minimum amount required for the first year under the
method described in paragraph 4(b)(ii) and does not specifically elect the
method described in paragraph 4(b)(i) by the end of such year, or if the date
specified in paragraph 4(b)(i) occurs first and he has not withdrawn the
entire balance in the Custodial Account by that time; otherwise, the beneficiary
shall be deemed to have elected the method described in paragraph 4(b)(i).
(b) If there is more than one beneficiary entitled to receive
distributions on equal priority upon the death of the Depositor or a prior
beneficiary then, to the extent permitted by Proposed Regulations section
1.401(a)(9)-1, O&A H-2, and subject to such requirements and limitations as the
Custodian may establish, the Custodial Account may be divided into separate
accounts for purposes of Article IV and this paragraph.
(c) Notwithstanding the references to "equal or substantially equal"
payments, if the Depositor or a beneficiary is receiving distributions under
paragraph 3(d), 3(e), or 4(b)(ii), he may withdraw amounts that exceed the
minimum amount required by paragraph 5 in any year, provided, that any excess
shall not be credited against the minimum amount required to be withdrawn in
subsequent years. Withdrawals may also be made at irregular intervals, provided
that the minimum amount required for each year shall be withdrawn by the last
day of such year, except that the minimum amount for the year in which the
Depositor attains age 70 1/2, but no subsequent year may be withdrawn by April 1
of the following year.
(d) In lieu of the methods of recalculating life expectancies annually as
specified in paragraph 2, the Depositor may elect for purposes of paragraph 3(c)
or 3(d), and the Depositor's surviving spouse may elect for purposes of
paragraph 4(b)(ii), to have his life expectancy, or his and his designated
beneficiary's joint and last survivor life expectancy, or the surviving spouse's
life expectancy, initially calculated in the year specified in paragraph 5 and
thereafter reduced by one year in each subsequent year. All elections described
in this paragraph 14(d) shall be made in writing in accordance with procedures
established by the Custodian and the Proposed Regulations or successors thereto.
Such elections must be made and, if made, shall be irrevocable after the date
upon which distributions are required to commence under paragraph 3 or 4(b)(ii).
(e) All references to the Proposed Regulations section 1.401(a)(9)-1 and
1.401(a)(9)-2 contained in Article IV and this paragraph 14 include the
applicable provisions of Proposed Regulations section 1.408-8 applying such
Proposed Regulations to individual retirement accounts, any subsequent
amendments to any such Proposed Regulations, and the applicable provisions of
the permanent Regulations, when issued, all of which are incorporated by
reference and shall control over any contrary provision of this Agreement.
Reference to specific provisions of the Proposed Regulations shall not be
construed to limit reference to other provisions where appropriate in the
interpretation of Article IV and this paragraph 14.
13
<PAGE>
MONETTA FUNDS IRA APPLICATION
COMPLETE THIS APPLICATION AND SEND ALONG WITH YOUR CHECK MADE PAYABLE TO FIRSTAR
TRUST COMPANY, TO: FIRSTAR TRUST COMPANY, Attn: Monetta Funds, P.O. Box 701,
Milwaukee, Wisconsin, 53201-0701.
<TABLE>
<CAPTION>
<S> <C>
1. IRA APPLICANT
-------------
Name of Individual: Social Security No.:
--------------------------------- ----------------------------------
Street Address: Birth Date:
--------------------------------- ----------------------------------
City: State: Zip Code:
--------------------------------- --------------- -----------------
Home Phone: ( ) Business Phone: ( )
--------------------------------- ----------------------------------
</TABLE>
2. CONTRIBUTION IS FOR CURRENT YEAR UNLESS YOU SPECIFY DIFFERENT YEAR BELOW
------------------------------------------------------------------------
Contribution is for 19____. If no year is indicated, current year will be
assumed.
3. CONTRIBUTION TYPE (Check one. For contributions which are not Regular, see
the appropriate section of the IRA Disclosure Statement in the Plan Booklet
for special instructions.) A Rollover consists of a qualifying distribution
which is paid to you from an employer's qualified plan or from another IRA,
to be deposited in your Monetta IRA within 60 days.
[ ] Regular [ ] Rollover [ ] Transfer [ ] SEP
[ ] Direct transfer
If a rollover or direct transfer, check one box to indicate the source of
the funds: [ ] an employer's qualified plan or an IRA derived from a
rollover from such a plan; [ ] an IRA to which you contributed [ ] a SEP-IRA
or [ ] a tax-sheltered annuity (403(b)) plan or an IRA derived from a
rollover from such a plan
4. INVESTMENT OF CONTRIBUTIONS
---------------------------
(1) If you do not choose a Fund, all of your contributions will be invested
in the Monetta Government Money Market Fund.
(2) Initial Investment Minimums: $250 Per Fund Account.
(3) Subsequent Investment Minimums: $50 Per Fund Account.
(4) There is an Annual Maintenance Fee charged by the Custodian of $12.50 per
Fund account. This fee is paid automatically by redeeming shares from
your account unless you add the fee to your contribution check or enclose
a separate check for your fee made payable to Firstar Trust Company.
Please see the Plan Booklet for further information on Custodian Fees.
<TABLE>
<CAPTION>
Fund Dollar Amount to be Invested
<S> <C>
MONETTA FUND $
--------------------
MONETTA SMALL-CAP EQUITY FUND $
--------------------
MONETTA MID-CAP EQUITY FUND $
--------------------
MONETTA LARGE-CAP EQUITY FUND $
--------------------
MONETTA BALANCED FUND $
--------------------
MONETTA INTERMEDIATE BOND FUND $
--------------------
MONETTA GOVERNMENT MONEY MARKET FUND $
--------------------
Total Contributions $
====================
Total Fees ($12.50 per Fund Account)* $
====================
Total $
====================
</TABLE>
Application continued on reverse.
*Limited to $25.00 per Participant
14
<PAGE>
MONETTA FUNDS IRA APPLICATION (Continued)
5. TELEPHONE EXCHANGE The telephone exchange privilege offered by the Monetta
Funds is automatically available unless you check the box below. The
exchange privilege authorizes the Funds and their transfer agent to act on
telephone instructions from any person to make an exchange.
[ ] I do not authorize telephone exchanges
6. BENEFICIARY DESIGNATION I hereby designate the following as my
Beneficiary(ies) under my Monetta Funds Individual Retirement Account
(IRA):
- ----------------------------- -------------------------------
Name Relationship
- ----------------------------- -------------------------------
Street Address Social Security No.
- --------------- ----------- -------------- -------------
City State Zip Code Birth Date
Every payment under my IRA by reason of my death shall be made to my
Beneficiary if he or she is living at the time such payment becomes due; and if
there is no designated Beneficiary living at the time any such payment becomes
due, the payment shall be made to my estate.
A Beneficiary Designation shall be valid only if dated, signed and filed
with the Custodian under the Plan before my death. I understand that I may
change my beneficiary designation by completing a "Change of Beneficiary" form
that I can obtain by calling 1-800-MONETTA and returning it to the Custodian.
SIGNATURE OF APPLICANT:
I hereby adopt the Monetta Funds Individual Retirement Plan and Custodial
Agreement. I appoint Firstar Trust Company as Custodian and agree to be bound by
the provisions of the Plan and Custodial Agreement. I certify that the foregoing
information is correct and that I received a copy of the Disclosure Statement
relating to the Plan and custodian fees, as well as a copy of the current
prospectus(es) of the Fund(s) in which my initial investment is to be made. The
terms, provisions and limitations of the IRA plan and Custodial Agreement, as
amended from time to time, are controlling and shall always govern all rights of
myself, my Beneficiaries and all persons claiming under, by or through them, or
any of them.
- ------------------------ --------------------------------------
Date Signature of Applicant
THIS DOCUMENT WILL BE RETAINED BY FIRSTAR TRUST COMPANY.
B.N. 0__ __ __ __
Internal Use Only
15
<PAGE>
TRANSFER FORM
COMPLETE THIS FORM
TO TRANSFER AN EXISTING IRA OR PLAN BALANCE
TO A MONETTA FUNDS IRA
PART I
(To be completed by investor and mailed to Firstar Trust Company, Attention:
Monetta Funds, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. If you are opening
a new account, enclose a Monetta Funds IRA application.)
TO: FIRSTAR TRUST COMPANY:
IF THIS IS A DIRECT TRANSFER FROM AN EMPLOYER'S QUALIFIED PLAN, SEE THE NOTICE
ON THE BACK.
The assets received are to be invested in:
[ ] My existing Monetta Fund IRA in _______________
(Fund name)
______________________________ Account No. _____________.
[ ] My new Monetta IRA. (A signed IRA Application must be completed and
returned with this Transfer Form.)
- ------------------------------- ------------------------------
Investor's Name Daytime Phone
- ------------------------ --------- ---------- --------
Street City State Zip Code
- ------------------------ ---------
Investor's Signature Date
TO: NAME OF PRESENT CUSTODIAN/TRUSTEE:
-------------------------------------------------------------
Mutual Fund (if applicable) Acct. No.
------------------------ -------------------
Address Phone No.
------------------------------ -----------------------
Street
------------------------------- ---------- -----------------
City State Zip Code
Present Custodian/Trustee:
I have established an account under the Monetta Funds Individual Retirement
Account. Please transfer the assets (cash only) indicated below to Firstar Trust
Company as successor custodian.
[ ] All Assets [ ] $________ only [ ] At maturity date of
[ ] Immediately (I am aware of any penalties which may occur)
- --------------------------------------------------------------------------------
PART II
(To be completed by Firstar Trust Company)
TO: THE ABOVE-NAMED CUSTODIAN/TRUSTEE:
Firstar Trust Company accepts its appointment as custodian for the above
account. Please forward a check, as directed above by the investor, payable to:
Firstar Trust Company, FBO
-------------------------------------------------
Mail check and accompanying documents, if any, to:
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701
Firstar Trust Company
16
<PAGE>
IMPORTANT NOTICE
To recipients of Distributions from Qualified Retirement Plans:
If your IRA account with us is to be funded by the rollover of a
distribution from your employer's qualified retirement plan, the law requires
that 20% of your distribution eligible for rollover be withheld for tax purposes
unless the distribution is made payable directly to the custodian of your
rollover IRA or another qualified plan.
If you are about to receive a distribution from your employer plan which is
eligible for rollover, that distribution may take one of the three forms:
1. Your employer or plan trustee may deliver a check to you. If so, make
sure the check is payable as follows:
Monetta Funds
Firstar Trust Company, Custodian
A/O ____________________________ IRA Rollover
(your name)
and deliver it along with a completed application to the following:
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201
2. Your employer or plan trustee may forward your distribution directly to
us. If this occurs, follow the same instructions as above.
3. If your employer requires that an account is opened before sending the
check, make sure that you have sent a completed application to Firstar Trust
Company with the indication that you are about to receive a rollover.
4. If your employer will be wiring funds to Firstar Trust Company, the
wiring instructions are as follows:
Firstar Bank Milwaukee, N.A. For further credit to:
ABA No. 0750-00022 ----------------------
Monetta Funds
For credit to:
-------------- -----------------------
Firstar Trust Company (Your Name)
Account No. 112-950-027
-----------------------
(Account Number)
<PAGE>
<TABLE>
<CAPTION>
Table of Contents Page
- ----------------- ----
<S> <C>
How to Open a Monetta IRA Account..................................Front Cover
Minimum Contribution...............................................Front Cover
Custodian Fees.....................................................Front Cover
Types of Accounts (General Information)................................... 2
Regular IRA.......................................................... 2
SEP-IRA.............................................................. 2
SIMPLE-IRA........................................................... 2
Rollover IRA......................................................... 2
Transfer From a Qualified Retirement Plan to a Monetta IRA................ 3
Transfer To a Monetta IRA From Another IRA................................ 3
Telephone Exchange Plan................................................... 3
Tax Benefits.............................................................. 4
When Can an Account be Opened?............................................ 4
Do I Pay Tax on Dividends and Distributions?.............................. 4
When May I Make Withdrawals?.............................................. 4
What If I Make A Withdrawal Before Age 59-1/2?............................ 4
How Are Distributions Made After My Death?................................ 5
Disclosure Statement...................................................... 6
IRA Custodial Agreement................................................... 11
Forms:.................................................................... 14
Application and Beneficiary Forms:................................... 14
Transfer Form:....................................................... 16
</TABLE>
MONETTA FUNDS
1776-A South Naperville Road
Wheaton, Illinois 60187-8133
1-800-MONETTA
CUSTODIAN
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-800-241-9772
DISTRIBUTOR
Funds Distributor, Inc.
Boston, Massachusetts 02109
THIS BOOKLET IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
A CURRENT COMBINED PROSPECTUS OF MONETTA FUND, INC. AND MONETTA TRUST.
MONETTA FUNDS
Individual
Retirement
Account
[logo]
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001 Pension Plan AA - Plan No. 01-002
<PAGE>
Table of Contents
Monetta Funds Prototype Defined Contribution
Retirement Plan.....................................................Section A
Adoption Agreement - Standardized
(Profit-Sharing Plan)...............................................Section B
Adoption Agreement - Standardized
(Pension Plan)......................................................Section C
Summary Plan Description............................................Section D
Employee Forms......................................................Section E
<PAGE>
SECTION A
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Table of Contents
ARTICLE I. INTRODUCTION............................................... 1
ARTICLE II. DEFINITIONS................................................ 2
ARTICLE III. PARTICIPATION..............................................10
Section 3.1. Participation at Effective Date............................10
Section 3.2. Participation after Effective Date.........................10
Section 3.3. Reentry....................................................10
Section 3.4. Participation by an Owner-Employee of More Than
One Trade or Business......................................10
ARTICLE IV. CONTRIBUTIONS..............................................12
Section 4.1. Employer Profit Sharing Contributions......................12
Section 4.2. Employer Pension Contributions.............................13
Section 4.3. Participant Voluntary Contributions........................14
Section 4.4 Time for Making Contributions..............................14
Section 4.5. Leased Employees...........................................15
Section 4.6. Rollovers and Transfers....................................15
ARTICLE V. CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))......................................16
Section 5.1. Cash or Deferred Arrangement (Code Section 401(k)).........16
Section 5.2. Elective Deferrals.........................................16
Section 5.3. Matching Contributions.....................................20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.4. Qualified Matching Contributions and Qualified Non-Elective
Contributions................................................ 23
Section 5.5. Special Distribution Rules................................... 24
Section 5.6. Definitions.................................................. 25
ARTICLE VI SECTION 415 LIMITATIONS...................................... 29
Section 6.1. Employers Maintaining Only this Plan......................... 30
Section 6.2. Employers Maintaining Other Master or Prototype Defined
Contribution Plans......................................... 30
Section 6.3. Employers Maintaining Other Defined Contribution Plans....... 31
Section 6.4. Employers Maintaining Defined Benefit Plans.................. 31
Section 6.5. Definitions.................................................. 31
ARTICLE VII. PARTICIPANTS' ACCOUNTS....................................... 35
Section 7.1. Separate Accounts............................................ 35
Section 7.2. Vesting...................................................... 35
Section 7.3. Computation of Vesting Service............................... 35
Section 7.4. Allocation of Forfeitures.................................... 36
ARTICLE VIII. PAYMENT OF BENEFITS.......................................... 37
Section 8.1. Benefits Payable Under the Plan.............................. 37
Section 8.2. Manner of Distributions...................................... 38
Section 8.3. Commencement of Payments..................................... 42
Section 8.4. Payment of Small Accounts.................................... 46
Section 8.5. Persons Under Legal or Other Disability...................... 46
Section 8.6. Withdrawals from Profit Sharing Plan......................... 46
Section 8.7. Transfer of Benefits to Eligible Retirement Plan............. 47
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IX. ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS............... 49
Section 9.1. Custodial Account............................................. 49
Section 9.2. Receipt of Contributions...................................... 49
Section 9.3. Investment of Account Assets.................................. 49
Section 9.4. Exclusive Benefit............................................. 50
Section 9.5. Expenses...................................................... 50
Section 9.6. Voting........................................................ 50
Section 9.7. Reports of the Custodian and Administrator.................... 50
Section 9.8. Limitation of Custodian's Duties and Liability................ 51
ARTICLE X. AMENDMENT AND TERMINATION..................................... 53
Section 10.1. Amendment..................................................... 53
Section 10.2. Termination................................................... 54
ARTICLE XI. FIDUCIARY RESPONSIBILITIES.................................... 55
Section 11.1. Administrator................................................. 55
Section 11.2. Powers of Administrator....................................... 55
Section 11.3. Records and Reports........................................... 55
Section 11.4. Other Administrative Provisions............................... 55
Section 11.5. Claims Procedure.............................................. 56
Section 11.6. Claims Review Procedure....................................... 56
ARTICLE XII. AMENDMENT AND CONTINUATION OF ORIGINAL PLAN................... 58
ARTICLE XIII. TOP-HEAVY PROVISIONS.......................................... 60
Section 13.1. Effect of Top-Heavy Status.................................... 60
Section 13.2. Additional Definitions........................................ 60
Section 13.3. Minimum Allocations........................................... 62
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 13.4. Benefit Limit Change........................................ 63
ARTICLE XIV. MISCELLANEOUS............................................... 64
Section 14.1. Rights of Employees and Participants........................ 64
Section 14.2. Merger With Other Plans..................................... 64
Section 14.3. Non-Alienation of Benefits.................................. 64
Section 14.4. Failure to Qualify.......................................... 64
Section 14.5. Mistake of Fact: Disallowance of Deduction.................. 65
Section 14.6. Participation under Prototype Plan.......................... 65
Section 14.7. Gender...................................................... 65
Section 14.8. Headings.................................................... 65
Section 14.9. Governing Law............................................... 65
</TABLE>
iv
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I.
INTRODUCTION
------------
This Plan, which is made available by Monetta Financial Services, Inc.
has been adopted by the Employer named in the Adoption Agreement(s) as a
qualified money purchase pension and/or profit sharing plan for its eligible
employees which is intended to qualify under Code Section 401(a). The Employer's
Plan shall consist of the following provisions, together with the Adoption
Agreement(s).
1
<PAGE>
ARTICLE II.
DEFINITIONS
-----------
Section 2.1. "Account" means the account or accounts maintained by the
Custodian for a Participant, as described in Article VII.
Section 2.2. "Administrator" means the plan administrator and
fiduciary of the Plan with authority and responsibility to control and manage
the operation and administration of the Plan in accordance with its terms and to
comply with the reporting, disclosure and other requirements of ERISA. Unless a
different Administrator is appointed by the Employer, the Administrator shall be
the Employer.
Section 2.3. "Beneficiary" means the person or persons designated by a
Participant or otherwise entitled to receive benefits in the event of the
Participant's death as provided herein. Such designation shall be made in
writing and in such form as may be required by the Administrator, and shall be
filed with the Administrator. Any designation may include contingent or
successive Beneficiaries. Where such designation has been properly made,
distribution of benefits shall be made directly to such Beneficiary or
Beneficiaries. The Beneficiary or Beneficiaries designated by a Participant may
be changed or withdrawn at any time from time to time, by the Participant, but
only by filing with the Administrator a new designation, and revoking all prior
designations. The most recent valid designation on file with the Administrator
at the time of the Participant's death shall be the Beneficiary.
Notwithstanding the foregoing, in the event the Participant is married at the
time of his death, the Beneficiary shall be the Participant's surviving spouse
unless such spouse consented in writing to the designation of an alternative
Beneficiary after notice of the spouse's rights and such consent was witnessed
by a Plan representative appointed by the Administrator or a notary public as
provided in Section 8.2(a) hereof. In the event no valid designation of
Beneficiary is on file with the Administrator at the date of death or no
designated Beneficiary survives him, the Participant's spouse shall be deemed
the Beneficiary; in the further event the Participant is unmarried or his spouse
does not survive him, the Participant's estate shall be deemed to be his
Beneficiary.
Section 2.4. "Break in Service" means a Plan Year in which a
Participant fails to complete at least five hundred one (501) Hours of Service.
Breaks in Service and Years of Service will be measured on the same vesting
computation period.
Section 2.5. "Code" means the Internal Revenue Code of 1986, as
interpreted by applicable regulations and rulings issued pursuant thereto, all
as amended and in effect from time to time. Reference to a Code Section shall
include that Section, and any comparable section or sections of any future
legislation that amends, supplements or supersedes that Section.
Section 2.6. "Compensation" is defined as wages within the meaning of
Section 3401(a) of the Code and all other payments of compensation to the
Employee by the Employee (in the course of the Employer's trade or business) for
which the Employer is required to furnish the Employee a written statement under
Sections 6041(d), 6051(a)(3) and 6052 of the Code, determined without regard to
any rules under Section 3401(a) that limit the
2
<PAGE>
remuneration included in wages based on the nature or locations of the
employment or the services performed. For any Self-Employed Individual covered
under the Plan, Compensation shall mean such individual's Earned Income.
For Plan Years beginning after December 31, 1988, the maximum amount
of Compensation taken into account under the Plan for a Participant in any Plan
Year shall not exceed two hundred thousand dollars ($200,000) or such greater
amount as permitted by the Secretary of the Treasury, except that the dollar
increase in effect on January 1 of any calendar year is effective for years
beginning in such calendar year and the first adjustment to the S200,000
limitation is effective on January 1, 1990. If the Plan determines Compensation
on a period of time that contains fewer than 12 calendar months, then the annual
compensation limit is an amount equal to the annual compensation limit for the
calendar year in which the compensation period begins multiplied by the ratio
obtained by dividing the number of full months in the period by 12.
For purposes of this limitation, the family aggregation rules of Code
Section 414(q)(6) shall apply, except that the term "family" shall include only
the spouse of the Participant and any lineal descendants of the Participant who
have not attained age nineteen (19) before the close of such year. If, as a
result of the application of such rules the adjusted two hundred thousand
dollars ($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level if the Plan
provides for permitted disparity), the limitation shall be prorated among the
affected individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation. If
Compensation for any prior Plan Year is taken into account in determining an
Employee's contributions or benefits for the current year, the Compensation for
such prior year is subject to the applicable annual compensation limit in effect
for that prior year. For this purpose, for years beginning before January 1,
1990, the applicable annual compensation limit is $200,000.
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual Compensation of each employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding
12 months over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan year,
the compensation for that prior determination period is subject to OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
Section 2.7. "Custodial Account" means the account established by the
Custodian, in accordance with Article IX, in the name of the Employer or for
each Participant as elected in the Adoption Agreement.
Section 2.8. "Custodian" means ________________________________, or
any successor thereto.
Section 2.9. "Disability" means a mental or physical condition of
injury or sickness, as determined by the Administrator based upon the report of
a medical examiner satisfactory to the Employer, which prevents a Participant
from carrying out the duties of his position and which is likely to be
permanent. Any such determination by the Administrator shall be made in a
uniform and nondiscriminatory manner.
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Section 2.10. "Earned Income" means net earnings from self-employment
in the trade or business with respect to which the Plan is established for which
the personal services of the individual are a material income-producing factor.
Net earnings shall be determined without regard to items not included in gross
income and the deductions allocable to such items. Net earnings shall be
reduced by contributions by the Employer to a qualified plan to the extent
deductible under Code Section 404. Net earnings shall be determined with regard
to the deduction allowed to the Employer under Code Section 164(f) for taxable
years beginning after December 31, 1989.
Section 2.11. "Effective Date" means the date as of which this Plan is
initially effective as indicated in item 3 of the Adoption Agreement.
Section 2.12. "Elective Deferrals" means any Employer contributions
made to the Plan at the election of a participating Employee, in lieu of payment
of an equal amount to the participating Employee in cash as Compensation
pursuant to Section 5.2 hereof, and shall include contributions made pursuant to
a salary reduction agreement or other deferral method. With respect to any
taxable year, a participating Employee's Elective Deferrals are the sum of all
employer contributions made on behalf of such Employee pursuant to an election
to defer under any qualified CODA as described in Code Section 401(k), any
simplified employee pension cash or deferred arrangement as described in Code
Section 402(h)(1)(B), any eligible deferred compensation plan under Code Section
457, any plan as described under Code Section 501(c)(18), and any employer
contributions made on the behalf of a participating Employee for the purchase of
an annuity contract under Code Section 403(b) pursuant to a salary reduction
agreement.
Section 2.13. "Employee" means an individual employed by the Employer
(including any eligible Self-Employed Individual) or any Related Employer
adopting this Plan except as excluded pursuant to item 4 of the Adoption
Agreement. The term Employee shall also include any individual who is a Leased
Employee, unless excluded pursuant to item 4 of the Adoption Agreement.
Section 2.14. "Employer" means any entity adopting the Plan.
Section 2.15. "Employer Pension Contributions" means the contributions
made by the Employer pursuant to Section 4.2 hereof if elected in item 6 of the
Adoption Agreement (Pension Plan).
Section 2.16. "Employer Profit Sharing Contributions" means the
contributions made by the Employer pursuant to Section 4.1 hereof if elected in
item 6 of the Adoption Agreement (Profit Sharing Plan).
Section 2.17. "ERISA" means the Employee Retirement Income Security
Act of 1974, as interpreted and applied under regulations and rulings issued
pursuant thereto, all as amended and in effect from time to time.
Section 2.18. "Hour of Service" means:
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(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;
and
(b) Each hour for which an Employee is paid, or entitled to payment,
by the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. No more than five hundred one
(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 of Service under this paragraph shall be calculated and credited
pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under subsection (a) or subsection (b), as
the case may be, and under this subsection (c). 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.
(d) Solely for purposes of determining whether a Break in Service, as
defined in Section 2.4, for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or in any
case in which such hours cannot be determined, eight (8) hours of service per
normal workday of such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence:
(i) by reason of the pregnancy of the individual;
(ii) by reason of a birth of a child of the individual;
(iii) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual;
or
(iv) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Hours of Service credited under this Section 2.18 shall be credited (i) in
the computation period in which the absence begins if the crediting is necessary
to prevent a Break in Service in that period, or (ii) in all other cases the
following computation period.
(e) Hours of Service shall be determined on the basis of actual hours
for which an Employee is paid or entitled to payment unless a different method
of determining Hours of Service is selected in item 4(A) of the Adoption
Agreement.
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(f) In the event the Employer maintains the plan of a predecessor
employer, service for such predecessor employer shall be treated as service for
the Employer. Hours of Service will be credited for employment with members of
an affiliated service group under Code Section 414(m), a controlled group of
corporations under Code Section 414(b), or a group of trades or businesses under
common control under Code Section 414(c) of which the Employer is a member and
any other entity required to be aggregated with the Employer pursuant to Code
Section 414(o) and the Regulations thereunder. Hours of Service will also be
credited for any Leased Employee for purposes of this Plan under Code Sections
414(n) or (o) and the Regulations thereunder, unless excluded under item 4 of
the Adoption Agreement.
Section 2.19. "Investment Advisor" means Monetta Financial Services,
Inc.
Section 2.20. "Investment Company" means any regulated investment
company(ies) designated by the Investment Advisor.
Section 2.21. "Investment Company Shares" means the shares of each
Investment Company.
Section 2.22. "Leased Employee" means any individual who is considered
a leased employee within the meaning of Code Sections 414(n) or (o). For
purposes of this Section, a Leased Employee means any person who, pursuant to an
agreement between the Employer and any other person (which may include the
Leased Employee), has performed services for the Employer (or for the Employer
and any Related Employer) in a capacity other than as a common law employee 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. Notwithstanding the foregoing, no individual shall be
considered to be a Leased Employee if (a) such individual is covered by a money
purchase pension plan providing: (i) a non-integrated employer contribution rate
of at least ten percent (10%) of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the individual's gross income under Code
Sections 125, 402(a)(8), 402(h) or 403(b), (ii) immediate participation, and
(iii) full and immediate vesting and (b) Leased Employees do not constitute more
than twenty percent (20%) of the Employer's nonhighly compensated work force.
Contributions or benefits provided to a Leased Employee by the leasing
organization which are attributable to services performed for the Employer shall
be treated as provided by the Employer.
Section 2.23. "Matching Contribution" means an Employer contribution
made to the Plan or any other defined contribution plan on behalf of a
participating Employee on account of a participating Employee's Elective
Deferrals pursuant to Section 5.3 hereof or on account of any employee
contributions or elective deferrals made to any other plan.
Section 2.24. "Net Profits" means the current or accumulated earnings
of the Employer before federal and state taxes and contributions to this or any
other qualified plan.
Section 2.25. "Normal Retirement Age" means age 65 or such other age
as selected in item 11 of the Adoption Agreement (Profit Sharing Plan) and item
9 of the Adoption
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Agreement (Pension Plan). If the Employer enforces a mandatory retirement age,
the Normal Retirement Age shall be the lesser of such mandatory retirement age
or the age specified in the Adoption Agreement.
Section 2.26. "Original Plan" means any defined-contribution plan
which meets the requirements of Code Section 401 and referred to in Article XII
of the Plan.
Section 2.27. "Owner-Employee" means an individual who is a sole
proprietor, or who is a partner owning more than ten percent (10%) of either the
capital or profits interest of the partnership.
Section 2.28. "Participant" means each Employee (including any
eligible Self-Employed Individual) who has completed the requirements for
eligibility specified in Section 3.1 hereof. Each such Employee shall become a
Participant as of the earlier of: (i)the first day of the Plan Year or (ii) the
first day of the seventh month of the Plan Year beginning after he completes
such requirements.
Section 2.29. "Participant Voluntary Contributions" means
contributions by a Participant under the Plan pursuant to Section 4.3, if
elected in item 9 of the Adoption Agreement (Profit Sharing Plan) and item 8 of
the Adoption Agreement (Pension Plan).
Section 2.30. "Pension Plan" means the feature of the Plan pursuant to
which the Employer makes Employer Pension Contributions. Such feature applies
only to the extent elected in item 6 of the Adoption Agreement (Pension Plan).
Section 2.31. "Plan" means this prototype profit sharing plan and/or
money purchase pension plan, together with the appropriate Adoption
Agreement(s), as set forth herein and as may be amended from time to time. As
used herein, the term Plan shall mean either or both the money purchase pension
plan and the profit-sharing plan depending on whether the Employer has adopted
one or both plans.
Section 2.32. "Plan Year" means the twelve (12) consecutive month
period designated in item 2 of the Adoption Agreement. The first Plan Year shall
commence on the Effective Date.
Section 2.33. "Profit Sharing Plan" means the features of the Plan
pursuant to which all contributions, other than Employer Pension Contributions,
are made to the Plan, including any contributions pursuant to the cash or
deferred arrangement (Section 401(k)) described in Article V hereof. Such
features apply only to the extent elected in items 6 and/or 8 of the Adoption
Agreement (Profit Sharing Plan).
Section 2.34. "Related Employer" means an organization which, together
with the Employer, constitutes (i) a controlled group of corporations as defined
in Code Section 414(b); (ii) trades or businesses under common control as
defined in Code Section 414(c); (iii) an affiliated service group as defined in
Code Section 414(m); or (iv) a group of employers required to be aggregated
under Code Section 414(o).
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<PAGE>
Section 2.35. "Self-Employed Individual" means an individual who has
Earned Income for the taxable year from the trade or business for which the Plan
was established or who would have had Earned Income but for the fact that the
trade or business had no Net Profits for the taxable year.
Section 2.36. "Valuation Date" means the last day of each Plan Year
and such other times as shall be determined by the Administrator.
Section 2.37. "Year of Employment" means the twelve (12) consecutive
month period, beginning on the date the Employee first performs an Hour of
Service or any anniversary thereof, in which the Employee completes at least one
thousand (1,000) Hours of Service or such lesser number of Hours of Service as
selected in item 4 of the Adoption Agreement.
Section 2.38. "Year of Service" means a Plan Year in which the
Employee completes at least one thousand (1,000) Hours of Service or such lesser
number of Hours of Service as selected in item 7 of the Adoption Agreement.
8
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ARTICLE III.
PARTICIPATION
-------------
Section 3.1. Participation at Effective Date. Each Employee shall
become a Participant on the Effective Date, if on the Effective Date such
Employee has completed the number of Years of Employment and has attained age 21
or such lesser age as elected in item 4 of the Adoption Agreement.
Section 3.2. Participation after Effective Date. Each Employee who did
not become a Participant as of the Effective Date, including future Employees,
shall be entitled to become a Participant in accordance with Section 2.28 after
such Employee has completed the number of Years of Employment and has attained
age 21 or such lesser age as elected in item 4 of the Adoption Agreement.
Section 3.3. Reentry. A former Participant shall become a Participant
immediately upon his return to employment with the Employer or his return to an
eligible class of Employees, whichever is applicable. In the event an Employee
who is not a member of the eligible class of Employees becomes a member of the
eligible class, such Employee will become a Participant in accordance with
Section 3.2 above; provided that if the Employee has previously satisfied the
eligibility requirements of Section 3.2, the Employee shall become a Participant
immediately upon becoming a member of the eligible class of Employees.
Section 3.4. Participation by an Owner-Employee of More Than One Trade
or Business.
(a) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business with respect to which this Plan is
established, and one or more other trades or businesses, this Plan and the plan
established with respect to such other trades or businesses must, when looked at
as a single plan, satisfy Code Sections 401(a) and (d) with respect to the
employees of this and all such other trades or businesses.
(b) If this Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of each such other trade or business must be included in a plan which
satisfies Code Section 401(a) and (d) and which provides contributions and
benefits not less favorable than provided for such Owner-Employees under this
Plan.
(c) If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which he does not control, and such
individual controls a trade or business, then the contributions or benefits of
the employees under the plan of the trade or business which he or she does
control must be as favorable as those provided for him or her under the most
favorable plan of the trade or business which he or she does not control.
(d) For purposes of the preceding subparagraphs, an Owner-Employee, or
two or more Owner-Employees, shall be considered to control a trade or business
if such Owner-
9
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Employee, or such two or more Owner-Employees together, own the entire interest
in an unincorporated trade or business, or, in the case of a partnership, own
more than fifty percent (50%) of either the capital interest or the profits
interest in such partnership. For purposes of the preceding sentence, an Owner-
Employee, or two or more Owner-Employees, shall be treated as owning any
interest in a partnership which is owned, directly or indirectly, by a
partnership which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
(e) Employees and Owner-Employees of trades or businesses which are
under common control (within the meaning of Code Section 414(c)) and Employees
and Owner-Employees of the members of an affiliated service group (within the
meaning of Code Section 414(m)) or of a group of aggregated employers (under
Code Section 414(o)) will be treated as employed by a single Employer for
purposes of employee benefit requirements of Code Section 414(m) (4).
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<PAGE>
ARTICLE IV.
CONTRIBUTIONS
-------------
Section 4.1. Employer Profit Sharing Contributions.
(a) If elected in item 6 of the Adoption Agreement (Profit Sharing
Plan), the Employer shall make an Employer Profit Sharing Contribution for each
Plan Year ending on or after the Effective Date in the amount determined under
such Adoption Agreement.
(b) The total amount of such Employer Profit Sharing Contribution for
a Plan Year shall be allocated to the Account of each eligible Participant as
follows:
(i) Unless otherwise elected in item 6(C) of the Adoption Agreement,
the total amount of such Employer Profit Sharing Contribution shall be allocated
based on the ratio that such eligible Participant's Compensation and/or Earned
Income for the Plan Year bears to the total Compensation and Earned Income of
all eligible Participants for the Plan Year.
(ii) If the Integration Formula is selected in item 6(C) of the
Adoption Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such eligible
Participant's Compensation and/or Earned Income for the Plan Year in excess of
the integration level for the Plan Year bears to the total Compensation and
Earned Income for all eligible Participants in excess of the integration level
for the Plan Year; provided, however, that contributions allocated to a
Participant with respect to Compensation and/or Earned Income in excess of the
integration level shall not represent a greater percentage of such excess
Compensation and/or Earned Income than the lesser of
(A) 200% of the base contribution percentage, or
(B) the base contribution percentage plus the greater of
(I) 5.7%, or
(II) the rate of tax under Code Section 3111 (a) which is
attributable to old-age insurance in effect at the
beginning of the Plan Year.
Any Employer Profit Sharing Contribution remaining after the
allocation in this subsection (ii) shall be allocated in accordance with
subsection (i) above. The "integration level" shall be the taxable wage base or
such lesser level of Compensation and/or Earned Income selected in item 6(C) of
the Adoption Agreement. The "base contribution percentage" shall mean the
percentage of Compensation and/or Earned Income which is contributed under the
Plan with respect to each Participant's Compensation and/or Earned Income not in
excess of the integration level.
If the integration level exceeds the greater of ten thousand dollars
($10,000) or one-fifth (1/5) of the taxable wage base but is not more than
eighty percent (80%) of the taxable wage base, the percentage referred to in (I)
above shall be reduced to 4.3% and a proportionate
11
<PAGE>
reduction shall be made to the rate described in (II) above. If the integration
level is more than eighty percent (80%) but less than one hundred percent (100%)
of the taxable wage base, the percentage referred to in (I) above shall be
reduced to 5.4% and a proportionate reduction shall be made to the rate
described in (II) above. The "taxable wage base" shall be the maximum amount of
earnings which may be considered wages for a year under Code Section 3121(a)(1)
in effect as of the beginning of the applicable Plan Year.
Notwithstanding the above, for any Plan Year in which the Plan is top-
heavy (as defined in Section 13.1 hereof) the Employer Profit Sharing
Contribution shall be allocated
(A) first, to each eligible Participant based on the ratio that such
Participant's Compensation and/or Earned Income for the Plan Year
bears to the total Compensation and Earned Income of all eligible
Participants for the Plan Year, but not more than three percent
(3%) of such Participant's Compensation and/or Earned Income,
(B) second, to each eligible Participant based on the ratio that such
Participant's Compensation and/or Earned Income in excess of the
integration level for the Plan Year bears to the total
Compensation and Earned Income of all eligible Participants in
excess of the integration level for the Plan Year, but not more
than three percent (3%) of such Participant's excess
Compensation and/or Earned Income, and
(C) any remaining Employer Profit Sharing Contribution shall be
allocated pursuant to the provisions of this subsection (ii)
above.
(c) A Participant will be considered eligible for an allocation of
the Employer Profit Sharing Contribution if the Participant (i) is employed by
the Employer on the last day of the Plan Year or (ii) has completed at least
Five Hundred one (501) Hours of Service during the Plan Year.
(d) If elected in item 6(B) of the Adoption Agreement, Employer
Profit Sharing Contributions for a Plan Year shall not exceed the Net Profits of
the Employer for such Plan Year.
Section 4.2. Employer Pension Contributions.
(a) If elected in item 6 of the Adoption Agreement (Pension Plan),
the Employer shall make an Employer Pension Contribution for each eligible
Participant for each Plan Year ending on or after the Effective Date in an
amount determined under such Adoption Agreement.
(b) The total amount of such Employer Pension Contribution for a Plan
Year shall be allocated to the Account of each eligible Participant as follows:
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(i) Unless otherwise elected in item 6(B) of the Adoption Agreement,
each eligible Participant shall be allocated an amount equal to the percentage
of such eligible Participant's Compensation and/or Earned Income as specified in
the Adoption Agreement.
(ii) If the Integration Formula is selected in item 6(B) of the
Adoption Agreement, the total amount of such Employer Pension Contribution shall
be allocated in accordance with the method described in Section 4.l (b)(ii)
above. Notwithstanding the foregoing, if the Integration Formula is selected
under the Profit Sharing Plan, the Employer Pension Contribution shall be
allocated in accordance with subsection (b)(i) above.
(c) A Participant will be considered eligible for an Employer Pension
Contribution if the Participant (i) is employed by the Employer on the last day
of the Plan Year or (ii) has completed at least Five Hundred one (501) Hours of
Service during the Plan Year.
Section 4.3. Participant Voluntary Contributions.
(a) If elected in item 9 of the Adoption Agreement (Profit Sharing
Plan) or item 8 of the Adoption Agreement (Pension Plan), a Participant may
voluntarily contribute to the Plan an amount up to ten percent (10%) of his
aggregate Compensation for all years since becoming a Participant under this
Plan and all other qualified plans of the Employer. Any Participant Voluntary
Contributions shall be limited in accordance with the provisions of Section 5.3,
even if the Employer does not elect the Cash or Deferred Arrangement (Section
401(k)) under item 8 of the Adoption Agreement (Profit Sharing Plan). If the
Profit Sharing Plan is elected, all Participant Voluntary Contributions shall be
deemed made to such plan. Participant Voluntary Contributions shall be limited
to Participants who are not highly compensated employees (within the meaning of
Code Section 414(q)) if elected in the Adoption Agreement.
(b) A Participant shall be entitled to withdraw from his appropriate
Account at any time upon thirty (30) days' notice from the Administrator to the
Custodian (which notice shall specify the amount of the withdrawal), a sum not
in excess of the capital amount contributed by him as Participant Voluntary
Contributions under the provisions of this Section 4.3, or the value of such
Account, whichever is less, provided that no ordinary income or capital gains
attributable to such contributions shall be subject to withdrawal.
Notwithstanding anything to the contrary herein, (i) all withdrawals are subject
to the provisions of Article VIII, and (ii) no forfeiture shall occur solely as
a result of a Participant's withdrawal of all or any portion of his Participant
Voluntary Contributions.
(c) No deductible voluntary employee contributions may be made for
taxable years beginning after December 31, 1986. Such contributions made prior
to that date will be maintained in a separate Account which will be
nonforfeitable at all times. The Account will share in the gains or losses in
the same manner as described in Section 9.3 of the Plan. Subject to Section 8.2,
a Participant may withdraw any part of the deductible voluntary contribution
Account by making a written application to the Administrator.
Section 4.4. Time for Making Contributions. Employer Pension
Contributions and Employer Profit Sharing Contributions must be made no later
than the due date, including
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extensions thereof, for filing the Employer's Federal income tax return for the
year coincident with or within which the Plan Year ends (or such later time as
authorized by Treasury Regulations). Participant Voluntary Contributions for any
Plan Year shall be made no later than thirty (30) days after the end of such
Plan Year. The Employer may establish a payroll deduction system or other
procedure to assist the making of Participant Voluntary Contributions and shall
transfer such contributions to the Custodian as soon as practicable after
collected.
Section 4.5. Leased Employees. Contributions or benefits provided to
a Leased Employee by the leasing organization (within the meaning of Code
Section 414(n)) which are attributable to services performed for the Employer
shall be treated as provided by the Employer for purposes of this Plan.
Section 4.6. Rollovers and Transfers. In the discretion of the
Administrator according to such uniform and nondiscriminatory rules established
by the Administrator, and in accordance with Sections 402 and 408 of the Code, a
Participant may make a rollover to the Plan or the Plan may accept a direct
transfer (including voluntary after-tax contributions) from another plan
qualified under Section 401(a) of the Code or from an individual retirement
account. If the Employer has adopted the Profit Sharing Plan, any rollover or
transfer shall be made to such Plan.
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ARTICLE V. CASH OR DEFERRED ARRANGEMENT
----------------------------------------
(CODE SECTION 401(k))
----------------------
Section 5.1. Cash or Deferred Arrangement (Code Section 401(k)). The
provisions of this Article shall be effective as of the first day of the Plan
Year in which this cash or deferred arrangement is elected in item 8 of the
Adoption Agreement (Profit Sharing Plan). Under no circumstances shall the
provisions of this Article apply prior to the time specified in the preceding
sentence.
Section 5.2. Elective Deferrals. (a) Election. (i) An Employee who
has satisfied the minimum age and service requirements set forth in item 8(A) of
the Adoption Agreement (Profit Sharing Plan) may elect to have Elective
Deferrals made to the Plan pursuant to a salary reduction agreement to the
extent permitted in item 8(A) of the Adoption Agreement (Profit Sharing Plan).
Such an election shall be effective as of the time specified in item 8(A) of the
Adoption Agreement (Profit Sharing Plan) and may not be made effective
retroactively.
(ii) An eligible Employee may also base Elective Deferrals, to the
extent provided in item 8(A) of the Adoption Agreement (Profit Sharing Plan), on
cash bonuses that, at the Employee's election, may be contributed to the Plan or
received by the Employee. Such an election shall be effective as of the time
specified in item 8(A) of the Adoption Agreement (Profit Sharing Plan) and may
not be made effective retroactively.
(b) Change in Rate. The rate at which Elective Deferrals are made
shall remain in effect until modified in accordance with item 8(A) of the
Adoption Agreement (Profit Sharing Plan). Notwithstanding the foregoing,
Elective Deferrals may be suspended entirely by an Employee at any time by
written notice to the Administrator. Any such suspension shall be effective as
soon as administratively practicable following the Administrator's receipt of
such notice.
(c) Vesting. A Participant shall at all times have a fully vested and
nonforfeitable interest in his Elective Deferrals.
(d) Excess Elective Deferrals. (i) No Participating Employee shall be
permitted to have Elective Deferrals made under this Plan or any other qualified
plan maintained by the Employer during any taxable year pursuant to Code
Sections 401(k), 408(k) or 403(b) in excess of the dollar limitation contained
in Code Section 402(g) in effect at the beginning of such taxable year.
(ii) A Participating Employee may assign to the Plan any Excess
Elective Deferrals made during a taxable year of such Employee by notifying the
Administrator on or before the date specified below of the Excess Elective
Deferrals to be assigned to the Plan. Notwithstanding any other provision of the
Plan, Excess Elective Deferrals, plus any income and minus any loss allocable
thereto, may be distributed no later than April 15 to any Participating Employee
to whose Accounts Excess Elective Deferrals were assigned for the preceding year
and who claims Excess Elective Deferrals for such taxable year. A Participating
Employee's claim for Excess Elective Deferrals shall be made in writing and
shall be submitted to the
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Administrator not later than the March 1 immediately preceding the relevant
April 15. Such claim shall specify the amount of the Participating Employee's
Excess Elective Deferrals for the preceding taxable year and shall be
accompanied by the Participating Employee'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 Code Sections
401(k), 408(k) or 403(b), exceed the limit imposed on the Participating Employee
by Code Section 402(g) for the year of the deferral.
(iii) Excess Elective Deferrals shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to Excess
Elective Deferrals is the sum of:
(A) income or loss allocable to the participating Employee's Elective
Deferrals Account for the taxable year for which the Excess
Elective Deferrals occurred multiplied by a fraction, the
numerator of which is such Participating Employee's Excess
Elective Deferrals for such taxable year and the denominator of
which is such Participating Employee's Elective Deferrals Account
balance as of the end of the taxable year without regard to any
income or loss occurring during such taxable year; and
(B) income or loss allocable to the Participating Employee's Elective
Deferrals Account for the period between the end of such taxable
year and the date of distribution under (A) above; or, at the
option of the Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the number of whole
calendar months between the end of such taxable year and the date
of distribution, counting the month of distribution if
distribution occurs after the fifteenth (l5th) of such month.
The amount of Excess Elective Deferrals that may be distributed with respect to
a Participating Employee shall be reduced by any Excess Contributions previously
distributed or recharacterized with respect to such Participating Employee for
the Plan Year beginning with or within such taxable year. In no event may the
amount distributed exceed the Participating Employee's total Elective Deferrals
for such taxable year.
(e) Actual Deferral Percentage. (i) The Actual Deferral Percentage
for Participating Employees who are Highly Compensated Employees for each Plan
Year and the Actual Deferral Percentage for Participating Employees who are not
Highly Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The Actual Deferral Percentage for Participating Employees who
are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Deferral Percentage for Participating Employees
who are not Highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(B) The Actual Deferral Percentage for Participating Employees who
are Highly Compensated Employees for the Plan Year shall not
exceed the
16
<PAGE>
Actual Deferral Percentage for Participating Employees who are
not Highly Compensated Employees for the same Plan Year
multiplied by 2.0, provided that the Actual Deferral Percentage
for Participating Employees who are Highly Compensated Employees
does not exceed the Actual Deferral Percentage for Participating
Employees who are not Highly Compensated Employees by more than
two (2) percentage points.
(ii) The Actual Deferral Percentage for any Participating Employee
who is a Highly Compensated Employee for the Plan Year and who is eligible to
have Elective Deferrals (and Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both) allocated to his Accounts under two or more
arrangements described in Code Section 401(k), that are maintained by the
Employer, shall be determined as if such Elective Deferrals (and, if applicable,
such Qualified Non-Elective Contributions or Qualified Matching Contributions,
or both) were made under a single arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements that have different
Plan Years, contributions for such employee shall be aggregated for purposes of
this subsection (e). Contributions which are required to be aggregated are any
contributions made under all cash or deferred arrangements ending with or within
the same calendar year.
(iii) In the event that the Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4) or 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such Code
Sections only if aggregated with this Plan, then this subsection shall be
applied by determining the Actual Deferral Percentage of Participating Employees
as if all such plans were a single plan. For Plan Years beginning after December
31, 1989, plans may be aggregated in order to satisfy Code Section 401(k) only
if they have the same Plan Year.
(iv) For purposes of determining the Actual Deferral Percentage of a
Participating Employee who is a five (5) percent owner or one of the ten (10)
most highly-paid Highly Compensated Employees, the Elective Deferrals (and
Qualified Non-Elective Contributions and Qualified Matching Contributions, or
both) and Compensation of such Participating Employee shall include the Elective
Deferrals (and, if applicable, Qualified Non-Elective Contributions and
Qualified Matching Contributions, or both) and Compensation for the Plan Year of
Family Members. Family Members, with respect to such Highly Compensated
Employees, shall be disregarded as separate employees in determining the Actual
Deferral Percentage both for Participating Employees who are not Highly
Compensated Employees and for Participating Employees who are Highly Compensated
Employees.
(v) For purposes of determining the Actual Deferral Percentage test,
Elective Deferrals, Qualified Non-Elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve-month period
immediately following the Plan Year to which such contributions relate.
17
<PAGE>
(vi) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Deferral Percentage test and the amount of Qualified
Non-Elective Contributions or Qualified Matching Contributions, or both, used in
such test.
(vii) The determination and treatment of the Actual Deferral
Percentage amounts of any Participating Employee shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) Distribution of Excess Contributions. (i) Notwithstanding any
other provision of this Plan, Excess Contributions, plus any income and minus
any loss allocable thereto, shall be distributed no later than the last day of
each Plan Year to Participating Employees to whose Accounts such Excess
Contributions were allocated for the preceding Plan Year. If such excess amounts
are distributed more than two and one-half (2-1/2) months after the last day of
the Plan Year in which such excess amounts arose, a ten percent (10%) excise tax
will be imposed on the Employer with respect to such amounts. Such distributions
shall be made to Highly Compensated Employees on the basis of the respective
portions of the Excess Contributions attributable to each of such Employees.
Excess Contributions shall be allocated to Participating Employees who are
subject to the family member aggregation rules of Code Section 414(q)(6) in the
manner prescribed by the regulations. Excess Contributions (including any
amounts recharacterized) shall be treated as Annual Additions for purposes of
Article VI of the Plan.
(ii) Excess Contributions shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to Excess
Contributions is the sum of:
(A) income or loss allocable to the Participating Employee's Elective
Deferrals Account (and, if applicable, the Qualified Non-Elective
Contributions Account or the Qualified Matching Contributions
Account, or both) for the Plan Year for which the Excess
Contributions occurred multiplied by a fraction, the numerator of
which is such Participating Employee's Excess Contributions for
such Plan Year and the denominator of which is such Participating
Employee's Account balance(s) attributable to Elective Deferrals
(and Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both) as of the end of the Plan Year without
regard to any income or loss occurring during such Plan Year; and
(B) income or loss allocable to the Participant's Elective Deferrals
Account (and, if applicable, the Qualified Non-Elective
Contribution Account or the Qualified Matching Contribution
Account, or both) for the period between the end of such Plan
Year and the date of distribution multiplied by the fraction
determined under (A) above; or, at the option of the Employer,
ten percent (10%) of the amount determined under (A) above
multiplied by the number of whole calendar months between the end
of such Plan Year and the date of distribution, counting the
month of distribution if distribution occurs after the fifteenth
(15th) of such month.
18
<PAGE>
(iii) Excess Contributions shall be distributed from the
Participating Employee's Elective Deferrals Account and Qualified Matching
Contributions Account (if applicable) in proportion to the Participating
Employee's Elective Deferrals and Qualified Matching Contributions (to the
extent used in the Actual Deferral Percentage test) for the Plan Year. Excess
Contributions shall be distributed from the Participating Employee's Qualified
Non-Elective Contributions Account only to the extent that such Excess
Contributions exceed the balance in the Participating Employee's Elective
Deferrals Account and Matching Contributions Account.
(g) Recharacterization. (i) A Participating Employee may treat his
Excess Contributions as an amount distributed to the Participating Employee and
then contributed by the Participating Employee to the Plan. Recharacterized
amounts will remain nonforfeitable and subject to the same distribution
requirements as Elective Deferrals. Amounts may not be recharacterized by a
Highly Compensated Employee to the extent that such amount in combination with
other Participant Voluntary Contributions would exceed any stated limit under
the Plan on Participant Voluntary Contributions. Recharactenzing Excess
Contributions shall be limited to Participants who are not Highly Compensated
Employees if elected in the Adoption Agreement.
(ii) Recharacterization must occur no later than two and one-half (2-
1/2) months after the end of the Plan Year in which such Excess Contributions
arose and is deemed to occur no earlier than the date the last Highly
Compensated Employee is informed in writing of the amount recharacterized and
the consequences thereof. Recharacterized amounts will be taxable to the
Participating Employee for such Participating Employee's taxable year in which
the Participating Employee would have received them in cash.
Section 5.3. Matching Contributions. (a) The Employer shall make
employer Matching Contributions to the Plan to the extent elected in item 8(B)
of the Adoption Agreement (Profit Sharing Plan).
(b) A Participant shall have a vested interest in his Matching
Contributions Account as determined under the vesting schedule elected in item
8(B) of the Adoption Agreement (Profit Sharing Plan). Forfeitures derived from
Matching Contributions which become available because of the vesting provisions
above, shall be applied to reduce the Employer Matching Contributions that would
otherwise be due for the Plan Year, or subsequent Plan Years.
(c) Actual Contribution Percentage. (i) The Actual Contribution
Percentage for Participating Employees who are Highly Compensated Employees for
each Plan Year and the Actual Contribution Percentage for Participating
Employees who are not Highly Compensated Employees for the same Plan Year must
satisfy one of the following tests:
(A) The Actual Contribution Percentage for Participating Employees
who are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Contribution Percentage for Participating
Employees who are not
19
<PAGE>
Highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(B) The Actual Contribution Percentage for Participating Employees
who are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Contribution Percentage for Participating
Employees who are not Highly Compensated Employees for the same
Plan Year multiplied by two (2), provided that the Actual
Contribution Percentage for Participating Employees who are
Highly Compensated Employees does not exceed the Actual
Contribution Percentage for Participating Employees who are not
Highly Compensated Employees by more than two (2) percentage
points.
(ii) If one or more Highly Compensated Employees participate in both
a cash or deferred arrangement and a plan subject to the Actual Contribution
Percentage test maintained by the Employer and the sum of the Actual Deferral
Percentage and the Actual Contribution Percentage of those Highly Compensated
Employees subject to either or both tests exceeds the Aggregate Limit, then the
Actual Contribution Percentage of those Highly Compensated Employees who also
participate in a cash or deferred arrangement will be reduced (beginning with
such Highly Compensated Employee whose Actual Contribution Percentage is the
highest) so that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amount is reduced shall be
treated as an Excess Aggregate Contribution. The Actual Deferral Percentage and
the Actual Contribution Percentage of the Highly Compensated Employees are
determined after any corrections required to meet the Actual Deferral Percentage
and the Actual Contribution Percentage tests. Multiple use does not occur if
both the Actual Deferral Percentage and the Actual Contribution Percentage of
the Highly Compensated Employees does not exceed 1.25 multiplied by the Actual
Deferral Percentage and the Actual Contribution Percentage of the Participating
Employees who are not Highly Compensated Employees.
(iii) For purposes of this subsection, the Contribution Percentage
for any Participating Employee who is a Highly Compensated Employee and who is
eligible to have Contribution Percentage Amounts allocated to his account under
two or more plans described in Code Section 401(a), or arrangements described in
Code Section 401(k) that are maintained by the Employer, shall be determined as
if the total of such Contribution Percentage Amounts was made under each plan.
If a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
(iv) In the event that this Plan satisfies the requirements of Code
Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such Code
Sections only if aggregated with this Plan, then this subsection shall be
applied by determining the Contribution Percentage of employees as if all such
plans were a single plan. For plan years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Code Section 401(m) only if they
have the same plan year.
20
<PAGE>
(v) For purposes of determining the Contribution Percentage of a
Participating Employee who is a five percent owner or one of the ten (l0) most
highly-paid Highly Compensated Employees, the Contribution Percentage Amounts
and Compensation of such Participating Employee shall include the Contribution
Percentage Amounts and Compensation for the Plan Year of Family Members. Family
Members, with respect to Highly Compensated Employees, shall be disregarded as
separate employees in determining the Contribution Percentage both for
Participating Employees who are not Highly Compensated Employees and for
Participating Employees who are Highly Compensated Employees.
(vi) For purposes of determining the Contribution Percentage test,
Employee Contributions are considered to have been made in the Plan Year in
which contributed to the Plan. Matching Contributions and Qualified Non-Elective
Contributions shall be considered made for a Plan Year if made no later than the
end of the twelve-month period beginning on the day after the close of the Plan
Year.
(vii) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Contribution Percentage test and the amount of
Qualified Non-Elective Contributions or Qualified Matching Contributions, or
both, used in such test.
(viii) The determination and treatment of the Contribution Percentage
of any Participating Employee shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(d) Distribution of Excess Aggregate Contributions. (i)
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 to Participating Employees to whose Accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions shall be allocated to Participating Employees who
are subject to the family member aggregation rules of Code Section 414(q)(6) in
the manner prescribed by the regulations. If such Excess Aggregate Contributions
are distributed more than two and one-half (2 1/2) months after the last day of
the Plan Year in which such excess amounts arose, a ten percent (10%) excise tax
will be imposed on the Employer with respect to those amounts. Excess Aggregate
Contributions shall be treated as Annual Additions for purposes of Article VI of
the Plan.
(ii) Excess Aggregate Contributions shall be adjusted for any income
or loss up to the date of distribution. The income or loss allocable to Excess
Aggregate Contributions is the sum of:
(A) income or loss allocable to the Participating Employee's
Participant Voluntary Contributions Account, Matching
Contributions Account, Qualified Matching Contribution Account
(if any, and if all amounts therein are not used in the Actual
Deferral Percentage test) and, if applicable, Qualified Non-
Elective Contributions Account and Elective Deferrals Account for
the Plan Year for which the Excess Aggregate
21
<PAGE>
Contributions occurred multiplied by a fraction, the numerator of
which is such Participating Employee's Excess Aggregate
Contributions for such Plan Year and the denominator of which is
the Participating Employee's Account balance(s) attributable to
Contribution Percentage Amounts as of the end of the Plan Year
without regard to any income or loss occurring during such Plan
Year; and
(B) income or loss allocable to the Participating Employee's
Participant Voluntary Contribution Account, Matching
Contributions Account, Qualified Matching Contribution Account
(if any, and if all amounts therein are not used in the Actual
Deferral Percentage test) and, if applicable, Qualified Non-
Elective Contributions Account and Elective Deferrals Account for
the period between the end of such Plan Year and the date of
distribution multiplied by the fraction determined under (A)
above; or, at the election of the Employer, ten percent (10%) of
the amount determined under (A) above multiplied by the number of
whole calendar months between the end of such Plan Year and the
date of distribution, counting the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
(iii) Forfeitures of Excess Aggregate Contributions shall be applied
to reduce Employer contributions for subsequent Plan Years.
(iv) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro rata basis from the Participating
Employee's Participant Voluntary Contributions Account, Matching Contributions
Account and Qualified Matching Contribution Account (and, if applicable, the
Participating Employee's Qualified Non-Elective Contributions Account or
Elective Deferrals Account, or both).
Section 5.4. Qualified Matching Contributions and Qualified Non-
Elective Contributions.
(a) Qualified Matching Contributions. The Employer may elect to make
Qualified Matching Contributions under the Plan in item 8(C) of the Adoption
Agreement. Qualified Matching Contributions may be made in lieu of distributing
Excess Contributions as provided in Section 5.2(f) hereof. Qualified Matching
Contributions may be either (i) additional amounts contributed to the Plan by
the Employer and allocated to the Accounts of Participating Employees who are
not Highly Compensated Employees based on such Employees' Elective Deferrals or
(ii) Matching Contributions otherwise made to the Plan pursuant to Section
5.3(a) hereof which the Employer designates as Qualified Matching Contributions.
The amount of Qualified Matching Contributions (if any) shall be determined by
the Employer for each year. All Qualifying Matching Contributions shall be used
to satisfy the Actual Deferral Percentage test pursuant to regulations under the
Code.
(b) The Employer may elect to make Qualified Non-Elective
Contributions under the Plan in item 8(C) of the Adoption Agreement. Qualified
Non-Elective Contributions
22
<PAGE>
may be made in lieu of distributing Excess Contributions as provided in Section
5.2(f) or Excess Aggregate Contributions as provided in Section 5.3(d) hereof.
Qualified Non-Elective Contributions may be either (i) additional amounts
contributed to the Plan by the Employer and allocated to the Accounts of
Participating Employees who are not Highly Compensated Employees based on such
Employees' Compensation or (ii) Profit Sharing Contributions otherwise made to
the Plan pursuant to Section 4.l(a) hereof which the Employer designates as
Qualified Non-Elective Contributions. The amount of Qualified Non-Elective
Contributions (if any) shall be determined by the Employer for each year. All
Qualified Non-Elective Contributions shall be used to satisfy either the Actual
Deferral Percentage test or the Average Contribution Percentage test, or both,
pursuant to regulations under the Code.
(c) Separate accounts for Qualified Non-Elective Contributions and
Qualified Matching Contributions will be maintained for each Participant
consistent with Section 7.1 hereof. Each account will be credited with the
applicable contributions and earnings thereon.
(d) For purposes of the special distribution rules in Section 5.5,
Qualified Matching Contributions and Qualified Non-Elective Contributions shall
be treated as Elective Deferrals.
(e) Qualified Matching Contributions and Qualified Non-Elective
Contributions shall be appropriately designated when contributed.
Section 5.5. Special Distribution Rules. Except as provided below,
Elective Deferrals, Qualified Non-Elective Contributions and Qualified Matching
Contributions, and income allocable to each, are not distributable to a
Participant or a Beneficiary, in accordance with such Participant's or
Beneficiary's election, earlier than upon separation from service, death, or
disability.
(a) Financial Hardship. (i) If elected by the Employer in item 8(D)
of the Adoption Agreement (Profit Sharing Plan), a Participant may elect to
withdraw all or any portion of his Elective Deferrals (excluding net earnings
credited thereto after December 31, 1988) on account of financial hardship. For
purposes of this Section 5.5, a financial hardship shall mean an immediate and
heavy financial need of the Participant which cannot be satisfied from other
resources reasonably available to such Participant. Hardship withdrawals are
subject to the spousal consent requirements of Code Sections 401(a)(11) and 417.
(ii) A withdrawal is made on account of an immediate and heavy
financial need of a Participant only if it is made on account of: (A)
unreimbursed medical expenses described in Code Section 213(d) of the
Participant or the Participant's spouse or dependents (as defined in Code
Section 152); (B) the purchase (excluding mortgage payments) of a principal
residence for the Participant; (C) payment of tuition for the next term of post-
secondary education for the Participant or the Participant's spouse, children or
dependents; or (D) the need to prevent the Participant's eviction from, or
foreclosure on the mortgage of, the Participant's principal residence or such
other events as may be approved by the Commissioner of Internal Revenue in
rulings, notices or other published documents.
23
<PAGE>
(iii) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Participant only if: (A) the
Participant has obtained all distributions, other than hardship distributions,
and all nontaxable loans under all plans maintained by the Employer; (B) all
plans maintained by the Employer provide that the Participant's Elective
Deferrals and any other elective contributions or employee contributions under
this Plan and any other plan maintained by the Employer (both qualified and
nonqualified) will be automatically suspended for twelve (12) months after the
receipt of the hardship distribution; (C) the distribution is not in excess of
the amount of an immediate and heavy financial need; and (D) all plans
maintained by the Employer provide that the Participant may not make Elective
Deferrals for the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable limit under Code
Section 402(g) for such taxable year less the amount of such Participant's
Elective Deferrals for the taxable year of the hardship distribution.
(iv) A request for a hardship distribution shall be made in writing
and in such form as may be prescribed by the Administrator. Processing of
applications and distributions of amounts under this Section, on account of a
bona fide financial hardship, shall be made as soon as administratively
feasible.
(b) Elective Deferrals at Age 59-1/2. Upon attaining age fifty-nine
and one-half (59 1/2), a Participant may elect to withdraw all or any portion of
his Elective Deferrals Account and/or Employer Matching Contributions Account,
as of the last day of any month, even if he is still employed.
Section 5.6. Definitions. For purposes of this Article, the following
words and phrases shall have the following meanings:
(a) "Actual Deferral Percentage" means, for a specified group of
Participating Employees for a Plan Year, the average of the ratios (calculated
separately for each Participating Employee in such group) of (i) the amount of
Employer contributions actually paid over to the Plan on behalf of such
Participating Employee for the Plan Year to (ii) the Participating Employee's
Compensation for such Plan Year (whether or not the Employee was a Participating
Employee for the entire Plan Year). Employer contributions on behalf of any
Participating Employee shall include: (i) any Elective Deferrals made pursuant
to the Participating Employee's, deferral election, including Excess Elective
Deferrals of Highly Compensated Employees, but excluding Elective Deferrals that
are taken into account in the Contribution Percentage test (provided the Actual
Deferral Percentage test is satisfied both with and without exclusion of these
Elective Deferrals); and (ii) at the election of the Employer, Qualified Non-
Elective Contributions and Qualified Matching Contributions. For purposes of
computing Actual Deferral Percentages, an Employee who would be a Participating
Employee but for the failure to make Elective Deferrals shall be treated as a
Participating Employee on whose behalf no Elective Deferrals are made.
(b) "Aggregate Limit" means the sum of (i) one hundred twenty-five
percent (125%) of the greater of the Actual Deferral Percentage of the
Participating Employees who are
24
<PAGE>
not Highly Compensated Employees for the Plan Year or the Actual Contribution
Percentage of Participating Employees who are not Highly Compensated Employees
under the Plan subject to Code Section 401(m) for the Plan Year beginning with
or within the Plan Year of the cash or deferred arrangement and (ii) the lesser
of two hundred percent (200%) or two (2) plus the lesser of such Actual Deferral
Percentage or Actual Contribution Percentage. "Lesser" is substituted for
"greater" in (i) above and "greater" is substituted for "lesser" after "two plus
the" in (ii) above if it would result in a larger Aggregate Limit.
(c) "Average Contribution Percentage" means the average of the
Contribution Percentages of the Employees in a group who are eligible to make
Participant Voluntary Contributions, or Elective Deferrals (if the Employer
takes such contributions into account in the calculation of the Contribution
Percentage), or to receive Matching Contributions (including forfeitures) or
Qualified Matching Contributions.
(d) "Contribution Percentage" means the ratio (expressed as a
percentage) of the Participating Employee's Contribution Percentage Amounts to
the Participating Employee's Compensation for the Plan Year (whether or not the
Employee was a Participating Employee for the entire Plan Year).
(e) "Contribution Percentage Amounts" means the sum of the
Participant Voluntary Contributions, Matching Contributions, and Qualified
Matching Contributions (to the extent not taken into account for purposes of the
Actual Deferral Percentage test) made under the Plan on behalf of the
Participating Employee for the Plan Year. Such Contribution Percentage Amounts
shall include forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participating Employee's Accounts which shall be
taken into account in the year in which such forfeiture is allocated. The
Employer may elect to include Qualified Non-Elective Contributions in the
Contribution Percentage Amounts. The Employer also may elect to use all or part
of the Elective Deferrals for the Plan Year in the Contribution Percentage
Amounts so long as the Actual Deferral Percentage test is satisfied both
including and excluding the Elective Deferrals that are included in the
Contribution Percentage Amounts.
(f) "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of:
(i) the aggregate Contribution Percentage Amounts taken into account
in computing the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
(ii) the maximum Contribution Percentage Amounts permitted by the
Actual Contribution Percentage test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 5.2(d) hereof and then determining Excess
Contributions pursuant to Section 5.2(f) hereof.
25
<PAGE>
(g) "Excess Contributions" means, with respect to any Plan Year, the
excess of:
(i) the aggregate amount of Employer contributions actually taken into
account in computing the Actual Deferral Percentage of Highly Compensated
Employees for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the Actual
Deferral Percentage test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the Actual Deferral Percentages,
beginning with the highest of such percentages).
(h) "Excess Elective Deferrals" means those Elective Deferrals that
are includible in a Participating Employee's gross income for a taxable year
under Code Section 402(g) because they exceed the limitation specified in
Section 5.2(d)(i) hereof. Excess Elective Deferrals shall be treated as Annual
Additions under the Plan.
(i) "Family Member" means the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of such lineal
ascendants and descendants, all within the meaning of Code Section 414(q)(6).
(j) "Highly Compensated Employee" means both highly compensated
active employees and highly compensated former employees.
(i) A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and who, during
the look-back year: (i) received compensation from the Employer in excess of
$75,000 (as adjusted pursuant to Code Section 415(d)); (ii) received
compensation from the Employer in excess of $50,000 (as adjusted pursuant to
Code Section 415(d)) and was a member of the top-paid group for such year; or
(iii) was an officer of the Employer and received compensation during such year
that is greater than 50 percent of the dollar limitation in effect under Code
Section 415(b)(1)(A).
The term Highly Compensated Employee also includes: (i) employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the employee is one of the 100
employees who received the most compensation from the Employer during the
determination year; and (ii) employees who are 5 percent owners at any time
during the look-back year or determination year. If no officer has satisfied the
compensation requirement of (iii) above during either a determination year or
look-back year, the highest paid officer for such year shall be treated as a
Highly Compensated Employee. For this purpose, the determination year shall be
the Plan Year. The look-back year shall be the twelve-month period immediately
preceding the determination year.
(ii) A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly
26
<PAGE>
compensated active employee for either the separation year or any determination
year ending on or after the employee's fifty-fifth (55th) birthday.
(iii) If an employee is, during a determination year or look-back
year, a Family Member of either a five percent owner who is an active or former
employee or a Highly Compensated Employee who is one of the ten (10) most highly
compensated employees ranked on the basis of Compensation paid by the Employer
during such year, then the Family Member and the five percent owner or top-ten
Highly Compensated Employee shall be aggregated. In such case, the Family
Member and five percent owner or top-ten Highly Compensated Employee shall be
treated as a single employee receiving Compensation and Plan contributions or
benefits equal to the sum of such Compensation and contributions or benefits of
the Family Member and five percent owner or top-ten Highly Compensated Employee.
(iv) The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of employees in the top-
paid group, the top 100 employees, the number of employees treated as officers
and the Compensation that is considered, will be made in accordance with Code
Section 414(q).
(k) "Participating Employee" means an Employee who is eligible to
make Elective Deferrals or Participant Voluntary Contributions (if the Employer
takes such contributions into account in the calculation of the Contribution
Percentage), or to receive Matching Contributions (including forfeitures) or
Qualified Matching Contributions. If an Employee contribution is required as a
condition of participation in the Plan, any Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as a
Participating Employee on behalf of whom no Employee contributions are made.
(1) "Qualified Matching Contributions" means Matching Contributions
which are one hundred percent (100%) vested and nonforfeitable at all times and
which are distributable only in accordance with the distribution provisions
applicable to Elective Deferrals.
(m) "Qualified Non-Elective Contributions" means contributions
(other than Matching Contributions or Qualified Matching Contributions) made by
the Employer and allocated to Participating Employees' Accounts that the
Participating Employees may not elect to receive in cash until distributed from
the Plan, are one hundred percent (100%) vested and nonforfeitable when made,
and are distributable only in accordance with the distribution provisions
applicable to Elective Deferrals.
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ARTICLE VI.
SECTION 415 LIMITATIONS
-----------------------
Section 6.1. Employers Maintaining Only this Plan.
(a) If the Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined in
Code Section 419(e)) or an individual medical account (as defined in Code
Section 415(1)(2)) maintained by the Employer, the amount of Annual Additions
which may be credited to a Participant's Account under this Plan for a
Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or
any other limitation contained in this Plan. If the Employer's contribution that
would otherwise be contributed or allocated to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, the amount contributed or allocated will be reduced so that
the Annual Additions for the Limitation Year will equal the Maximum Permissible
Amount.
(b) Prior to the determination of the Participant's actual
compensation for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated annual compensation for
such Limitation Year. Such estimated annual compensation shall be determined on
a reasonable basis and shall be uniformly determined for all Participants
similarly situated. Any Employer contributions based on estimated annual
compensation shall be reduced by any Excess Amounts carried over from prior
years.
(c) As soon as it is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year shall
be determined on the basis of the Participant's actual Compensation for such
Limitation Year.
(d) If, pursuant to Section 6.1(c) and notwithstanding the
provisions of Section 6.l(a) hereof which require a reduction of contributions
so as not to exceed the limitations of this Article VI, there is an Excess
Amount with respect to a Participant for a Limitation Year, such Excess Amount
shall be disposed of as follows:
(i) Any Participant Voluntary Contributions, to the extent that the
return would reduce the Excess Amount, shall be returned to the Participant.
(ii) In the event that the Participant is covered by this Plan at the
end of the Limitation Year, remaining Excess Amounts after the application of
clause (i) shall be applied to reduce future Employer contributions (including
any allocation of forfeitures) for such Participant under this Plan in the next
Limitation Year (and each succeeding year, as necessary).
(iii) In the event that the Participant is not covered by this Plan
at the end of the Limitation Year, remaining Excess Amounts after the
application of clause (i) shall not be distributed to the Participant, but shall
be held unallocated in a suspense account and shall be applied to reduce future
Employer contributions (including any allocation of forfeitures) for all
remaining Participants in the next Limitation Year (and each succeeding year, as
necessary).
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(iv) If a suspense account is in existence at any time during the
Limitation Year pursuant to this Section, it will not participate in the
allocation of any investment gains and losses, and all amounts in the suspense
account must be allocated and reallocated to Participants' Accounts before any
Employer or Employee contributions may be made to the Plan for such Limitation
Year. Excess amounts may not be distributed to Participants or former
Participants.
Section 6.2. Employers Maintaining Other Master or Prototype Defined
Contribution Plans.
(a) If, in addition to this Plan, the Participant is covered under
another qualified defined contribution plan which qualifies as a Master or
Prototype Plan or a welfare benefit fund (as defined in Code Section 419(e)) or
an individual medical account (as defined in Code Section 415(1)(2)) maintained
by the Employer during any Limitation Year, the amount of Annual Additions which
may be allocated under this Plan on the Participant's behalf for such Limitation
Year, shall not exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant's account under such other plans, welfare
benefit funds or individual medical accounts for the same Limitation Year. If
the Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer are less
than the Maximum Permissible Amount and the Employer contribution that would
otherwise be contributed or allocated to the Participant's Account under this
Plan would cause the Annual Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so that the
Annual Additions under all such plans and funds for the Limitation Year will
equal the Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under such other defined contribution plans and welfare benefit
funds in the aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the Participant's Account
under this Plan for the Limitation Year.
(b) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in subsection (a)
above may be determined on the Participant's estimated annual compensation for
such Limitation Year. Such estimated annual compensation shall be determined on
a reasonable basis and shall be uniformly determined for all Participants
similarly situated. Any Employer contribution based on estimated annual
compensation shall be reduced by any Excess Amounts carried over from prior
years.
(c) As soon as it is administratively feasible after the end of the
Limitation Year, the amounts referred to in subsection (a) above shall be
determined on the basis of the Participant's actual Compensation for such
Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount for a Limitation Year, such Excess Amount
shall be deemed to consist of the Annual Additions last allocated, except that
Annual Additions attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the actual
allocation date.
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(e) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of another
plan, the Excess Amount attributed to this Plan will be the product of:
(i) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of Code Section
415), times
(ii) the ratio of (A) the amount allocated to the Participant as of
such date under this Plan, divided by (B) the total amount allocated as of such
date under all qualified master or prototype defined contribution plans
(determined without regard to the limitations of Code Section 415).
(f) Any Excess Amounts attributed to this Plan shall be disposed of
as provided in Section 6.1(d).
Section 6.3. Employers Maintaining Other Defined Contribution Plans.
If the Participant is covered under another plan which is a qualified defined
contribution plan which is not a Master or Prototype Plan maintained by the
Employer, Annual Additions allocated under this Plan on behalf of any
Participant shall be limited in accordance with the provisions of Section 6.2,
as though the other plan were a Master or Prototype Plan, unless the Employer
provides other limitations in the Adoption Agreement.
Section 6.4. Employers Maintaining Defined Benefit Plans. If the
Participant is covered or was covered at any time under a qualified defined
benefit plan maintained by the Employer, the projected annual benefit thereunder
and the Annual Additions credited to any such Participant's Account under this
Plan and any other qualified defined contribution plan in any Limitation Year
will be limited so that the sum of the Defined Contribution Fraction and the
Defined Benefit Fraction with respect to such Participant will not exceed 1.0 in
any Limitation Year. The Annual Additions which may be credited to the
Participant's Account under this Plan for any Limitation Year will be limited in
accordance with the Adoption Agreement.
Section 6.5. Definitions. For purposes of this Article VI, the
following terms shall be defined as follows:
(a) Annual Additions -- The sum of the following amounts allocated to
a Participant's Account for a Limitation Year: (i) all Employer contributions;
(ii) all Participant contributions (other than a qualified rollover contribution
as described in Code Section 402(a)(5)); (iii) all forfeitures; (iv) all amounts
allocated, after March 31, 1984, to an individual medical account (as defined in
Code Section 415(1)(2)) which is part of a defined benefit or annuity plan
maintained by the Employer are treated as Annual Additions to a defined
contribution plan; and (v) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the separate
account of a "key employee" (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
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For the purposes of this Article VI, amounts reapplied under Sections 6.1(d) and
6.2(f) of the Plan to reduce Employer contributions shall also be included as
Annual Additions.
(b) Compensation--A Participant's wages as defined in Code Section
3121(a), for purposes of calculating social security taxes, but determined
without regard to the wage base limitation in Code Section 3121(a)(1), the
limitations on the exclusions from wages in Code Section 3121(a)(5)(C) and (D)
for elective contributions and payments by reason of salary reduction
agreements, the special rules in Code Section 3121(v), any rules that limit
covered employment based on the type or location of an employee's employer, and
any rules that limit the remuneration included in wages based on familial
relationship or based on the nature or location of the employment or the
services performed (such as the exceptions to the definition of employment in
Code Section 3121(b)(1) through (20)). For any Self-Employed Individual
Compensation means Earned Income.
For Limitation Years beginning after December 31, 1991, for purposes
of applying the limitations of this Article, Compensation for a Limitation Year
is the Compensation actually paid or includible in gross income during such
Limitation Year. Notwithstanding the preceding sentence, Compensation for a
participant in a defined contribution plan who is permanently and totally
disabled (as defined in Code Section 22(e)(3)) is the Compensation such
participant would have received for the Limitation Year if the participant had
been paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled. Such imputed Compensation for a disabled
participant may be taken into account-only if the participant is not a highly
compensated employee (as defined in Code Section 414(q)) and contributions made
on behalf of such participant are nonforfeitable when made.
(c) Defined Benefit Fraction--A fraction, the numerator of which is
the sum of a Participant's Projected Annual Benefits under all the qualified
defined benefit plans whether or not terminated) maintained by the Employer
determined at the end of the Limitation Year, and the denominator of which is
the lesser of (i) one hundred and twenty-five percent (125%) of the dollar
limitation for such Limitation Year under Code Sections 415(b) and (d) (or such
higher amount determined by the Commissioner of Internal Revenue applicable to
the calendar year with which or within which the Limitation Year ends) or (ii)
one hundred and forty percent (140%) of the Participant's average Compensation
(or Earned Income) for the three highest consecutive calendar years of service
during which the Participant was in the Plan including any adjustments under
Code Section 415(b). Notwithstanding the above, if the Participant was a
Participant as of the first limitation year beginning after December 31, 1986 in
one or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be less than
the product of 1.25 times the sum of the annual benefits under such plans which
the Participant had accrued as of the close of the last Limitation Year
beginning after January 1, 1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied the
requirements of Code Section 415 for all Limitation Years beginning before
January 1, 1987.
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(d) Employer--The Employer that adopts this Plan and in the case of a
group of employers which constitutes (i) a controlled group of corporations (as
defined in Code Section 414(b) as modified by Code Section 415(h)); (ii) trades
or businesses (whether or not incorporated) which are under common control (as
defined in Section 414(c) as modified by Code Section 415(h)); (iii) an
affiliated service group (as defined in Code Section 414(m)); or (iv) a group of
entities required to be aggregated (pursuant to Code Section 414(o)) all such
employers shall be considered a single employer for purposes of applying the
limitations of this Article VI.
(e) Excess Amount--The excess of the Participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
(f) Limitation Year--A calendar year or any other twelve (12)
consecutive month period adopted by the Employer in item 12 of the Adoption
Agreement (Profit Sharing Plan) or item 10 of the Adoption Agreement (Pension
Plan). All qualified plans maintained by the Employer shall use the same
Limitation Year. If the Limitation Year is amended to a different twelve (12)
consecutive month period, the new Limitation Year shall begin on the date within
the Limitation Year in which the amendment is made.
(g) Master or Prototype Plan--A plan the form of which is the subject
of a favorable opinion letter from the Internal Revenue Service.
(h) Maximum Permissible Amount--For a Limitation Year, the Maximum
Permissible Amount with respect to any Participant shall be the lesser of (i)
the Defined Contribution Dollar Limitation or (ii) twenty-five percent (25%) of
the Participant's Compensation for the Limitation Year. The Compensation
limitation described in (ii) shall not apply to any contribution for medical
benefits (within the meaning of Code Sections 401(h) or 419A(f)(2)) which is
otherwise treated as an Annual Addition under Code Sections 415(1)(1) or
419A(d)(2). If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month
period, the Maximum Permissible Amount shall not exceed the defined contribution
dollar limitation in Code Section 415(c)(1)(A) multiplied by a fraction, the
numerator of which is the number of months in the short Limitation Year and the
denominator of which is twelve (12).
(i) Projected Annual Benefit--A Participant's annual retirement
benefit (adjusted to the actuarial equivalent of a straight life annuity if
expressed in a form other than a straight life or qualified joint and survivor
annuity) under the Plan, assuming that the Participant will continue employment
until the later of current age or Normal Retirement Age, and that the
Participant's Compensation for the Limitation Year and all other relevant
factors used to determine benefits under the Plan will remain constant for all
future Limitation Years.
(j) Defined Contribution Fraction--A fraction, the numerator of
which is the sum of the Annual Additions credited to the Participant's account
under this and all other qualified 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 non-
deductible employee contributions to all qualified defined benefit plans
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(whether or not terminated) maintained by the Employer for the current and all
prior Limitation Years and the Annual Additions attributable to all welfare
benefit funds (as defined in Code Section 419(e)) and individual medical
accounts (as defined in Code Section 415(1)(2) maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate amounts for the
current and all prior Limitation Years of service with the Employer (regardless
of whether a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any Limitation Year is the lesser of (i) one hundred
and twenty-five percent (125%) of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or (ii)
thirty-five percent (35%) of the Participant's Compensation for such
Limitation Year.
If the Employee was a participant as of the end of the first day of
the first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in existence on
May 5, 1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the product of: (i)
the excess of the sum of the fractions over 1.0 times (ii) the denominator of
this fraction, will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would be
computed as of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987. The annual addition
for any Limitation Year beginning before January 1, 1987, shall not be computed
to treat all Employee contributions as Annual Additions.
(k) Defined Contribution Dollar Limitation--For a Limitation Year,
thirty thousand dollars ($30,000) or, if greater, one-fourth of the defined
benefit dollar limitation set forth in Code Section 415(b)(1) as in effect for
such Limitation Year.
(1) Highest Average Compensation--The average Compensation for the
three consecutive Years of Service with the Employer which produces the highest
average.
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ARTICLE VII.
PARTICIPANTS' ACCOUNTS
----------------------
Section 7.1. Separate Accounts. Separate Accounts will be maintained
for each Participant for each of the following types of contributions, and the
income, expenses, gains and losses attributable thereto:
(a) Employer Profit Sharing Contributions pursuant to
Section 4.1 hereof;
(b) Employer Pension Contributions pursuant to Section 4.2 hereof;
(c) Participant Voluntary Contributions pursuant to Section 4.3
hereof;
(d) Elective Deferrals pursuant to Section 5.2 hereof;
(e) Matching Contributions pursuant to Section 5.3 hereof;
(f) Rollover Contributions pursuant to Section 4.6 hereof.
The Custodian shall establish such other separate Accounts as may be necessary
under the Plan. These Accounts shall be for accounting purposes only and the
Custodian shall not be required to establish separate Custodial Accounts for
these contributions.
Section 7.2. Vesting. (a) A Participant shall at all times have a
fully vested and nonforfeitable interest in all his Accounts except his Employer
Profit Sharing Contributions Account and/or his Employer Pension Contributions
Account.
(b) A Participant shall have a vested interest in his Employer Profit
Sharing Contributions Account and/or his Employer Pension Contributions Account
as determined under the vesting schedule elected in item 7 of the Adoption
Agreement.
Section 7.3. Computation of Vesting Service. All of a Participant's
Years of Service with the Employer shall be counted to determine the
nonforfeitable percentage of his Employer Profit Sharing Contributions Account
and/or his Employer Pension Contributions Account except those Years of Service
excluded under item 7 of the Adoption Agreement. A former Participant who had a
nonforfeitable right to all or a portion of his Account balance derived from
Employer contributions at the time of his termination shall receive credit for
Years of Service prior to his Break in Service upon completing a Year of Service
after his return to the employ of the Employer. A former Participant who did
not have a nonforfeitable right to any portion of his Account balance derived
from Employer contributions at the time of termination from service will be
considered a new employee for vesting purposes, if the number of consecutive one
year Breaks in Service equals or exceeds the greater of (i) five (5) years or
(ii) the aggregate number of Years of Service before such Breaks in Service. If
such a former Participant's Years of Service before termination from service may
not be disregarded pursuant to the preceding sentence, such former Participant's
prior Years of Service shall not be cancelled hereunder.
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Section 7.4. Allocation of Forfeitures.
(a) As of the end of the Plan Year, forfeitures derived from Employer
Profit Sharing Contributions Accounts which become available for reallocation
during such Plan Year because of the operation of the vesting provisions of
Section 7.2tb), shall be allocated to the Employer Profit Sharing Contribution
Accounts of the Participants who are eligible to share in an Employer Profit
Sharing Contributions for the Plan Year. Such amounts shall be allocated
according to the ratio that each such Participant's Compensation or Earned
Income for the Plan Year bears to the total Compensation and Earned Income of
all such Participants for the Plan Year. Forfeitures under this subsection (a)
will be allocated only for the benefit of Participants of the Employer adopting
this Plan.
(b) Forfeitures derived from Employer Pension Contributions which
become available for reallocation during a Plan Year shall be applied to reduce
the Employer Pension Contributions that would otherwise be due for such Plan
Year under Section 4.2. Forfeitures under this subsection (b) will only be used
to reduce the Employer Pension Contributions of the Employer adopting this Plan.
(c) If a benefit is forfeited because a Participant or Beneficiary
cannot be found, such benefit will be reinstated if a claim is made by the
Participant or Beneficiary.
(d) No forfeiture will occur solely as a result of a Participant's
withdrawal of any Employee contributions.
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ARTICLE VIII.
PAYMENT OF BENEFITS
-------------------
Section 8.1. Benefits Payable Under the Plan.
(a) Normal Retirement. A Participant's interest in all Employer
contributions allocated to his Accounts shall be fully vested and nonforfeitable
on and after his Normal Retirement Age. Such Participant may retire at any time
on or after that date and shall be entitled to receive, in accordance with the
provisions of Sections 8.2 and 8.3 hereof, the total amount credited to his
Accounts. Any Participant who is employed beyond his Normal Retirement Age
shall continue to share in Employer contributions until his actual retirement.
(b) Death Benefits. Upon the death of a Participant while employed by
the Employer, the total amount credited to such Participant's Accounts (plus
such Participant's share of the Employer contributions for the year of his
death), shall be payable to such Participant's Beneficiary in accordance with
Sections 8.2 and 8.3 hereof. Upon the death of a Participant following his
termination of employment with the Employer, the vested portion of his Accounts
which has not been distributed shall be payable to such Participant's
Beneficiary in accordance with Sections 8.2 and 8.3 hereof.
(c) Other Termination of Employment. A Participant who terminates
employment with the Employer on account of Disability shall be entitled to
receive, in accordance with Sections 8.2 and 8.3 hereof, the total amount
credited to his Account. A Participant whose employment with the Employer is
terminated prior to his Normal Retirement Date for any reason other than death
or Disability shall be entitled to receive, in accordance with the provisions of
Sections 8.2 and 8.3 hereof, the portions of his Accounts that have vested
pursuant to Section 7.2 hereof.
(d) Forfeitures. Any amounts in a Participant's Accounts which are not
payable under subsection (c) above when his employment with the Employer is
terminated shall remain in such Accounts and shall continue to share in profits
or losses on investments under Section 9.3 hereof until such former Participant
incurs five (5) consecutive Breaks in Service, whereupon they shall be forfeited
and administered in accordance with Section 7.4 hereof. In the event a former
Participant is reemployed by the Employer before incurring five (5) consecutive
Breaks in Service his Accounts shall continue to vest in accordance with the
vesting schedule specified in the applicable Adoption Agreement.
Notwithstanding the foregoing, if a terminated Participant receives a
distribution on account of termination of his Participation in the Plan of his
entire vested interest in the Pension Plan or the Profit Sharing Plan, such
Participant's nonvested interest in the relevant plan shall be treated as a
forfeiture and administered in accordance with Section 7.4 hereof. If the
Participant elects to have distributed less than the entire vested portion of
his Account balance derived from Employer contributions, the part of the
nonvested portion that will be treated as a forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the amount of the
distribution attributable to Employer contributions and the denominator of which
is the total value of the vested Employer derived Account balance. For purposes
of this Section, if the value of an employee's vested account balance is zero,
the
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Employee shall be deemed to have received a distribution of such vested
account balance. A Participant's vested account balance shall not include
accumulated deductible employee contributions within the meaning of Code Section
72(o)(5)(B) for plan years beginning prior to January 1, 1989. If a Participant
receives or is deemed to receive a distribution pursuant to this subsection (d)
and such Participant subsequently resumes employment covered under the Plan, the
forfeited amounts shall be restored from current forfeitures, or if those are
insufficient by a special Employer contribution, provided that the Participant
repays to the Plan the full amount of the distribution attributable to Employer
contributions prior to the earlier of (i) five (5) years after the Participant
is reemployed, or (ii) the time the Participant incurs five (5) consecutive
Breaks in Service. In the event a former Participant is reemployed after
incurring five (5) consecutive Breaks in Service, separate Accounts will be
maintained for Employer contributions allocated before and after the Break in
Service, and Years of Service earned after his return to employment shall be
disregarded in determining the Participant's vested percentage in his prebreak
Employer contributions.
Section 8.2. Manner of Distributions.
(a) Distributions From Pension Plan. Distributions from the Pension
Plan shall be made as follows:
(i) A Participant's vested interest in the Plan shall be paid by
purchasing an annuity contract from a licensed insurance company, unless the
Participant elects to receive his interest in one of the alternate forms of
benefit described in subsection (c) below. If a Participant is not married at
his annuity starting date, the annuity contract shall provide a monthly benefit
for his life. If a Participant is married at his annuity starting date, the
annuity shall be in the form of a qualified joint and survivor annuity. A
"qualified joint and survivor annuity" is an immediate annuity for the life of
the Participant with a survivor annuity for the life of the spouse which is
equal to fifty percent (50%) of the amount of the annuity which is payable
during the joint lives of the Participant and the spouse and which is the amount
of benefit which can be purchased with the Participant's vested Account balance.
The Participant may elect to have such annuity distributed upon attainment of
the earliest retirement age under the Plan. Any annuity contract purchased
hereunder and distributed in accordance with this Section 8.2 shall be
nontransferable and shall comply with the terms of this Plan. For purposes of
this Section, the earliest retirement age shall be the Participant's age on the
earliest date on which the Participant could elect to receive retirement
benefits.
(ii) Unless an optional form of benefit is selected in accordance with
subsection (c) below, if a Participant has a spouse and dies prior to his
annuity starting date (the date annuity payments commence), the Participant's
vested Account balance in the Plan shall be applied toward the purchase of a
life only annuity contract from a licensed insurance company providing a benefit
for the life of the surviving spouse. The surviving spouse may elect to have
such annuity distributed within a reasonable period after the Participant's
death. (iii) For any distribution subject to the annuity requirements in
subsection (i) above, a Participant or Beneficiary may elect in writing, within
the ninety (90) day period ending on the annuity starting date (the date annuity
or any other form of benefit payments commence), to receive his vested
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interest in the Plan in one of the alternate forms of benefit set forth in
subsection (c) below in lieu of the form of benefit otherwise payable hereunder.
Any waiver of the joint and survivor annuity by a married Participant shall not
be effective unless: (A) the Participant's spouse consents in writing to the
election; (B) the election designates a specific Beneficiary, including any
class of beneficiaries or any contingent beneficiaries, which may not be changed
without spousal consent (or the spouse expressly permits designations by the
Participant without any further spousal consent); (C) the spouse's consent
acknowledges the effect of the election; and (D) the spouse's consent is
witnessed by a Plan representative or notary public. Additionally, a
Participant's waiver of the joint and survivor annuity shall not be effective
unless the election designates a form of benefit payment which may not be
changed without spousal consent (or the spouse expressly permits designations by
the Participant without any further spousal consent). If it is established to
the satisfaction of a Plan representative that there is no spouse or that the
spouse cannot be located, a waiver will be deemed a qualified election. Any
consent by a spouse obtained under this provision (or establishment that the
consent of a spouse may not be obtained) shall be effective only with respect to
such spouse. A consent that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge that the spouse
has the right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the spouse voluntarily elects to relinquish
either or both of such rights. A revocation of a prior election may be made by a
Participant without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the Participant and
the spouse have received notice as provided in subsection (v) below.
(iv) A Participant may elect in writing to waive the surviving spouse
benefit otherwise payable under subsection (ii) above. The benefit may be
waived at any time during the period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of the
Participant's death. A Participant and the spouse may waive the pre-retirement
survivor death benefit prior to age 35, provided that such early waiver becomes
invalid in the Plan Year the Participant attains age 35 and a new waiver must be
made pursuant to this subsection (iv). If the Participant separates from
service prior to the first day of the Plan Year in which he attains age 35, the
surviving spouse benefit may be waived, with respect to the Participant's
account balance as of the date of separation, at any time during the period
which begins on the date of such separation and ends on the date of the
Participant's death. Notwithstanding the foregoing, any election by a
Participant to waive the surviving spouse benefit payable under subsection (ii)
above shall not be effective unless: (A) the Participant's spouse consents in
writing to the election; (B) the spouse's consent acknowledges the effect of the
election; and (C) the spouse's consent is witnessed by a Plan representative or
notary public. If it is established to the satisfaction of a Plan representative
that there is no spouse or that the spouse cannot be located, a waiver will be
deemed a qualified election. Any consent by a spouse obtained under this
provision (or establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A revocation of a prior
election may be made by a Participant without the consent of the spouse at any
time before the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be valid unless the
Participant and the spouse have received notice as provided in subsection (v)
below.
38
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(v) The Administrator shall provide the Participant and the Spouse, as
applicable, with a written explanation of: (A) the terms and conditions of the
annuity described in subsections (i) or (ii), as applicable; (B) the
Participant's or Spouse's, as applicable, right to waive the payment of benefits
in the form of an annuity; (C) the rights of the Participant's spouse; and (D)
the right to make, and the effect of, the revocation of a previous election to
waive the payment of benefits in the form of an annuity described in subsections
(i) or (ii) hereof. In the case of the annuity described in subsection (i), such
explanation shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the annuity starting date. In the case of the annuity
described in subsection (ii), such explanation shall be provided within the
applicable period for such Participant. The applicable period for a Participant
is whichever of the following periods ends last: (A) the period beginning with
the first day of the Plan Year in which the Participant attains age 32 and
ending with the close of the Plan Year preceding the Plan Year in which the
Participant attains age 35; (B) a reasonable period ending after the individual
becomes a Participant; (C) a reasonable period ending after this Article first
applies to the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from service in the
case of a Participant who separates from service before attaining age 35. For
purposes of applying the preceding paragraph, a reasonable period ending after
the enumerated events described in (B) and (C) is the end of the two-year period
beginning one year prior to the date the applicable event occurs, and ending one
year after that date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be provided
within the two-year period beginning one year prior to separation and ending one
year after separation. If such a Participant thereafter returns to employment
with the Employer, the applicable period for such Participant shall be
redetermined. A written explanation comparable to the notices described above
shall be provided to a Participant who is waiving the surviving spouse benefit
prior to attaining age 35.
(vi) The Administrator shall be responsible for the purchase of any
annuity contracts required to be purchased in accordance with the terms of this
Plan.
(b) Distributions from Profit Sharing Plan. Distributions from the
Profit Sharing Plan shall be made in the form elected by the Participant (or
Beneficiary) as described in subsection (c) below. Notwithstanding the
foregoing, if the Profit Sharing Plan is a direct or indirect transferee of a
defined benefit plan, a money purchase pension plan (including a target benefit
plan), or a stock bonus or profit sharing plan or is an amendment of an original
Plan which is (or was) subject to the survivor annuity requirements of Code
Sections 401(a)(11) or 417 then distributions shall be made in accordance with
the provisions of subsection (a) above.
(c) Optional Forms of Distribution. All distributions required under
this subsection shall be determined and made in accordance with the Income Tax
Regulations under Code Section 401(a)(9), including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of such Regulations.
(i) Amounts payable to a Participant shall be distributed in one of
the following forms as elected by the Participant, with spousal consent, as
applicable:
39
<PAGE>
(A) a lump sum; or
(B) installments over a period certain not to exceed the life
expectancy of the Participant or the joint life expectancy of the
Participant and his Beneficiary.
Such election shall be made in writing and in such form as shall be acceptable
to the Administrator. If the Participant fails to elect any of the methods of
distribution described above within the time specified for such election, the
Administrator shall distribute the Participant's Account in the form of a single
sum cash payment by the April 1 following the calendar year in which the
Participant attains age seventy and one-half (70-1/2).
(ii) If a Participant's benefit is to be distributed in installment
payments under (B) above, the amount distributed for each calendar year,
beginning with distributions for the first distribution calendar year, must at
least equal the quotient obtained by dividing the Participant's benefit by the
applicable life expectancy. The life expectancy (or joint and last survivor
expectancy) is calculated using the attained age of the Participant (or
Beneficiary) as of the Participant's (or Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year which has elapsed
since the date life expectancy was first calculated. If life expectancy is being
recalculated, the applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first distribution
calendar year, and, if life expectancy is being recalculated, such succeeding
calendar year.
Unless otherwise elected by the Participant (or the Participant's
spouse) by the time distributions are required to begin, life expectancies shall
be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse Beneficiary may not be recalculated. Life expectancy
and joint life expectancy are computed by use of the expected return multiples
in Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
Notwithstanding anything herein to the contrary, for calendar years
beginning before January 1, 1989, if the Participant's spouse is not the
designated Beneficiary, the method of distribution selected must assure that at
least fifty percent (50%) of the present value of the amount available for
distribution is paid within the life expectancy of the Participant. For
calendar years beginning after December 31, 1988, the amount to be distributed
each year shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (A) the applicable life expectancy or (B)
if the Participant's spouse is not the designated Beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the Income Tax Regulations. Distributions after the death of the Participant
shall be distributed using the applicable return multiple specified in Section
1.72-9 of the Income Tax Regulations as the relevant divisor without regard to
Section 1.401(a)(9)-2 of the Income Tax Regulations.
(iii) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date as described in Section 8.3(c) hereof. The minimum distribution
for other calendar years, including the minimum
40
<PAGE>
distribution for the distribution calendar year in which such required beginning
date occurs, must be made on or before December 31 of that distribution calendar
year.
(d) In any case where the Participant or Beneficiary has determined
payment to be on an installment basis, such Participant or Beneficiary may by
written request directed to the Administrator, at any time following
commencement of such installment payments, accelerate all or any portion of the
unpaid balance.
(e) For purposes of this Section a "spouse" shall include the spouse
or surviving spouse of a Participant, provided that a former spouse-shall be
treated as the spouse or surviving spouse and a current spouse will not be
treated as a spouse or surviving spouse to the extent provided under a qualified
domestic relations order as described in Code Section 414(p).
(f) The payment of benefits in either a lump sum or in installments
under this Section 8.2 may be made in cash or in Investment Company Shares.
Section 8.3. Commencement of Payments. (a) Subject to the provisions
of this Section 8.3, payment of benefits, under whichever method is selected,
shall- be made or commence as soon as administratively practicable after the
Valuation Date immediately following the Participant's retirement, death or
other termination of employment.
(b) If the Participant's vested Account balance in the Pension Plan or
the Profit Sharing Plan exceeds (or at the time of any prior distribution
exceeded) three thousand five hundred dollars ($3,500), no distribution of that
interest shall be made prior to the time the Participant's Account becomes
immediately distributable without the written consent of the Participant and, in
the case of the Pension Plan, the Participant's spouse (or where either the
Participant or the spouse has died, the survivor). The consent of the
Participant and the Participant's spouse shall be obtained in writing within the
ninety (90) day period ending on the annuity starting date. The annuity starting
date is the first day of the first period for which an amount is paid as an
annuity or any other form. The Administrator shall notify the Participant and
the Participant's spouse of the right to defer any distribution until the
Participant's Account balance is no longer immediately distributable. Such
notification shall include a general description of the material features, and
an explanation of the relative values of the optional forms of benefit available
under the Plan in a manner that would satisfy the notice requirements of Code
Section 417(a)(3), and shall be provided no less than thirty (30) days and no
more than ninety (90) days prior to the annuity starting date; provided that if
a distribution is one to which Sections 401(a)(11) and 417 of the Internal
Revenue Code do not apply, such distribution may commence less than 30 days
after the notice required under Section 1.411(a)-ll(c) of the Income Tax
Regulations is given, provided that:
(1) the Administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days receiving the notice to consider the
decision of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively elects
a distribution.
Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a qualified joint and survivor
annuity while the Account balance is immediately distributable. (Furthermore, if
payment in the form of a qualified joint and survivor annuity is not required
with respect to the Participant pursuant to Section 8.2(b) of the Plan, only the
Participant need consent to the distribution of an Account balance that is
immediately distributable.) Neither the consent of the Participant nor the
Participant's spouse shall be required to the extent that a distribution is
required to satisfy Code Sections 401(a)(9) or 415. In addition, upon
termination of this Plan if the Plan does not offer an annuity option (purchased
from a commercial insurance company), the Participant's Account balance may,
without the Participant's consent, be distributed to the Participant or
transferred to another
41
<PAGE>
defined contribution plan (other than an employee stock ownership plan as
defined in Code Section 4975(e)(7)) within the same controlled group.
An Account balance is immediately distributable if any part of the
Account balance could be distributed to the Participant (or surviving spouse)
before the Participant attains (or would have attained if not deceased) the
later of his Normal Retirement Age or age sixty-two (62).
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first Plan Year
beginning after December 31, 1988, a Participant's vested Account balance shall
not include amounts attributable to accumulated deductible employee
contributions within the meaning of Code Section 72(o)(5)(B).
(c) Unless the Participant (or the Participant's Beneficiary, if the
Participant is dead) elects to defer commencement under (b) above, distribution
of benefits shall begin no later than the sixtieth (60th) day after the close of
the Plan Year in which occurs the latest of (i) the Participant's attainment of
age 65 (or normal retirement age, if earlier); (ii) the tenth (10th) anniversary
of the year in which the Participant commenced participation in the Plan; or
(iii) the date the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and the spouse to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.1 of the Plan, shall be deemed to be an election to
defer commencement of payment of any benefit sufficient to satisfy this Section.
(d) Notwithstanding anything herein to the contrary, payment of
benefits to a Participant shall commence by the Participant's required beginning
date, even if the Participant is still employed. A Participant's required
beginning date is the April 1 of the calendar year following the calendar year
in which the Participant attains age seventy and one-half (70-1/2); provided
that the required beginning date of a Participant who attains age 70-1/2: before
January 1, 1988, shall be determined in accordance with (i) or (ii) below:
(i) The required beginning date of a Participant who is not a 5-
percent owner is the first day of April of the calendar year following the
calendar year in which the later of retirement or attainment of age seventy and
one-half (70-1/2) occurs.
(ii) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the first day of
April following the later of the calendar year in which the Participant attains
age seventy and one-half (70-1/2), or the earlier of the calendar year with or
within which ends the Plan Year in which the Participant becomes a 5-percent
owner, or the calendar year in which the Participant retires.
The required beginning date of a Participant who is not a 5-percent
owner who attains age seventy and one-half (70-1/2) during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
42
<PAGE>
A Participant is treated as a 5-percent owner for purposes of this
subsection (d) if such Participant is a 5-percent owner as defined in Code
Section 416(i) (determined in accordance with Code Section 416, but without
regard to whether the Plan is top-heavy) at any time during the Plan Year ending
with or within the calendar year in which such owner attains age sixty-six and
one-half (66-1/2) or any subsequent Plan Year.
Once distributions have begun to a 5-percent owner under this
subsection (d), they must continue to be distributed, even if the Participant
ceases to be a 5-percent owner in a subsequent year.
Distributions may be delayed pursuant to an election made prior to
January 1, 1984, under Section 242 of the Tax Equity and Fiscal Responsibility
Act of 1982; provided that the method of distribution selected must be in
accordance with the requirements of Code Section 401(a)(9) as in effect prior to
amendment by the Deficit Reduction Act of 1984 If such an election is revoked,
any subsequent distribution must satisfy the requirements of Code Section
401(a)(9). If a designation is revoked subsequent to the date distributions are
required to begin, the Plan must distribute by the end of the calendar year
following the calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been distributed to
satisfy Code Section 401(a)(9), but for such Section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such distributions must meet
the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-
2 of the Income Tax Regulations. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere substitution
or addition of another Beneficiary (one not named in the designation) under the
designation will not be considered to be a revocation of the designation, so
long as such substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or indirectly (for
example, by altering the relevant measuring life).
(e)(i) If a Participant dies after benefit payments have begun, the
Participant's remaining interest in the Plan shall be distributed to his
designated Beneficiary at least as rapidly as under the method of distribution
being used prior to the Participant's death.
(ii) If the Participant dies before benefit payments have commenced,
distribution of the Participant's entire interest in the Plan shall be completed
by the December 31 of the calendar year containing the fifth (5th) anniversary
of the Participant's death, except to the extent that an election is made to
receive distributions in accordance with the following: (A) if any portion of
the Participant's interest is payable to a designated Beneficiary, distributions
may be made over the life or over a period certain not greater than the life
expectancy of the designated Beneficiary commencing on or before December 31 of
the calendar year immediately following the calendar year in which the
Participant died; (B) if the designated Beneficiary is the Participant's
surviving spouse, the date distributions are required to begin in accordance
with (A) above shall not be earlier than the later of December 31 of the
calendar year immediately following the calendar year in which the Participant
died and December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2).
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<PAGE>
If the Participant has not made an election pursuant to this
subsection (ii) by the time of his death, the designated Beneficiary must elect
the method of distribution no later than the earlier of December 31 of the
calendar year in which distributions would be required to begin under this
subsection (e) or December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not elect a method
of distribution, distribution of the Participant's entire interest in the Plan
must be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
For purposes of this subsection (ii), if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of this subsection (ii), with the exception of paragraph (B) above, shall be
applied as if the surviving spouse were the Participant. Any amount paid to a
child of the Participant will be treated as if it had been paid to the surviving
spouse if the amount becomes payable to the surviving spouse when the child
reaches the age of majority.
For the purposes of this subsection (e), distribution of a
Participant's interest is considered to begin on the Participant's required
beginning date (or the date distribution is required to begin to the surviving
spouse). If a distribution in the form of an annuity irrevocably commences to
the Participant before the required beginning date, the date the distribution is
considered to begin is the date distribution actually commences.
(iii) A Participant's interest in the Plan is his Account balance as
of the last valuation date in the calendar year immediately preceding the
distribution calendar year (the valuation calendar year) increased by the amount
of any contributions or forfeitures allocated to the Account balance as of dates
in the valuation calendar year after the valuation date and decreased by
distributions made in the valuation calendar year after the valuation date. If
any portion of the minimum distribution for the first distribution calendar year
is made in the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in the second
distribution calendar year shall be treated as if it had been made in the
immediately preceding distribution calendar year.
The distribution calendar year is a calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to subsection (ii) above.
For purposes of this subsection (e), the designated Beneficiary is the
individual who is designated as the Beneficiary under the Plan in accordance
with Code Section 401(a)(9) and the proposed regulations thereunder.
Section 8.4. Payment of Small Amounts. Notwithstanding anything herein
to the contrary, if the present value of the Participant's vested interest in
the Pension Plan does not exceed (nor at the time of any prior distribution
exceeded) three-thousand five hundred dollars
44
<PAGE>
($3,500) as of the date the Participant's employment with the Employer
terminates, the Administrator shall distribute the present value of such
interest to the Participant in a lump sum as soon as administratively
practicable after the end of the Plan Year in which termination occurs.
Likewise, if the total present value of the Participant's vested interest in the
Profit Sharing Plan and Cash or Deferred Arrangement does not exceed (nor at any
time of any prior distribution exceeded) three thousand five hundred dollars
($3,500) as of the date the Participant's employment with the Employer
terminates, the Administrator shall distribute the present value of this
interest to the Participant in a lump sum as soon as administratively
practicable after the end of the Plan Year in which termination occurs. A
Participant whose entire vested interest in the Pension Plan and/or the Profit
Sharing Plan has been distributed or who has no vested interest in the Pension
Plan and/or the Profit Sharing Plan shall be deemed cashed out from the Pension
Plan and/or the Profit Sharing Plan, as applicable.
Section 8.5. Persons Under Legal or Other Disability. In the event a
Participant or Beneficiary is declared incompetent and a guardian or other
person legally charged with the care of his person or of his property is
appointed, any benefits to which such Participant or Beneficiary is entitled
shall be paid to such guardian or other person legally charged with the care of
his person or of his property.
Section 8.6. Withdrawals from Profit Sharing Plan. (a) If elected in
item 10 of the Adoption Agreement (Profit Sharing Plan), a Participant shall be
permitted to withdraw the specified percentage of his vested Employer Profit
Sharing Account while he is still employed after attainment of age fifty-nine
and one-half (59 1/2) or prior to attainment of such age on account of a
financial hardship; provided, that such Participant has been an active
Participant in the Plan for at least five (5) years. A Participant may not make
another withdrawal on account of financial hardship under this Section 8.6 until
he has been an active Participant for at least an additional five (5) years from
the date of his last hardship withdrawal. For purposes of this Section 8.6, a
financial hardship shall mean a financial need or emergency which requires the
distribution of a Participant's Plan account in order to meet such need or
emergency. The determination of the existence of a financial hardship and the
amount required to be distributed to meet the hardship shall be made by the
Administrator in accordance with such uniform and nondiscriminatory rules as may
be established by the Administrator. A request for a withdrawal shall be made in
writing in a form prescribed by the Administrator and shall be made in
accordance with procedures and limitations established by the Administrator.
Notwithstanding the above, no withdrawal under this Section 8.6 shall be
permitted if the Integration Formula is selected in item 6 of the Adoption
Agreement (Profit Sharing Plan).
(b) If a distribution is made pursuant to this Section 8.6 at a time
when the Participant has a nonforfeitable right to less than one hundred percent
(100%) of his Account balance derived from Employer contributions and the
Participant may increase the nonforfeitable percentage in the Account:
(i) A separate Account will be established for the Participant's
interest in the Plan as of the time of the distribution; and
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<PAGE>
(ii) At any relevant time the Participant's nonforfeitable portion of
the separate Account will be equal to an amount ("X") determined by the formula:
X = P(AB+(RxD))-(RxD)
For purposes of applying the formula above: P is the nonforfeitable percentage
at the relevant time, AB is the Account balance at the relevant time, D is the
amount of the distribution, and R is the ratio of the Account balance at the
relevant time to the Account balance after distribution.
Section 8.7. Transfer of Benefits to Eligible Retirement Plan. (a)
This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Article VIII, a distributee may elect,
at the time and in the manner prescribed by the Administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (i) any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and (iii) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(c) An eligible retirement plan is an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
(d) A distributee includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(e) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
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<PAGE>
ARTICLE IX.
ESTABLISHMENT OF
CUSTODIAL ACCOUNT; INVESTMENTS
------------------------------
Section 9.1. Custodial Account. (a) Unless the Employer elects
otherwise in the Adoption Agreement, the Custodian shall open and maintain
separate Custodial Accounts for each individual that the Employer shall from
time to time certify to the Custodian as a Participant in the Plan. Such
Custodial Accounts shall reflect the various Participant Accounts described at
Section 7.1 hereof.
(b) If the Employer so elects in the Adoption Agreement the Custodian
shall open and maintain a single Custodial Account in the name of the Employer.
If only a single Custodial Account is established, the Employer shall be
responsible for maintaining the records for the individual Participant accounts.
(c) In the event that separate balances are not maintained for the
portion of a Participant's Account balance derived from Employer contributions
and Participant Voluntary Contributions, the Account balance derived from
Participant Voluntary Contributions shall be the Participant's total account
balance multiplied by a fraction, the numerator of which is the total amount of
Participant Voluntary Contributions (less any withdrawals) and the denominator
of which is the sum of the numerator and the total Employer contributions
(including Elective Deferrals) made on behalf of such Participant.
Section 9.2. Receipt of Contributions. The Custodian shall accept such
contributions of money on behalf of Participants as it may receive from time to
time from the Employer. The Custodian may, in its sole discretion, also accept
money or Investment Company Shares held under a preceding plan of the Employer
qualified under Code Section 401(a) or which qualify as rollover contributions
or transfers under Section 4.6 of the Plan. All such contributions shall be
accompanied by written instructions, in a form acceptable to the Custodian, from
the Employer specifying the Participant Accounts to which they are to be
credited.
Section 9.3. Investment of Account Assets. (a) Upon written
instructions given by the Employer on a uniform and nondiscriminatory basis as
between Participants, the Custodian shall invest and reinvest contributions
credited to a Participant Account(s) in Investment Company Shares. All
Participant Accounts shall share in the profits or losses of the investments on
a pro rata basis (i.e., in the ratio that the Participant's Account balance
bears to all Account balances, other than Accounts which are self-directed under
subsection (b) below), subject to adjustment by the Administrator on a fair and
equitable basis for contributions, distributions and/or withdrawals during the
year. The amount of each contribution credited to a Participant Account to be
applied to the purchase of Investment Company Shares shall be invested by the
Custodian at the applicable offering price. These purchases shall be credited to
such Account with notation as to cost. The Custodian shall have no discretionary
investment responsibility and in no event be liable to any person for following
investment instructions given by the Employer or the Participant in the manner
provided herein.
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<PAGE>
(b) Each Participant, through his separate Participant Account(s),
shall be the beneficial owner of all investments held in such Account(s). The
Employer however shall direct the Custodian (in a nondiscriminatory manner)
regarding the selection of specific Investment Company Shares to be purchased
for the Accounts of the Participants. The Employer may permit (in a
nondiscriminatory manner) the individual Participants to select and direct the
purchase of specific Investment Company Shares for their own Account(s). In such
a situation, the Employer shall transmit all such directions to the Custodian.
Notwithstanding the foregoing, unless otherwise elected in the Adoption
Agreement the individual Participant may direct the investment of his Account(s)
and select the specific Investment Company Shares for purchase for his
individual Account(s) by directly communicating with the Custodian.
(c) All income, dividends and capital gain distributions received on
the Investment Company Shares held in each Participant Account shall be
reinvested in such shares which shall be credited to such Account. If any
distribution on Investment Company Shares may be received at the election of the
Participant in additional shares or in cash or other property, the Custodian
shall elect to receive it in additional shares. Al1 investments acquired by the
Custodian shall be registered in the name of the Custodian or its registered
nominee.
Section 9.4. Exclusive Benefit. The Custodial Account or Accounts
established hereby shall not be used or diverted to purposes other than the
exclusive benefit of Participants or their Beneficiaries.
Section 9.5. Expenses. All expenses and charges in respect of the Plan
and the Custodial Account, including, without limitation, the Custodian's fees
and commissions and taxes of any kind upon or with respect to the Plan, shall be
paid by the Employer; provided, however, that the Custodian shall be authorized
to pay such charges and expenses from the Plan if the Employer shall fail to
make payment within thirty (30) days after it has been billed therefor by the
Custodian or such charges have otherwise become due.
Section 9.6. Voting. The Custodian shall deliver, or cause to be
executed and delivered, to the Employer all notices, prospectuses, financial
statements, proxies and proxy soliciting materials received by the Custodian
relating to investments held in Participants' Accounts. The Custodian shall vote
all proxies only in accordance with instructions received from the Employer.
Section 9.7. Reports of the Custodian and Administrator. (a) The
Custodian shall keep accurate and detailed records of all receipts, investments,
disbursements and other transactions required to be performed hereunder. Not
later than sixty (60) days after the close of each calendar year (or after the
Custodian's resignation or removal), the Custodian shall file with the Employer
a written report reflecting the receipts, disbursements and other transactions
effected by it during such year (or period ending with such resignation or
removal) and the assets of this Plan at its close. Such report shall be open to
inspection by any Participant for a period of thirty (30) days immediately
following the date on which it is filed with the Employer. Upon the expiration
of such thirty (30) day period, the Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to its
acts, transactions, duties,
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obligations or responsibilities as shown in or reflected by such report, except
with respect to any such acts or transactions as to which the Employer shall
have filed written objections with the Custodian within such thirty (30) day
period.
(b) Annual reports provided to the Employer by the Custodian shall be,
in the Custodian's discretion, on a calendar year basis unless otherwise
required by law. The Employer shall compute the valuation of all Plan assets at
least annually at the fair market value as of the last day of each calendar
year.
(c) The Custodian shall keep such records, make such identifications
and file such returns and other information concerning the Plan as may be
required of the Custodian under the Code or forms adopted thereunder.
(d) The Administrator shall be solely responsible for the filing of
any reports or information required under the Code or forms adopted thereunder.
Section 9.8. Limitation of Custodian's Duties and Liability. (a) The
Custodian's duties are limited to those set forth in this Plan, and the
Custodian shall have no other responsibility in the administration of the Plan
or for compliance by the Employer with any provision thereof. The Custodian
shall not be responsible for the collection of contributions provided for under
the Plan; the purpose or propriety of any distribution; or any action or
nonaction taken by the Employer or pursuant to the Employer's request. The
Custodian shall have no responsibility to determine if instructions received by
it from the Employer, or the Employer's designated agent, comply with the
provisions of the Plan. The Custodian shall not have any obligation either to
give advice to any Participant on the taxability of any contributions or
payments made in connection with the Plan or to determine the amount of excess
contribution and net income attributable thereto. The Custodian may employ
suitable agents and counsel and pay their reasonable expenses and compensation,
and such agents or counsel may or may not be agent or counsel for the Employer,
and may be the Investment Advisor or an Investment Company.
(b) The Employer shall at all times fully indemnify and hold harmless
the Custodian, its agents, counsel, successors and assigns, from any liability
arising from distributions made or actions taken, and from any and all other
liability whatsoever which may arise in connection with this Plan, except
liability arising from the negligence or willful misconduct of the Custodian.
The Custodian shall be under no duty to take any action other than as herein
specified with respect to this Plan unless the Employer shall furnish the
Custodian with instructions in a form acceptable to the Custodian; or to defend
or engage in any suit with respect to this Plan unless the Custodian shall have
first agreed in writing to do so and shall have been fully indemnified to the
satisfaction of the Custodian. The Custodian (and its agents) may conclusively
rely upon and shall be protected in acting upon any written order from the
Employer or any other notice, request, consent, certificate or other instrument
or paper believed by it to be genuine and to have been properly executed, and,
so long as it acts in good faith, in taking or omitting to take any other
action. No amendment to the Plan shall place any greater
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burden on the Custodian without its written consent. The Custodian shall not be
liable for interest on any cash balances maintained in the Plan.
(c) The Employer shall have the sole authority to enforce the terms of
the Plan on behalf of any and all persons having or claiming any interest
therein by virtue of the Plan.
(d) The Custodian, its agents, counsel, successors and assigns, shall
not be liable to the Employer, or to any Participants or Beneficiary for any
depreciation or loss of assets, or for the failure of this Plan to produce any
or larger net earnings. The Custodian further shall not be liable for any act or
failure to act of itself, its agents, employees, or attorneys, so long as it
exercises good faith, is not guilty of negligence or willful misconduct, and has
selected such agents, employees, and attorneys with reasonable diligence. The
Custodian shall have no responsibility for the determination or verification of
the offering or redemption prices or net asset values of Investment Company
Shares, and shall be entitled to rely for such prices and net asset values upon
statements issued by or on behalf of the Investment Company issuing the
Investment Company Shares. The Custodian shall have no duty to inquire into the
investment practices of such Investment Company; such Investment Company shall
have the exclusive right to control the investment of its funds in accordance
with its stated policies, and the investments shall not be restricted to
securities of the character now or hereafter authorized for trustees by law or
rules of court. The Custodian shall not be liable or responsible for any
omissions, mistakes, acts or failures to act of such Investment Company, or its
successors, assigns or agents. Notwithstanding the foregoing, nothing in this
Plan shall relieve the Custodian of any responsibility or liability under ERISA.
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ARTICLE X.
AMENDMENT AND TERMINATION
-------------------------
Section 10.1. Amendment. (a) The Employer reserves the right at any
time and from time to time to amend or terminate the Plan. No part of the Plan
shall by reason of any amendment or termination be used for or diverted to
purposes other than the exclusive benefit of Participants and their
Beneficiaries, and further that no amendment or termination may retroactively
change or deprive any Participant or Beneficiary of rights already accrued under
the Plan except insofar as such amendment is necessary to preserve the
qualification and tax exemption of the Plan pursuant to Code Section 401. No
amendment shall increase the duties of the Custodian or otherwise adversely
affect the Custodian unless the Custodian expressly agrees thereto. However, if
the Employer amends any provision of this Plan (including a waiver of the
minimum funding requirements under Code Section 412(d)) other than by changing
any election made in the Adoption Agreement, adopting an amendment stated in the
Adoption Agreement which allows the Plan to satisfy Code Section 415, to avoid
duplication of minimum benefits under Code Section 416 or to add certain model
amendments published by the Internal Revenue Service which specifically provide
that their adoption will not cause the Plan to be treated as an individually
designed plan, such Employer shall no longer participate under this prototype
plan and the Employer's Plan shall be deemed to be an individually designed
plan. The Employer hereby irrevocably delegates (retaining, however, the right
and power to change any election made in the Adoption Agreement) to the
Investment Advisor the right and power to amend the Plan at any time, and from
time to time, and the Employer by adopting the Plan shall be deemed to have
consented thereto. The Investment Advisor shall notify the Employer of any
amendment to the Plan. For purposes of any Investment Advisor amendments, the
mass submitter shall be recognized as the agent of the Investment Advisor. If
the Investment Advisor does not adopt the amendments made by the mass submitter,
it will no longer be identical to or a minor modifier of the mass submitter
plan.
(b) No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit except to the
extent permitted by Code Sections 412(c)(8) and 411(d)(6). For purposes of this
subsection, a Plan amendment which has the effect of decreasing a Participant's
Account balance or eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment shall be treated as
reducing an accrued benefit. Furthermore, if the vesting schedule of a Plan is
amended, in the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such Employee's right
to his Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
(c) Notwithstanding subsection (a) above, an 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 such Code Sections.
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Section 10.2. Termination. Upon complete discontinuance of the
Employer's Profit Sharing Contributions (if the Employer has adopted a Profit
Sharing Plan by completing the appropriate Adoption Agreement) or termination or
partial termination of the Plan, each affected Participant's Account shall
become nonforfeitable. Upon termination or partial termination of the Plan, the
Employer shall instruct the Custodian whether currently to distribute to each
Participant the entire amount of the Participant's Account, in such one or more
of the methods described in Article VIII, or whether to continue the Plan and to
make distributions therefrom as if the Plan had continued; provided that, in the
event the Plan is continued, the Plan must continue to satisfy the requirements
of Code Section 401(a). The Employer shall in all events exercise such
discretion in a nondiscriminatory manner. The Plan shall continue in effect
until the Custodian shall have completed the distribution of all of the Plan
asset and the accounts of the Custodian have been settled.
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ARTICLE XI
FIDUCIARY RESPONSIBILITIES
--------------------------
Section 11.1. Administrator. The Administrator shall have the power
to allocate fiduciary responsibilities and to designate other persons to carry
out such fiduciary responsibilities; provided such allocation is in writing and
filed with the Plan records. The Administrator may employ one or more persons to
render advice to the Administrator with regard to its responsibilities under the
Plan, and consult with counsel, who may be counsel to the Employer.
Section 11.2. Powers of Administrator. The Administrator shall
administer the Plan in accordance with its terms and shall have all powers
necessary to carry out its terms. The Administrator shall have discretionary
authority to determine eligibility for benefits and to interpret and construe
the terms of the Plan, and any such determination, interpretation or
construction shall be final and binding on all parties unless arbitrary and
capricious. Any such discretionary authority shall be carried out in a uniform
and nondiscriminatory manner.
Section 11.3. Records and Reports. The Administrator, or those to
whom it has delegated fiduciary duties, shall keep a record of all proceedings
and actions, and shall maintain all such books of account, records and other
data as shall be necessary for the proper administration of the Plan. The
Administrator, or those to whom it has delegated fiduciary duties, shall have
responsibility for compliance with the provisions of ERISA relating to such
office, including filing with the Secretary of Labor and Internal Revenue
Service of all reports required by the Code and/or ERISA and furnishing
Participants and Beneficiaries with descriptions of the Plan and reports
required by ERISA.
Section 11.4. Other Administrative Provisions.
(a) No bond or other security shall be required of the Administrator,
and/or any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated, except as may be required by ERISA.
(b) The Administrator or the Employer may shorten, extend or waive
the time (but not beyond sixty days) required by the Plan for filing any notice
or other form with the Administrator or the Employer, or taking any other action
under the Plan, except a response to an appeal under Section 11.6, from a
decision of the Administrator.
(c) The Administrator or the Employer may direct that such reasonable
expenses as may be incurred in the administration of the Plan shall be paid out
of the funds of the Plan, unless the Employer shall pay them.
(d) The Administrator, the Custodian, and any other persons
performing fiduciary duties under the Plan shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims, and no
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such person shall be liable, to the maximum extent permitted by ERISA, for any
act of commission or omission in accordance with the foregoing standard.
Section 11.5. Claims Procedure. Any claim relating to benefits under
the Plan shall be filed with the Administrator on a form prescribed by the
Administrator. If a claim is denied in whole or in part, the Administrator shall
give the claimant written notice of such denial within ninety (90) days after
the filing of such claim, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is
needed; and
(d) An explanation of the Plan's procedure for review of the denial
of the claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the ninetieth (90th) day after such claim was filed, the claim
shall be deemed to have been denied on that day for the purpose of permitting
the claimant to request review of the claim.
Section 11.6. Claims Review Procedure.
(a) Any person whose claim filed pursuant to Section 11.5 has been
denied in whole or in part by the Administrator may request review of the claim
by the Employer, by filing a written request with the Administrator. The
claimant shall file such request (including a statement of his position) with
the Employer no later than sixty (60) days after the mailing or delivery of the
written notice of denial provided for in Section 11.5, or, if such notice is not
provided, within sixty (60) days after such claim is deemed denied pursuant to
Section 10.5. The claimant shall be permitted to review pertinent documents. A
decisions shall be rendered by the Employer and communicated to the claimant not
later than sixty (60) days after receipt of claimant's written request for
review. However, if the Employer finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to extend this period
and so notifies the claimant in writing, the decision shall be rendered as soon
as practicable, but in no event later than one hundred and twenty (120) days
after the claimant's request for review. The employer's decision shall be in
writing and shall specifically set forth:
(i) The reasons for the decision; and
(ii) The pertinent Plan provisions on which the decision is based.
Any such decision of the Employer shall bind the claimant and the Employer, and
the Administrator shall take appropriate action to carry out such decision.
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(b) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in subsection (a) above
prior to initiating any claim for judicial review.
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ARTICLE XII.
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
-------------------------------------------
Notwithstanding any of the foregoing provisions of the Plan to the
contrary, an employer that has previously established an Original Plan may, in
accordance with the provisions of the Original Plan, amend and continue the
Original Plan in the form of this Plan and become an Employer hereunder, subject
to the following:
(a) subject to the conditions and limitations of the Plan, each
person who is a Participant under the Original Plan immediately prior to the
effective date of the amendment and continuation thereof in the form of this
Plan will continue as a Participant in this Plan;
(b) no election may be made in the Adoption Agreement if such
election would reduce the benefits of a Participant under the Original Plan to
less than the benefits to which he would have been entitled if he had resigned
from the employ of the Employer on the date of the Amendment and continuation of
the Original Plan in the form of this Plan;
(c) the amounts, if any, of a Participant's or-former Participant's
Accounts immediately prior to the effective date of the amendment and
continuation of the Original Plan in the form of this Plan shall be reduced to
cash, deposited with the Custodian and constitute the opening balances in such
Participant's Account under this Plan;
(d) amounts being paid to individuals in accordance with the
provisions of the Original Plan shall continue to be paid under this Plan, but
in the form that they were being paid under the Original Plan;
(e) any Beneficiary designation in effect under the Original Plan
immediately before its amendment and continuation in the form of this Plan which
effectively meets the requirements contained in Section 2.3 hereof shall be
deemed to be a valid Beneficiary designation pursuant to Section 2.3 of this
Plan, unless and until the Participant or former Participant revokes such
Beneficiary designation or makes a new Beneficiary designation under this Plan.
If the Beneficiary designation form does not meet the requirements of Section
2.3 hereunder, the Participant's spouse shall be deemed to be his Beneficiary.
If the Participant is unmarried, or his spouse does not survive him, his estate
shall be deemed his Beneficiary.
(f) if the Original Plan's vesting schedule (or this Plan's vesting
schedule) or the Plan is amended or changed in any way that directly or
indirectly affects the computation of a Participant's nonforfeitable interest in
his Account derived from Employer contributions, each such Participant with at
least three (3) Years of Service with the Employer may elect, within a
reasonable period after the adoption of the amendment or change, to have his
nonforfeitable percentage computed under the Plan without regard for the
amendment or change. For any Participant who does not have at least one (1) Hour
of Service in any Plan Year beginning after December 31, 1988, the preceding
sentence shall be applied by substituting "five (5) Years of Service" for "three
(3) Years of Service" where such language appears therein. Any such election
must be made during the period commencing on the date of the amendment or change
and ending
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on the latest of: (i) sixty (60) days after that date; (ii) sixty (60) days
after the effective date of the amendment or change; or (iii) sixty (60) days
after such Participant is issued written notice of the amendment or change by
the Plan Administrator or Employer.
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ARTICLE XIII.
TOP-HEAVY PROVISIONS
--------------------
Section 13.1. Effect of Top-Heavy Status. The Plan shall be a "top-
heavy Plan" for any Plan Year commencing after December 31, 1983, if any of the
following conditions exist:
(a) If the Top-Heavy Ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group.
(b) If this Plan is a part of a Required Aggregation Group but not
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of
plans exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group and part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds sixty percent (60%).
If the Plan is a Top-Heavy Plan in any Plan Year beginning after
December 31, 1983, the provisions of Sections 13.3 through 13.6 shall supersede
any conflicting provisions of the Plan or the Adoption Agreement.
Section 13.2. Additional Definitions. Solely for purposes of this
Article, the following terms shall have the meanings set forth below:
(a) "Key Employee" means any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the Determination Period
was an officer of the Employer if such individual's annual compensation exceeds
50 percent of the dollar limitation under Code Section 415(b)(1)(A), an owner
(or considered an owner under Code Section 318) of one of the ten largest
interests in the Employer if such individual's compensation exceeds 100 percent
(100%) of the dollar limitation under Code Section 415(c)(1)(A), a five percent
(5%) owner of the Employer, or one percent (1%) owner of the Employer who has an
annual compensation of more than $150,000. Annual compensation means
compensation as defined in Code Section 415(c)(3), of the Code, but including
amounts contributed by the Employer pursuant to a salary reduction agreement
which are excludible from the Employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b). The determination period is the plan year
containing the Determination Date and the four (4) preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Code Section 416(i)(1) and the Regulations thereunder.
(b) "Determination Date" means the last day of the preceding Plan
Year. For the first Plan Year of the Plan Determination Date shall mean the last
day of that year.
(c) "Top-Heavy Ratio" means:
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(i) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer has not
maintained any defined benefit plan which during the five (5) year period ending
on the Determination Date(s) has or has had accrued benefits, the Top-Heavy
Ratio for this plan alone or for the Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the sum of the account
balances of all Key Employees as of the determination date(s) (including any
part of any account balance distributed in the five (5) year period ending on
the Determination Date(s)), and the denominator of which is the sum of all
account balances (including any part of any account balance distributed in the
five (5) year period ending on the Determination Date(s)), both computed in
accordance with Code Section 416 and the Regulations thereunder. Both the
numerator and denominator of the Top-Heavy Ratio are increased to reflect any
contribution not actually made as of the Determination Date, but which is
required to be taken into account on that date under Code Section 416 and the
Regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which during the
five (5) year period ending on the Determination Date(s) has or has had any
accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation
Group as appropriate is a fraction, the numerator of which is the sum of account
balances under the aggregated defined contribution plan or plans for all Key
Employees, determined in accordance with (i) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all Key
Employees as of the Determination Date(s), and the denominator of which is the
sum of the account balances under the aggregated defined contribution plan or
plans for all participants, determined in accordance with (i) above, and the
present value of accrued benefits under the defined benefit plan or plans for
all participants as of the Determination Date(s), all determined in accordance
with Code Section 416 and the Regulations thereunder. The accrued benefits under
a defined benefit plan in both the numerator and denominator of the Top-Heavy
Ratio are increased for any distribution of an accrued benefit made in the five
(5) year period ending on the Determination Date.
(iii) For purposes of (i) and (ii) above the value of account
balances and the present value of accrued Valuation Date that falls within or
ends with the twelve (12) month period ending on the Determination Date, except
as provided in Code Section 416 and the Regulations thereunder for the first and
second plan years of a defined benefit plan. The account balances and accrued
benefits of a participant (A) who is not a Key Employee but who was a Key
Employee in a prior year, or (B) who has not been credited with at least one (1)
hour of service with any employer maintaining the plan at any time during the
five (5) year period ending on the Determination Date will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in accordance with
Code Section 416 and the Regulations thereunder. Deductible employee
contributions will not be taken into account for purposes of computing the Top-
Heavy Ratio.
When aggregating plans the value of account balances and accrued
benefits will be calculated with reference to the determination dates that fall
within the same calendar year.
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(iv) The accrued benefit of a participant other than a Key Employee
shall be determined under (i) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained by the employer, or
(ii) if there is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional rule of Code
Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means 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" means (i) each qualified plan of the
Employer in which at least one Key Employee participates or participated at any
time during the five (5) year period ending on the Determination Date
(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) "Valuation Date" means (i) in the case of a defined contribution
plan, the Determination Date, and (ii) in the case of a defined benefit plan,
the date as of which funding calculations are generally made within the twelve
(12) month period ending on the Determination Date.
(g) "Employer" means the employer or employers whose employees are
covered by this Plan and any other employer which must be aggregated with any
such employer under Code Sections 414(b), (c), (m) and (o).
(h) "Present Value" means the value based on an interest rate of five
percent (5%) and mortality assumptions based on the 1971 GAM Mortality Table or
such other interest rate or mortality assumptions as may be specified in the
Adoption Agreement.
Section 13.3. Minimum Allocations. (a) For any year in which the Plan
is a Top-Heavy Plan, each Participant who is not a Key Employee and who is not
separated from service at the end of the Plan Year shall receive allocations of
Employer contributions and forfeitures under this Plan at least equal to three
percent (3%) of Compensation (as defined in Section 2.6) for such year or, if
less, the largest percentage of the first two hundred thousand dollars
($200,000) of compensation allocated on behalf of the Key Employee for the Plan
Year where the Employer has no defined benefit plan which designates this Plan
to satisfy Code Section 401. This minimum allocation shall be determined without
regard for any Social Security contribution and shall be provided even though
under other provisions the Participant would not otherwise be entitled to
receive an allocation or would have received a lesser allocation because of (i)
the Participant's failure to complete One Thousand (1,000) Hours of Service (or
any equivalent provided in the Plan), or (ii) the Participant's failure to make
mandatory Employee contributions to the Plan, or (iii) Compensation less than a
stated amount.
(b) The provision in (a) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or plans of the
employer and the employer has
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provided in the Adoption Agreement that the minimum allocation or benefit
requirement applicable to top-heavy plans will be met in the other plan or
plans.
(c) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b)) may not be forfeited under Code Sections
411(a)(3)(B) or 411(a)(3)(D)
(d) For purposes of subsection (a) above, neither Elective Deferrals
nor Employer Matching Contributions shall be taken into account for the purposes
of satisfying the minimum top-heavy benefits requirement.
Section 13.4. Benefit Limit Change. If the Employer maintains both
the Plan and a defined benefit plan which cover one or more of the same Key
Employees and the plans are Top-Heavy in a Plan Year, then Section 6.5(c) and
(j) hereof shall be amended to substitute "one hundred percent (100%)" for the
number "one hundred and twenty-five percent (125%)" where the latter appears
therein.
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ARTICLE XIV.
MISCELLANEOUS
-------------
Section 14.1. Rights of Employees and Participants. No Employee or
Participant shall have any right or claim to any benefit under the Plan except
in accordance with the provisions of the Plan, and then only to the extent that
there are funds available therefor in the hands of the Custodian. The
establishment of the Plan shall not be construed as creating any contract of
employment between the Employer and any Employee or otherwise conferring upon
any Employee or other person any legal right to continuation of employment, nor
as limiting or qualifying the right of the Employer to discharge any Employee
without regard to the effect that such discharge might have upon his rights
under the Plan.
Section 14.2. Merger With Other Plans. The Plan shall not be merged
or consolidated with, nor transfer its assets or liabilities to, any other plan
unless each Participant, Beneficiary and other person entitled to benefits,
would (if the Plan then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive if the Plan had terminated immediately
prior to the merger, consolidation or transfer.
Section 14.3. Non-Alienation of Benefits. The right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation, or assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities or torts, either voluntarily or involuntarily. Any
attempt by the Participant, Beneficiary or other person to anticipate, alienate
or assign his interest in or right to a benefit or any claim against him seeking
to subject such interest or right to legal or equitable process shall be null
and void for all purposes hereunder to the extent permitted by ERISA and the
Code. Notwithstanding the foregoing or any other provision of the Plan, the
Administrator shall recognize and give effect to a qualified domestic relations
order with respect to child support, alimony payments or marital property rights
if such order is determined by the Administrator to meet the applicable
requirements of Code Section 414(p). If any such order so directs, distribution
of benefits to the alternate payee may be made at any time, even if the
Participant is not then entitled to a distribution. The Administrator shall
establish reasonable procedures relating to notice to the Participant and
determinations respecting the qualified status of any domestic relations order.
Section 14.4. Failure to Qualify. Notwithstanding anything in this
Plan to the contrary, all contributions under the Plan made prior to the receipt
by the Employer of a determination by the Internal Revenue Service to the effect
that the Plan is qualified under Code Section 401 shall be made on the express
condition that such a determination will be received, and in the event that the
Internal Revenue Service determines upon initial application for a determination
that the Plan is not so qualified or tax exempt, all contributions made by the
Employer or Participants prior to the date of determination must be returned
within one (1) year from the date of such determination, but only if the
application for qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is adopted or such
later date as the Secretary of the Treasury may prescribe.
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Section 14.5. Mistake of Fact: Disallowance of Deduction.
Notwithstanding anything in this Plan to the contrary, any contributions made by
the Employer which are conditioned on the deductibility of such amount under
Code Section 404, to the extent of the amount disallowed, or which are made
because of a mistake of fact must be returned to the Employer within one year
after such disallowance or such mistaken contribution.
Section 14.6. Participation under Prototype Plan. If the Plan as
adopted by the Employer either fails to attain or maintain qualification under
the Code, such Plan will no longer participate in this prototype plan and will
be considered an individually designed plan.
Section 14.7. Gender. Where the context admits, words used in the
singular include the plural, words used in the plural include the singular, and
the masculine gender shall include the feminine and neuter genders.
Section 14.8. Headings. The headings of Sections are included solely
for convenience of reference, and if there is any conflict between such headings
and the text of the Plan, the text shall control.
Section 14.9. Governing Law. Except to the extent governed by ERISA
and any other applicable federal law, the Plan shall be construed, administered
and enforced according to the laws of the state in which the Employer has its
principal place of business.
63
<PAGE>
Section B
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PROFIT-SHARING PLAN)
The undersigned Employer hereby adopts and establishes the Monetta
Funds Prototype Defined Contribution Retirement Plan. This Plan is subject to
the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:___________________________________________________________________
Address:________________________________________________________________
________________________________________________________________
Telephone Number: (____) ______________________________________________
Employer Identification Number:_________________________________________
Type of Entity: [_] Corporation
[_] Partnership
[_] Sole Proprietorship
[_] Other (please describe)
__________________________________________________
Employer's Taxable Year is [_] calendar year or [_] fiscal year
beginning ____________________________________________________________.
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name: _______________________________________________________________
Address: _______________________________________________________________
_______________________________________________________________
Telephone Number: (___) _____________________________
Plan Year is the [_] calendar year, [_] Employer's fiscal year, or [_] year
beginning _______________.
<PAGE>
3. EFFECTIVE DATE
Execution of this Adoption Agreement (elect one):
[_] Establishes a new plan.
[_] Is an amendment to an Original Plan.
This amendment is effective ____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective _____________, 19__. (You need not
complete items 4, 5 or 6 and check item 7(A)(l).)
The Effective Date of the Plan is ________________, 19__. (If this is
an amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an Employee must satisfy the
following Age and Service Requirements (please fill in the blanks):
(1) An Employee must complete ___ (enter 1 or 2 years) Year(s) of
Employment. If more than 1 year is selected, you must also check
item 7(A)(1).
A Year of Employment shall mean the 12 consecutive month period
beginning on the date an Employee first performs an Hour of
Service or an anniversary thereof during which the Employee has
completed __________ (insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of the method
elected below. Only one method may be elected. The method elected
shall be applied to all Employees covered under the Plan.
[_] On the basis of actual hours for which an Employee is paid or entitled
to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of Service if the Employee
would be credited with at least l Hour of Service during the day.
<PAGE>
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of Service if the
Employee would be credited with at least 1 Hour of Service during
the week.
[_] On the basis of months worked:
[_] Employee shall be credited with 190 Hours of Service if the
Employee would be credited with at least 1 Hour of Service during
the month.
(2) An Employee must attain age _____ (not greater than age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective bargaining
agreement between the Employer and employee representatives
under which retirement benefits were the subject of good faith
bargaining. The term "employee representatives" does not include
any organization more than one-half of whose members are
officers, executives or owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in item 4 above.
(B) For any self-employed individual, Compensation means Earned Income.
6. EMPLOYER PROFIT SHARING CONTRIBUTIONS
(A) The Employer Profit Sharing Contributions for each Plan Year shall be
(check one):
[_] A discretionary amount determined by the Employer, but not more
than 15% of the aggregate Compensation and Earned Income of
Participants eligible to share in such contribution for the Plan
Year.
<PAGE>
[_] An amount equal to ___% (not more than 15%) of the aggregate
Compensation and Earned Income of Participants eligible to share
in such contribution for the Plan Year.
(B) Employer Profit Sharing Contributions:
[_] Shall be made out of Net Profits.
[_] May be made without regard to Net Profits.
(C) Allocation Formulas
The Employer Profit Sharing Contributions (and) forfeitures) shall be
allocated to the accounts of eligible Participants pursuant to the
following formula (elect one):
(1) [_] Compensation Formula
[_] Employer Profit Sharing Contributions (and forfeitures)
shall be allocated based on each eligible Participant's
total Compensation for the Plan Year.
NOTE: If the Integration Formula is selected under the Pension Plan,
the Compensation Formula must be selected under this Plan.
(2) [_] Integration Formula
Employer Profit Sharing Contributions (and forfeitures)
shall be allocated based on each eligible Participant's
Compensation in excess of the Integration Level and total
Compensation for the Plan Year, subject to the limitation
set forth in Section 4.1(b) of the Plan.
[_] The Integration Level shall be the taxable wage base for
FICA tax purposes.
[_] The Integration Level shall be $_________ (not to exceed
the FICA taxable wage base).
NOTE: If the Plan is top-heavy all eligible Participants must first
be allocated 3% of their total Compensation and any remaining
contributions may be allocated pursuant to the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested interest in
his Employer Profit Sharing Contribution Account under the following
vesting schedule (check one):
<PAGE>
(1) [_] A Participant shall at all times have a nonforfeitable and
fully vested interest.
(2) [_] A Participant shall be fully vested after ___ (not more than
3) Years of Service.
(3) [_] A Participant shall become vested in accordance with the
following schedule:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
---------------- ----------
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
(B) A "Year of Service" shall mean any Plan Year in which an Employee
completes at least _________ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the Employer
except as noted below (check one, both or none).
(1) [_] All Years of Service prior to the effective date of this
Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. CASH OR DEFERRED ARRANGEMENT (SECTION 401(K))
Please check one:
[_] This Plan will include a cash or deferred arrangement (complete the
remainder of this Section). The Effective Date of this Cash or
Deferred Arrangement (Section 401(k)) is ______________, 19__.
[_] This Plan will not include a cash or deferred arrangement (do not
complete the remainder of this Section).
(A) Elective Deferrals.
(1) An Employee shall be eligible to make Elective Deferrals
under Article V of the Plan upon satisfying the following
eligibility requirements:
<PAGE>
[_] An Employee must complete ______ (not greater than 1 year)
Years of Employment.
[_] An Employee must attain age ______ (not greater than 21).
[_] Union Employees are excluded from making Elective Deferrals.
[_] All Employees are eligible to make Elective Deferrals.
(2) An Employee may elect to make Elective Deferrals to the Plan
equal to a percentage of regular salary or wages for a pay period
as specified in a salary reduction agreement. The maximum
percentage of Elective Deferrals shall be ________%.
[_] Elective Deferrals may be based on cash bonuses paid to the
Employee. The maximum percentage of such Elective Deferrals
shall be ____%.
(3) An Employee may change the rate of his Elective Deferrals:
[_] On the first day of each Plan Year.
[_] And on the following additional dates:
(4) [_] Recharacterization of excess contributions will be
available only for non-highly compensated employees.
(B) Matching Contributions
(1) [_] The percentage of Elective Deferral contributions which are
matched is:
[_] %.
[_] of the first % of Elective Deferrals.
[_] A percentage determined by the Employer, but will not be more
than 100%.
(2) Matching Contributions are made:
[_] Each pay period in which Elective Deferrals are made.
[_] At the end of the Plan Year for Employees meeting the
requirements for annual contributions.
<PAGE>
(3) [ ] Matching Contributions will vest under the following schedule
(elect one):
[ ] Employee shall at all times have a nonforfeitable and fully
vested interest in any Matching Contributions.
[ ] An Employee shall be fully vested in any Matching Contributions
after (not more than 3) Years of Service.
[ ] An Employee shall become vested in any Matching Contributions in
accordance with the following schedule:
Nonforfeitable
Years of Service Percentage
----------------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(C) Special Contributions
[ ] The Employer may make Qualified Matching Contributions subject
to Section 5.4 of the Plan.
[ ] The Employer may make Qualified Non-Elective Contributions,
subject to Section 5.4 of the Plan.
Note: These special contributions are used to satisfy the
nondiscrimination tests which apply to elective deferral and
matching contributions.
(D) Hardship Withdrawals
[ ] Withdrawals on account of financial hardship are allowed in
accordance with Section 5.5(a) of the Plan.
[ ] Withdrawals on account of financial hardship are not allowed.
9. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[ ] Participant Voluntary Contributions are permitted.
[ ] Participant Voluntary Contributions are permitted only for non-highly
compensated employees.
<PAGE>
[ ] Participant Voluntary Contributions are not permitted.
10. WITHDRAWAL OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
[ ] A Participant who has participated in the Plan for at least 5 years
may withdraw up to -% of his vested Employer Profit Sharing
Contribution Account after attaining age 59 1/2 or on account of a
financial hardship in accordance with Section 8.6 of the Plan.
Note: Withdrawals are not permitted if the Integration Formula is
selected in item 6(C)(2).
[ ] Withdrawals are not permitted.
11. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to exceed
65].
12. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of________________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Pension Plan) which is
either (i) a qualified defined contribution plan other than a Master or
Prototype Plan or (ii) a qualified defined benefit plan in which any
Participant in this Plan is (or was) a participant or could become a
participant, or if the Employer maintains a welfare benefit fund or an
individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions allocated
to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and 6.4 of
the Plan will automatically apply.
13. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of the
Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present values
to compute the Top-Heavy ratio shall be:
Interest Rate: ___%
<PAGE>
Mortality Table: ___________________
14. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[ ] The Custodian shall establish a single Custodial Account in the
name of the Employer and the Employer shall keep all records for
the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct the
investment of his Account balance.
[ ] Participant self-direction of the investment of his Account
balance is not permitted.
15. CUSTODIAN
The undersigned as Employer hereby appoints ________________ as Custodian.
16. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule. The fee
schedule may be changed by the Custodian with advance notice. If not
separately included, any acceptance fee listed in the attached schedule
will be deducted from the initial contribution received from the Employer.
Any acceptance or other Custodian fees included will be deducted equally
from each Owner-Employee's contribution or Account. Annual maintenance fees
for each Participant's Account and any fees directly related to activity in
that Participant's Account shall be deducted annually and activity fees
will be deducted at the time incurred. Sufficient Investment Company Shares
will be redeemed to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to such
additional charges as will reasonably compensate the Custodian for the
services performed.
17. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax advisors
with respect to the Plan. The Employer acknowledges that it may not
continue participation under the Plan if it fails to attain or maintain tax
qualification of the Plan or if it amends the Plan other than by a change
in the Adoption Agreement. The Employer agrees that whenever a Participant
Contribution is made, the Employer will determine that the Participant has
received the appropriate current Investment Company prospectus. The
Employer represents that the Participant has received such prospectus by
depositing contributions with the Custodian.
<PAGE>
The Employer acknowledges that if it has ever maintained or later adopts
any plan (including 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) or an individual medical account, as defined in
Code Section 415(1)(2)) in addition to this Plan (or the Pension Plan), it
may not rely on an opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under Code
Section 401. If the Employer adopts or maintains multiple plans and wishes
reliance that the Plan is qualified, application for an individual
determination letter should be made to the appropriate District Office of
the Internal Revenue Service.
18. ADDITIONAL INFORMATION
This Plan is sponsored by:
Monetta Financial Services, Inc.
1776A S. Naperville Rd.
Wheaton, IL 60187
(708) 462-9800
Further information regarding this Plan may be obtained by contacting the
Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any amendments
made to this Plan or of the discontinuance or abandonment of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer: _________________________________________________
Name of person signing above (please print): ___________________________
Date: ___________________
<PAGE>
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under the Plan.
------------------------------
By:
---------------------------
Date:
-------------------------
<PAGE>
SECTION C
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PENSION PLAN)
The undersigned Employer hereby adopts and establishes the Monetta
Funds Prototype Defined Contribution Retirement Plan. This Plan is subject to
the terms set forth below in this Adoption Agreement.
1. EMPLOYER INFORMATION
Name:
----------------------------------------------------------------------
Address:
--------------------------------------------------------------------
--------------------------------------------------------------------
Telephone Number: ( )
---- -------------------------------------------------
Employer Identification Number:
Type of Entity: [ ] Corporation
[ ] Partnership
[ ] Sole Proprietorship
[ ] Other (please describe)
--------------------------------------------------
Employer's Taxable Year is [ ] calendar year or [ ] fiscal year
beginning
-----------------------------------------------------------------
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------
------------------------------------------------------------------
Telephone Number: ( )
---- -------------------------------------------------
Plan Year is the [ ] calendar year, [ ] Employer's fiscal year, or [ ] year
beginning _______________.
<PAGE>
3. EFFECTIVE DATE
Execution of this Adoption Agreement (check one):
[ ] Establishes a new plan.
[ ] Is an amendment to an Original Plan.
This amendment is effective _____________, 19__.
[ ] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective _____________, 19__. (You need not
complete items 4, 5 or 6 and check item 7(A)(l)).
The Effective Date of the Plan is ________________, 19__. (If this is
an amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[ ] An Employee need not complete any waiting period.
[ ] In order to become a Participant, an Employee must satisfy the
following Age and Service Requirements:
(1) An Employee must complete _____ (enter 1 or 2 years) Year(s)
of Employment. If more than 1 year is selected, you must
also check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive month
period beginning on the date an Employee first performs an
Hour of Service or an anniversary thereof during which the
Employee has completed __________ (insert 1,000 or less)
Hours of Service.
Hours of Service shall be determined on the basis of the
method elected below. Only one method may be elected. The
method elected shall be applied to all Employees covered
under the Plan.
[ ] On the basis of actual hours for which an Employee is paid
or entitled to payment.
[ ] On the basis of days worked:
An Employee shall be credited with 10 Hours of Service if
the Employee would be credited with at least l Hour of
Service during the day.
<PAGE>
[ ] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of Service if
the Employee would be credited with at least 1 Hour of
Service during the week.
[ ] On the basis of months worked:
Employee shall be credited with 190 Hours of Service if the
Employee would be credited with at least 1 Hour of Service
during the month.
(2) An Employee must attain age _____ (not greater than age 21).
(B) Union Employees shall be:
[ ] Included as eligible employees.
[ ] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective bargaining
agreement between the Employer and employee representatives under
which retirement benefits were the subject of good faith
bargaining. The term "employee representatives" does not include
any organization more than one-half of whose members are
officers, executives or owners of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[ ] All taxable earnings for the Plan Year.
[ ] Only amounts earned after completion of the eligibility
requirements selected in 4 above.
(B) For any self-employed individual, Compensation means Earned Income.
6. EMPLOYER PENSION CONTRIBUTIONS
(A) The Employer Pension Sharing Contributions for each Plan Year shall be
____% (not more than 25%) of the aggregate Compensation and Earned
Income of eligible Participants. This contribution will be reduced by
the amount of any forfeitures allocated to the accounts of
Participants for such Plan Year.
(B) Allocation Formulas
The Employer Pension Contributions shall be allocated pursuant to the
following formula (check one):
<PAGE>
(1) [_] Compensation Formula
Employer Pension Contributions shall be allocated based on
each eligible Participant's total Compensation for the Plan
Year.
Note: If the Integration Formula is elected under the Profit Sharing
Plan, the Compensation Formula must be elected under this Plan
(2) [_] Integration Formula
Employer Pension Contributions (and forfeitures) shall be
allocated based on each eligible Participant's Compensation
in excess of the Integration Level and total Compensation
for the Plan Year, subject to the limitations set forth in
Section 4.2(b) or the Plan.
[_] The Integration Level shall be the taxable wage base for
FICA tax purposes.
[_] The Integration Level shall be $_____ (not to exceed the
FICA taxable wage base).
Note: If the Plan is top-heavy all eligible Participants must first be
allocated 3% of their total Compensation and any remaining
contributions may be allocated pursuant to the Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested interest in
his Employer Pension Contribution Account under the following vesting
schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable and
fully vested interest.
(2) [_] A Participant shall be fully vested after ___ (not more than
3) Years of Service.
(3) [_] A Participant shall become vested in accordance with the
following schedule:
Vested
Years of Service Percentage
---------------- ----------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
<PAGE>
(B) A "Year of Service" shall mean any Plan year in which an Employee
completes at least _________ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the Employer
except as noted below (check one, both or none).
(1) [_] All Years of Service prior to the effective date of this
Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. PARTICIPANT AFTER-TAX CONTRIBUTIONS
[_] Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for non-highly
compensated employees.
[_] Participant Voluntary Contributions are not permitted.
9. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to exceed
65].
10. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of_______________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Profit Sharing Plan)
which is either (i) a qualified defined contribution plan other than a
Master or Prototype Plan or (ii) a qualified defined benefit plan in which
any Participant in this Plan is (or was) a participant or could become a
participant, or if the Employer maintains a welfare benefit fund or an
individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions allocated
to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and 6.4 of
the Plan will automatically apply.
11. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of the
Plan, unless different assumptions are selected below.
<PAGE>
The interest rate and mortality assumptions for determining present values
to compute the Top-Heavy ratio shall be:
Interest Rate: ___%
Mortality Table: ___________________
12. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[_] The Custodian shall establish a single Custodial Account in the
name of the Employer and the Employer shall keep all records for
the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct the
investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
13. CUSTODIAN
The undersigned as Employer hereby appoints ________________ as Custodian.
14. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule. The fee
schedule may be changed by the Custodian with advance notice from time to
time. If not separately included, any acceptance fee listed in the attached
schedule will be deducted from the initial contribution received from the
Employer. Any acceptance or other Custodian fees included will be deducted
equally from each Owner-Employee's contribution or Account. Annual
maintenance fees for each Participant's Account and any fees directly
related to activity in that Participant's Account shall be deducted
annually and activity fees will be deducted at the time incurred.
Sufficient Investment Company Shares will be redeemed to cover this fee.
Extraordinary services resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to such
additional charges as will reasonably compensate the Custodian for the
services performed.
15. FUNDING WAIVER
In the event the Employer obtains a funding waiver under Code Section 412
from the Internal Revenue Service, the Employer shall amend the Plan by
adding language which will override the affected provisions of the Plan and
this Adoption Agreement (attach appropriate overriding language to this
Adoption Agreement to comply with the Code).
<PAGE>
Note: An Employer that amends the Plan because of a waiver of the minimum
funding requirements under Code Section 412 will no longer participate in
this prototype Plan and will be considered to have adopted an individually
designed plan.
16. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax advisors
with respect to the Plan. The Employer acknowledges that it may not
continue participation under the Plan if it fails to attain or maintain tax
qualification of the Plan or if it amends the Plan other than by a change
in the Adoption Agreement. The Employer agrees that whenever a Participant
contribution is made, the Employer will determine that the Participant has
received the appropriate current Investment Company prospectus. The
Employer represents that the Participant has received such prospectus by
depositing contributions with the Custodian.
The Employer acknowledges that if it has ever maintained or later adopts
any plan (including 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) or an individual medical account, as defined in
Code Section 415(1)(2)) in addition to this Plan (or the Profit Sharing
Plan), it may not rely on an opinion letter issued by the National Office
of the Internal Revenue Service as evidence that this Plan is qualified
under Code Section 401. If the Employer adopts or maintains multiple plans
and wishes reliance that the Plan is qualified, application for an
individual determination letter should be made to the appropriate District
Office of the Internal Revenue Service.
17. ADDITIONAL INFORMATION
This Plan is sponsored by:
Monetta Financial Services, Inc.
1776A S. Naperville Rd.
Wheaton, IL 60187
(708) 462-9800
Further information regarding this Plan may be obtained by contacting the
Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any amendments
made to this Plan or of the discontinuance or abandonment of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
<PAGE>
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer: ____________________________________________
Name of person signing above (please print): ___________________________
Date: ___________________
<PAGE>
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under the
Plan.
____________________________
By: __________________________
Date:_________________________
<PAGE>
SECTION D
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
SUMMARY PLAN DESCRIPTION
FOR ILLUSTRATIVE PURPOSES ONLY
------------------------------
<PAGE>
NOTE TO EMPLOYERS:
This form of Summary Plan Description for the Monetta Funds Prototype
Defined Contribution Retirement Plan is intended for illustrative purposes only.
Each Employer adopting the Plan should have its own legal advisor carefully
review the form of Summary Plan Description with respect to the individual
elections made in the Adoption Agreements. An Employer may wish to revise the
language of this form of Summary and include examples for clarification.
To use this form, an Employer must fill in the appropriate blanks and
check the appropriate boxes according to the elections made in the Adoption
Agreements. Please see the attached instructions for assistance in completing
your Summary Plan Description.
Department of Labor regulations require that a Summary Plan
Description be filed with the Department of Labor and distributed to Plan
participants no later than 120 days after the Plan is adopted. Thereafter, each
employee must be given a copy no later than 90 days after becoming a Plan
participant.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ADMINISTRATIVE INFORMATION................................................ 1
INTRODUCTION............................................................... 2
WHO IS COVERED............................................................. 2
EMPLOYER CONTRIBUTIONS..................................................... 3
Profit Sharing Plan................................................... 3
Money Purchase Pension Plan........................................... 3
Compensation.......................................................... 4
Allocations of Employer Contributions................................. 4
Profit Sharing Plan................................................... 4
Money Purchase Pension Plan........................................... 5
EMPLOYEE CONTRIBUTIONS..................................................... 5
After-Tax Voluntary Contributions..................................... 5
Rollover Contributions................................................ 5
ELIGIBILITY FOR BENEFITS................................................... 6
Retirement or Disability.............................................. 6
Death................................................................. 6
Other Termination of Employment....................................... 6
VESTING.................................................................... 7
Year of Service....................................................... 7
PAYMENT OF BENEFITS........................................................ 8
Form of Benefit....................................................... 8
WITHDRAWALS FROM THE PLAN.................................................. 9
Withdrawals from Profit Sharing Plan.................................. 9
Withdrawals of After-Tax Contributions................................ 10
Distributions Prior to Age 59-1/2..................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
PLAN INVESTMENTS.......................................................... 10
ANNUAL STATEMENTS......................................................... 10
TRANSFERS FROM OTHER PLANS................................................ 10
AMENDMENT OR TERMINATION OF THE PLAN...................................... 11
LIMITATIONS ON BENEFITS................................................... 11
CLAIMS PROCEDURE.......................................................... 11
ERISA RIGHTS.............................................................. 11
</TABLE>
ii
<PAGE>
ADMINISTRATIVE INFORMATION
Plan Name _____________________________________
Prototype Defined Contribution
Retirement Plan
Plan Sponsor/Employer ______________________________________
______________________________________
______________________________________
(____)________________________________
Plan Sponsor Identification No: ______________________________________
Plan Number: [_] 001 Profit Sharing Plan
[_] 002 Money Purchase Pension Plan
Type of Plan [_] Defined Contribution Profit
Sharing Retirement Plan
[_] Defined Contribution Money
Purchase Pension Plan
Plan Administrator ______________________________________
______________________________________
______________________________________
(____)________________________________
Plan Year: __________________to__________________
Funding Medium: Custodial Accounts
Custodian: First Trust Company
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Agent for Service Service of legal process may
of Legal Process: be made on the Plan Administrator
<PAGE>
INTRODUCTION
------------
______________________________________ (the "Employer'') has adopted
the Monetta Funds Prototype Defined Contribution Retirement Plan (the "Plan") to
provide its eligible employees with an opportunity to accumulate retirement
benefits on a tax-advantaged basis. The Plan when combined with Social Security
benefits and personal savings is intended to assist you in providing financial
security when you retire.
This Summary Plan Description is intended to serve as an easy-to-read
explanation of the Plan as effective ______________. It summarizes, in a very
condensed form, the Plan's important provisions as they apply to you and other
Plan participants. Only the portions of this Summary which have been completed
or checked are applicable to your Plan. Any sections which have not been checked
or completed should be ignored.
Although every effort has been made to make this Summary as accurate
as possible, this Summary is not a substitute for the Plan itself. Thus, the
requirements for participation and the benefits payable will be determined
strictly in accordance with the Plan document. In the event of any conflict
between the terms of the Plan and this Summary Plan Description, the provisions
of the Plan, and not this Summary, will govern the actual rights and benefits to
which you may be or become entitled.
If you have any questions concerning your participation or benefits
under the Plan, please to contact the Plan Administrator, at the address and
phone number listed in the Administrative Information on page 1.
WHO IS COVERED
--------------
An employee of the Employer will become a participant in the Plan on
the earlier of the first day of the Plan Year or the first day of the seventh
month of the Plan Year following
[_] the date of his or her employment.
[_] completion of _____ Years of Employment and atttainment of age _____.
A "Year of Employment" is a 12 consecutive month period beginning with your
employment commencement date or any anniversary of that date during which you
complete at least ________ Hours of Service. An "Hour of Service" means each
hour for which you are paid or entitled to payment for the performance of
services for the Employer. However, you will receive credit for only a limited
number of hours during any single continuous period of absence for which you are
paid for reasons other than performance of work, such as vacation, illness,
disability, leave of absence or similar reasons.
2
<PAGE>
EMPLOYER CONTRIBUTIONS
----------------------
Contributions to the Plan made by your Employer each Plan Year are
determined as follows:
[_] Profit Sharing Plan
-------------------
[_] The Employer may, but is not required to, make a discretionary
profit sharing contribution to the Plan in an amount determined
by the Employer.
[_] The Employer will make a profit sharing contribution to the Plan
in an amount equal to _____________% of the aggregate
compensation and earned income of all of the participants
eligible to share in such contribution.
The profit sharing contribution will be made to the Plan
[_] only if the Employer has net profits for the year.
[_] regardless of whether the Employer has net profits for the year.
[_] Money Purchase Pension Plan
---------------------------
The Employer will make a money purchase pension contribution to the
Plan in an amount equal to _____________% of the aggregate compensation and
earned income of all of the participants eligible to share in such contribution.
Compensation
- ------------
For purposes of the Plan, your compensation includes
[_] all of your taxable earnings for the plan year.
[_] only amounts earned during the plan year after completion of the
eligibility requirements described above.
For self-employed individuals, compensation means their earned income for the
applicable year. The maximum amount of compensation and/or earned income which
can be considered for a participant during any plan year is $235,840 for 1993
(adjusted annually for cost-of-living increases).
Allocations of Employer Contributions
- -------------------------------------
Amounts contributed by the Employer will be allocated among the
accounts of eligible participants on the following basis:
3
<PAGE>
[_] Profit Sharing Plan
-------------------
[_] The amount credited to each eligible participant's account will
be based on his or her compensation and/or earned income for the
year in relation to the total compensation and earned income of
all participants for such year.
[_] The amount credited to each eligible participant's account will
be based on his or her compensation and/or earned income in
excess of the Integration Level in relation to the aggregate of
such excess compensation and earned income of all participants
for such year. However, the allocation is subject to certain
limits on the amount of the contribution which may be allocated
to highly compensated employees.
[_] The Integration Level is the maximum taxable wage base for
Social Security (FICA) tax purposes.
[_] The Integration Level is $_________.
[_] Money Purchase Pension Plan
---------------------------
[_] The amount credited to each eligible participant's account will
be based on his or her compensation and/or earned income for the
year in relation to the total compensation and earned income of
all participants for such year.
[_] The amount credited to each eligible participant's account will
be based on his or her compensation and/or earned income in
excess of the Integration Level in relation to the aggregate of
such excess compensation and earned income of all participants
for such year. However, the allocation is subject to certain
limits on the amount of the contribution which may be allocated
to highly compensated employees.
[_] The Integration Level is the maximum taxable wage base for
Social Security (FICA) tax purposes.
[_] The Integration Level is $_________.
You will be eligible to receive allocation for any plan year during which you
complete at least 501 hours of service or if you are employed on the last day of
the plan year.
EMPLOYEE CONTRIBUTIONS
----------------------
[_] After-Tax Voluntary Contributions
---------------------------------
You may also make voluntary contributions to the Plan in an amount up
to 10% of your total compensation or earned income. Although these voluntary
contributions are not tax deductible, as long as the Plan maintains its tax
qualified status, there will be no tax payable on the income or gains
attributable to such contributions until your account is distributed to you.
4
<PAGE>
Rollover Contributions
- ----------------------
Under special circumstances, you may be permitted to "rollover"
certain distributions from other tax qualified plans. The specific requirements
for a distribution to qualify for rollover treatment are very technical and are
provided U1 the Plan. A qualifying rollover contribution, if done in accordance
with the Plan provisions, permits you to avoid tax at the time of the
distribution from the other plan. Such amounts, however, will be taxed at the
time they are distributed from this Plan.
ELIGIBILITY FOR BENEFITS
------------------------
Retirement or Disability
- ------------------------
If your employment terminates on or after you attain age ___ (the Plan's
normal retirement age) or on account of a total and permanent disability, you
will be entitled to receive the total of all balances in your plan accounts. The
forms of payment available to you are discussed under the section entitled
"Payment of Benefits" below.
Death
- -----
Your beneficiary is entitled to receive a benefit from the Plan upon your
death. If you die prior to receiving any of your plan benefits, the amount
payable to your beneficiary will be the total of all balances in your Plan
accounts. If you have already begun to receive benefits from the Plan due to
retirement or other termination of employment, your beneficiary will receive the
total of all remaining balances in your Plan accounts.
When you join the Plan, you are given the opportunity to designate a
beneficiary. If you are married at the date of your death, your designation of
someone other than your spouse as beneficiary will not be effective unless your
spouse has consented in writing to such designation. A spousal consent must be
made on the prescribed form provided by the Plan Administrator and witnessed by
a Plan representative or notary public. Subject to the spousal consent
requirements, you may change your beneficiary at any time by filing a new
written designation with the Plan Administrator.
If you do not have a properly designated beneficiary at the date of your
death, your surviving spouse will receive any benefits payable under the Plan.
If you have no surviving spouse, your estate will receive such benefits.
Other Termination of Employment
- -------------------------------
If your employment with the Company terminates before the Plan's normal
retirement age for any reason other than death or disability, you will be
entitled only to the portion of your plan accounts that are vested.
5
<PAGE>
VESTING
-------
You will become vested in your plan accounts attributable to employer
profit sharing and/or money purchase pension contributions based on the
following:
[ ] You will also have a fully vested and nonforfeitable interest in all
of your other plan accounts. You, or your designated beneficiary, will
always be paid these amounts.
[ ] The amounts in your plan accounts will become fully vested and
nonforfeitable after ________Years of Service with the Employer.
[ ] The amounts in your plan accounts will become fully vested and
nonforfeitable according to the following schedule:
Vested
Years of Service Percentage
---------------- ----------
2 or less 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
You are always 100% vested in any voluntary aftertax contributions you make
under the Plan.
Year of Service
- ---------------
A "Year of Service" means any plan year during which you complete at least
______Hours of Service.
[ ] You will receive credit for all of your Years of Service, except all
Years of Service prior to the effective date of the Plan.
[ ] You will receive credit for all of your Years of Service except any
Years of Service before the plan year in which you had attained age
18.
[ ] All your Years of Service with the Employer will count towards the
vesting of the amounts in your plan accounts.
Any percentage of your plan accounts which is not vested at the time you
terminate employment will be forfeited after you incur a "Break in Service". A
Break in Service is defined as any period of twelve (12) consecutive months
during which you do not complete at least 501 Hours of Service for the Employer.
The amount forfeited from your accounts when you incur a Break in Service will
be reinstated, and continue to vest, if you are reemployed by the Employer
before you incur 5 consecutive Breaks in Service. Your employment with the
Employer both
6
<PAGE>
before and after a Break in Service is then combined to determine your vested
percentage. If you are reemployed by the Employer after incurring 5 or more
consecutive Breaks in Service, the amount previously forfeited from your
accounts will not be reinstated, however, your Years of Service earned before
the Break in Service will be aggregated with Years of Service earned following
your reemployment for purposes of determining your vested percentage in
subsequent Employer contributions or matching contributions.
PAYMENT OF BENEFITS
-------------------
Form of Benefit
- ---------------
Generally, you may elect to receive distributions from the Profit Sharing
Plan in either of the following optional payment forms:
(1) a lump sum payment, or
(2) installments over a period of time not exceeding your life
expectancy or the joint life expectancy of you and your
beneficiary.
Distributions from the Money Purchase Pension Plan will be made to you in
the form of an annuity contract purchased from an insurance company, unless you
(and your Spouse, if any) elect otherwise. If you are unmarried, you will
receive a "life only annuity" payable monthly until your death. If you are
married, you will receive a "joint and 50% survivor annuity" with monthly
payments made to you for life, and upon your death, monthly payments will be
made to your surviving spouse equal to 50% of the monthly benefit you received
prior to your death. You may waive this annuity form of payment and receive your
distribution(s) in one of the forms described above. However, if you are
married, your selection of an alternate payment form will be effective only with
your spouse's written consent. A spousal consent must be made on the prescribed
form provided by the Plan Administrator and witnessed by a Plan representative
or notary public. If you die before any distribution and, your spouse is your
beneficiary, an annuity payable for the life of your spouse will be purchased
from an insurance company. Your spouse, however, may elect another form of
payment.
Normally, distributions will be made or commence as soon as
administratively practicable following the date of your retirement, death or
other termination of employment. However, if your vested Plan account balances
exceed $3,500, no distribution can be made prior to your normal retirement age
without your written consent. You may also elect to defer payments even after
your normal retirement age. However, certain minimum distributions must be made
starting with the April 1 following the year in which you attain age 70-1/2.
These minimum distributions are based on your life expectancy or the joint life
expectancy of you and your designated beneficiary. If you do not receive the
minimum required amount, you may be subject to a 50% federal excise tax.
7
<PAGE>
If your Plan account balances are less than $3,500, your distribution will
be made in a lump sum as soon as practicable after the end of the plan year in
which your employment terminates.
In the event of your death, your account balances, if not used to purchase
an annuity contract for your surviving spouse, must be completely distributed to
your beneficiary within 5 years of the date of your death. However, there are
several exceptions to this rule. Payments may be made over the life or life
expectancy of your beneficiary, if those payments commence within 1 year of the
date of your death. If your spouse is your beneficiary, these annual life
expectancy distributions may be delayed until the date you would have attained
age 70-1/2. If you had begun receiving installment payments from your account
prior to your death, your beneficiary may elect to continue to receive the
remaining installment payments.
Withdrawals From The Plan
- -------------------------
Generally, contributions to the Plan cannot be withdrawn while you are
still employed.
[ ] Withdrawals from Profit Sharing Plan
------------------------------------
If you have participated in the Plan for at least 5 years, you may withdraw
up to ____% of the vested portion of your profit sharing plan account after
attaining age 59-1/2 or on account of financial hardship. A financial hardship
means a financial need or emergency which requires the distribution of the
participant's plan account in order to meet this emergency. The determination
whether a financial hardship exists will be made by the Plan Administrator. Once
you have made a withdrawal, you may not make another withdrawal until you have
completed at least 5 more years of participation after the date of the prior
withdrawal.
Withdrawals of After-Tax Contributions
- --------------------------------------
You may withdraw all or any part of your voluntary after-tax contributions
by giving the Plan Administrator at least 30 days written notice.
Distributions Prior to Age 59-1/2
- ---------------------------------
It is important for you to note that distributions or withdrawals prior to age
59-1/2 may be subject to an additional 10% penalty tax. This penalty tax does
not apply to distributions following death or disability or to distributions
which are rolled over to another plan or an individual retirement account
("IRA"). There are a few other exceptions to this tax. If you are considering a
distribution or withdrawal prior to age 59-1/2, you should contact your tax
advisor.
Direct Transfer to Eligible Retirement Plans
- --------------------------------------------
The rules governing the rollover/transfer and withholding requirements on
distributions from qualified retirement have been changed effective January 1,
1993. In general, most distributions from a plan may now be rolled over to an
IRA. However, the following distributions may not be rolled over:
8
<PAGE>
(1) A distribution that is part of a series of periodic payments
made over a specified period of 10 or more years or over the
life expectancy or the joint life expectancy or the
participant and/or his or her beneficiary.
(2) Any distribution (or part thereof) made to satisfy minimum
distribution requirements.
(3) Any portion of a distribution that is a nontaxable return of after-tax
contributions.
(4) Corrective distributions of excess deferral or contributions under a
401(k) plan.
(5) Loans that are deemed distributions.
(6) The "P.S. 58" cost of life insurance coverage.
If a distribution can be rolled over it is subject to mandatory 20% Federal tax
withholding. Distributions of under $200 (aggregating all distributions received
in one calendar year) are exempt from withholding. A distributee may avoid the
mandatory withholding by directly transferring the distribution to an IRA. Prior
to any distribution, the administrator of your plan must provide you a notice of
the withholding and rollover rules. The notice should be provided no earlier
than 90 days and no less than 30 days prior to any distribution.
PLAN INVESTMENTS
----------------
Contributions to the Plan will be held by the Custodian and invested in one
or more of the Monetta Funds.
[ ] You will be able to direct the investment of your plan accounts. Your
plan accounts will be credited with the income, gains and losses based
on the Monetta Fund investment(s) you select.
[ ] All of the assets of the Plan are invested as directed by the
Employer. Your accounts will be credited with your proportionate share
of the income, gains and/or losses of the Plan's investments.
ANNUAL STATEMENTS
-----------------
Following the end of each plan year, you will receive a statement of each
of your plan account balances. In addition, financial information with respect
to the Plan's assets and gains, losses, income and expenses will be distributed
annually to all participants.
TRANSFERS FROM OTHER PLANS
--------------------------
The Plan permits direct transfers of monies from similar eligible tax
qualified plans. Direct transfers go from trustee to trustee and are not subject
to the special rollover rules described above.
9
<PAGE>
AMENDMENT OR TERMINATION OF THE PLAN
------------------------------------
The Employer may amend or terminate the Plan at any time. If the Employer
terminates the Plan, all participants will be fully vested in their plan
accounts.
LIMITATIONS ON BENEFITS
-----------------------
No benefit under this Plan may be assigned or pledged, nor may any benefit
the subject to your debts or other legal obligations, except as provided by law.
One exception is that benefits may be paid pursuant to qualified domestic
relations order issued by a court. Benefits under the Plan are also subject to
maximum limitations imposed by the Internal Revenue Service regulations. These
restrictions typically apply to the highly compensated employees of the
Employer. Any participant affected by these restrictions will be fully advised.
CLAIMS PROCEDURE
----------------
You (or other claimant) may claim your benefits under the Plan by filing a
written request for such benefits with the Plan Administrator. The Plan
Administrator makes all determinations as to whether a claimant is entitled to
any benefits under the Plan and the amount of such benefits. Within 90 days
after receipt of the request, the Plan Administrator shall duly consider the
claim. If the claim is denied in whole or in part, the Plan Administrator shall,
writing state the reasons for the denial, the Plan provisions upon which the
denial is based, a description of any additional information or material
required by the Plan Administrator and the procedure for review of the denial.
If notice is not furnished by the Plan Administrator within the 90 day period of
time, the claim shall be deemed denied and the claimant shall be permitted to
request review of the claim.
In the event of a denial of a claim, a claimant may request the Employer to
review the denied claim. The request must be made within 60 days after receipt
of written denial of the claim. The claimant may review pertinent Plan documents
and submit issues and comments in writing to the Employer. Within 60 days after
receipt of the request for review, the Employer shall notify the claimant in
writing of its final decision. However, if the Employer finds it necessary, due
to special circumstances (for example, the need to hold a hearing), to extend
this period and so notifies the claimant in writing, the decision shall be
rendered as soon as practicable, but in no event later than 120 days after the
claimant's request for review.
ERISA RIGHTS
------------
As a participant in this Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 (ERISA).
This law provides that all Plan participants shall be entitled to:
Examine, without charge, at the office of the Plan Administrator (and at
other specified locations, if appropriate), all Plan documents, including
copies of all documents filed by the Plan with the U. S. Department of
Labor, such as detailed annual reports.
10
<PAGE>
Obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator. The Plan Administrator may make a
reasonable charge for the copies.
Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant with a copy of
this summary annual report.
Obtain a statement telling you whether you have an earned current vested
interest in your account and whether, under the terms of the Plan, you will
be entitled to receive a retirement income if you stop working under the
Plan now. If you do not have a current vested interest or right to a
benefit at age 65, the statement will tell you how many more years you have
to work to obtain these rights. This statement must be requested in writing
and is not required to be given more than once a year. The Plan must
provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes duties
upon the people who are responsible for the operation of the employee benefit
plan. The people who operate your Plan, called "fiduciaries" of the Plan, have a
duty to do so prudently and in the interest of you and other Plan participants
and beneficiaries.
No one, including your Employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining your
benefits or exercising your rights under ERISA. If your claim for your benefit
is denied in whole or in part you must receive a written explanation of the
reason for the denial. You have the right to have your Employer review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan Administrator and do not
receive them within 30 days, you may file suit in a federal court. In such a
case, the court may require the Plan Administrator to provide the material and
pay you up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U. S. Department of
Labor, or you may file suit in a federal court. The court will decide who should
pay court costs and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees, for example, if it finds your claim is
frivolous.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about you
rights under ERISA, you should contact the nearest Area Office of the U. S.
Labor-Management Services Administration, Department of Labor.
Because the Plan is a defined contribution plan, plan benefits are not
guaranteed by the Pension Benefit Guaranty Corporation.
11
<PAGE>
SECTION E
EMPLOYEE FORMS
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ACCOUNT APPLICATION
1. EMPLOYEE INFORMATION
Name Telephone Number ( )
------------------------------- --- ---------------------
Address
------------------------------------------------------------------------
City State Zip
------------------------------- ---------------- ----------------
Birth Date Social Security Number
------------------------- --------------------
2. EMPLOYER INFORMATION
Employer Name
------------------------------------------------------------------
Address
------------------------------------------------------------------------
City State Zip
------------------------------- ---------------- ----------------
Employer Tax ID Telephone Number ( )
-------------------- --- ---------------------
3. INVESTMENTS
Contributions will be invested in the following Monetta Funds:
[_] Monetta Fund, Inc. (____%)
[_] Monetta Mid-Cap Equity Fund (____%)
[_] Monetta Large-Cap Equity Fund (____%)
[_] Monetta Balanced Fund (____%)
[_] Monetta Intermediate Bond Fund (____%)
[_] Monetta Government Market Fund (____%)
If a specific fund is not selected, contributions will be invested in the
Monetta Government Money Market Fund. You may change your fund investments by
filing a Change of Investments form with the Monetta Funds.
4. EMPLOYEE SIGNATURE
I adopt the Monetta Funds Prototype Defined Contribution Retirement Plan and
appoint Firstar Trust Company as Custodian. I acknowledge that I have received
and read the Prospectus for the Monetta Fund(s) in which I am invested. If I am
contributing a distribution form from another employer-sponsored retirement
plan, I certify that such distribution is a qualifying transfer or rollover. I
certify under penalties of perjury that my Social Security Number (above) is
correct. I understand that the Custodian will charge fees that are shown in the
plan materials and they may be separately billed or collected by redeeming
sufficient shares from my fund account balance(s).
- ------------------------------ --------------------------
Employee Signature Date
5. EMPLOYER ADOPTION
I am a participant in the Monetta Funds Prototype Defined Contribution
Retirement Plan and appoint the Custodian or its agent to perform those
functions and appropriate administrative services specified in the Plan
Document. I have received and read the prospectus for the Fund(s) in which I am
making my contribution. I (the Participant) certify under penalties of perjury
that my Social Security number is correct. I am not currently under IRS
notification that I am subject to backup, withholding (strike out this clause if
under notification), and I am of legal age. I (the Employer) certify under
penalties of perjury that my Tax I.D. number is correct. If I am opening this
Defined Contribution Retirement Plan with a distribution from an
employer-sponsored retirement plan, I certify that the distribution qualifies as
a rollover contribution. I understand that the Custodian's fees, as determined
in accordance with the fee schedule distributed by the Custodian from time to
time, may be collected by redeeming sufficient shares from each fund account
balance. The Custodian may change the fee schedule from time to time.
- ------------------------------------------------ --------------------------
Employer Authorized Signature Title Date
6. CUSTODIAN ACCEPTANCE
FIRSTAR TRUST COMPANY
- ------------------------------------------------ --------------------------
Authorized Signature Title Date
- ------------------------------------------------ --------------------------
Employee Signature Date
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
BENEFICIARY DESIGNATION AND SPOUSAL CONSENT
Employee:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Social Security No.: Date of Birth:
----------------------- --------------------
1. Primary Beneficiary* (If you are married and if someone other than or
in addition to your spouse is designated, the Spousal Consent below
must be completed).
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Social Security No.: Relationship:
----------------------- ---------------------
2. Secondary Beneficiary*
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Social Security No.: Relationship:
----------------------- ---------------------
*Multiple Primary and/or Secondary Beneficiaries can be designated by
inserting "See Attached Sheet" in the appropriate beneficiary category
and by providing the information required above, as well as the
percentage of the death benefit that each beneficiary is to receive,
on a separate sheet and attaching it to this designation. If you have
not provided otherwise in completing this designation, all sums
payable to more than one beneficiary in the applicable category shall
be paid equally to those beneficiaries living at the time of your
death.
- ----------------------------------- ------------------------------------
Employee Signature Date
SPOUSAL CONSENT
---------------
As the spouse of the Employee, I consent to the Beneficiary Designation made
above (or on the attached sheet, if any) and acknowledge that by doing so I am
waiving my right to be the sole Primary Beneficiary of any death benefits due
under the Plan.
-----------------------------------
Name of Spouse (Print)
------------------------------------ -------------------------------------
Signature of Spouse Date
Subscribed before me this day of , 19 .
----- ---------------------------- --
Notary Public, County,
---------------------- ------------------------------
My Commission (expires):
-------------------------------------------------------
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
INVESTMENT ALLOCATIONS
1. EMPLOYEE INFORMATION
Name Telephone Number
------------------------------ (------)----------------------
Address
-------------------------------------------------------------------------
City State Zip
---------------------------- ------------------------ ----------------
Social Security Number
----------------------------------------------------------
2. ALLOCATIONS OF CONTRIBUTIONS AND ACCOUNTS
Please allocate my future contributions and my existing account balances
among the following Monetta Funds as designated below. If you do not have any
existing account balances, insert "N/A" in the applicable blanks.
Contributions will be invested in the following Monetta Funds:
Future Existing
Contributions Account Balances
------------- ----------------
[ ] Monetta Mid-Cap Equity Fund _____% _____%
[ ] Monetta Intermediate Bond Fund _____% _____%
[ ] Monetta Government Money Market Fund _____% _____%
If a specific fund is not selected, all contributions will be invested in the
Government Money Market Fund. You may change your fund investments at a later
date by filing a new Investment Allocations form with the Monetta Funds.
3. EMPLOYEE SIGNATURE
I understand that the allocations I have elected above will continue to be
effective until I file a new Change of Investments form. I acknowledge that I
have received and read the Prospectus for the Monetta Fund(s) in which I am
investing.
- ---------------------------------- -----------------------------------------
Employee Signature Date
4. CUSTODIAN ACCEPTANCE
FIRSTAR TRUST COMPANY
- ---------------------------------- -----------------------------------------
Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
(SECTION 401(K) CASH OR DEFERRED ARRANGEMENT)
SALARY REDUCTION AGREEMENT
I hereby elect to have my Employer reduce my salary by ____________ (insert a
whole percentage/dollar amount not less than __________ or more than __________)
for each pay period and to have such amount paid to the Custodian of the Plan as
Elective Deferrals. I understand that the rate of my Elective Deferrals can be
changed only as of each __________, but that I can discontinue such
contributions at any time. I also understand that the Plan Administrator may
limit the amount of my Elective Deferrals to satisfy certain tax law
requirements, and that amount of my Elective Deferrals cannot in any event
exceed $8,994 for 1993 (the maximum amount of Elective Deferrals is indexed
annually for cost of living increases).
- ----------------------------------- ------------------------------------
Employee Signature Date
A direction to reduce salary can be modified only as of ____________,
but can be discontinued at any time. To discontinue your Elective Deferrals,
complete a new form and enter 0%.
* * * * * * * *
Received by Employer
- ------------------------------------ ------------------------------------
Employer Authorized Signature Title Date
Two copies of this form must be completed and signed by the Employee, and both
copies should be filed with the Employer. One copy will be marked to show
receipt by the Employer and returned to the Employee.
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
TRANSFER AUTHORIZATION
Use this form to transfer an existing tax-sheltered annuity or Prototype Defined
Contribution Retirement Plan custodial account to the Monetta Funds Prototype
Defined Contribution Retirement Plan. Provide Monetta Funds with the completed
form, along with your application form and salary reduction agreement (if
applicable).
1. EMPLOYEE INFORMATION
Name Telephone Number ( )
---------------------------------------- --- ------------
Address
------------------------------------------------------------------------
City State Zip
----------------------------- ---------------------- ------------
Social Security Number
---------------------------------------------------------
2. EMPLOYER INFORMATION
Employer Name
------------------------------------------------------------------
Address
------------------------------------------------------------------------
City State Zip
----------------------------- ---------------------- ------------
Employer Tax ID Telephone Number ( )
----------------------------- --- ------------
3. CURRENT QUALIFIED PLAN TRUSTEE/CUSTODIAN INFORMATION
- --------------------------------------------------------------------------------
Name of Current Trustee/Custodian
- --------------------------------------------------------------------------------
Address
- --------------------------------------------- ----------------------------------
City State Zip Account Number
4. INVESTMENT INSTRUCTIONS
Transfer into my existing Monetta Funds Prototype Defined Contribution
Retirement Plan account # .
---------------
Transfer into a new Monetta Fund Prototype Defined Contribution Retirement
Plan account as designated in my Investment Allocations form.
<PAGE>
5. AUTHORIZATION TO TRANSFER
This letter shall serve as notification of my intention to effect a direct
transfer of my existing qualified plan account. This letter directs you to
transfer [_] all or [_] part ($_____) of my plan account listed in Section 3
and transfer such amounts to my Monetta Funds Prototype Defined Contribution
Retirement Plan account.
6. EMPLOYEE/EMPLOYER SIGNATURES
Both the undersigned Employer and Employee understand that this agreement is
irrevocable and binding. In the event that either of the undersigned receives a
check for the proceeds of the liquidated plan account, such check will
immediately be endorsed over to Firstar Trust Company, Custodian of the Monetta
Funds Prototype Defined Contribution Retirement Plan, in accordance with the
terms of this agreement. Employer agrees to serve as the agent of the Employee
whose signature appears below for the purpose of this transfer. Finally, the
undersigned Employer and Employee intend that the transfer of funds contemplated
herein be deemed a single, integrated transaction. Firstar Trust Company agrees
to accept any funds transferred in accordance with this request.
- ------------------------------------- ---------------------------------------
Employee Signature Employer Signature Title
- ------------------------------------- ---------------------------------------
Date Date
- -------------------------------------
Signature Guarantee (if required)*
*Important: Please check with your current trustee/custodian to determine if
a signature guarantee is required.
Firstar Trust Company will complete this Acceptance Agreement
As Custodian for Monetta Funds Prototype Defined Contribution Retirement Plan,
we have been appointed to serve as successor custodian of the qualified plan
account. Please prepare a check representing liquidation of the investment
referenced above. To ensure proper credit, please return a copy of this form
along with the check.
Please send to: Monetta Funds
c/o Firstar Trust Company
P.O. Box 2936
Milwaukee, WI 53201-2936
FIRSTAR TRUST COMPANY
- ------------------------------------------------ -------------------------
Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
DISTRIBUTION/TRANSFER REQUEST
1. EMPLOYEE INFORMATION
Name Telephone Number ( )
------------------------------ ----------------
Address
-------------------------------------------------------------
City State Zip
------------------------------ ------------ ---------
Birth Date Social Security Number
-------------------- ------------
2. EMPLOYER INFORMATION
Employer Name
-------------------------------------------------------
Address
-------------------------------------------------------------
City State Zip
-------------------------------------- --------- -------
Employer Tax ID Telephone Number ( )
------------------- -------------
3. DISTRIBUTION/TRANSFER REQUEST
The distribution or transfer of my account shall be made as follows:
[_] Single lump-sum payment.
[_] Other (please describe - monthly, quarterly or annual payments over a
period not longer than your life expectancy of you and your
beneficiary)
--------------------------------------------------------
[_] Transfer to (indicate successor trustee/custodian)
------------------
If the direct transfer option is not selected, 20% of your distribution may be
required to be withheld. See the Federal Withholding/Distribution Information
Form for more details. That Form also describes the federal income tax treatment
of your distribution, including averaging and roll-overs.
Note: If your account balance exceeds S3,500, you may need the consent of your
spouse before any distribution is made.
4. REQUIREMENTS FOR DISTRIBUTIONS
The distribution or transfer is made on account of:
[_] Termination of Employment.
[_] Retirement.
[_] Death (name of beneficiary _______________________________________).
[_] Disability.
[_] Attainment of Age 59-1/2.
[_] Termination of Plan.
<PAGE>
5. EMPLOYEE OR BENEFICIARY SIGNATURE
I consent to the distribution or transfer of my Monetta Funds Prototype Defined
Contribution Retirement Plan account balance as elected above.
- --------------------------------- ------------------------
Employee or Beneficiary Signature Date
- --------------------------------- ------------------------
Spouse's Signature (if required) Date
6. PLAN ADMINISTRATOR SIGNATURE
The Plan Administrator certifies that the distribution or transfer
elected above is permitted under the terms of the Plan and that, if required,
the proper spousal consent has been obtained.
- -------------------------------------------------- ----------------
Plan Administrator Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
(SECTION 401(1c) CASH OR DEFERRED ARRANGEMENT)
FINANCIAL HARDSHIP DISTRIBUTION REQUEST
1. EMPLOYEE INFORMATION
Name Telephone Number ( )
---------------------------------------- ----------------
Address
-------------------------------------------------------------------------
City State Zip
---------------------------------------- ------------ -----------
Birth Date Social Security Number
------------------ -----------------------------
2. HARDSHIP DISTRIBUTION REQUEST
I request a hardship distribution from my account in the amount of
$ . (Distributions shall be made pro rata from each
----------------
of your investment funds.)
I intend to use the funds requested for the following purpose:
[_] To purchase my primary place of residence.
[_] To pay the upcoming post-secondary educational expenses for me or my
dependents.
[_] To pay medical and/or hospital expenses for myself or my dependents.
(NOTE: The 10% additional tax penalty will not apply when the
withdrawal is used to pay medical expenses that exceed 7-1/2% of my
adjusted gross income.)
[_] To prevent the eviction from, or foreclosure on the mortgage of, my
principal residence.
3. CERTIFICATION
As a participant under the Plan, I certify that:
i. I have no other reasonably available resources from which these funds
may be obtained;
ii. The withdrawal is not in excess of the amount needed to satisfy the
need;
<PAGE>
iii. I have taken all possible distributions from all of my employer's
plans, excluding hardship distributions, but including nontaxable
loans;
iv. I will not be allowed to make any contributions or salary deferrals
(if applicable) to any employer plan for at least 12 months after
receiving the hardship distribution;
v. My elective deferrals to all of the employer's plans in the calendar
year immediately following receipt of the hardship withdrawal will be
restricted to the maximum amount ($9,500 as indexed) less my elective
contributions in the year of the hardship distribution; and
vi. The amount I have requested to withdraw is not subject to a qualified
domestic relations order.
4. EMPLOYEE SIGNATURE
I request the distribution from my Monetta Fund Prototype Defined
Contribution Retirement Plan account on account of financial hardship.
I certify that the information indicated above is true and correct. I
understand that this distribution is subject to normal income tax, and
may also be subject to an additional 10% early distribution penalty if
I have not attained age 59 1/2.
- --------------------------------------- ---------------------
Employee Signature Date
- --------------------------------------- ---------------------
Spouse's Signature (if required) Date
5. PLAN ADMINISTRATOR SIGNATURE
The Plan Administrator approves the hardship distribution request by the
Employee as described above, and certifies that the distribution is permitted
under the terms of the Plan and that, if required, the proper spousal consent
has been obtained.
- --------------------------------------- ---------------------
Plan Administrator Authorized Signature Date
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
FEDERAL WITHHOLDING TAX FORM
FOR CERTAIN DISTRIBUTIONS
The distributions you receive from your retirement plan are generally
subject to federal income tax withholding. See Federal Withholding Distribution
information Form. However, for certain distributions, you may elect not to have
withholding apply. This withholding election applies only to (1) distributions
which are part of a Series of payments which will last for your life expectancy,
the joint life expectancy of you and your beneficiary or a period of 10 years or
more, and (2) any distribution (or portion thereof) which is made to satisfy the
minimum distribution requirements. IF YOU ARE RECEIVING ANOTHER FORM OF
DISTRIBUTION, DO NOT USE THIS FORM. Withholding will only apply to the portion
of one of these distributions that is included in your income subject to federal
income tax. Thus, for example, there will be no withholding on the return of
your own nondeductible contributions to the plan.
You may elect not to have withholding apply to a distribution described above
by returning the signed and dated election to your plan administrator.
Unless you elect not to have withholding apply, withholding will apply to the
taxable portion of your distribution as prescribed by the Internal Revenue
Service.
If you elect not to have withholding apply to your distribution, or if you do
not have enough federal income tax withheld from your distribution, you may be
responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
- --------------------------------------------------------------------------------
Instructions:
Indicate below whether you want any federal income tax withheld from your
distribution. Return the signed and dated election to your plan administrator.
Even if you elect not to have federal income tax withheld, you are liable for
payment of federal income tax on the taxable portion of your distribution. You
also may be subject to tax penalties under the estimated tax payment rules if
your payments of estimated tax and withholding, if any, are not adequate.
______ I do not want to have federal income tax withheld from my
distribution.
______ I want to have federal income tax withheld from my distribution.
I want $ or % withheld from the gross taxable
- -------- ---------- ----------
distribution.
- -------------------------------- -------- ---------------------------
Employee Signature Date Social Security Number
<PAGE>
MONETTA FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
FEDERAL WITHHOLDING/DISTRIBUTION INFORMATION FORM
This notice contains important information you will need before you
decide how to receive your benefits from the Monetta Funds Prototype Defined
Contribution Retirement Plan (the "Plan").
SUMMARY
A payment from the Plan that is eligible for "rollover" can be taken
in two ways. You have all or any portion of your payment either (1) PAID IN A
"DIRECT ROLLOVER" or (2) PAID TO YOU. A rollover is a payment of your Plan
benefits to your individual retirement arrangement (IRA) or to another employer
plan. This choice will affect the tax you owe.
If you choose a DIRECT ROLLOVER
[_] Your payment will not be taxed in the current year and no income tax
will be withheld.
[_] Your payment will be made directly to your IRA or, if you
choose, to another employer plan that accepts your rollover.
[_] Your payment will be taxed later when you take it out of the IRA or
the employer plan.
If you choose to have your Plan benefits PAID TO YOU
. You will receive only 80% of the payment, because the Plan Administrator
is required to withhold 20% of the payment and send it to the IRS as
income tax withholding to be credited against your taxes.
. Your payment will be taxed in the current year unless you roll it over.
You may be able to use special tax rules that could reduce the tax you
owe. However, if you receive the payment before age 59-1/2, you also may
have to pay an additional 10% tax.
. You can roll over the paying it to your IRA or to another employer plan
that accepts your rollover within 60 days of receiving the payment. The
amount rolled over will not be taxed until you take it out of the IRA or
employer plan.
<PAGE>
. If you want to roll over 100% of the payment to an IRA or an employer
plan, you must find other money to replace the 20% that was withheld. If
you roll over only the 80% that you received, you will be taxed on the
20% that was withheld and that is not rolled over.
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This
means that they can be rolled over to an IRA or to another employer plan that
accepts rollovers. Your Plan Administrator should be able to tell you what
portion of your payment is an eligible rollover distribution. The following
types of payments cannot be rolled over:
Non-Taxable Payments. In general, only the "taxable portion" of your
payment is an eligible rollover distribution. If you have made "after-
tax" employee contributions to the Plan, these contributions will be
non-taxable when they are paid to you, and they cannot be rolled over.
(After-tax employee contributions generally are contributions you made
from your own pay that were already taxed.)
Payments Spread Over Long Periods. You cannot roll over a payment if
it is part of a series of equal (or almost equal) payments that are
made at least once a year and that will last for
. your lifetime (or your life expectancy), or
. your lifetime and your beneficiary's lifetime (or life
expectancies), or
. a period of ten years or more.
"Required Minimum Payments. Beginning in the year you reach age 70-1/2, a
certain portion of your payment cannot be rolled over because it is a "required
minimum payment" that must be paid to you.
2
<PAGE>
II. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment that
is an "eligible rollover distribution," as described above. In a direct
rollover, the eligible rollover distribution is paid directly from the Plan to
an IRA or another employer plan that accepts rollovers. If you choose a direct
rollover, you are not taxed on a payment until you later take it out of the IRA
or the employer plan.
Direct Rollover to an IRA. You can open an IRA to receive the direct
rollover. (The term "IRA," as used in this notice, includes individual
retirement accounts and individual retirement annuities.) If you choose to have
your payment made directly to an IRA, contact an IRA sponsor (usually a
financial institution) to find out how to have your payment made in a direct
rollover to an IRA at that institution. If you are unsure of how to invest your
money, you can temporarily establish an IRA to receive the payment. However, in
choosing an IRA, you may wish to consider whether the IRA you choose will allow
you to move all or a part of your payment to another IRA at a later date,
without penalties or other limitations. See IRS Publication 590, Individual
Retirement Arrangements, for more information on IRAs (including limits on how
often you can roll over between IRAs).
Direct Rollover to a Plan. If you are employed by a new employer that has
a plan, and you want a direct rollover to that plan, ask the administrator of
that plan whether it will accept your rollover. If your new employer's plan does
not accept a rollover, you can choose a direct rollover to an IRA.
Direct Rollover of a Series of Payments. If you receive eligible rollover
distributions that are paid in a series for less than ten years, your choice to
make or not make a direct rollover for a payment will apply to all later
payments in the series until you change your election. You are free to change
your election for any later payment in the series.
III. PAYMENT PAID TO YOU
If you have the payment made to you, it is subject to 20% income tax
withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA or another plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.
Income Tax Withholding:
Mandatory Withholding. If any portion of the payment to you is an eligible
rollover distribution, the Plan is required by law to withhold 20% of that
amount. This amount is sent to the IRS as income tax withholding. For example,
if your eligible rollover
3
<PAGE>
distribution is $10,000, only $8,000 will be paid to you because the Plan must
withhold $2,000 as income tax. However, when you prepare your income tax return
for the year, you will report the full $10,000 as payment from the Plan. You
will report the $2,000 as tax withheld, and it will be credited against any
income tax you owe for the year.
Voluntary Withholding. If any portion of your payment is not an eligible
rollover distribution but is taxable, the mandatory withholding rules described
above do not apply. In this case, you may elect not to have withholding apply to
that portion. To elect out of withholding, ask the Plan Administrator for the
election form and related information.
Sixty-Day Rollover Option. If you have an eligible rollover distribution
paid to you, you can still decide to roll over all or part of it to an IRA or
another employer plan that accepts rollovers. If you decide to roll over, you
must make the rollover within 60 days after you receive the payment. The portion
of your payment that is rolled over will not be taxed until you take it out of
the IRA or the employer plan.
You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. On the other
hand, if you roll over only the 80% that you received, you will be taxed on the
20% that was withheld.
Example: Your eligible rollover distribution is $10,000, and you choose to
have it paid to you. You will receive $8,000, and $2,000 will be sent to the IRS
as income tax withholding. Within 60 days after receiving the $8,000, you may
roll over the entire $10,000 to an IRA or employer plan. To do this, you roll
over the $8,000 you received from the Plan, and you will have to find $2,000
from other sources (your savings, a loan, etc.). In this case, the entire
$10,000 is not taxed until you take it out of the IRA or employer plan. If you
roll over the entire $10,000, when you file your income tax return you may get a
refund of the $2,000 withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did not
roll over is taxed in the year it was withheld. When you file your income tax
return you may get a refund of part of the $2,000 withheld. (However, any refund
is likely to be larger if you roll over the entire $10,000.)
Additional 10% Tax If You Are Under Age 59-1/2. If you receive a payment
before you reach age 59-1/2 and you do not roll it over, then, in addition to
the regular income tax, you may have to pay an extra tax equal to 10% of the
taxable portion of the payment. The additional 10% tax does not apply to your
payment if it is (1) paid to you because you separate from service with your
employer during or after the year you reach age 55, (2) paid because you retire
due to disability, (3) paid to you as equal (or almost equal)
4
<PAGE>
payments over your life or life expectancy (or your and your beneficiary's lives
or life expectancies), or (4) used to pay certain medical expenses. See IRS Form
5329 for more information on the additional 10% tax.
Special Tax Treatment. If your eligible rollover distribution is not
rolled over, it will be taxed in the year you receive it. However, if it
qualifies as a "lump sum distribution," it may be eligible for special tax
treatment. A lump sum distribution is a payment, within one year, of your entire
balance under the Plan (and certain other similar plans of the employer) that is
payable to you because you have reached age 59-1/2 or have separated from
service with your employer (or, in the case of a self-employed individual,
because you have reached age 59-1/2 or have become disabled). For a payment to
qualify as a lump sum distribution, you must have been a participant in the Plan
for at least 5 years. The special tax treatment for lump sum distributions is
described below.
Five-Year Averaging. If you receive a lump sum distribution after you are
age 59-1/2, you may be able to make a one-time election to figure the tax on the
payment by using "5-year averaging." Five-year averaging often reduces the tax
you owe because it treats the payment much as if it were paid over 5 years.
Ten-Year Averaging If You Were Born Before January 1, 1936. If you receive
a lump sum distribution and you were born before January 1, 1936, you can make a
one-time election to figure the tax on the payment by using "10-year averaging"
(using 1986 tax rates) instead of 5-year averaging (using current tax rates).
Like the 5-year averaging rules, 10-year averaging often reduces the tax you
owe.
Capital Gain Treatment If You Were Born Before January 1, 1936. In
addition, if you receive a lump sum distribution and you were born before
January 1, 1936, you may elect to have the part of your payment that is
attributable to your pre-1974 participation in the Plan (if any) taxed as long-
term capital gain at a rate of 20%.
There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum
distributions that you receive in that same year. If you have previously rolled
over a payment from the Plan (or certain other similar plans of the employer),
you cannot use this special tax treatment for later payments from the Plan. If
you roll over your payment to an IRA, you will not be able to use this special
tax treatment for later payments from the IRA. Also, if you roll over only a
portion of your payment to an IRA, this special tax treatment is not available
for the rest of the payment. Additional restrictions are described in IRS Form
4972, which has more information on lump sum distributions and how you elect the
special tax treatment.
5
<PAGE>
IV. SURVIVING SPOUSES, ALTERNATIVE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized above that apply to payments to employees
also apply to payments to surviving spouses of employees and to spouses or
former spouses who are "alternate payees." You are an alternate payee if your
interest in the Plan results from a "qualified domestic relations order," which
is an order issued by a court, usually in connection with a divorce or legal
separation. Some of the rules summarized above also apply to a deceased
employee's beneficiary who is not a spouse. However, there are some exceptions
for payments to surviving spouses, alternate payees, and other beneficiaries
that should be mentioned.
If you are a surviving spouse, you may choose to have an eligible rollover
distribution paid in a direct rollover to an IRA or paid to you. If you have the
payment paid to you, you can keep it or roll it over yourself to an IRA but you
cannot roll it over to an employer plan. If you are an alternate payee, you have
the same choices as the employee. Thus, you can have the payment paid as a
direct rollover or paid to you. If you have it paid to you, you can keep it or
roll it over yourself to an IRA or to another employer plan that accepts
rollovers. If you are a beneficiary other than the surviving spouse, you cannot
choose a direct rollover, and you cannot roll over the payment yourself.
If you are a surviving spouse, an alternate payee, or another beneficiary,
your payment is not subject to the additional 10% tax described in section III
above, even if you are younger than age 59-1/2.
If you are a surviving spouse, an alternate payee or another beneficiary,
you may be able to use the special tax treatment for lump sum distributions, as
described in section III above. If you receive a payment because of the
employee's death, you may be able to treat the payment as a lump sum
distribution if the employee met the appropriate age requirements, whether or
not the employee had 5 years of participation in the Plan.
HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules that
might apply to your payment. The rules described above are complex and contain
many conditions and exceptions that are not included in this notice. Therefore,
you may want to consult with a professional tax advisor before you take a
payment of your benefits from the Plan. Also, you can find more specific
information on the tax treatment of payments from qualified retirement plans in
IRS Publication 575, Pension and Annuity Income, and IRS Publication 590,
Individual Retirement Arrangements. These publications are available from your
local IRS office or by calling 1-800-TAX-FORMS.
6
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
<PAGE>
TABLE OF CONTENTS
Monetta Fund Retirement Plan
403(b)(7).......................................................Section A
Employee Forms..................................................Section B
ii
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
Section A
---------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ELIGIBILITY................................................................. 1
PARTICIPATION............................................................... 2
CONTRIBUTIONS............................................................... 2
INVESTMENT OF CONTRIBUTIONS................................................. 4
DISTRIBUTIONS............................................................... 5
ADMINISTRATION.............................................................. 9
THE INVESTMENT ADVISOR...................................................... 11
AMENDMENT AND TERMINATION................................................... 12
PROHIBITED TRANSACTIONS..................................................... 12
CHANGES IN APPLICABLE LAW................................................... 13
ERISA RIGHTS................................................................ 13
ADMINISTRATIVE INFORMATION.................................................. 15
</TABLE>
iii
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
PLAN DOCUMENT
- -------------
Employees of certain exempt organizations and schools may have a
portion of their compensation set aside for their retirement years in a mutual
fund custodial account plan. The employee is not taxed on the amount set aside
or the earnings thereon until the accumulated funds are withdrawn, normally at
retirement.
Under the Monetta Funds Section 403(b)(7) Retirement Plan,
contributions are held by the authorized custodian (the "Custodian") and are
invested in shares of any of the regulated investment companies designated by
Monetta Financial Services, Inc., the Investment Advisor. The Monetta Funds
403(b)(7) Retirement Plan (the "Plan") is designed to allow eligible employers
described in Article I to make employer contributions to the Plan and to allow
eligible employees to elect to have their employer make contributions to the
Plan on their behalf pursuant to a salary reduction agreement. This Plan is
intended to comply with the provisions of the Employee Retirement Income
Security Act of 1974 (the "Act") and the Internal Revenue Code of 1986, as
amended (the "Code").
ARTICLE I
ELIGIBILITY
-----------
A. Any person who performs services as an employee for an employer
which is an organization described in Section 501(c)(3) of the Code and is
exempt from tax under Section 501(a) of the Code, or who performs services for
an educational institution (as defined in Section 170(b)(1)(A)(ii) of the Code)
or for an employer which is a State or political subdivision of a State or an
agency or instrumentality of either, and who obtains the consent of such
employer to participate herein, is eligible to adopt this Plan.
B. Any employer which is an organization described in Section
501(c)(3) of the Code and is exempt from tax under Section 501(a) of the Code,
or is an educational institution (as defined in Section 170(b)(1)(A)(ii) of the
Code) or a State or a political subdivision of a State or an agency or
instrumentality of either (the "Employer") may, but is not required to, adopt
this Plan for some or all of its eligible employees. It is, however, necessary
for the Employer if it does not adopt this Plan to cooperate to the extent of
executing the proper documents allowing the employee to establish a custodial
account and to reduce the employee's salary and apply the amount of the
reduction to contributions for the employee under this Plan.
C. An eligible individual shall not be entitled to elect to have his
Employer make contributions to the Plan pursuant to a salary reduction agreement
unless the Employer has established a plan or program which allows all employees
of the Employer (except as otherwise permitted by the Code) the opportunity to
have contributions made pursuant to such an agreement. An Employer may exclude
from participation employees who are participants in an eligible deferred
compensation plan under Section 457 of the Code, a qualified cash or deferred
<PAGE>
arrangement under Section 401(k) of the Code or another Section 403(b) annuity
contract, and nonresident aliens and certain students.
D. In lieu of or in addition to a salary reduction arrangement, an
Employer may make contributions on behalf of its employees, but an Employer is
not obligated to do so. If an Employer makes contributions (other than
contributions made pursuant to a salary reduction agreement), this Plan as
adopted by such Employer must satisfy the nondiscrimination and minimum
participation requirements as set forth in Section 403(b)(12) of the Code.
E. An eligible individual is not disqualified from participation by
reason of the fact that his Employer provides any other retirement plan for its
employees. However, the contributions under this Plan or any other Section
403(b) plan will be affected by the Employer's contributions to such other
retirement plan.
ARTICLE II
PARTICIPATION
-------------
An eligible employee who wishes to establish this Plan (the
"Individual") may do so by completing the Section 403(b)(7) Application and
Salary Reduction Agreement or Transfer Form (as applicable), obtaining the
Employer's signature and returning all necessary forms to Monetta Funds. An
eligible Employer may adopt this Plan by either having the Individual follow the
procedure described in the preceding sentence or by obtaining the Individual's
signature on the Application and following the procedure itself thereafter.
The Application and the Salary Reduction Agreement, if applicable, are
incorporated herein by reference as part of the Plan. The Plan will be
effective upon written acceptance by or on behalf of the Custodian of the
Application. If the Employer maintains a written Section 403(b) plan for which
this Plan serves as a funding vehicle, the terms and conditions of such plan
shall take precedence over the provisions of this Plan to the extent such
provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
-------------
A. An Employer may contribute cash to the Plan in any taxable year in
any amount which (a) is not an "excess contribution" as defined in Section
4973(c) of the Code and (b) if such contribution is made pursuant to a Salary
Reduction Agreement between the Employer and the Individual, does not exceed the
limitation on "elective deferrals" contained in Section 402(g) of the Code.
Neither the Investment Advisor nor the Custodian shall be responsible for
determining the amount an Employer may contribute on behalf of the Individual,
nor shall either be responsible to recommend or compel Employer contributions
under the Plan.
If during any taxable year the Employer contributes an amount which is
an "excess contribution", such excess contribution (plus any income attributable
thereto) shall, upon
2
<PAGE>
written request, be paid to the Individual by the Custodian or applied towards a
contribution for the next subsequent year. In the event that an amount
contributed during a calendar year exceeds the limitation on "elective
deferrals" contained in Section 402(g) of the Code and the Individual notifies
the Custodian, in writing, of such excess amount no later than March 1 of the
following calendar year, the Custodian will distribute such excess amount (plus
any income attributable thereto) to the Individual not later than the following
April 15. Neither the Investment Advisor nor the Custodian shall have any
responsibility for determining that an excess contribution or excess elective
deferral has been made or for distributing such excess amount except in
accordance with the specific written instructions of the Individual.
B. In addition, the Individual or the Employer may (a) transfer or
cause to be transferred to the Plan the cash surrender or redemption value of a
Section 403(b) annuity or variable annuity or the assets of another Section
403(b)(7) custodial account for which contributions were previously made on the
Individual's behalf or (b) contribute to the Plan any amount distributed from a
Section 403(b) annuity or custodial account which qualifies as a "rollover
contribution" within the meaning of Section 403(b)(8) of the Code. Neither the
Investment Advisor nor the Custodian shall be responsible for the tax treatment
to the Individual of any transfer or rollover contribution or for losses
resulting from any acts, omissions or delays of any party transferring or
rolling over assets to the Individual's account.
C. Employer contributions to the Plan (including permissible salary
reduction contributions) are not taxable income in the taxable year contributed.
The maximum amount which may be contributed to the Plan on an Individual's
behalf may not exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the Code) or
$30,000 whichever is less. For this purpose, "compensation" generally
means amounts included in your taxable income, but does not include Section
403(b) contributions.
(2) The Individual's "exclusion allowance" under Section 403(b)(2) of
the Code, which is calculated as 20% of Includible Compensation times the
number of years of service minus the aggregate amount previously
contributed by the Employer (including salary reduction contributions),
under a Section 403(b) plan and excluded from the Individual's gross income
for prior tax years. "Includible Compensation" (as defined in Section
403(b)(3) of the Code) is current taxable compensation from a school or
other eligible employer, but does not include amounts contributed by an
eligible employer to a qualified retirement plan which were not currently
taxed to the employee or Section 403(b) contributions. (A special minimum
exclusion allowance applies to certain church employees whose adjusted
gross income is $17,000 or less under Section 403(b)(2)(D) of the Code.)
(3) For amounts contributed pursuant to a Salary Reduction Agreement,
$9,500 less any salary reduction contributions made during the year under a
qualified cash or deferred arrangement under Section 401(k) of the Code, a
simplified employee pension under Section 408(k) of the Code or any other
Section 403(b) annuity or custodial account.
If employed by an educational institution, hospital, home health
service agency, health and welfare service agency or a church or convention or
association of churches, the
3
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Individual may elect to be governed by one of three alternate limitations: (a)
in lieu of the limitation described in (1) above, an amount equal to the lesser
of 25% of Includible Compensation plus $4,000, or $15,000; (b) that the
limitation described in (2) above not apply; or (c) for the year in which the
Individual's employment terminates, replace the 25% of compensation (but not the
$30,000) limitation described in (1) above with an amount which is equal to the
contributions which could have been made, but were not, under Code Section
403(b), during a ten-year period ending on the date of termination. The final
"catch-up" contribution in (c) cannot exceed $30,000 and may only be used once.
The alternate limitations available to employees of educational institutions,
hospitals, home health service agencies, health and welfare service agencies or
churches or conventions or associations of churches are mutually exclusive and
an election of one of the alternatives is irrevocable.
In addition, any employee of such an employer who has completed at
least 15 years of service, may increase the amount described in (3) above by the
lesser of:
(a) $3,000;
(b) $15,000, less amounts excluded in prior years under this special
catch up election; or
(c) the excess of $5,000 multiplied by the number of years of service
minus any salary reduction contributions under a Section 403(b)
annuity, a Section 401(k) plan or a simplified employee pension
made by the employer on behalf of the employee for prior taxable
years.
D. The interest of the Individual in the Plan and the assets in his
custodial account shall be nonforfeitable at all times, may not be assigned, and
shall not be subject to alienation, assignment, trustee process, garnishment,
attachment, execution or levy of any kind, except with regard to payment of the
expenses of the Custodian as authorized by the provisions of this Plan.
Notwithstanding the foregoing or any other provision herein to the contrary, the
Custodian may recognize a qualified domestic relations order with respect to
child support, alimony payments or marital property rights if such order
contains sufficient information for the Employer to determine that it meets the
applicable requirements of Section 414(p) of the Code. If any such order so
directs, distribution of benefits to the alternate payee may be made at any time
even if the Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
---------------------------
All contributions made to the Plan shall be used by the Custodian to
purchase shares of any of the regulated investment companies designated by the
Investment Advisor. Such regulated investment companies will be referred to as
the "Investment Companies," and the shares of the Investment Companies will be
referred to as "Investment Company Shares". Unless otherwise directed by the
Employer, contributions shall be allocated to a separate custodial account
("Custodial Account") established for the Individual. The Individual (or the
4
<PAGE>
Individual's beneficiary) may direct the Custodian to invest his Custodial
Account. The Individual (or the Individual's beneficiary) may direct the
Custodian to transfer all or any part of his Custodial Account assets from one
Investment Company to another at any time. In directing the Custodian to invest
contributions and/or Custodial Account assets, the Individual (or the
Individual's beneficiary) shall designate a percentage allocation to any or all
of the then available Investment Companies. Any changes in the allocation of
future contributions or current Custodial Account assets will be effective only
when the Custodian receives written authorization from the Individual (or the
Individual's beneficiary). All dividends and capital gains shall be reinvested
in additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
-------------
A. The Individual, or his beneficiary or estate in the event of his
death, shall be entitled to distribution of the assets in his Custodial Account
upon the occurrence of one of the following events:
(a) The Individual's attainment of age 59 1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59 1/2 may be subject to a 10% additional
tax under the Code.
For purposes of the Plan, the Individual shall be considered disabled
if he is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long continued and indefinite duration.
B. In addition, an Individual may request distribution of the assets
in his Custodial Account (to the extent attributable to contributions made
pursuant to a Salary Reduction Agreement, not including any earnings thereon)
upon incurring a substantial financial hardship. A substantial financial
hardship shall exist if the Individual incurs immediate and heavy financial need
and that need cannot be met by other resources reasonably available to the
Individual.
The Individual shall be eligible to receive a hardship distribution
from his Custodial Account after the Custodian's receipt of written notification
from the Employer indicating: (a) that the Individual has incurred a substantial
financial hardship and (b) the specific amount needed to meet the substantial
financial hardship. The amount distributed from the Custodial Account shall not
exceed the amount specified in the notification.
5
<PAGE>
For purposes of this Plan, a substantial financial hardship shall mean
medical expenses incurred by the Individual, his spouse or a dependent, purchase
(excluding mortgage payments) of a principal residence for the Individual,
payment of tuition for the next semester or quarter of post-secondary education
for the Individual, his spouse or a dependent, the need to prevent the eviction
of the Individual from his principal residence or foreclosure on the mortgage of
the Individual's principal residence, or such other events as may be approved by
the Commissioner of Internal Revenue in rulings, notices or other published
documents.
In determining whether the need cannot be met by other resources
reasonably available to the Individual, the Employer may rely on the
Individual's certification, executed in a form and manner specified by the
Employer, that the need cannot be relieved:
(a) through reimbursement or compensation by insurance or otherwise;
(b) by reasonable liquidation of the Individual's assets, to the
extent such liquidation would not itself cause an immediate and
heavy financial need;
(c) by cessation of elective deferrals under the Plan; and
(d) by other distributions or nontaxable [at the time of the loan]
loans from plans maintained by the Employer or by any other
employer, or by borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide the
certification described above, or in the event the Employer determines that it
cannot reasonably rely on the certification provided by an Individual, then the
requirements of this Paragraph B shall be deemed satisfied only if all of the
following conditions are satisfied:
(a) the distribution is not in excess of the amount of the immediate
and heavy financial need of the Individual;
(b) the Individual has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans from plans maintained by the Employer;
(c) the Individual's elective deferrals under this Plan and all other
plans maintained by the Employer shall be suspended for at least
12 months after receipt of the hardship distribution; and
(d) under this Plan and all other plans maintained by the Employer,
the Individual may not make elective deferrals for the
Individual's taxable year immediately following the taxable year
of the hardship distribution in excess of the limitation on
elective deferrals in effect for such next taxable year under
Section 402(g) of the Code less the amount of such Individual's
elective deferrals for the taxable year of the hardship
distribution.
The Employer shall be responsible for:
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<PAGE>
(a) determining that a substantial financial hardship exists;
(b) designating the amount necessary to meet such a substantial
financial hardship; and
(c) notifying the Custodian in writing of its decisions.
If the Employer does not process hardship distributions in accordance
with the standards set forth under this Plan and applicable law, the hardship
distribution provisions under this Paragraph B shall be ineffective. Neither
the Custodian nor the Investment Advisor shall be responsible for determining
that a substantial financial hardship exists or the amount necessary to satisfy
such hardship and may rely on any written notification from the Employer
certifying the existence and the amount of a substantial financial hardship.
Any determination under this Paragraph B is to be made in accordance
with uniform and nondiscriminatory standards established by the Employer. The
Individual has the responsibility of providing the Employer with any and all
documents, financial data or other information which the Employer deems
necessary in order to make the determination.
C. The Individual may elect a form of distribution from among the
following alternatives:
(a) A single sum payment in cash;
(b) Equal or substantially equal monthly, quarterly, or annual
payments over a period not extending beyond the life expectancy
of the Individual; or
(c) Equal or substantially equal monthly, quarterly, or annual
payments over a period not extending beyond the joint and last
survivor life expectancy of the Individual and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After attaining age 70 1/2, certain restrictions
may apply to Individual's ability to change the period over which payments are
made. In no event shall the Custodian or the Investment Advisor have any
responsibility for determining, or giving advice with respect to, life
expectancies or minimum distribution requirements.
If the Individual fails to elect any of the methods of distribution
described above within the time specified for such election, the Custodian may
distribute the Individual's Custodial Account in the form of a single sum cash
payment by the April 1 following the calendar year in which the Individual
attains age 70 1/2. If the Individual elects a mode of distribution under
subparagraphs (b) or (c) of this Paragraph C, except as otherwise required by
Section 403(b)(10) of the Code, the amount of the monthly, quarterly or annual
payments shall be determined by dividing the entire interest of the Individual
in the Custodial Account at the close of the prior year by the number of years
remaining in the period specified by the Individual's election.
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<PAGE>
D. Unless the Individual (or his spouse) elects not to have life
expectancy recalculated, the Individual's life expectancy (and the life
expectancy of the Individual's spouse, if applicable) will be recalculated
annually using their attained ages as of their birthdays in the year for which
the minimum 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.
E. The Individual must receive distributions from the Plan in
accordance with Regulations prescribed by the Secretary of the Treasury pursuant
to Section 403(b)(10) of the Code which are hereby incorporated by reference, or
in the absence of such regulations, in accordance with Section 401(a)(9) of the
Code. In general, these provisions require that certain minimum distributions
must commence not later than the April 1 following the calendar year in which
the Individual attains age 70 1/2.
F. If the Individual dies before his entire interest in the Custodial
Account is distributed to him, the remaining undistributed balance of such
interest shall be distributed to the beneficiary or beneficiaries, if any,
designated by the Individual. If no designation of a beneficiary shall have
been made, distribution shall be made to the Individual's surviving spouse, or
the Individual's estate, in that order.
If the Individual dies after installment payments have commenced, the
beneficiary shall continue to receive distributions in accordance with the
payment method specified by the Individual or may elect, in writing, to receive
a lump sum distribution.
If the Individual dies prior to the commencement of benefits, the
beneficiary may elect, in writing, to receive the distribution in one of the
following forms:
(a) A single sum payment in cash made by the December 31 of the year
containing the fifth anniversary of the Individual's death; or
(b) Equal or substantially equal monthly, quarterly, or annual
payments commencing not later than the December 31 following the
year of the Individual's death over a period not to exceed the
life expectancy of the beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's spouse,
distributions may be delayed until the December 31 of the year in which the
Individual would have attained age 70 1/2. A beneficiary must receive
distributions from the Plan in accordance with the regulations prescribed by the
Secretary of the Treasury pursuant to Section 403(b)(10) of the Code, including
the incidental death benefit requirements, which are hereby incorporated by
reference, or in the absence of such Regulations, in accordance with Section
401(a)(9) of the Code.
G. The Individual may designate a beneficiary or beneficiaries, and
may, in addition, name a contingent beneficiary. Such designation shall be made
in writing in a form
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<PAGE>
acceptable to the Custodian. The Individual may, at any time, revoke his or her
designation of a beneficiary or change the beneficiary by filing notice of such
revocation or change with the Custodian. Notwithstanding the foregoing, in the
event the Individual is married at the time of his death, the beneficiary shall
be the Individual's surviving spouse unless such spouse consented in writing to
the designation of an alternative beneficiary after notice of the spouse's
rights and such consent was witnessed by a notary public or representative of
the Employer. In the event no valid designation of beneficiary is on file with
the Employer or the Custodian at the date of death or no designated beneficiary
survives him, the Individual's spouse shall be deemed the beneficiary; in the
further event the Individual is unmarried or his spouse does not survive him,
the Individual's estate shall be deemed to be his beneficiary.
ARTICLE VI
ADMINISTRATION
--------------
Except as otherwise provided in this Plan, the Custodian shall perform
solely the duties assigned to the Custodian hereunder as agent on behalf of the
Individual and any beneficiary. The Custodian shall not be deemed to be a
fiduciary in carrying out the following duties:
(a) Receiving contributions pursuant to the provisions of this Plan.
(b) Holding, investing and reinvesting the contributions in
Investment Company Shares.
(c) Registering any property held by the Custodian in its own name,
or in nominee or bearer form that will pass delivery.
(d) Making distributions from the Custodial Account in cash.
The Custodian shall mail to the Individual all proxies, proxy
soliciting materials, and periodic reports or other communications that may come
into the Custodian's possession by reason of its custody of Investment Company
Shares. The Individual shall vote the proxy, notwithstanding the fact that the
Custodian may be the registered owner of the Investment Company Shares, and the
Custodian shall have no further liability or responsibility with respect to the
voting of such shares.
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after December
31st each year, and whenever required by Regulations adopted by the Internal
Revenue Service under the Code, the Custodian shall file with the Individual a
written report of the Custodian's transactions relating to the Custodial Account
during the period from the last previous accounting, and shall file such other
reports with the Internal Revenue Service as may be required by its Regulations.
Unless the Individual sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Individual shall be deemed
to have approved such report, and,
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<PAGE>
in such case the Custodian shall be forever released and discharged with respect
to all matters and things included therein. The Custodian may seek a judicial
settlement of its accounts. In any such proceeding the only necessary party
thereto in addition to the Custodian shall be the Individual.
All written notices or communications to the Individual or the
Employer shall be effective when sent by first class mail to the last known
address of the Individual or the Employer on the Custodian's records. All
written notices or communications to the Custodian shall be mailed or delivered
to the Custodian at its designated mailing address, and no such written notice
of communications shall be effective until the Custodian's actual receipt
thereof. The Custodian shall be entitled to rely conclusively upon, and shall be
fully protected in any action taken by it in good faith in reliance upon the
authenticity of signatures contained in all written notices or other
communications which it receives and which appear to have been sent by the
Individual, the Employer, or any other person.
The Custodian shall make payments from the Custodial Account in
accordance with written directions received from the Individual, and it need not
make inquiry as to the rightfulness of such distribution. If the Custodian has
reason to believe that a distribution may be due, it may, but shall not be
required to make the distribution at the request of any beneficiary who appears
to be entitled thereto. The Custodian shall properly withhold from any payment
to the Individual or beneficiary such amounts as may be required to satisfy any
income or other tax withholding requirements.
The Custodian shall use ordinary care and reasonable diligence in the
performance of its duties as Custodian. The Custodian shall have no
responsibilities other than those provided for herein or in the Act or Code and
shall not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence, except as
provided for herein or in the Act or Code and shall not be liable for a mistake
in judgment, for any action taken in good faith, or for any loss that is not a
result of its gross negligence, except as provided by the Act or regulations
promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the
Custodian harmless from and against any liability that the Custodian may incur
in the administration of the Custodial Account, unless arising from the
Custodian's own negligence or willful misconduct or from a violation of the
provisions of the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction of the
Individual with respect to the investment of contributions, or to make
suggestions to the Individual with respect to the investment, retention or
disposition of any contributions or assets held in the Custodial Account.
The Custodian shall be paid out of the Custodial Account for expenses
of administration, including the fees of counsel employed by the Custodian,
taxes, and its fees for maintaining the Custodial Account which are set forth in
the Application or in accordance with any schedule of fees subsequently adopted
by the Custodian. The Custodian may make changes
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<PAGE>
in the fee schedule at any time. The Custodian may sell Investment Company
Shares and use the proceeds of sale to pay the foregoing expenses.
The Custodian will send account statements periodically, and after all
transactions. Statements will include any information as the law may require,
and in particular the amount of contributions, earnings, distributions, and
total account valuation at the end of the year. The Custodian will also send a
statement to the Internal Revenue Service as required by law.
The Custodian may resign as Custodian of any Individual's Custodial
Account upon sixty (60) days' prior notice to the Investment Advisor and thirty
(30) days' prior notice to each Individual who will be affected by such
resignation.
ARTICLE VII
THE INVESTMENT ADVISOR
----------------------
The Individual and the Employer delegate to the Investment Advisor the
following powers with respect to the Plan: to remove the Custodian and select a
successor Custodian; and to amend this Plan as provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate from
time to time, and shall be exercised only when similarly exercised with respect
to all other Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with regard
to the administration of the Plan except as provided in this Article VII of the
Plan, and none of them shall incur any liability of any nature to the Individual
or beneficiary or other person in connection with any act done or omitted to be
done in good faith in the exercise of any power or authority herein delegated to
the Investment Advisor.
The Individual and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against any
and all liabilities and expenses, including attorneys' and accountants' fees,
incurred in connection with the exercise of, or omission to exercise, any of the
powers delegated to it under this Article, except such liabilities and expense
as may arise from the Investment Advisor's and/or Investment Company's willful
misconduct.
If the Investment Advisor shall hereafter determine that it is no
longer desirable for it to continue to exercise any of the powers hereby
delegated to it, it may relieve itself of any further responsibilities hereunder
by notice in writing to the Individual at least sixty (60) days prior to the
date on which it proposes to discontinue the exercise of the powers delegated to
it.
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<PAGE>
ARTICLE VIII
AMENDMENT AND TERMINATION
-------------------------
The Individual and the Employer delegate to the Investment Advisor the
power to amend this Plan (including retroactive amendments).
The Individual or the Employer may amend the Application (including
retroactive amendment) by submitting to the Custodian a copy of such amended
Application, and evidence satisfactory to the Custodian that the Plan, as
amended by such amended Application, will continue to qualify under the
provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit: (a) any part
of the Custodial Account to be diverted to any purpose that is not for the
exclusive benefit of the Individual and his beneficiaries; (b) the Individual to
be deprived of any portion of his interest in the Custodial Account; or (c) the
imposition of an additional duty on the Custodian without its consent.
The Employer reserves the right to terminate further contributions to this
Plan. The Individual also reserve the right to terminate his adoption of the
Plan in the event that he shall be unable to secure a favorable ruling from the
Internal Revenue Service with respect to this Plan. In the event of such
termination, the Custodian shall distribute the Custodial Account to the
Individual. The Individual also reserves the right to transfer the assets of his
Custodial Account to such other form of Section 403(b)(7) retirement plan as he
may determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require.
ARTICLE IX
PROHIBITED TRANSACTIONS
-----------------------
Except as provided in Section 408 of the Act or Section 4975 of the Code,
the Custodian:
A. Shall not cause the Plan to engage in a transaction if it knows or
should know that such transaction constitutes a direct or indirect:
(a) Sale or exchange or leasing of any property between the Plan and a
party in interest;
(b) lending of money or other extension of credit between the Plan and a
party in interest;
(c) furnishing of goods, services, or facilities between the Plan and
a party in interest;
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<PAGE>
(d) transfer to, or use by or for the benefit of, a party in interest, of
any assets of the Plan;
(e) acquisition, on behalf of the Plan, of any employer security or
employer real property in violation of Section 407(a) of the Act.
B. Shall not permit the Plan to hold any employer security or
employer real property if it knows or should know that holding such security or
real property violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Plan in its own interest or
for its own account.
D. Shall not in any capacity act in any transaction involving the
Plan on behalf of a party (or represent a party) whose interests are adverse to
the interests of the Plan or the interests of its participants or beneficiaries.
E. Shall not receive any consideration for its own account from any
party dealing with the Plan in connection with a transaction involving the
assets of the Plan; provided that nothing in this Article IX shall be construed
to prohibit the payment to the Custodian of any fees otherwise authorized under
the terms of this Plan.
ARTICLE X
CHANGES IN APPLICABLE LAW
-------------------------
The foregoing Plan provisions are intended to comply with applicable
Code requirements as currently in effect. Certain provisions of the Tax Reform
Act of 1986, effective in 1989, affect the operation and administration of the
Plan. The changes impose additional nondiscrimination, distribution and
withdrawal requirements. An individual should consult his attorney or tax
advisor as to the effect these changes have on his Section 403(b)(7)
contributions.
It should be understood that neither the Investment Advisor nor the
Custodian is in a position to render legal or tax advice and that the
information contained in and the documents furnished with this description
merely represent the Investment Advisor's understanding of the statutes and
regulations affecting the establishment and qualification of a Section 403(b)(7)
plan. Accordingly, an Individual is urged to consult his attorney or tax
advisor in connection with the adoption of the Plan and the submission of a
ruling request on his behalf.
ARTICLE XI
ERISA RIGHTS
------------
As a participant in the Plan, you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 ("ERISA").
This law provides that all Plan participants shall be entitled to:
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<PAGE>
Examine, without charge, at the office of the plan administrator (and
at other specified locations, if appropriate), all Plan documents,
including copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports.
Obtain copies of all Plan documents and other Plan information upon
written request to the plan administrator. The plan administrator may make
a reasonable charge for the copies. Receive a summary of the Plan's annual
financial report. The plan administrator is required by law to furnish
each Participant with a copy of this summary annual report.
Obtain a statement telling you whether you have a current vested
interest in your account and whether, under the terms of the Plan, you will
be entitled to receive a retirement benefit if you stop working under the
Plan now. If you do not have a current vested interest or right to a
benefit at normal retirement age, the statement will tell you how many more
years you have to work to obtain these rights. This statement must be
requested in writing and is not required to be given more than once a year.
The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people who are responsible for the operation of the Plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining your
benefits or exercising your rights under ERISA. If your claim for your benefit
is denied in whole or in part you must receive a written explanation of the
reason for the denial. You have the right to have the plan administrator review
and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the plan administrator and do not
receive them within 30 days, you may file suit in a federal court. In such a
case, the court may require the plan administrator to provide the materials and
pay you up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the plan administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. The court will decide who
should pay court costs and legal fees. If you are successful, the court may
order the person you have sued to pay these costs and fees. If you lose, the
court may order you to pay these costs and fees, for example, if it finds your
claim is frivolous.
If you have any questions about your Plan, you should contact the plan
administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S Labor-
Management Services Administration, Department of Labor.
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<PAGE>
ADMINISTRATIVE INFORMATION
--------------------------
Plan Name: ________________________________________________
Employer: ________________________________________________
________________________________________________
________________________________________________
(___) __________________________________________
EIN: __________________________________________
Administrator: ________________________________________________
________________________________________________
________________________________________________
________________________________________________
(___) __________________________________________
EIN: __________________________________________
The Administrator shall be the agent for service
of legal process.
Plan Number: _____
Type of Plan: Defined Contribution, Section 403(b)(7) Plan
Funding Medium: Custodial Accounts
Custodian: ________________________________________________
Plan Year: ________________________________________________
Section B
Employee Forms
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
ACCOUNT APPLICATION
1. EMPLOYEE INFORMATION
Name ________________________________ Telephone Number (__) __________________
Address ______________________________________________________________________
City ____________________________________ State _______________Zip____________
Birth Date ______________________________ Social Security Number______________
2. EMPLOYER INFORMATION
Employer Name ________________________________________________________________
Address ______________________________________________________________________
City ____________________________________ State _______________Zip____________
Employer Tax ID ________________________ Telephone Number (__)________________
3. INVESTMENTS
Contributions will be invested in the following Monetta Funds:
<TABLE>
<CAPTION>
<S> <C> <C>
[ ] Monetta Mid-Cap Equity Fund (_____%)
[ ] Monetta Intermediate Bond Fund (_____%)
[ ] Monetta Government Money Market Fund (_____%)
</TABLE>
If a specific fund is not selected, contributions will be invested in the
Monetta Government Money Market Fund. You may change your fund investments by
filing a Change of Investments form with the Monetta funds.
4. EMPLOYEE SIGNATURE
I adopt the Monetta Funds Section 403(b)(7) Retirement Plan and appoint Firstar
Trust Company as Custodian. I acknowledge that I have received and read the
Prospectus for the Monetta fund(s) in which I am invested. If I am contributing
a distribution from another employer-sponsored retirement plan, I certify that
such distribution is a qualifying transfer or rollover. I certify under
penalties of perjury that my Social Security Number (above) is correct. I
understand
<PAGE>
that the Custodian will charge fees that are shown in the plan materials and
they may be separately billed or collected by redeeming sufficient shares from
my fund account balance(s).
____________________________________ _______________________________
Employee Signature Date
5. EMPLOYER ADOPTION
The Employer adopts the Monetta Funds Section 403(b)(7) Retirement Plan and
agrees to the terms and conditions of such plan. The Employer certifies that it
is a qualifying organization described in Code Section 403(b)(1)(A) and further
agrees that it shall be responsible for any ancillary Section 403(b) plan it
maintains.
____________________________________ ________________________________
Employer Authorized Signature Title Date
6. CUSTODIAN ACCEPTANCE
FIRSTAR TRUST COMPANY
___________________________________ ________________________________
Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
CHANGE OF INVESTMENTS
1. EMPLOYEE INFORMATION
Name ________________________________ Telephone Number (__) ___________________
Address ______________________________________________________________________
City ______________________________________ State _______________ Zip_________
Social Security Number ________________________________________________________
2. ALLOCATIONS OF CONTRIBUTIONS AND ACCOUNTS
Please allocate my future contributions and my existing account balances
among the following Monetta Funds as designated below.
Contributions will be invested in the following Monetta Funds:
Future Existing
Contributions Account Balances
[_] Monetta Mid-Cap Equity Fund ______% ______%
[_] Monetta Intermediate Bond Fund ______% ______%
[_] Monetta Government Money Market Fund ______% ______%
If a specific fund is not selected, all contributions will be invested in the
Government Money Market Fund. You may Change your fund in investments at a
later date by filing a new Change of Investments form with the Monetta Funds.
3. EMPLOYEE SIGNATURE
I understand that the allocations I have elected above will continue to be
effective until I file a new Change of Investments form. I acknowledge that I
have received and read the Prospectus for the Monetta Fund(s) in which I am
invested.
- ------------------------------- -------------------------------
Employee Signature Date
4. CUSTODIAN ACCEPTANCE
FIRSTAR TRUST COMPANY
- -----------------------------------------------------------------------
Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
BENEFICIARY DESIGNATION AND SPOUSAL CONSENT
Employee:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
Social Security No.: Date of Birth:
------------------------------ ---------
1. PRIMARY BENEFICIARY* (If you are married and if someone other than or in
addition to your spouse is designated, the Spousal Consent below must be
completed).
Name:
-----------------------------------------------------------------
Address:
--------------------------------------------------------------
Social Security No.: Relationship:
-------------------------- --------
2. SECONDARY BENEFICIARY*
Name:
-----------------------------------------------------------------
Address:
--------------------------------------------------------------
Social Security No.: Relationship:
-------------------------- --------
*Multiple Primary and/or Secondary Beneficiaries can be designated by
inserting "See Attached Sheet" in the appropriate beneficiary category and
by providing the information required above, as well as the percentage of
the death benefit that each beneficiary is to receive, on a separate sheet
and attaching it to this designation. If you have not provided otherwise in
completing this designation, all sums payable to more than one beneficiary
in the applicable category shall be paid equally to those beneficiaries
living at the time of your death.
----------------------------------- ---------------------------
Employee Signature Date
<PAGE>
SPOUSAL CONSENT
---------------
As the spouse of the Employee, I consent to the Beneficiary Designation made
above (or on the attached sheet, if any) and acknowledge that by doing so I am
waiving my right to be the sole Primary Beneficiary of any death benefits due
under the Plan.
--------------------------------
Name of Spouse (Print)
-------------------------------- ------------------------
Signature of Spouse Date
Subscribed before me this day of , 19 .
------ ------------------ -------
-------------------------------------------------------------------
Notary Public, County,
----------------------------- --------------------
My Commission (expires):
--------------------------------------
<PAGE>
MONETTA FUNDS 403(b) RETIREMENT PLAN
------------------------------------
[Name of Adopting Employer]
403(b)(7) RETIREMENT PLAN
1. PARTICIPANT ELECTIVE DEFERRAL CONTRIBUTION AUTHORIZATION
I hereby elect to have the Company reduce my salary by ______ for each
pay period and to have such amount paid to the Custodian of the Plan as an
Elective Deferral Contribution (insert a whole percentage/dollar amount not less
than _____ or more than _____). I understand that the rate of my Elective
Deferral Contribution can be changed only as of each __________________________
but that I can discontinue such contributions at any time. I also understand
that the amount of my Elective Deferral cannot exceed $7,000 for any year (as
adjusted for cost of living changes after 1987), and that if I am a "highly
compensated employee" my contributions may have to be adjusted to satisfy
certain requirements of the Internal Revenue Code.
Dated:_______________________________
_____________________________________
Signature of Participant
A direction to reduce salary can be modified only as of _______________
corresponds to the Adoption Agreement under section 12.2.1(b), but can be
discontinued at any time. To discontinue the Elective Deferral Authorization,
complete a new form and enter 0%.
**********
----------
2. PARTICIPANT ELECTIVE DEFERRAL ON CASH BONUS AUTHORIZATION
(Use only if elected in section 12.2.2 in the Adoption Agreement.)
I hereby elect to have the Company reduce my bonus for the period
ending __________ by _____% and to have such amount paid to the Custodian of the
Plan as an Elective Deferral Contribution.
Dated:_______________________________
_____________________________________
Signature of Participant
Received by Company on _______________________________________
By ____________________
This form must be completed and signed by the Participant and both copies should
be filed with the Company. One copy will be marked to show receipt by the
Company and returned to the Participant.
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
SALARY REDUCTION AGREEMENT
I hereby elect to have my Employer reduce my salary by _______(insert
a whole percentage/dollar amount not less than _____or more than _____________)
for each pay period and to have such amount paid to the Custodian of the Plan as
a Salary Reduction contribution. I understand that the rate of my Salary
Reduction Contributions can be changed only as of each _______________________,
but that I can discontinue such contributions at any time. I also understand
that the amount of my Salary Reduction contributions cannot exceed $9,500 for
any year.
- ----------------------------- -------------------------------
Employee Signature Date
A direction to reduce salary can be modified only as of ____________,
but can be discontinued at any time. To discontinue your Salary Reduction
Contributions, complete a new form and enter 0%.
* * * * * * * *
Received by Employer
- ----------------------------- -------------------------------
Employee Signature Title Date
Two copies of this form must be completed and signed by the Employee, and
both copies should be filed with the Employer. One copy will be marked to show
receipt by the Employer and returned to the Employee.
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
Distribution Request Form
1. Name:____________________________________________________________________
2. Current Mailing Address:
Street___________________________________________________________________
City________________________________State________________Zip_____________
3. Social Security Number:_______________________________
4. Birth Date:___________________________________________
5. Date of Employment:___________________________________
6. Date of Termination:__________________________________
7. Date of Initial Participation in Plan:________________
8. Reason for Termination (check appropriate line)
_______Employment Termination _________ Death
_______Retirement _________ Certified Disability
_______Other (explain)__________________________________________________
If participant is deceased, please include beneficiary's full name,
address, and social security number, and a copy of the beneficiary
designation.
9. Participation is entitled to 100% of his contributions (including
rollovers) and ____% of his employer contribution account, such account
balance is to be valued as of _____________.
10. Method of distribution of benefits (check appropriate line)
_________Single lump-sum payment
_________Other (explain)_________________________________________________
Note: Distribution in excess of $3,500 requires the written consent of the
participant or his beneficiary.
11. Does the terminated participant participate in another profit-sharing plan
maintained by the employer: ______Yes _______No
12. This is to certify that the benefits to be paid are in accordance with the
Retirement Equity Act of 1984 and, if the distributee's signature is
required but does not appear below, such authorization has been obtained in
a form acceptable to the plan administrator.
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
DISTRIBUTION/TRANSFER REQUEST
1. EMPLOYEE INFORMATION
Employee: _____________________________________________________________________
Address: ______________________________________________________________________
City ____________________________________ State _______________ Zip_____________
Date of Birth: _____________________________ Social Security No.: _____________
2. EMPLOYER INFORMATION
Employer Name __________________________________________________________________
Address ________________________________________________________________________
City ____________________________________ State _______________ Zip_____________
Employer Tax ID ______________________ Telephone Number (__) ___________________
3. DISTRIBUTION/TRANSFER REQUEST
The distribution or transfer of my account shall be made as follows:
[_] Single lump-sum payment.
[_] Other (please describe - monthly, quarterly or annual payments over a
period not longer than your life expectancy or the joint life
expectancy of you and your beneficiary)_____________________________.
[_] Transfer to (indicate successor trustee/custodian)__________________.
If the direct transfer option is not selected, 20% of your distribution may
be required to be withheld. See the Federal Withholding/Distribution
Information Form for more details. That Form also describes the federal
income tax treatment of your distribution, including averaging and roll-
overs.
Note: If your account balance exceeds $3,500, you may need the consent of
your spouse before any distribution is made.
4. REQUIREMENTS FOR DISTRIBUTIONS
The distribution or transfer is made on account of:
[_] Termination of Employment.
[_] Retirement.
<PAGE>
[_] Death (name of beneficiary _______________________________________).
[_] Disability.
[_] Attainment of age 59-1/2
[_] Termination of Plan.
5. EMPLOYEE OR BENEFICIARY SIGNATURE
I consent to the distribution or transfer of my Monetta Funds Section
403(b)(7) Retirement Plan account balance as elected above.
_________________________________________________ ___________________________
Employee or Beneficiary Signature Date
_________________________________________________ ___________________________
Spouse's Signature (if required) Date
6. PLAN ADMINISTRATOR SIGNATURE
The Plan Administrator certifies that the distribution or transfer elected
above is permitted under the terms of the Plan and that, if required, the proper
spousal consent has been obtained.
_________________________________________________ ___________________________
Plan Administrator Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
SECTION 403 (b)(7) RETIREMENT PLAN
FINANCIAL HARDSHIP DISTRIBUTION REQUEST
1. EMPLOYEE INFORMATION
Name ________________________________ Telephone Number (__) ____________________
Address ________________________________________________________________________
City _____________________________________ State _______________ Zip____________
Birth Date ______________________________ Social Security Number _______________
2. HARDSHIP DISTRIBUTION REQUEST
I request a hardship distribution from my account in the amount of
$______________. (Distributions shall be made pro rata from each of your
investment funds.)
I intend to use the funds requested for the following purpose:
[_] To purchase my primary place of residence.
[_] To pay the upcoming post-secondary educational expenses for me or my
dependents.
[_] To pay medical and/or hospital expenses for myself or my dependents.
(NOTE: The 10% additional tax penalty will not apply when the
withdrawal is used to pay medical expenses that exceed 7 1/2% of my
adjusted gross income.)
[_] To prevent the eviction from, or foreclosure on the mortgage of, my
principal residence.
3. CERTIFICATION
As a participant under the Plan, I certify that:
i. I have no other reasonably available resources from which these funds
may be obtained;
ii. The withdrawal is not in excess of the amount needed to satisfy the
need;
iii. I have taken all possible distributions from all of my employer's
plans, excluding hardship distributions, but including nontaxable
loans;
<PAGE>
iv. I will not be allowed to make any contributions or salary deferrals
(if applicable) to any employer plan for at least 12 months after
receiving the hardship distribution;
v. My elective deferrals to all of the employer's plans in the calendar
year immediately following receipt of the hardship withdrawal will be
restricted to the maximum amount ($9,500 as indexed) less my elective
contributions in the year of the hardship distribution; and
vi. The amount I have requested to withdraw is not subject to a qualified
domestic relations order.
4. EMPLOYEE SIGNATURE
I request the distribution from my Monetta Fund Section 403(b)(7) Retirement
Plan account on account of financial hardship. I certify that the information
indicated above is true and correct. I understand that this distribution is
subject to normal income tax, and may also be subject to an additional 10% early
distribution penalty if I have not attained age 59-1/2.
_______________________________________ ________________________________
Employee Signature Date
_______________________________________ ________________________________
Spouse's Signature (if required) Date
5. PLAN ADMINISTRATOR SIGNATURE
The Plan Administrator approves the hardship distribution request by the
Employee as described above, and certifies that the distribution is permitted
under the terms of the Plan and that, if required, the proper spousal consent
has been obtained.
_______________________________________ ________________________________
Plan Administrator Authorized Signature Date
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
TRANSFER AUTHORIZATION
Use this form to transfer an existing tax-sheltered annuity or Section 403(b)(7)
custodial account to the Monetta Funds Section 403(b)(7) Retirement Plan.
Provide Monetta Funds with the completed form, along with your application form
and salary reduction agreement (if applicable).
1. EMPLOYEE INFORMATION
Name_______________________________Telephone Number(___) ______________________
Address________________________________________________________________________
City______________________________State_____________________Zip________________
Social Security Number_________________________________________________________
2. EMPLOYER INFORMATION
Employer Name__________________________________________________________________
Address________________________________________________________________________
City______________________________State_____________________Zip________________
Employer Tax ID_________________Telephone Number (___)_________________________
3. CURRENT SECTION 403(b) CUSTODIAN/TRUSTEE INFORMATION
_______________________________________________________________________________
Name of Current Custodian/Trustee
_______________________________________________________________________________
Address
_____________________________________ __________________________________
City State Zip Account Number
4. INVESTMENT INSTRUCTIONS
[_] Transfer into my existing Monetta Funds Section 403(b)(7) Plan Retirement
account #__________________________.
[_] Transfer into a new Monetta Fund Section 403(b)(7) Retirement Plan account
as designated my account application.
5. AUTHORIZATION TO TRANSFER
This letter shall serve as notification of my intention to effect a tax-free
exchange of my tax-sheltered annuity contract or Section 403(b)(7) custodial
account. This letter directs you to cancel the tax-sheltered annuity contract
described in Section 3 for its cash surrender value, or liquidate [_] all or [_]
part ($______________) of the Section 403(b)(7) custodial account listed in
Section 3 and transfer such amounts to my Monetta Funds Section 430(b)(7)
Retirement Plan account.
6. EMPLOYEE/EMPLOYER SIGNATURES
Both the undersigned Employer and Employee understand that this agreement is
irrevocable and binding. In the event that either of the undersigned receives a
check for the proceeds of the liquidated annuity contract or 403(b)(7) custodial
account, such check will immediately be endorsed over to Firstar Trust Company,
Custodian of the Monetta Funds Section 403(b)(7) Retirement Plan, in accordance
with the terms of this agreement. Employer agrees to serve as the agent of the
Employee whose signature appears below for the purpose of this transfer.
Finally, the undersigned Employer and Employee intend that the transfer of fund
contemplated herein be deemed a single, integrated transaction. Firstar Trust
Company agrees to accept any funds transferred in accordance with this request.
__________________________________ ___________________________________________
Employee Signature Employer Signature Title
__________________________________ ___________________________________________
Date Date
__________________________________
Signature Guarantee (if required)*
*Important: Please check with your current custodian/trustee to determine if a
signature guarantee is required.
Firstar Trust Company will complete this Acceptance Agreement
As Custodian for Monetta Funds Section 403(b)(7) Retirement Plan, we have been
appointed to serve as successor custodian of the Section 403(b)(7) account.
Please prepare a check representing liquidation of the investment referenced
above. To ensure proper credit, please return a copy of this form along with
the check.
Please send to: Monetta Funds
c/o Firstar Trust Company
P.O. Box 2936
Milwaukee, WI 53201-2936
FIRSTAR TRUST COMPANY
_____________________________________________ ______________________________
Authorized Signature Title Date
<PAGE>
MONETTA FUNDS
SECTION 403(b) RETIREMENT PLAN
FEDERAL WITHHOLDING TAX FORM
FOR CERTAIN DISTRIBUTIONS
The distributions you receive from your retirement plan are generally subject to
federal income tax withholding. See Federal Withholding/Distribution
Information Form. However, for certain distributions, you may elect not to have
withholding apply. This withholding election applies only to (1) distributions
which are part of a series of payments which will last for your life expectancy,
the joint life expectancy of you and your beneficiary or a period of 10 years or
more, and (2) any distribution (or portion thereof) which is made to satisfy the
minimum distribution requirements. If you are receiving another form of
distribution, do not use this form. Withholding will only apply to the portion
of one of these distributions that is included in your income subject to federal
income tax. Thus, for example, there will be no withholding on the return of
your own nondeductible contributions to the plan.
You may elect not to have withholding apply to a distribution described above by
returning the signed and dated election to your plan administrator. Unless you
elect not to have withholding apply, withholding will apply to the taxable
portion of your distribution as prescribed by the Internal Revenue Service.
If you elect not to have withholding apply to your distribution, or if you do
not have enough federal income tax withheld from your distribution, you may be
responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
- --------------------------------------------------------------------------------
Instructions:
Indicate below whether you want any federal income tax withheld from your
distribution. Return the signed and dated election to your plan administrator.
Even if you elect not to have federal income tax withheld, you are liable for
payment of federal income tax on the taxable portion of your distribution. You
also may be subject to tax penalties under the estimated tax payment rules if
your payments of estimated tax and withholding, if any, are not adequate.
____________ I do not want to have federal income tax withheld from my
distribution.
____________ I want to have federal income tax withheld from my distribution.
____________ I want $________ or ________% withheld from the gross taxable
distribution.
____________________________ _____________________ _________________________
Employee Signature Date Social Security Number
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
FEDERAL WITHHOLDING TAX FORM
FOR LUMP-SUM DISTRIBUTIONS OR IN-SERVICE WITHDRAWALS
The distributions receive from his retirement plan are subject to federal income
tax withholding unless you elect not to have withholding apply. Withholding
will only apply to the portion of your distribution that is included in your
income subject to federal income tax. Thus, for example, there will be no
withholding on the return of your own nondeductible contributions to the plan.
You may elect not to have withholding apply to your distribution by returning
the signed and dated election to your plan administrator.
Unless you elect not to have withholding apply, federal income tax will be
withheld from the taxable portion of your distribution. The amount to be
withheld depends upon whether or not your distribution is a qualified total
distribution. A "qualified total distribution" means any designated
distribution which it is reasonable to believe is made within one taxable year
of the payee, is made from or under a qualified plan described in Section 401(a)
or Section 403(a), and consists of the balance to the credit of the employee
under the plans. The amount to be withheld on qualified total distributions will
be determined under tables prescribed by the Secretary that approximate the tax
that would be imposed under Section 402(c) if the payee elected to treat the
distribution as a lump-sum distribution within the meaning of Section
402(e)(4)(a). On distributions that are not qualified total distributions, ten
percent of the taxable portion of the distribution will be withheld.
If you elect not to have withholding apply to your distribution, or if you do
not have enough federal income tax withheld from your distribution, you may be
responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
- --------------------------------------------------------------------------------
Instructions:
Indicate below whether you want any federal income tax withheld from your
distribution. Return the signed and dated election to your plan administrator.
<PAGE>
Even if you elect not to have federal income tax withheld, you are liable for
payment of federal income tax on the taxable portion of your distribution. You
also may be subject to tax penalties under the estimated tax payment rules if
your payments of estimated tax and withholding, if any, are not adequate.
_______ I do not want to have federal income tax withheld from my
distribution.
_______ I want to have federal income tax withheld from my distribution
(at 5% for lump sums or 10% for in-service withdrawals).
_______ I want $__________ or _____% withheld from the gross taxable
distribution.
___________________________ ____________________ ______________________
Employee Signature Date Social Security Number
<PAGE>
MONETTA FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
FEDERAL WLTHHOLDING/DISTRIBUTION INFORMATION FORM
This notice contains important information you will need before you
decide how to receive your benefits from the Monetta Funds Section 403(b)(7)
Retirement Plan (the "Plan").
SUMMARY
A payment from the Plan that is eligible for "rollover" can be taken
in two ways. You have all or any portion of your payment either (1) PAID IN A
"DIRECT ROLLOVER" or (2) PAID TO YOU. A rollover is a payment of your Plan
benefits to your individual retirement arrangement (IRA) or to another employer
plan. This choice will affect the tax you owe.
If you choose a DIRECT ROLLOVER
. Your payment will not be taxed in the current year and no income tax
will be withheld.
. Your payment will be made directly to your IRA or, if you choose, to
another employer plan that accepts your rollover.
. Your payment will be taxed later when you take it out of the IRA or the
employer plan.
If you choose to have your Plan benefits PAID TO YOU
. You will receive only 80% of the payment, because the Plan Administrator
is required to withhold 20% of the payment and send it to the IRS as
income tax withholding to be credited against your taxes.
. Your payment will be taxed in the current year unless you roll it over.
You may be able to use special tax rules that could reduce the tax you
owe. However, if you receive the payment before age 59-l/2, you also
may have to pay an additional 10% tax.
. You can roll over the paying it to your IRA or to another employer plan
that accepts your rollover within 60 days of receiving the payment.
The amount rolled over will not be taxed until you take it out of the
IRA or employer plan.
. If you want to roll over 100% of the payment to an IRA or an employer
plan, you must find other money to replace the 20% that was withheld.
If you roll over only the 80% that you received, you will be taxed on
the 20% that was withheld and that is not rolled over.
<PAGE>
I. PAYMENTS THAT CAN AND CANNOT BE ROLLED OVER
Payments from the Plan may be "eligible rollover distributions." This
means that they can be rolled over to an IRA or to another employer plan that
accepts rollovers. Your Plan Administrator should be able to tell you what
portion of your payment is an eligible rollover distribution. The following
types of payments cannot be rolled over:
Non-Taxable Payments. In general, only the "taxable portion" of your
payment is an eligible rollover distribution. If you have made "after-tax"
employee contributions to the Plan, these contributions will be non-taxable
when they are paid to you, and they cannot be rolled over. (After-tax
employee contributions generally are contributions you made from your own
pay that were already taxed.)
Payments Spread Over Long Periods. You cannot roll over a payment if
it is part of a series of equal (or almost equal) payments that are made at
least once a year and that will last for
. your lifetime (or your life expectancy), or
. your lifetime and your beneficiary's lifetime (or life expectancies), or
. a period of ten years or more.
"Required Minimum Payments" Beginning in the year you reach age 70-
1/2, a certain portion of your payment cannot be rolled over because it is
a "required minimum payment" that must be paid to you.
II. DIRECT ROLLOVER
You can choose a direct rollover of all or any portion of your payment
that is an "eligible rollover distribution," as described above. In a direct
rollover, the eligible rollover distribution is paid directly from the Plan to
an IRA or another employer plan that accepts rollovers. If you choose a direct
rollover, you are not taxed on a payment until you later take it out of the IRA
or the employer plan.
Direct Rollover to an IRA. You can open an IRA to receive the direct
rollover. (The term "IRA," as used in this notice, includes individual
retirement accounts and individual retirement annuities.) If you choose to have
your payment made directly to an IRA, contact an IRA sponsor (usually a
financial institution) to find out how to have your payment made in a direct
rollover to an IRA at that institution. If you are unsure of how to invest your
money, you can temporarily establish an IRA to receive the payment. However, in
choosing an IRA, you may wish to consider whether the IRA you choose will allow
you to move all or a part of your payment to another IRA at a later date,
without penalties or other limitations. See IRS Publication 590, Individual
Retirement Arrangements, for more information on IRAs (including limits on how
often you can roll over between IRAs).
2
<PAGE>
Direct Rollover to a Plan. If you are employed by a new employer that
has a plan, and you want a direct rollover to that plan, ask the administrator
of that plan whether it will accept your rollover. If your new employer's plan
does not accept a rollover, you can choose a direct rollover to an IRA.
Direct Rollover of a Series of Payments. If you receive eligible
rollover distributions that are paid in a series for less than ten years, your
choice to make or not make a direct rollover for a payment will apply to all
later payments in the series until you change your election. You are free to
change your election for any later payment in the series.
III. PAYMENT PAID TO YOU
If you have the payment made to you, it is subject to 20% income tax
withholding. The payment is taxed in the year you receive it unless, within 60
days, you roll it over to an IRA or another plan that accepts rollovers. If you
do not roll it over, special tax rules may apply.
Income Tax Withholding:
- ----------------------
Mandatory Withholding. If any portion of the payment to you is an
eligible rollover distribution, the Plan is required by law to withhold 20% of
that amount. This amount is sent to the IRS as income tax withholding. For
example, if your eligible rollover distribution is $10,000, only $8,000 will be
paid to you because the Plan must withhold $2,000 as income tax. However, when
you prepare your income tax return for the year, you will report the full
$10,000 as payment from the Plan. You will report the $2,000 as tax withheld,
and it will be credited against any income tax you owe for the year.
Voluntary Withholding. If any portion of your payment is not an
eligible rollover distribution but is taxable, the mandatory withholding rules
described above do not apply. In this case, you may elect not to have
withholding apply to that portion. To elect out of withholding, ask the Plan
Administrator for the election form and related information.
Sixty-Day Rollover Option. If you have an eligible rollover
distribution paid to you, you can still decide to roll over all or part of it to
an IRA or another employer plan that accepts rollovers. If you decide to roll
over, you must make the rollover within 60 days after you receive the payment.
The portion of your payment that is rolled over will not be taxed until you take
it out of the IRA or the employer plan.
You can roll over up to 100% of the eligible rollover distribution,
including an amount equal to the 20% that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period to contribute to
the IRA or the employer plan to replace the 20% that was withheld. On the other
hand, if you roll over only the 80% that you received, you will be taxed on the
20% that was withheld.
Example: Your eligible rollover distribution is $10,000, and you
choose to have it paid to you. You will receive $8,000, and $2,000 will be sent
to the IRS as income tax
3
<PAGE>
withholding. Within 60 days after receiving the $8,000, you may roll over the
entire $10,000 to an IRA or employer plan. To do this, you roll over the $8,000
you received from the Plan, and you will have to find $2,000 from other sources
(your savings, a loan, etc.). In this case, the entire $10,000 is not taxed
until you take it out of the IRA or employer plan. If you roll over the entire
$10,000, when you file your income tax return you may get a refund of the $2,000
withheld.
If, on the other hand, you roll over only $8,000, the $2,000 you did
not roll over is taxed in the year it was withheld. When you file your income
tax return you may get a refund of part of the $2,000 withheld. (However, any
refund is likely to be larger if you roll over the entire $10,000.)
Additional 10% Tax If You Are Under Are 59-1/2. If you receive a
payment before you reach age 59-1/2 and you do not roll it over, then, in
addition to the regular income tax, you may have to pay an extra tax equal to
1095 of the taxable portion of the payment. The additional 10% tax does not
apply to your payment if it is (1) paid to you because you separate from service
with your employer during or after the year you reach age 55, (2) paid because
you retire due to disability, (3) paid to you as equal (or almost equal)
payments over your life or life expectancy (or your and your beneficiary's lives
or life expectancies), or (4) used to pay certain medical expenses. See IRS Form
5329 for more information on the additional 10% tax.
Special Tax Treatment. If your eligible rollover distribution is not
rolled over, it will be taxed in the year you receive it. However, if it
qualifies as a "lump sum distribution," it may be eligible for special tax
treatment. A lump sum distribution is a payment, within one year, of your
entire balance under the Plan (and certain other similar plans of the employer)
that is payable to you because you have reached age 59-1/2 or have separated
from service with your employer (or, in the case of a self-employed individual,
because you have reached age 59-1/2 or have become disabled). For a payment to
qualify as a lump sum distribution, you must have been a participant in the Plan
for at least 5 years. The special tax treatment for lump sum distributions is
described below.
Five-Year Averaging. If you receive a lump sum distribution after you
are age 59-1/2, you may be able to make a one-time election to figure the tax on
the payment by using "5-year averaging." Five-year averaging often reduces the
tax you owe because it treats the payment much as if it were paid over 5 years.
Ten-Year Averaging If You Were Born Before January 1, 1936. If you
receive a lump sum distribution and you were born before January 1, 1936, you
can make a one-time election to figure the tax on the payment by using "10-year
averaging" (using 1986 tax rates) instead of 5-year averaging (using current tax
rates). Like the 5-year averaging rules, 10-year averaging often reduces the
tax you owe.
Capital Gain Treatment If You Were Born Before January 1, 1936. In
addition, if you receive a lump sum distribution and you were born before
January 1, 1936, you may elect to have the part of your payment that is
attributable to your pre-1974 participation in the Plan (if any) taxed as long-
term capital gain at a rate of 20%.
4
<PAGE>
There are other limits on the special tax treatment for lump sum
distributions. For example, you can generally elect this special tax treatment
only once in your lifetime, and the election applies to all lump sum
distributions that you receive in that same year. If you have previously rolled
over a payment from the Plan (or certain other similar plans of the employer),
you cannot use this special tax treatment for later payments from the Plan. If
you roll over your payment to an IRA, you will not be able to use this special
tax treatment for later payments from the IRA. Also, if you roll over only a
portion of your payment to an IRA, this special tax treatment is not available
for the rest of the payment. Additional restrictions are described in IRS Form
4972, which has more information on lump sum distributions and how you elect the
special tax treatment.
IV. SURVIVING SPOUSES, ALTERNATIVE PAYEES, AND OTHER BENEFICIARIES
In general, the rules summary above that apply to payments to
employees also apply to payments to surviving spouses of employees and to
spouses or former spouses who are "alternate payees." You are an alternate
payee if your interest in the Plan results from a "qualified domestic relations
order," which is an order issued by a court, usually in connection with a
divorce or legal separation. Some of the rules summarized above also apply to a
deceased employee's beneficiary who is not a spouse. However, there are some
exceptions for payments to surviving spouses, alternate payees, and other
beneficiaries that should be mentioned.
If you are a surviving spouse, you may choose to have an eligible
rollover distribution paid in a direct rollover to an IRA or paid to you. If
you have the payment paid to you, you can keep it or roll it over yourself to an
IRA but you cannot roll it over to an employer plan. If you are an alternate
payee, you have the same choices as the employee. Thus, you can have the
payment paid as a direct rollover or paid to you. If you have it paid to you,
you can keep it or roll it over yourself to an IRA or to another employer plan
that accepts rollovers. If you are a beneficiary other than the surviving
spouse, you cannot choose a direct rollover, and you cannot roll over the
payment yourself.
If you are a surviving spouse, an alternate payee, or another
beneficiary, your payment is not subject to the additional 10% tax described in
section III above, even if you are younger than age 59-1/2.
If you are a surviving spouse, an alternate payee or another
beneficiary, you may be able to use the special tax treatment for lump sum
distributions, as described in section III above. If you receive a payment
because of the employee's death, you may be able to treat the payment as a lump
sum distribution if the employee met the appropriate age requirements, whether
or not the employee had 5 years of participation in the Plan.
HOW TO OBTAIN ADDITIONAL INFORMATION
This notice summarizes only the federal (not state or local) tax rules
that might apply to your payment. The rules described above are complex and
contain many conditions and exceptions that are not included in this notice.
Therefore, you may want to consult with a professional tax advisor before you
take a payment of your benefits from the Plan. Also, you can
<PAGE>
find more specific information on the tax treatment of payments from qualified
retirement plans in IRS Publication 575, Pension and Annuity Income, and IRS
Publication 590, Individual Retirement arrangements. These publications are
available from you local IRS office or by calling 1-800-TAX-FORMS.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> These schedules contain summary financial information extracted from
the audited Annual Report of the Registrant dated December 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> MONETTA MID CAP EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 14,160
<INVESTMENTS-AT-VALUE> 17,343
<RECEIVABLES> 14
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,358
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20
<TOTAL-LIABILITIES> 20
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,986
<SHARES-COMMON-STOCK> 1,170
<SHARES-COMMON-PRIOR> 1,188
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 168
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,183
<NET-ASSETS> 17,338
<DIVIDEND-INCOME> 144
<INTEREST-INCOME> 107
<OTHER-INCOME> 1
<EXPENSES-NET> 200
<NET-INVESTMENT-INCOME> 52
<REALIZED-GAINS-CURRENT> 423
<APPREC-INCREASE-CURRENT> 2,890
<NET-CHANGE-FROM-OPS> 3,365
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 436
<NUMBER-OF-SHARES-REDEEMED> 457
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 3,122
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (254)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 200
<AVERAGE-NET-ASSETS> 16,230
<PER-SHARE-NAV-BEGIN> 11.96
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 2.85
<PER-SHARE-DIVIDEND> (.04)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.81
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> MONETTA LARGE CAP EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,133
<INVESTMENTS-AT-VALUE> 2,343
<RECEIVABLES> 7
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,350
<PAYABLE-FOR-SECURITIES> 59
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3
<TOTAL-LIABILITIES> 62
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,066
<SHARES-COMMON-STOCK> 187
<SHARES-COMMON-PRIOR> 101
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 210
<NET-ASSETS> 2,288
<DIVIDEND-INCOME> 14
<INTEREST-INCOME> 12
<OTHER-INCOME> 0
<EXPENSES-NET> 21
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> 160
<APPREC-INCREASE-CURRENT> 147
<NET-CHANGE-FROM-OPS> 312
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4
<DISTRIBUTIONS-OF-GAINS> 141
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 123
<NUMBER-OF-SHARES-REDEEMED> 49
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 1,216
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21
<AVERAGE-NET-ASSETS> 1,410
<PER-SHARE-NAV-BEGIN> 10.57
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 2.93
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (1.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.27
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> MONETTA BALANCED FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,267
<INVESTMENTS-AT-VALUE> 2,382
<RECEIVABLES> 22
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,425
<PAYABLE-FOR-SECURITIES> 87
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 89
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,210
<SHARES-COMMON-STOCK> 185
<SHARES-COMMON-PRIOR> 39
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 115
<NET-ASSETS> 2,336
<DIVIDEND-INCOME> 4
<INTEREST-INCOME> 20
<OTHER-INCOME> 0
<EXPENSES-NET> 11
<NET-INVESTMENT-INCOME> 13
<REALIZED-GAINS-CURRENT> 76
<APPREC-INCREASE-CURRENT> 94
<NET-CHANGE-FROM-OPS> 183
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13
<DISTRIBUTIONS-OF-GAINS> 61
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 157
<NUMBER-OF-SHARES-REDEEMED> 17
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 1,926
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11
<AVERAGE-NET-ASSETS> 827
<PER-SHARE-NAV-BEGIN> 10.61
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 2.59
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (.56)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.64
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> MONETTA INTERMEDIATE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,732
<INVESTMENTS-AT-VALUE> 2,719
<RECEIVABLES> 55
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,774
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,786
<SHARES-COMMON-STOCK> 271
<SHARES-COMMON-PRIOR> 350
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13)
<NET-ASSETS> 2,769
<DIVIDEND-INCOME> 2
<INTEREST-INCOME> 206
<OTHER-INCOME> 0
<EXPENSES-NET> 18
<NET-INVESTMENT-INCOME> 190
<REALIZED-GAINS-CURRENT> (4)
<APPREC-INCREASE-CURRENT> (4)
<NET-CHANGE-FROM-OPS> 182
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 190
<DISTRIBUTIONS-OF-GAINS> 17
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> 160
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> (820)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 18
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28
<AVERAGE-NET-ASSETS> 3,304
<PER-SHARE-NAV-BEGIN> 10.24
<PER-SHARE-NII> .61
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.61)
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.21
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> MONETTA GOVERNMENT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,279
<INVESTMENTS-AT-VALUE> 6,279
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,279
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 47
<TOTAL-LIABILITIES> 47
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,232
<SHARES-COMMON-STOCK> 6,232
<SHARES-COMMON-PRIOR> 4,393
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,232
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 310
<OTHER-INCOME> 0
<EXPENSES-NET> 18
<NET-INVESTMENT-INCOME> 292
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 292
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,949
<NUMBER-OF-SHARES-REDEEMED> 14,378
<SHARES-REINVESTED> 268
<NET-CHANGE-IN-ASSETS> 1,839
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39
<AVERAGE-NET-ASSETS> 5,904
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
