File No. 33-79290
As filed on ^ September 29, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ________
Post-Effective Amendment No. ^ 15 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. ^ 16 X
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INVESCO SPECIALTY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
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Copies to:
Ronald M. Feiman, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
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Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective
___ immediately upon filing pursuant to paragraph (b)
___ ^ on ________________, pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
^ X on December 1, 1998, pursuant to paragraph (a)(i)
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___ 75 days after filing pursuant to paragraph (a)(ii)
___ on ________________, pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously elected, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of its shares of common
stock for sale under the Securities Act of 1933. Registrant's Rule 24f-2 Notice
for the fiscal year ended July 31, ^ 1998, will be filed on or about ^ October
26, 1998.
Page 1 of 650
Exhibit index is located at page 284
<PAGE>
INVESCO SPECIALTY FUNDS, INC.
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CROSS-REFERENCE SHEET
Form N-1A
Item Caption
--------- -------
Part A Prospectus
1....................... Cover Page
2....................... Annual Fund Expenses; Essential
Information
3....................... Financial Highlights; Fund Price ^
And Performance
4....................... Investment Objective ^ And
Strategy/Investment Objective ^ And
Policies; Investment Policies ^ And
Risks; The Fund/Funds ^ And
Its/Their Management
5....................... The Fund/Funds ^ And Its/Their
Management; Additional Information
5A...................... Not Applicable
6....................... Services Provided by the Funds/Fund
Services; Taxes, Dividends ^ And
Other Distributions; Additional
Information
7....................... How Shares Can Be Purchased/How To
Buy Shares; Fund Price ^ And
Performance; Services Provided ^ By
The Funds/Fund Services; The Funds
^ And Its/Their Management
8....................... Services Provided by the Funds/Fund
Services; How ^ To Redeem
Shares/How ^ To Sell Shares
9....................... Not Applicable
<PAGE>
Form N-1A
Item Caption
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Part B Statement of Additional Information
10...................... Cover Page
11...................... Table of Contents
12...................... The Funds ^ And Their Management
13...................... Investment Practices; Investment
Policies ^ And Restrictions
14...................... The Funds ^ And Their Management
15...................... The Funds ^ And Their Management;
Additional Information
16...................... The Funds ^ And Their Management;
Additional Information
17...................... Investment Practices; Investment
Policies ^ And Restrictions
18...................... Additional Information
19...................... How Shares Can Be Purchased; How
Shares Are Valued; Services
Provided ^ By The Funds;
Tax-Deferred Retirement Plans; How
^ To Redeem Shares
20...................... Dividends, Other Distributions ^
And Taxes
21...................... How Shares Can Be Purchased
22...................... Performance Data
23...................... Additional Information
Part C Other Information
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO WORLDWIDE CAPITAL GOODS FUND
INVESCO WORLDWIDE COMMUNICATIONS FUND
INVESCO Worldwide Capital Goods Fund (the "Capital Goods Fund") seeks to
achieve capital appreciation by investing, under normal circumstances, at least
65% of its total assets in companies that are primarily engaged in the design,
development, manufacture, distribution, sale or service of capital goods, or in
the mining, processing, manufacture or distribution of raw materials and
intermediate goods used by industry and agriculture.
INVESCO Worldwide Communications Fund (the "Communications Fund") seeks to
achieve a high total return on investment through capital appreciation and
current income by investing, under normal circumstances, at least 65% of its
total assets in companies that are primarily engaged in the design, development,
manufacture, distribution or sale of communications services and equipment. Up
to 35% of the Communications Fund's assets will be invested, under normal
circumstances, in companies that are engaged in developing, constructing or
operating communications infrastructure projects throughout the world, or in
supplying equipment or services to such companies.
Under normal circumstances, each Fund will invest at least 65% of its total
assets in issuers domiciled in at least three countries, one of which may be the
United States, although the Funds' investment adviser expects each Fund's
investments to be allocated among a larger number of countries. The percentage
of each Fund's assets invested in securities of issuers domiciled in the United
States normally will be higher than that invested in securities issued by
companies in any other single country. However, it is possible that at times a
Fund may have 65% or more of its total assets invested in foreign securities.
The Funds have adopted certain investment policies which may expose the Funds to
increased risks or costs. See "Risk Factors" and "Investment Objectives and
Policies-Portfolio Turnover."
Each Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of seven separate ^
portfolios of investments. This Prospectus relates to shares of the Capital
Goods and Communications Funds. Separate ^ Prospectuses are available upon
request from INVESCO Distributors, Inc. for the Company's other funds, INVESCO
European Small Company Fund, INVESCO Latin American Growth Fund, INVESCO Asian
Growth Fund, INVESCO Realty Fund and INVESCO S&P 500 Index Fund. Investors may
purchase shares of any or all of the Funds. Additional funds may be offered in
the future.
<PAGE>
This Prospectus provides you with the basic information you should know
before investing in the Capital Goods Fund or Communications Fund. You should
read it and keep it for future reference. A Statement of Additional Information
dated December 1, ^ 1998, containing further information about the Funds has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. To ^ request a free copy, write to INVESCO
Distributors, Inc., Post Office Box 173706, Denver, Colorado 80217-3706; call
1-800-525-8085; or visit our web site ^ at http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUNDS
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
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ANNUAL FUND EXPENSES...........................................................7
FINANCIAL HIGHLIGHTS...........................................................9
^ PERFORMANCE DATA............................................................12
INVESTMENT OBJECTIVES AND POLICIES............................................12
RISK FACTORS..................................................................18
THE FUNDS AND THEIR MANAGEMENT................................................22
HOW SHARES CAN BE PURCHASED...................................................25
SERVICES PROVIDED BY THE FUNDS................................................28
HOW TO REDEEM SHARES..........................................................31
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS......................................33
ADDITIONAL INFORMATION........................................................34
<PAGE>
ANNUAL FUND EXPENSES
The Funds are no-load; there are no fees to purchase, exchange or redeem
shares. The Funds^ are authorized to pay a ^ Rule 12b-1 distribution fee of one
quarter of one percent of each Fund's average net assets each year. (See "How
Shares Can Be Purchased -^ Distribution Expenses.") Lower expenses benefit Fund
shareholders by increasing the Funds' total return.
Annual operating expenses are calculated as a percentage of each Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO") the Funds' adviser, voluntarily reimburses the Capital Goods
and Communications Funds for certain expenses in excess of 2.00% and 2.00%,
respectively (excluding excess amounts that have been offset by the expense
offset arrangements described below), of each Fund's average net assets.
Capital Goods Communications
Fund Fund
------------- --------------
Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None None
Sales load "charge" on reinvested
dividends None None
Redemption fees None None
Exchange fees None None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.65% 0.65%
12b-1 Fees 0.25% 0.25%
Other Expenses ^(after
absorbed expenses) 1.07% 0.42%(1)
Transfer Agency Fee(1) ^(3) 0.48% 0.28%
General Services,
Administrative ^ 0.59% 0.14%
Services, Registration,
^ Postage(1)(4)
Total Fund Operating
Expenses ^(2) 1.97%(1) 1.32%
^(1) It should be noted that the Fund's actual total operating expenses
were lower than the figures shown because the Fund's distribution ^, transfer
agency and custodian fees were reduced under expense offset arrangements.
However, as a result of an SEC requirement ^, the figures shown above do not
reflect these reductions. In comparing expenses for different years, please note
that the ^ Ratios of Expenses to Average Net Assets shown under "Financial
Highlights" do reflect reductions for periods prior to the fiscal year ended
July 31, 1996. See "The Funds ^ And Their Management."
^(2) Ratio is based on Total Expenses of the Fund, which is before any
expense offset arrangements.
<PAGE>
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Capital Goods Fund $20 ^ $62 $107 $231
Communications Fund ^ $14 $42 $73 $160
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in a
Fund will bear directly or indirectly. Such expenses are paid from the
respective Fund's assets. (See "The Funds ^ And Their Management.") The Funds
charge no sales loads, redemption fees, or exchange fees. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
^ Because the Funds pay a distribution fee, investors who own Fund
shares for a long period of time may pay more than the economic equivalent of
the maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by ^ PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's ^ 1998 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO Distributors, Inc. at the address
or telephone number on the back cover of this Prospectus. ^
Worldwide Capital Goods Fund
<TABLE>
<CAPTION>
Year Ended July 31
------------------------------------------------------------
1998 1997 1996 1995(a)
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $12.70 $9.61 $9.84 $10.00
------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)(b) 0.00 0.05 0.01 0.01
Net Gains or (Losses) on
Securities (Both Realized
and Unrealized) (0.32) 4.37 0.01 (0.16)
------------------------------------------------------------
Total from Investment
Operations (0.32) 4.42 0.02 (0.15)
------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.00 0.06 0.00 0.01
Distributions from
Capital ^ Gains 1.21 1.27 0.25 0.00
------------------------------------------------------------
Total Distributions 1.21 1.33 0.25 0.01
------------------------------------------------------------
Net Asset Value -
End of Period $11.17 $12.70 $9.61 $9.84
============================================================
TOTAL RETURN (2.06%) 50.86% 0.27% (1.49%)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATIOS
Net Assets - End of Period
<S> <C> <C> <C> <C>
($000 Omitted) $13,095 $22,254 $7,731 $10,364
Ratio of Expenses to
Average ^ Net Assets^(c) 1.97%(d) 1.98%(d) 2.11%(d) 2.00%
Ratio of Net Investment
Income (Loss) to
Average Net Assets^(c) (0.23%) 0.51% 0.05% 0.25%
Portfolio Turnover Rate 219% 192% 247% 193%
</TABLE>
(a) Commencement of investment operations was August 1, 1994.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended July 31, 1998.
(c)^ Various expenses of the ^ Fund were voluntarily absorbed by INVESCO ^ for
the years ended July 31, 1997, 1996 and 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have
been 2.58%, 2.49% and 2.96%, respectively, and ratio of net investment
income (loss) to average net assets would have been (0.09%), (0.33%) and
(0.71%), respectively.
^(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
^
<PAGE>
INVESCO Specialty Funds, Inc.
Financial Highlights (Continued)
(For a Fund Share Outstanding Throughout Each Period)
^
Worldwide Communications Fund
<TABLE>
<CAPTION>
Year Ended July 31
-----------------------------------------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995(a)
PER SHARE DATA
Net Asset Value -
Beginning of Period $15.31 $12.43 $12.30 $10.00
-----------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.01 0.06 0.22 0.11
Net Gains on Securities
(Both ^ Realized and
Unrealized) 5.32 3.90 1.38 2.35
-----------------------------------------------------------
Total from Investment
Operations 5.33 3.96 1.60 2.46
-----------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment ^ Income 0.00 0.06 0.22 0.11
Distributions from
Capital ^ Gains 1.04 1.02 1.25 0.05
-----------------------------------------------------------
Total Distributions 1.04 1.08 1.47 0.16
-----------------------------------------------------------
Net Asset Value -
End of Period $19.60 $15.31 $12.43 $12.30
===========================================================
TOTAL RETURN 36.79% 33.93% 13.67% 24.83%
RATIOS
Net Assets - End of Period
($000 Omitted) $276,577 $72,458 $50,516 $27,254
Ratio of Expenses to
Average ^ Net Assets ^ 1.32%(b) 1.69%(b) 1.66%(b) 1.95%
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.16%) 0.56% 1.78% 1.43%
Portfolio Turnover Rate 55% 96% 157% 215%
</TABLE>
^(a) Commencement of investment operations was August 1, 1994.
^(b) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
^ PERFORMANCE DATA
From time to time, the Funds advertise their total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of a Fund refers to the
annual rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and capital gain distributions, to the end
of a specified period. Periods of one year, five years, and ten years and/or
life of the Fund are used if available. Any given report of total return
performance should not be considered as representative of future performance.
The Funds charge no sales loads, redemption fees, or exchange fees which would
affect the total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Funds, comparative data between the Funds' performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Funds in performance reports, will be
drawn from the "Global Funds" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVES AND POLICIES
INVESCO WORLDWIDE CAPITAL GOODS FUND
^ The Capital Goods Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
companies that are primarily engaged in the design, development, manufacture,
distribution, sale or service of capital goods, or in the mining, processing,
manufacture, or distribution of raw materials and intermediate goods used by
industry and agriculture. The foregoing investment objective is fundamental and
may not be changed in any material respect without the approval of the Capital
Goods Fund's shareholders. Capital goods include finished products and equipment
used by industrial and agricultural firms, such as industrial machinery,
<PAGE>
construction equipment, computers, software, farm equipment, office equipment,
and electrical and telecommunications equipment, as well as components and
sub-assemblies of such products. Raw materials and intermediate goods include
chemicals, timber, paper, metals, textiles, cement, gypsum and other
commodities.
INVESCO WORLDWIDE COMMUNICATIONS FUND
^ The Communications Fund seeks to achieve a high total return on
investment through capital appreciation and current income by investing, under
normal circumstances, at least 65% of its total assets in companies that are
primarily engaged in the design, development, manufacture, distribution or sale
of communications services and equipment. The foregoing investment objective is
fundamental and may not be changed in any material respect without the approval
of the Communications Fund's shareholders. The Communications Fund may invest in
companies involved in services and products such as long distance, local and
cellular telephone service; wireless communications systems such as personal
communications networks, paging and special mobile radio; local and wide area
networks; fiber optic transmission; satellite communication; microwave
transmission; television and movie programming; broadcasting; and cable
television.
Up to 35% of the Communications Fund's assets will be invested, under
normal circumstances, in companies that are engaged in developing, constructing
or operating infrastructure projects throughout the world, or in supplying
equipment or services to such companies. Infrastructure projects include
communications systems such as those described above, as well as electric
utilities, water and sewer projects, natural gas and oil pipelines,
environmental projects, housing, and transportation projects such as airports,
railroads, highways, bridges and ports.
Investment Policies Applicable to Both Funds
Each Fund has a policy regarding concentration of its investments which is
fundamental and may not be changed without the approval of the respective Fund's
shareholders. The Capital Goods Fund will concentrate its investments (i.e.,
invest more than 25% of its total assets) in the capital goods, raw materials
and intermediate goods industries described above. The Communications Fund will
concentrate its investments (i.e., invest more than 25% of its total assets) in
the communications industries described above. A particular company will be
deemed to be primarily engaged in the group of industries designated for
investment by a Fund if, in the determination of the Funds' investment adviser
^, more than 50% of its gross income or net sales are derived from activities in
such industries or more than 50% of its assets are dedicated to the production
of revenues from such industries. In circumstances where, based on available
financial information, a question exists whether a company meets one of these
standards, the Fund may invest in equity securities of such company only if ^
INVESCO determines, after review of information describing the company and its
<PAGE>
business activities, that the company's primary business is within the group of
industries designated for investment by that Fund, as such industries are
described above.
Under normal circumstances, each Fund will invest at least 65% of its total
assets in issuers domiciled in at least three countries, one of which may be the
United States, although ^ INVESCO expects each Fund's investments to be
allocated among a larger number of countries. The percentage of each Fund's
assets invested in securities of issuers domiciled in the United States normally
will be higher than that invested in securities issued by companies in any other
single country. However, it is possible that at times a Fund may have 65% or
more of its total assets invested in foreign securities. Investments in foreign
securities involve certain risks which are discussed below under "Risk Factors."
Under normal conditions, each Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities) which are discussed more fully in the Statement of
Additional Information. In selecting the equity securities in which the Funds
invest, ^ INVESCO attempts to identify companies that in ^ INVESCO's opinion
have demonstrated or, are likely to demonstrate in the future, strong earnings
growth relative to other companies in the same industry. The dividend payment
records of companies are also considered. Equity securities may be issued by
either established, well-capitalized companies or newly-formed, small-cap
companies, and may trade on regional or national stock exchanges or in the
over-the-counter market. The risks of investing in small capitalization
companies are discussed below under "Risk Factors."
Consistent with its investment objective, each Fund also may invest in
fixed-income securities (corporate bonds, commercial paper, debt securities
issued by the U.S. government, its agencies and instrumentalities, or foreign
governments and, to a lesser extent, municipal bonds, asset-backed securities
and zero coupon bonds). Each Fund may invest no more than 15% of its total
assets in debt securities that are rated below BBB by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, judged by ^ INVESCO to be equivalent
in quality to debt securities having such ratings (commonly referred to as "junk
bonds"). In no event will a Fund ever invest in a debt security rated below CCC
by S&P or Caa by Moody's or, if unrated, judged by ^ INVESCO to be equivalent in
quality to debt securities having such ratings. The risks of investing in lower
rated debt securities are discussed below under "Risk Factors."
Each Fund may invest up to 35% of its total assets in securities of
companies that are engaged in businesses outside the field of business activity
in which at least 65% of the Fund's total assets is invested. These investments
may include equity securities or fixed-income securities selected to meet the
Capital Goods Fund's investment objective of capital appreciation or the
<PAGE>
Communications Fund's objective of achieving a high total return on investment
through capital appreciation and current income, as the case may be. Such equity
securities may be issued by either established, well-capitalized companies or
newly-formed, small-cap companies, and may trade on regional or national stock
exchanges or in the over-the-counter market. Such fixed-income securities must
meet the quality standards described above. These equity and fixed-income
securities may be issued by either U.S. or foreign companies or governments. The
risks of investing in lower rated debt securities and in foreign securities are
discussed below under "Risk Factors." In addition, the Funds may hold certain
cash and cash equivalent securities as cash reserves ("cash securities").
The ^ amounts invested in stocks, bonds and cash securities may ^ vary from
time to time, depending upon ^ INVESCO's assessment of business, economic and
market conditions. In periods of ^ unfavorable economic and market conditions,
as determined by ^ INVESCO, either Fund may depart from its basic investment
objective and assume a ^ defensive position, ^ by temporarily investing up to
100% of its assets ^ in high-quality money market instruments, such as
short-term U.S. government obligations, commercial paper or repurchase
agreements ^, seeking to protect its assets until conditions stabilize. The
Funds reserve the right to hold equity, fixed-income and cash securities in
whatever proportion is deemed desirable at any given time for temporary
defensive purposes. While a Fund is in a defensive position, the opportunity to
achieve capital appreciation will be limited; however, the ability to maintain a
defensive position enables the Funds to seek to avoid capital losses during
market downturns. Under normal market conditions, the Funds do not expect to
have a substantial portion of their assets invested in cash securities.
In order to hedge their portfolios, the Funds may purchase and write
options on securities (including index options and options on foreign
securities), and may invest in futures contracts for the purchase or sale of
foreign currencies, fixed-income securities and instruments based on financial
indices (collectively, "futures contracts"), options on futures contracts,
forward contracts and interest rate swaps and swap-related products. Interest
rate swaps involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. These practices and securities, some of which
are known as derivatives, and their risks are discussed below under "Risk
Factors" and in the Statement of Additional Information.
Additional information on certain of the types of securities in which the
Funds may invest is set forth below:
U.S. Government and Agency Securities.^ Investments in U.S. government
securities may consist of securities issued or guaranteed by the United States
government or any agency or instrumentality of the United States government. In
some cases, these securities are direct obligations of the U.S. government, such
as U.S. Treasury bills, notes and bonds. In other cases, these securities are
obligations guaranteed by the U.S. government, such as Government National
<PAGE>
Mortgage Association obligations, or obligations of U.S. government authorities,
agencies or instrumentalities, such as Fannie Mae (formerly, Federal National
Mortgage Association), Federal Home Loan Banks, Federal Financing Bank and
Federal Farm Credit Bank, which are supported only by the creditworthiness of
the issuer.
When-Issued Securities.^ Each Fund may make commitments in an amount of up
to 10% of the value of its total assets at the time any commitment is made to
purchase or sell equity or debt securities on a when-issued or delayed delivery
basis (i.e., securities may be purchased or sold by the Fund with settlement
taking place in the future, often a month or more later). The payment obligation
and, in the case of debt securities, the interest rate that will be received on
the securities generally are fixed at the time the Fund enters into the
commitment. During the period between purchase and settlement, no payment is
made by the Fund and no interest accrues to the Fund. At the time of settlement,
the market value of the security may be more or less than the purchase price,
and the Fund bears the risk of such market value fluctuations. Each Fund
maintains cash, U.S. government securities, or other liquid securities having an
aggregate value equal to the amount of such purchase commitments, in a
segregated account until payment is made.
Illiquid and Rule 144A Securities.^ The Funds may invest in securities
which are illiquid because they are subject to restrictions on their resale
("restricted securities") or because, based upon their nature or the market for
such securities, they are not readily marketable. However, a Fund will not
purchase any such security if the purchase would cause the Fund to invest more
than 15% of its net assets in illiquid securities. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes of
this restriction. Investments in illiquid securities involve certain risks to
the extent that a Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, a Fund might have to bear the expense and incur the delays associated
with effecting registration.
^ The Funds may purchase certain restricted securities that are not
registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities"), may be purchased without
regard to the foregoing 15% limitation if a liquid institutional trading market
exists. The liquidity of the Fund's investments in Rule 144A Securities could be
impaired if dealers or institutional investors become uninterested in purchasing
these securities. The Company's board of directors has delegated to ^ INVESCO
the authority to determine the liquidity of Rule 144A Securities pursuant to
guidelines approved by the board. For more information concerning Rule 144A
Securities, see the Statement of Additional Information.
Repurchase Agreements.^ The Funds may enter into repurchase agreements
with respect to debt instruments eligible for investment by the Funds with
member banks of the Federal Reserve System, registered broker-dealers and
<PAGE>
registered government securities dealers, which are deemed creditworthy. A
repurchase agreement, which may be considered a "loan" under the Investment
Company Act of 1940, is a means of investing monies for a short period. In a
repurchase agreement, a Fund acquires a debt instrument (generally a security
issued by the U.S. government or an agency thereof, a banker's acceptance, or a
certificate of deposit) subject to resale to the seller at an agreed-upon price
and date (normally, the next business day). In the event that the original
seller defaults on its obligation to repurchase the security, the Fund could
incur costs or delays in seeking to sell such security. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors. A Fund will not enter into a repurchase
agreement maturing in more than seven days if as a result more than 15% of its
net assets would be invested in such repurchase agreements and other illiquid
securities. The Funds have not adopted any limit on the amount of their net
assets that may be invested in repurchase agreements maturing in seven days or
less.
Securities Lending.^ The Funds also may lend their securities to qualified
brokers, dealers, banks, or other financial institutions. This practice permits
the Funds to earn income, which, in turn, can be invested in additional
securities of the type described in this Prospectus in pursuit of the Funds'
investment objectives. Loans of securities by a Fund will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
government or its agencies equal to at least 100% of the current market value of
the loaned securities, determined on a daily basis. Cash collateral will be
invested only in high quality short-term investments offering maximum liquidity.
Lending securities involves certain risks, the most significant of which is the
risk that a borrower may fail to return a portfolio security. The Funds monitor
the creditworthiness of borrowers in order to minimize such risks. A Fund will
not lend any security if, as a result of the loan, the aggregate value of
securities then on loan would exceed 33-1/3% of the Fund's total assets (taken
at market value).
Portfolio Turnover.^ There are no fixed limitations regarding portfolio
turnover for the Funds' portfolios. Although the Funds do not trade for
short-term profits, securities may be sold without regard to the time they have
been held in a Fund when, in the opinion of ^ INVESCO, investment considerations
warrant such action. In addition, portfolio turnover rates may increase as a
result of large amounts of purchases or redemptions of Fund shares due to
economic, market or other factors that are not within the control of ^ INVESCO.
As a result, while it is anticipated that the portfolio turnover rates for the
Funds' portfolios generally will not exceed 200%, under certain market
conditions these portfolio turnover rates may exceed 200%. Increased portfolio
turnover would cause a Fund to incur greater brokerage costs than would
<PAGE>
otherwise be the case, and may result in the acceleration of capital gains that
are taxable when distributed to shareholders. The Funds' portfolio turnover
rates are set forth under "Financial Highlights" and, along with the Funds'
brokerage allocation policies, are discussed in the Statement of Additional
Information.
Investment Restrictions.^ The Funds are subject to a variety of
restrictions regarding their investments that are set forth in this Prospectus
and in the Statement of Additional Information. Certain of the Funds' investment
restrictions are fundamental, and may not be altered without the approval of the
respective Fund's shareholders. Such fundamental investment restrictions include
the restrictions which prohibit a Fund from: lending more than 33-1/3% of its
total assets to other parties (excluding purchases of commercial paper, debt
securities and repurchase agreements); with respect to 75% of its total assets,
purchasing the securities of any one issuer (other than cash items and
government securities) if the purchase would cause the Fund to have more than 5%
of its total assets invested in the issuer or to own more than 10% of the
outstanding voting securities of the issuer; and borrowing money or issuing
senior securities except that a Fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) and may enter into reverse
repurchase agreements in an aggregate amount not exceeding 33-1/3% of its total
assets. However, unless otherwise noted, the Funds' investment restrictions and
their investment policies are not fundamental and may be changed by action of
the Company's board of directors. Unless otherwise noted, all percentage
limitations contained in the Funds' investment policies and restrictions apply
at the time an investment is made. Thus, subsequent changes in the value of an
investment after purchase or in the value of the Funds' total assets will not
cause any such limitation to have been violated or to require the disposition of
any investment, except as otherwise required by law. If the credit ratings of an
issuer are lowered below those specified for investment by the Funds, the Funds
are not required to dispose of the obligations of that issuer. The determination
of whether to sell such an obligation will be made by ^ INVESCO based upon an
assessment of credit risk and the prevailing market price of the investment. If
a Fund borrows money, its share price may be subject to greater fluctuation
until the borrowing is repaid. Each Fund attempts to minimize such fluctuations
by not purchasing additional securities when borrowings, including reverse
repurchase agreements, are greater than 5% of the value of the Fund's total
assets. As a fundamental policy in addition to the above, each Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund. See "Additional Information -^
Master/Feeder Option."
RISK FACTORS
There can be no assurance that the Funds will achieve their investment
objectives. The Funds' investments in common stocks and other equity securities
may, of course, decline in value.
<PAGE>
Year 2000 Computer Issue. Due to the fact that many computer systems in use
today cannot recognize the Year 2000, but will, unless corrected, revert to 1900
or 1980 or cease to function at that time, the markets for securities in which
the Funds invest may be detrimentally affected by computer failures affecting
portfolio investments or trading of securities beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production issues for individual companies and overall economic
uncertainties. Earnings of individual issuers may be affected by remediation
costs, which may be substantial. The Funds' investments may be adversely
affected.
Debt Securities. The Funds' investments in fixed-income securities
generally are subject to both credit risk and market risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments, or both, as
they come due. The ratings given a security by S&P or Moody's provide a
generally useful guide to such credit risk. The lower the rating given a
security by such rating service, the greater the credit risk such rating service
perceives to exist with respect to such security. Increasing the amount of Fund
assets invested in unrated or lower grade securities, while intended to increase
the yield produced by those assets, also will increase the credit risk to which
those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although ^ INVESCO limits the Funds' investments
in fixed-income securities to securities it believes are not highly speculative,
both kinds of risk are increased by investing in debt securities rated below the
top three grades by S&P or Moody's or, if unrated, securities determined by Fund
Management to be of equivalent quality. Although bonds in the lowest investment
grade debt category (those rated BBB by S&P or Baa by Moody's) are regarded as
having adequate capability to pay principal and interest, they have speculative
characteristics. Adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case for higher rated bonds. Lower rated bonds by Moody's
(categories Ba, B, Caa) are of poorer quality and also have speculative
characteristics. Bonds rated Caa may be in default or there may be present
elements of danger with respect to principal or interest. Lower rated bonds by
S&P (categories BB, B, CCC) include those which are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with their terms; BB indicates the lowest
degree of speculation and CCC a high degree of speculation. While such bonds
likely will have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
<PAGE>
For a specific description of each corporate bond rating category, please refer
to Appendix B to the Statement of Additional Information.
Industry Concentration.^ While the Funds diversify their investments by
investing, with respect to 75% of their total assets, not more than 5% of their
total assets in the securities of any one issuer, Fund Management normally will
invest each Fund's assets primarily in companies engaged in the particular
fields of business activity designated for investment by that Fund. As a result
of this investment policy, an investment in a Fund may be subject to greater
fluctuations in value than generally would be the case if an investment were
made in an investment company that did not concentrate its investments in a
similar manner. Certain economic factors or specific events may exert a
disproportionate impact upon the prices of equity securities of companies within
a particular industry relative to their impact on the prices of securities of
companies engaged in other industries. For example, the success of the companies
in which the Capital Goods Fund may invest is closely related to overall capital
spending levels. Capital spending is influenced by broad factors such as
economic cycles, interest rates, technological obsolescence, foreign competition
and governmental regulation, as well as individual company factors such as
profitability. The Communications Fund may invest in companies that are
developing new technologies and, accordingly, are subject to the risks of
intense competition, failure to obtain adequate financing or necessary
regulatory approvals and rapid product obsolescence. In addition, the types of
companies in which the Communications Fund may invest generally are subject to
substantial government regulation. Companies engaged in infrastructure projects
are subject to various risks, including difficulties in securing financing for
large projects and costs and delays resulting from environmental considerations.
In addition, changes in the market price of the equity securities of a
particular company which occupies a dominant position in an industry may tend to
influence the market prices of other companies within the same industry. As a
result of the foregoing factors, an investment in one or both of the Funds may
not constitute a complete, balanced investment program.
Foreign Securities.^ For U.S. investors, the returns on foreign securities
are influenced not only by the returns on the foreign investments themselves,
but also by currency risk (i.e., changes in the value of the currencies in which
the securities are denominated relative to the U.S. dollar). In a period when
the U.S. dollar generally rises against a foreign currency, returns for a U.S.
investor on foreign securities denominated in that foreign currency may
decrease. By contrast, in a period when the U.S. dollar generally declines, the
returns on foreign securities generally are enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
<PAGE>
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
may result in greater price volatility; foreign withholding taxes payable on a
Fund's investment income on foreign securities, which may reduce dividend income
payable to shareholders; the possibility of expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations;
political instability which could affect U.S. investment in foreign countries;
potential restrictions on the flow of international capital; and the possibility
of a Fund experiencing difficulties in pursuing legal remedies and collecting
judgments. The Fund's investments in foreign securities may include investments
in developing countries. Many of these securities are speculative and their
prices may be more volatile than those of securities issued by companies located
in more developed countries.
^ Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). EMU intends to establish a common
European currency for EMU countries which will be known as the "euro." Each
participating country presently plans to adopt the euro as its currency on
January 1, 1999. The old national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear entirely.
Other European countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Funds.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for the Fund. As the euro is
implemented, there may be changes in the relative strength and value of the U.S.
dollar and other major currencies, as well as possible adverse tax consequences.
The euro transition by EMU countries - present and future - may impact the
fiscal and monetary policies of those participating countries. There may be
increased levels of price competition among business firms within EMU countries
and between businesses in EMU and non-EMU countries. The outcome of these
uncertainties could have unpredictable effects on trade and commerce and result
in increased volatility for all financial markets.
Small Capitalization Companies. The Funds may invest in equity securities
issued by small-cap companies. The Funds' investments in small capitalization
<PAGE>
stocks may include companies that have limited operating histories, product
lines, and financial and managerial resources. These companies may be subject to
intense competition from larger companies, and their stock may be subject to
more abrupt or erratic market movements than the stocks of larger, more
established companies. Due to these and other factors, small cap companies may
suffer significant losses as well as realize substantial growth.
Futures, Options and Other Derivative Instruments.^ The use of futures,
options, forward contracts and swaps exposes the Funds to additional investment
risks and transaction costs, and as a result, no more than 5% of each Fund's
total assets will be committed to such investments. If Fund Management seeks to
protect the Funds against potential adverse movements in the securities, foreign
currency or interest rate markets using these instruments, and such markets do
not move in a direction adverse to the Funds, the Funds could be left in a less
favorable position than if such strategies had not been used. Risks inherent in
the use of futures, options, forward contracts and swaps include (1) the risk
that interest rates, securities prices and currency markets will not move in the
directions anticipated; (2) imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. Further information on the use of futures, options,
forward foreign currency contracts and swaps and swap-related products, and the
associated risks, is contained in the Statement of Additional Information.
THE FUNDS AND THEIR MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Funds, and reviews the services provided by the adviser. Under ^ an
agreement with the Company, INVESCO ^, 7800 E. Union Avenue, Denver, Colorado,
serves as the Funds' investment adviser^; it is primarily responsible for
providing the Funds with portfolio management and various administrative
services ^.
Pursuant to an agreement with the Company, ^ INVESCO Distributors, Inc.
("IDI") ^ is the Funds' distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by ^
INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Funds'
distributor.
^ INVESCO ^ and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
<PAGE>
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. ^ INVESCO
^ continued to operate under ^ its existing ^ name. AMVESCAP PLC ^ had
approximately ^ $261 billion in assets under management^ as of June 30, 1998.
INVESCO was established in 1932 and, as of July 31, ^ 1998, managed 14 mutual
funds, consisting of ^ 49 separate portfolios, with combined assets of
approximately ^ $19.6 billion on behalf of ^ 884,099 shareholders.
Prior to February 3, 1998, Institutional Trust Company d/b/a INVESCO Trust
Company ("ITC") provided sub-advisory services to the Funds; termination of its
sub-advisory services in no way changed the basis upon which investment advice
is provided to the Funds, the cost of those services to the Funds or the persons
actually performing the investment advisory and other services previously
provided by ITC. INVESCO provides such day-to-day portfolio management services
as the investment adviser to the Funds.
The Funds are managed by members of INVESCO's Sector Team, which is headed
by Daniel B. Leonard. The following individuals are primarily responsible for
the day-to-day management of the Funds' portfolio holdings:
Worldwide Capital Goods Fund: ^ John Segner has been the portfolio manager
of the Fund since ^ January 1998. Mr. Segner also manages INVESCO Energy
Portfolio. Mr. Segner is also a vice president of INVESCO ^. Mr. Segner was
previously the managing director and principal with The Mitchell Group, Inc.
(1990-1997), manager of marketing development (1988-1990) and manager of
financial analysis (1986-1988) with First Tennessee National Corporation, and a
financial analyst with Amerada Hess Corporation (1985-1986). Mr. Segner received
an M.B.A. in Finance from the University of Texas-Austin and a B.S. in Civil
Engineering from the University of Alabama.
Worldwide Communications Fund: Brian B. Hayward, a Chartered Financial
Analyst, has been portfolio manager of the Fund since July 1997. Mr. Hayward
also manages INVESCO Strategic Utilities Portfolio and INVESCO VIF - Utilities
Fund. Mr. Hayward began his investment career in 1985 and was most recently the
senior equity analyst with Mississippi Valley Advisors in St. Louis, Missouri.
Mr. Hayward received ^ an M.A. in Economics and a B.A. in Mathematics from the
University of Missouri.
INVESCO permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that INVESCO believes
is not detrimental to the Funds or INVESCO's other advisory clients. See the
Statement of Additional Information for more detailed information.
<PAGE>
Each Fund pays INVESCO a monthly management ^ fee which is based upon a
percentage of ^ each Fund's average net assets ^, determined daily. The ^
management fee is computed at the annual rate of 0.65% on the first $500 million
of each Fund's average net assets, 0.55% on the next $500 million of each Fund's
average net assets and 0.45% on each Fund's average net assets over $1 billion.
^
The Company also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with ^ INVESCO. Pursuant to the Administrative
Agreement, ^ INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, each Fund pays ^ INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ INVESCO also is paid a fee by each Fund for providing transfer agent
services. See "Additional Information."
The management and custodial services provided to the Funds by INVESCO and
the Funds' custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Funds' securities trades, their share pricing and their account
services. The Funds and their service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
Each Fund's expenses, which are accrued daily, are ^ deducted from each
Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangements) of the Capital Goods Fund and the Communications
Fund for the fiscal year ended July 31, ^ 1998 including investment management
fees (but excluding brokerage commissions, which are included as a cost of
acquiring securities), amounted to ^ 1.97% and ^ 1.32%, respectively, of each
Fund's average net assets. Certain expenses for the Capital Goods Fund and the
Communications Fund are voluntarily absorbed by ^ INVESCO ^ pursuant to a
commitment to the Fund in order to ensure that ^ each Fund's total operating
expenses do not exceed 2.00%. This commitment may be changed following
consultation with the Company's board of directors.
<PAGE>
^ INVESCO places orders for the purchase and sale of portfolio securities
with brokers and dealers based upon ^ INVESCO's evaluation of such ^ brokers'
and dealers' financial responsibility coupled with their ability to effect
transactions at the best available prices. As discussed under "How Shares Can Be
Purchased - Distribution Expenses," the Company may market shares of the Funds
through intermediary brokers ^ and dealers that have entered into Dealer
Agreements with ^ INVESCO or IDI, as the Funds' distributor. The Funds may place
orders for portfolio transactions with qualified ^ brokers and dealers that
recommend the Funds, or sell shares of the Funds to clients, or act as agent in
the purchase of Fund shares for clients, if ^ INVESCO believes that the quality
of execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms.
^
HOW SHARES CAN BE PURCHASED
Shares of each Fund are sold on a continuous basis by IDI, as the Funds'
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Funds. To purchase shares of either or both Funds, send a check made
payable to INVESCO Funds Group, Inc., together with a completed application
form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided By The ^ Funds," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) ^ INVESCO may permit a lesser amount to be
invested in a Fund under a federal income tax-deferred retirement plan (other
than an IRA account), or under a group investment plan qualifying as a
sophisticated investor; and (4) ^ INVESCO reserves the right to increase, reduce
or waive the minimum purchase requirements in its sole discretion where it
determines such action is in the best interests of the Fund.
<PAGE>
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Funds' office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO ^, at 7800 E. Union
Avenue, Denver, CO 80237.
Orders to purchase shares of either Fund can be placed by telephone. Shares
of the Funds will be issued at the net asset value per share next determined
after receipt of telephone instructions. Generally, payments for telephone
orders must be received by the respective Fund within three business days or the
transaction may be ^ canceled. In the event of such cancellation, the purchaser
will be held responsible for any loss resulting from a decline in the value of
the shares. In order to avoid such losses, purchasers should send payments for
telephone purchases by overnight courier or bank wire. ^ INVESCO has agreed to
indemnify the Funds for any losses resulting from such cancellations of
telephone purchases.
If your check does not clear, or if a telephone purchase must be ^ canceled
due to nonpayment, you will be responsible for any related loss a Fund or ^
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Funds
have the option to redeem shares from any identically registered account in the
Funds or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Funds through a securities broker may be charged
a commission or transaction fee by the broker for the handling of the
transaction if the broker so elects. Any investor may deal directly with a Fund
in any transaction. In that event, there is no such charge. IDI or ^ INVESCO may
from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Funds.
Each Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of ^ INVESCO, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange (generally
4:00 p.m., New York time) and also may be computed on other days under certain
circumstances. Net asset value per share for each Fund is calculated by dividing
the market value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
that Fund. If market quotations are not readily available, a security or other
<PAGE>
asset will be valued at fair value as determined in good faith by the board of
directors. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Company's board of directors believes that such value represents
fair value.
Distribution Expenses. Each Fund is authorized under a Plan and Agreement
of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the Company in connection with the distribution of the Fund's shares to
investors. These activities and services may include the payment of compensation
(including incentive compensation and/or continuing compensation based on the
amount of customer assets maintained in the Fund) to securities dealers and
other financial institutions and organizations, which may include INVESCO- and
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
^ preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Funds as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These ^ services and activities may be conducted by the staff of INVESCO, IDI or
^ their affiliates or by third parties.
Under the Plan, the ^ Funds' payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of each Fund's average net assets during the
month. IDI is not entitled to payment for overhead expenses under the Plan, but
may be paid for all or a portion of the compensation paid for salaries and other
employee benefits for the personnel of ^ INVESCO or IDI whose primary
responsibilities involve marketing shares of the INVESCO funds, including the
Funds. Payment amounts by each Fund under the Plan, for any month, may only be
made to compensate IDI for permissible activities engaged in and services
provided by IDI during the rolling 12-month period in which that month falls.
Therefore, any obligations incurred by IDI in excess of the limitations
described above will not be paid by the Funds and will be borne by IDI. In
addition, IDI and its affiliates may from time to time make additional payments
from ^ their revenues to securities dealers, financial advisers and financial
institutions that provide distribution-related and/or administrative services
<PAGE>
for the Funds. No further payments will be made by a Fund under the Plan in the
event of the Plan's termination. Payments made by a Fund may not be used to
finance directly the distribution of shares of any other Fund of the Company or
other mutual fund advised by ^ INVESCO and distributed by IDI. However, payments
received by IDI which are not used to finance the distribution of shares of the
Fund became part of IDI's revenues and may be used by IDI for ^ activities ^
that promote distribution of any of the mutual funds advised by ^ INVESCO.
Subject to review by the ^ Company's directors^, payments made by each Fund
under the Plan for compensation of marketing personnel, as noted above, are
based on an allocation formula designed to ensure that all such payments are
appropriate. IDI will bear any distribution- and service-related expenses in
excess of the amounts which are compensated pursuant to the Plan. The Plan also
authorizes any financing of distribution which may result from IDI's use of its
own resources,^ provided that such fees are legitimate and not excessive. For
more information see "How Shares Can Be Purchased - ^ Distribution Plan" in the
Statement of Additional Information.
SERVICES PROVIDED BY THE FUNDS
Shareholder Accounts. ^ INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Funds. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Funds' office by using the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund making the
distribution at the net asset value per share of that Fund in effect on the
ex-dividend or ex-distribution date. A shareholder may, however, elect to
reinvest dividends and other distributions in certain of the other no-load
mutual funds advised by ^ INVESCO and distributed by IDI, or to receive payment
of all dividends and other distributions in excess of $10.00 by check by giving
written notice to ^ INVESCO at least two weeks prior to the record date on which
the change is to take effect. Further information concerning these options can
be obtained by contacting ^ INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
<PAGE>
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ INVESCO at least two weeks prior to the
next scheduled check. Further information regarding the Periodic Withdrawal Plan
and its requirements and tax consequences can be obtained by contacting ^
INVESCO.
Exchange Policy. Shares of either Fund may be exchanged for shares of any
other Fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by ^ INVESCO and distributed by
IDI, on the basis of their respective net asset values at the time of the
exchange: ^ INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Equity Funds, Inc. (formerly, INVESCO Capital Appreciation Funds,
Inc.), INVESCO Flexible Funds, Inc. (formerly, INVESCO Multiple Asset Funds,
Inc.), INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc.^, INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds,
Inc. and INVESCO Value Trust.
An exchange involves the redemption of shares in a Fund and investment of
the redemption proceeds in shares of another Fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ INVESCO, using the telephone number or address on the
^ back of this Prospectus. Exchanges made by telephone must be in an amount of
at least $250, if the exchange is being made into an existing account of one of
the INVESCO funds. All exchanges that establish a new account must meet the
Fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Funds will not
be liable for following instructions communicated by telephone that they
reasonably believe to be genuine. The Funds employ procedures, which they
believe are reasonable, designed to confirm that exchange instructions are
genuine. These may include recording telephone instructions and providing
written confirmations of exchange transactions. As a result of this policy, the
investor may bear the risk of any loss due to unauthorized or fraudulent
instructions; provided, however, that if a Fund fails to follow these or other
reasonable procedures, the Fund may be liable.
<PAGE>
In order to prevent abuse of this policy to the disadvantage of other
shareholders, each Fund reserves the right to terminate the exchange option of
any shareholder who requests more than four exchanges in a year. A Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange policy will be given at least 60 days prior to the date of termination
or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact ^ INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis. The
minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting ^
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employer make
automatic purchases of Fund shares for them by deducting a specified amount from
their regular paychecks. This automatic investment program can be modified or
terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Tax-Deferred Retirement Plans. Shares of either Fund may be purchased for
self-employed individual retirement plans, ^ various individual retirement
accounts ("IRAs"), simplified employee pension plans and corporate retirement
<PAGE>
plans. In addition, shares can be used to fund tax qualified plans established
under Section 403(b) of the Internal Revenue Code by educational institutions,
including public school systems and private schools, and certain kinds of
non-profit organizations, which provide deferred compensation arrangements for
their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ INVESCO. ITC, an affiliate of INVESCO, is
qualified to serve as trustee or custodian under these plans and provides the
required services at competitive rates. Retirement plans (other than IRAs)
receive monthly statements reflecting all transactions in their Fund accounts.
IRAs receive the confirmations and quarterly statements described under
"Shareholder Accounts." For complete information, including prototype forms and
service charges, call ^ INVESCO at the telephone number listed on the ^ back of
this Prospectus or send a written request to: Retirement Services, INVESCO Funds
Group, Inc., Post Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of either Fund may be redeemed at any time at their current net
asset value per share next determined after a request in proper form is received
at the Funds' office. (See "How Shares Can Be Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not ^
post office box, of INVESCO ^ at 7800 E. Union Avenue, Denver, CO 80237. If no
certificates have been issued, a written redemption request signed by each
registered owner of the account may be submitted to ^ INVESCO at the post office
box address noted above. If shares are held in the name of a corporation,
additional documentation may be necessary. Call or write for specific
information. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
<PAGE>
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or when an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, ^ INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, each Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in
accounts of IRA plans) may request expedited redemption of shares having a
minimum value of $250 (or redemption of all shares if their value is less than
$250) held in accounts maintained in their name by telephoning redemption
instructions to ^ INVESCO, using the telephone number on the ^ back of this
Prospectus. The redemption proceeds, at the shareholder's option, either will be
mailed to the address listed for the shareholder's Fund account, or wired
(minimum of $1,000) or mailed to the bank which the shareholder has designated
to receive the proceeds of telephone redemptions. The Funds charge no fee for
effecting such telephone redemptions. Unless ^ INVESCO permits a larger
redemption request to be placed by telephone, a shareholder may not place a
redemption request by telephone in excess of $25,000. These telephone redemption
privileges may be modified or terminated in the future at the discretion of ^
INVESCO.
For ITC-sponsored federal income tax-deferred retirement plans ^, the term
"shareholders" is defined to mean plan trustees that file a written request to
be able to redeem Fund shares by telephone. Shareholders should understand that,
while the Funds will attempt to process all telephone redemption requests on an
expedited basis, there may be times, particularly in periods of severe economic
or market disruption, when (a) they may encounter difficulty in placing a
telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
^ Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a New Account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Funds will not be
liable for following instructions communicated by telephone that they reasonably
<PAGE>
believe to be genuine. The Funds employ procedures, which they believe are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmation
of transactions initiated by telephone. As a result of this policy, the investor
may bear the risk of any loss due to unauthorized or fraudulent instructions;
provided, however, that if a Fund fails to follow these or other reasonable
procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. Each Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
shareholders allows the Funds to maintain their tax status as regulated
investment ^ companies. The Funds do not expect to pay any federal income or
excise taxes because of their tax status as regulated investment companies.
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes, unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of ^ either Fund
or another fund in the INVESCO group.
Net realized capital gains of the Funds are classified as short-term and
long-term gains depending upon how long ^ a Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a ^ maximum rate of 20% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held for more than 18 months are taxable at a maximum
rate of 20% (depending on the shareholder's marginal tax rate). Beginning
January 1, 1998, the IRS Restructuring and Reform Act of 1998, signed into law
on July 24, 1998, lowers the holding period for long-term capital gains entitled
to the 20% capital gains tax rate from 18 months to 12 months. Accordingly, all
long-term gains realized after December 31, 1997 on the sale of securities held
for more than 12 months will be taxable at a maximum rate of 20%. At the end of
each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of ^ distributions by the Funds ^.
Shareholders ^ may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
<PAGE>
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
Each Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Funds.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. ^ Shareholders can avoid backup withholding on ^ their
Fund account by ensuring that ^ INVESCO has a correct, certified tax
identification number, unless the shareholder is subject to backup withholding
for other reasons.^
^ Shareholders should consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. Each Fund earns ordinary or net
investment income in the form of interest and dividends ^ on its investments.
Dividends paid by each Fund will be based solely on ^ net investment income
earned by it. Each Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on an annual basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, each Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital ^ gain. Net realized capital gains, if any,
together with gains^ realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital ^
gain distributions are automatically reinvested in additional shares of the Fund
at net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution, regardless of how long the Fund
shares have been held by the shareholder. The Fund's share price will then drop
by the amount of the distribution on the ex-dividend or ex-distribution date. If
a shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Funds have equal voting rights, based on
one vote for each share owned and a corresponding fractional vote for each
<PAGE>
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a fund-by-fund basis. When not all
funds are affected by a matter to be voted upon, only shareholders of the fund
or funds affected by the matter will be entitled to vote thereon. The Company is
not generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of ^ a Fund or as may be
required by applicable law or the Company's Articles of Incorporation. The
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Master/Feeder Option. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objective and substantially the
same investment policies and restrictions as those applicable to the Fund. It is
expected that any such investment company would be managed by ^ INVESCO in
substantially the same manner as the existing Fund. If permitted by applicable
laws and policies then in effect, any such investment may be made in the sole
discretion of the Company's board of directors without further approval of the
shareholders of the affected Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the respective Fund and its shareholders. In making that
determination, the board will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. No assurance can be given that costs will be materially reduced if
this option is implemented.
Shareholder Inquiries. All inquiries regarding the Funds should be directed
to the Funds at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO ^, 7800 E. Union Ave.,
Denver, Colorado 80237, also acts as registrar, transfer agent, and dividend
disbursing agent for the Funds pursuant to a Transfer Agency Agreement which
provides that each Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account, but is an
expense of ^ each Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of ^ INVESCO, may provide sub-transfer
agency or recordkeeping services to a Fund which reduce or eliminate the need
<PAGE>
for identical services to be provided on behalf of the Fund by ^ INVESCO. In
such cases, ^ INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to ^ INVESCO by
each Fund.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
Two no-load mutual funds investing
globally in designated market
sectors.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO EUROPEAN SMALL COMPANY FUND
INVESCO European Small Company Fund (the "Fund") seeks to achieve capital
appreciation by investing, under normal circumstances, at least 65% of its total
assets in equity securities of European companies whose individual equity market
capitalizations would place them (at the time of purchase) in the same size
range as companies in approximately the lowest 25% of market capitalization of
companies that have equity securities listed on a U.S. national securities
exchange or trade in the NASDAQ system ("small companies"). Based on this
policy, the companies held by the Fund will typically have equity market
capitalizations under $1 billion. Additionally, the Fund will, under normal
circumstances, invest at least 65% of its total assets in issuers domiciled in
at least five countries, although the Fund's investment adviser expects the
Fund's investments to be allocated among a larger number of countries. In this
regard, no more than 50% of the Fund's total assets will be invested in any one
country. For a description of risks inherent in investing in the Fund see "Risk
Factors" and "Portfolio Turnover." The Fund is not intended as a complete
investment program due to risks of investing in the Fund. See the section
entitled "Risk Factors."
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of seven separate ^
portfolios of investments. This Prospectus relates to shares of the INVESCO
European Small Company Fund. Separate prospectuses are available upon request
from INVESCO Distributors, Inc. for the Company's other funds: INVESCO Worldwide
Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO Latin
American Growth Fund, INVESCO Asian Growth Fund, INVESCO Realty Fund and INVESCO
S&P 500 Index Fund. Investors may purchase shares of any or all of the Funds.
Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, ^ 1998
containing further information about the Fund has been filed with the Securities
and Exchange Commission and is incorporated by reference into this Prospectus.
To ^ request a free copy, write to INVESCO Distributors, Inc., Post Office Box
173706, Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site
^ at http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES..........................................................41
FINANCIAL HIGHLIGHTS..........................................................43
PERFORMANCE DATA..............................................................45
INVESTMENT OBJECTIVE AND POLICIES.............................................45
RISK FACTORS..................................................................51
THE FUND AND ITS MANAGEMENT...................................................54
^ HOW SHARES CAN BE PURCHASED.................................................57
SERVICES PROVIDED BY THE FUND.................................................61
HOW TO REDEEM SHARES..........................................................63
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS......................................64
ADDITIONAL INFORMATION........................................................66
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund, however, is authorized to pay a ^ Rule 12b-1 distribution fee
of one quarter of one percent of the Fund's average net assets each year. (See
"How Shares Can Be Purchased -^ Distribution Expenses.") Lower expenses benefit
Fund shareholders by increasing the Fund's total return.
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO") and INVESCO Asset Management Limited ("IAML") voluntarily
reimburse the Fund for certain expenses in excess of 2.00% (excluding excess
amounts that have been offset by the expense offset arrangements described
below) of the Fund's average net assets.
Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 1.04%
Transfer Agency Fee(3) ^ 0.58%
General Services, Administrative ^ 0.46%
Services, Registration, Postage(4)
Total Fund Operating Expenses ^ 2.04%
(after voluntary expense limitation)(1)(2)
(1) It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian and transfer agency
fees and pricing expenses were reduced under expense offset arrangements.
However, as a result of an SEC requirement ^, the figures shown above do not
reflect these reductions. In comparing expenses for different years, please note
that the ^ Ratios of Expenses to Average Net Assets shown under "Financial
Highlights" do reflect reductions for periods prior to the fiscal year ended
July 31, 1996. See "The Fund ^ And Its Management."
(2) ^ Certain Fund expenses are voluntarily absorbed by INVESCO Funds
Group, Inc. and INVESCO Asset Management Limited ("IAML"). In the absence of
such absorbed expenses, the Fund's "Other Expenses" and "Total Fund Operating
Expenses" in the above table would have been 1.06% and 2.06%, respecctively, of
the Fund's average net assets based on the actual expenses of the Fund for the
fiscal year ended July 31, 1998. See "The Fund And Its Management."
(3) Consists of the transfer agency fee described under "Additional
Information - Transfer and Dividend Disbursing Agent."
<PAGE>
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services furnished under an Administrative
Services Agreement, costs of registration of Fund shares under applicable laws,
and costs of printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $21 $64 $111 $238
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See "The Fund ^ And Its Management.") The Fund charges no sales
loads, redemption fees, or exchange fees. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The assumed 5% annual return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than the assumed amount.
^ Because the Fund pays a distribution fee, investors who own Fund shares
for a long period of time may pay more than the economic equivalent of the
maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by ^ PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's ^ 1998 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO Distributors, Inc. at the address
or telephone number shown ^ on the back cover of this Prospectus.
INVESCO European Small Company Fund
<TABLE>
<CAPTION>
Period
Ended
Year Ended July 31 July 31
----------------------------------------- ---------------
1998 1997 1996 1995(a)^
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $16.29 $15.08 $11.56 $10.00
----------------------------------------- ---------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)(b) 0.00 (0.05) 0.07 0.04
Net Gains on Securities
(Both ^ Realized and
Unrealized) 2.82 1.79 3.52 1.56
----------------------------------------- ---------------
Total from Investment
Operations 2.82 1.74 3.59 1.60
----------------------------------------- ---------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.00 0.00 0.07 0.04
Distributions from
Capital ^ Gains 3.45 0.53 0.00 0.00
----------------------------------------- ---------------
Total Distributions 3.45 0.53 0.07 0.04
----------------------------------------- ---------------
Net Asset Value -
End of Period $15.66 $16.29 $15.08 $11.56
========================================= ===============
TOTAL RETURN 24.15% 11.71% 31.07% 15.98%(c)^
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
RATIOS
Net Assets - End of Period
($000 Omitted) $71,532 $75,057 $94,261 $3,801
Ratio of Expenses to
Average ^ Net Assets^(d) 2.04%(e) 1.62%(e) 1.68%(e) 2.00%(f)
Ratio of Net Investment
Income ^(Loss) to
Average Net Assets^(d) (0.48%) (0.18%) 1.23% 2.37%(f)^
Portfolio Turnover Rate ^ 98% 87% 141% 0%(c)
</TABLE>
^(a) From February 15, 1995, commencement of investment operations, to July 31,
1995.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended July 31, 1998.
(c)^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
^(d) Various expenses of the Fund were voluntarily absorbed by INVESCO ^ and
IAML for the year ended July 31, 1998 and the period ended July 31, 1995.
If such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 2.06% and 10.17% (annualized),
respectively, and ratio of net investment income (loss) to average net
assets would have been (0.50%) and (5.80%) (annualized), respectively.^
^(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser and Sub-Adviser, which is before any expense offset
arrangements.
^(f) Annualized
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical earnings and are not intended to
indicate future performance. The "total return" of the Fund refers to the annual
rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and other distributions, to the end of a
specified period. Periods of one year, five years, ten years and/or life of the
Fund are used if available. ^ Any given report of total return performance
should not be considered as representative of future performance. The Fund
charges no sales loads, redemption fees, or exchange fees which would affect the
total return computation.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and performance of recognized indices of investment results for the
same period, and/or assessments of the quality of shareholder service, may be
provided to shareholders. Such indices include indices provided by Dow Jones &
Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average, the James Capel
European Smaller Companies Index, the Hoare Govette Smaller Companies Index, the
FT-Actuaries Europe Index and the Deutcher Aktienindex, all of which are
unmanaged market indicators. In addition, rankings, ratings, and comparisons of
investment performance and/or assessments of the quality of shareholder service
appearing in publications such as Money, Forbes, Kiplinger's Personal Finance,
Morningstar, and similar sources which utilize information compiled (i)
internally; (ii) by Lipper Analytical Services, Inc.; or (iii) by other
recognized analytical services, may be used in advertising. The Lipper
Analytical Services, Inc. mutual fund rankings and comparisons, which may be
used by the Fund in performance reports, will be drawn from the "International
Small Company" Lipper mutual fund grouping, in addition to the broad-based
Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
^ The Fund seeks to achieve capital appreciation by investing, under normal
circumstances, at least 65% of its total assets in equity securities of European
companies whose individual equity market capitalizations would place them (at
the time of purchase) in the same size range of companies in approximately the
lowest 25% of market capitalization of companies that have equity securities
listed on a U.S. national securities exchange or traded in the NASDAQ system
("small companies"). Based on this policy, the companies held by the Fund will
typically have equity market capitalizations under $1 billion. The foregoing
<PAGE>
investment objective is fundamental and may not be changed without the approval
of the INVESCO European Small Company shareholders. The balance of the Fund's
assets may be invested in securities of companies other than European companies
and companies whose capitalization exceeds that of small companies. The Fund
defines securities of European companies as follows: (1) securities of companies
organized under the laws of a European country; (2) securities of companies for
which the principal securities trading market is in Europe; (3) securities
issued or guaranteed by a government agency, instrumentality, political
subdivision, or central bank of a European country; (4) securities of companies,
wherever organized, with at least 50% of the issuer's assets, gross revenues, or
profit in any one of the two most recent fiscal years derived from activities or
assets in Europe; or (5) securities of European companies, as defined above, in
the form of depository receipts or shares. The Fund has not established any
minimum investment standards, such as earnings history, type of industry,
dividend payment history, etc., with respect to the Fund's investments in
foreign equity securities and, therefore, investors in the Fund should consider
that investments may consist in part of securities which may be deemed to be
speculative.
Additionally, under normal circumstances, the Fund will invest at least 65%
of its total assets in issuers domiciled in at least five countries, although
the Fund's adviser or sub-adviser (collectively, "Fund Management") expects the
Fund's investments to be allocated among a larger number of countries. For
purposes of this Fund, investments may be made in any countries located on the
European continent (which extends as far east as Russia) including, but not
limited to, Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Holland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey and the United Kingdom. In that regard, no more than 50% of
the Fund's total assets will be invested in securities issued by companies
domiciled in any one country. The economies of European countries may vary
widely in their condition, and may be subject to sudden changes that could have
a positive or negative impact on the Fund. The securities in which the Fund
invests will typically be listed on the principal stock exchanges in these
countries, or in the secondary or junior markets, although the Fund may purchase
securities listed on the over-the-counter market in these countries. While the
Fund's investment adviser believes that smaller companies can offer greater
growth potential than larger, more established firms, the former also involve
greater risk and price volatility. To help reduce risk, Fund Management expects,
under normal market conditions, to vary its portfolio investments by company,
industry and country. Investments in foreign securities involve certain risks
which are discussed below under "Risk Factors."
Under normal conditions, the Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities) which are discussed more fully in the Statement of
Additional Information. In selecting the equity securities in which the Fund
invests, Fund Management attempts to identify small companies it believes offer
<PAGE>
favorable long-term growth potential. It also invests in companies which may
receive greater market recognition over time. The Fund's investments in small
capitalization stocks may include companies that have limited operating
histories, product lines, and financial and managerial resources. These
companies may be subject to intense competition from larger companies, and their
stock may be subject to more abrupt or erratic market movements than the stocks
of larger, more established companies. Due to these and other factors, small
companies may suffer significant losses as well as realize substantial growth.
Consistent with its investment objectives, the balance of the Fund's assets
may be invested in fixed-income securities (corporate bonds, commercial paper,
debt securities issued by the U.S. government, its agencies and
instrumentalities, or foreign governments and, to a lesser extent, municipal
bonds, asset-backed securities and zero coupon bonds). The Fund may invest up to
15% of its total assets in debt securities that are rated below BBB by Standard
& Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, that are judged by
Fund Management to be equivalent in quality to debt securities having such
ratings (commonly referred to as "junk bonds"). In no event will a Fund ever
invest in a debt security rated below CCC by S&P or Caa by Moody's or, if
unrated, judged by Fund Management to be equivalent in quality to debt
securities having such ratings. The risks of investing in lower rated debt
securities are discussed below under "Risk Factors."
The amounts invested in stocks, bonds and cash securities may ^ vary from
time to time, depending upon Fund Management's assessment of business, economic
and market conditions. In periods of ^ unfavorable economic and market
conditions, as determined by Fund Management, the Fund may depart from its basic
investment objective and assume a ^ defensive position^ by temporarily investing
up to 100% of its assets ^ in high-quality money market instruments, such as
short-term U.S. government obligations, commercial paper or repurchase
agreements ^, seeking to protect its assets until conditions stabilize. The Fund
reserves the right to hold equity, fixed income and cash securities in whatever
proportion is deemed desirable at any given time for temporary defensive
purposes. While a Fund is in a defensive position, the opportunity to achieve
capital appreciation will be limited; however, the ability to maintain a
temporary defensive position enables the Fund to seek to avoid capital losses
during market downturns. Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in cash securities.
In order to hedge its portfolio, the Fund may purchase and write options on
securities (including index options and options on securities), and may invest
in futures contracts for the purchase or sale of foreign currencies,
fixed-income securities and instruments based on financial indices
(collectively, "futures contracts"), options on futures contracts, forward
contracts and interest rate swaps and swap-related products. Interest rate swaps
<PAGE>
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. These practices and instruments, some of which
are known as derivatives, and their risks are discussed below under "Risk
Factors" and in the Statement of Additional Information.
Additional information on certain types of securities in which the Fund may
invest is set forth below:
When-Issued Securities.^ The Fund may make commitments in an amount of up
to 10% of the value of its total assets at the time any commitment is made to
purchase or sell equity or debt securities on a when-issued or delayed delivery
basis (i.e., securities may be purchased or sold by the Fund with settlement
taking place in the future, often a month or more later). The payment obligation
and, in the case of debt securities, the interest rate that will be received on
the securities are generally fixed at the time the Fund enters into the
commitment. During the period between purchase and settlement, no payment is
made by the Fund and no interest accrues to the Fund. At the time of settlement,
the market value of the security may be more or less than the purchase price,
and the Fund bears the risk of such market value fluctuations. The Fund
maintains cash, U.S. government securities, or other liquid securities having an
aggregate value equal to the amount of such purchase commitments in a segregated
account until payment is made.
Illiquid and Rule 144A Securities.^ The Fund may invest in securities which
are illiquid because they are subject to restrictions on their resale
("restricted securities") or because, based upon their nature or the market for
such securities, they are not readily marketable. However, the Fund will not
purchase any such security if the purchase would cause the Fund to invest more
than 15% of its net assets in illiquid securities. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes of
this restriction. Investments in illiquid securities involve certain risks to
the extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, the Fund might have to bear the expense and incur the delays
associated with effecting registration.
^ The Fund may purchase certain restricted securities that are not
registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities"), may be purchased without
regard to the foregoing 15% limitation if a liquid institutional trading market
exists. The liquidity of the Fund's investments in Rule 144A Securities could be
impaired if dealers or institutional investors become uninterested in purchasing
these securities. The Company's board of directors has delegated to ^ INVESCO
the authority to determine the liquidity of Rule 144A Securities pursuant to
guidelines approved by the board. For more information concerning Rule 144A
Securities, see the Statement of Additional Information.
<PAGE>
The settlement period of securities transactions in foreign markets may be
longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than in developed countries.
Repurchase Agreements.^ The Fund may enter into repurchase agreements with
respect to debt instruments eligible for investment by the Fund with member
banks of the Federal Reserve System, registered broker-dealers and registered
government securities dealers, which are deemed creditworthy. A repurchase
agreement, which may be considered a "loan" under the Investment Company Act of
1940, is a means of investing monies for a short period. In a repurchase
agreement, the Fund acquires a debt instrument (generally a security issued by
the U.S. government or an agency thereof, a banker's acceptance, or a
certificate of deposit) subject to resale to the seller at an agreed-upon price
and date (normally, the next business day). In the event that the original
seller defaults on its obligation to repurchase the security, the Fund could
incur costs or delays in seeking to sell such security. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors. The Fund will not enter into a repurchase
agreement maturing in more than seven days if as a result more than 15% of its
net assets would be invested in such repurchase agreements and other illiquid
securities. The Fund has not adopted any limit on the amount of its net assets
that may be invested in repurchase agreements maturing in seven days or less.
Securities Lending.^ The Fund also may lend its securities to qualified
brokers, dealers, banks, or other financial institutions. This practice permits
the Fund to earn income, which, in turn, can be invested in additional
securities of the type described in this Prospectus in pursuit of the Fund's
investment objective. Loans of securities by a Fund will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
government or its agencies equal to at least 100% of the current market value of
the loaned securities, determined on a daily basis. Cash collateral will be
invested only in high quality short-term investments offering maximum liquidity.
Lending securities involves certain risks, the most significant of which is the
risk that a borrower may fail to return a portfolio security. The Fund monitors
the creditworthiness of borrowers in order to minimize such risks. The Fund will
not lend any security if, as a result of the loan, the aggregate value of
securities then on loan would exceed 33-1/3% of the Fund's total assets (taken
at market value).
Portfolio Turnover.^ There are no fixed limitations regarding portfolio
turnover for the Fund's portfolio. Although the Fund does not trade for
short-term profits, securities may be sold without regard to the time they have
<PAGE>
been held in the Fund when, in the opinion of Fund Management, investment
considerations warrant such action. In addition, portfolio turnover rates may
increase as a result of large amounts of purchases or redemptions of Fund shares
due to economic, market or other factors that are not within the control of Fund
Management. As a result, while it is anticipated that the portfolio turnover
rates for the Fund's portfolio generally will not exceed 200%, under certain
market conditions these portfolio turnover rates may exceed 200%. Increased
portfolio turnover would cause the Fund to incur greater brokerage costs than
would otherwise be the case, and may result in the acceleration of realized
capital gains or losses that are taxable when distributed to shareholders. The
Fund's portfolio turnover rates are set forth under "Financial Highlights" and,
along with the Fund's brokerage allocation policies, are discussed in the
Statement of Additional Information.
Investment Restrictions.^ The Fund is subject to a variety of restrictions
regarding its investments that are set forth in this Prospectus and in the
Statement of Additional Information. Certain of the Fund's investment
restrictions are fundamental, and may not be altered without the approval of the
Fund's shareholders. Such fundamental investment restrictions include the
restrictions which prohibit the Fund from: lending more than 33-1/3% of its
total assets to other parties (excluding purchases of commercial paper, debt
securities and repurchase agreements); investing more than 25% of the value of
the Fund's total assets in any one industry (other than government securities);
with respect to 75% of its total assets, purchasing the securities of any one
issuer (other than cash items and government securities) if the purchase would
cause the Fund to have more than 5% of its total assets invested in the issuer
or to own more than 10% of the outstanding voting securities of the issuer; and
borrowing money or issuing senior securities except that the Fund may borrow
money for temporary or emergency purposes (not for leveraging or investment)
including entering into reverse repurchase agreements. However, unless otherwise
noted, the Fund's investment restrictions and its investment policies are not
fundamental and may be changed by action of the Company's board of directors.
Unless otherwise noted, all percentage limitations contained in the Fund's
investment policies and restrictions apply at the time an investment is made.
Thus, subsequent changes in the value of an investment after purchase or in the
value of the Fund's total assets will not cause any such limitation to have been
violated or to require the disposition of any investment, except as otherwise
required by law. If the credit ratings of an issuer are lowered below those
specified for investment by the Fund, the Fund is not required to dispose of the
obligations of that issuer. The determination of whether to sell such an
obligation will be made by Fund Management based upon an assessment of credit
risk and the prevailing market price of the investment. If the Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is repaid. The Fund attempts to minimize such fluctuations by not purchasing
additional securities when borrowings, including reverse repurchase agreements,
are greater than 5% of the value of the Fund's total assets. As a fundamental
policy in addition to the above, the Fund may, notwithstanding any other
<PAGE>
investment policy or limitation (whether or not fundamental), invest all of its
assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
limitations as the Fund. See "Additional Information - ^ Master/Feeder Option."
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. There is typically less publicly available
information concerning foreign and small companies than for domestic and larger,
more established companies. Some small companies have limited product lines,
distribution channels and financial and managerial resources. Also, because
smaller companies normally have fewer shares outstanding than larger companies
and trade less frequently, it may be more difficult for the Fund to buy and sell
significant amounts of such shares without an unfavorable impact on prevailing
market prices. Some of the companies in which the Fund may invest may
distribute, sell or produce products which have recently been brought to market
and may be dependent on key personnel with varying degrees of experience.
^ Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
Foreign Securities. For U.S. investors, the returns on foreign securities
are influenced not only by the returns on the foreign investments themselves,
but also by currency risk (i.e., changes in the value of the currencies in which
the securities are denominated relative to the U.S. dollar). In a period when
the U.S. dollar generally rises against a foreign currency, the returns for a
U.S. investor on foreign securities denominated in that foreign currency may
decrease. By contrast, in a period when the U.S. dollar generally declines, the
returns on foreign securities generally are enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
<PAGE>
may result in greater price volatility; foreign withholding taxes payable on the
Fund's investment income on foreign securities, which may reduce dividend or
capital gains income payable to shareholders; the possibility of expropriation
or confiscatory taxation; adverse changes in investment or exchange control
regulations; political instability which could affect U.S. investment in foreign
countries; potential restrictions on the flow of international capital; and the
possibility of a Fund experiencing difficulties in pursuing legal remedies and
collecting judgments. The Fund's investments in foreign securities may include
investments in developing countries. Many of these securities are speculative
and their prices may be more volatile than those of securities issued by
companies located in more developed countries.
^ Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). EMU intends to establish a common
European currency for EMU countries which will be known as the "euro." Each
participating country presently plans to adopt the euro as its currency on
January 1, 1999. The old national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear entirely.
Other European countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for the Fund. As the euro is
implemented, there may be changes in the relative strength and value of the U.S.
dollar and other major currencies, as well as possible adverse tax consequences.
The euro transition by EMU countries - present and future - may impact the
fiscal and monetary policies of those participating countries. There may be
increased levels of price competition among business firms within EMU countries
and between businesses in EMU and non-EMU countries. The outcome of these
uncertainties could have unpredictable effects on trade and commerce and result
in increased volatility for all financial markets.
Lower Rated Securities. The Fund's investments in fixed-income securities
generally are subject to both credit risk and market risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments, or both, as
they come due. The ratings given a security by S&P and Moody's provide a
<PAGE>
generally useful guide as to such credit risk. The lower the rating given a
security by such rating service, the greater the credit risk such rating service
perceives to exist with respect to such security. Increasing the amount of Fund
assets invested in unrated or lower grade securities, while intended to increase
the yield produced by those assets, also will increase the credit risk to which
those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by S&P or Moody's or, if unrated, securities
determined by Fund Management to be of equivalent quality. Although bonds in the
lowest investment grade debt category (those rated BBB by S&P or Baa by Moody's)
are regarded as having adequate capability to pay principal and interest, they
have speculative characteristics. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher rated bonds. Lower rated bonds
are commonly known as "junk bonds." Those so rated by Moody's (categories Ba, B,
Caa) are of poorer quality and also have speculative characteristics. Bonds
rated Caa may be in default or there may be present elements of danger with
respect to principal or interest. Lower rated bonds by S&P (categories BB, B,
CCC) include those which are regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with their terms; BB indicates the lowest degree of speculation and
CCC a high degree of speculation. While such bonds likely will have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions. For a specific description of each
corporate bond rating category, please refer to Appendix B to the Statement of
Additional Information.
Futures, Options and Other Derivative Instruments.^ The use of futures,
options, forward contracts and swaps exposes the Fund to additional investment
risks and transaction costs, and as a result, no more than 5% of the Fund's
total assets will be committed to such investments. If Fund Management seeks to
protect the Fund against potential adverse movements in the securities, foreign
currency or interest rate markets using these instruments, and such markets do
not move in a direction adverse to the Fund, the Fund could be left in a less
favorable position than if such strategies had not been used. Risks inherent in
the use of futures, options, forward contracts and swaps include (1) the risk
that interest rates, securities prices and currency markets will not move in the
directions anticipated; (2) imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
<PAGE>
currencies being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. Further information on the use of futures, options,
forward foreign currency contracts and swaps and swap-related products, and the
associated risks, is contained in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under ^ an
agreement with the Company, INVESCO ^, 7800 E. Union Avenue, Denver, Colorado,
serves as the Fund's investment adviser. Under this agreement, ^ INVESCO is
primarily responsible for providing the Fund with various administrative
services and supervising the Fund's daily business affairs. These services are
subject to review by the Company's board of directors.
Pursuant to an agreement with ^ INVESCO, IAML serves as the sub-adviser to
the Fund. IAML also acts as sub-adviser to the INVESCO European Fund, the
INVESCO Pacific Basin Fund, the INVESCO International Growth Fund, the INVESCO
Emerging Markets Fund and the INVESCO Latin American Growth Fund. IAML, subject
to the supervision of ^ INVESCO, is primarily responsible for selecting and
managing the Fund's investments. ^
Pursuant to an agreement with the Company, ^ INVESCO Distributors, Inc.
("IDI") ^ is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by ^
INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Fund's
distributor.
^ INVESCO, IAML and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. ^ INVESCO
and IAML continued to operate under their existing names. AMVESCAP PLC ^ had
approximately ^ $261 billion in assets under management^ as of June 30, 1998.
INVESCO was established in 1932 and, as of July 31, ^ 1998, managed 14 mutual
funds, consisting of ^ 49 separate portfolios, with combined assets of
approximately ^ $19.6 billion on behalf of ^ 884,099 shareholders.
<PAGE>
The following individuals serve as lead portfolio managers for the Fund and
are supported by a team of fund managers primarily responsible for determining,
in accordance with a senior investment policy group, the country-by-country
allocation of the portfolio's assets, overall stock selection and the ongoing
implementation and risk control policies applicable to the portfolio:
Andy Crossley Co-portfolio manager of the Fund since
1995 (inception); Fund manager of INVESCO
Asset Management Limited (1991 to
present); began investment career in
1988; B.S.-Banking and Finance,
Loughborough University; Associate of the
Chartered Institute of Bankers.
Claire Griffiths Co-portfolio manager of the Fund since
1995 (inception); Fund manager of INVESCO
Asset Management Limited (1991 to
present); began investment career in
1989; M.A., St. John's College,
Cambridge.
Mr. Crossley and Ms. Griffiths head a team of individual country
specialists who are responsible for managing security selection for their
assigned country and sector within the parameters established by the investment
policy group of IAML, sub-adviser to the Fund.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
The Fund pays INVESCO a monthly management ^ fee which is based upon a
percentage of the Fund's average net assets ^, determined daily. The ^
management fee is computed at the annual rate of 0.75% on the first $500 million
of the Fund's average net assets, 0.65% on the next $500 million of the Fund's
average net assets and 0.55% on the Fund's average net assets over $1 billion.
Out of ^ the advisory fee which it receives from the Fund, ^ INVESCO pays
IAML, as the Fund's sub-adviser, a monthly fee based upon the average daily
value of the Fund's net assets. Based upon approval of the Company's board of
directors at a meeting held May 14, 1998, the calculation of subadvisory fees of
the Fund has been changed from 33.33% of the advisory fee (0.25% on the first
$500 million of the ^ Fund's average net assets, ^ 0.2167% on the next $500
million of the ^ Fund's average net assets and ^ 0.1833% on the ^ Fund's average
net assets in excess of $1 billion) to 40% of the advisory fee (0.30% on the
first $500 million of the Fund's average net assets, 0.26% on the next $500
million of the Fund's average net assets and 0.22% on the Fund's average net
assets in excess of $1 billion). No fee is paid by the ^ Fund to IAML.
<PAGE>
The Company also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with ^ INVESCO. Pursuant to the Administrative
Agreement, ^ INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays ^ INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ INVESCO also is paid a fee by the Fund for providing transfer agent
services. See "Additional Information."
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
The Fund's expenses, which are accrued daily, are ^ deducted from the
Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangement) of the Fund for the fiscal period ended July 31, ^
1998, including investment management fees (but excluding brokerage commissions,
which are included as a cost of acquiring securities), amounted to ^ 2.04% of
the Fund's average net assets. Certain expenses for the Fund are voluntarily
absorbed by ^ INVESCO and IAML pursuant to a commitment to the Fund in order to
ensure that the Fund's total operating expenses do not exceed 2.00%. This
commitment may be changed following consultation with the Company's board of
directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such ^ brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. As discussed under "How
Shares Can Be Purchased - Distribution Expenses," the Company may market shares
of the ^ Fund through intermediary brokers or dealers that have entered into
<PAGE>
Dealer Agreements with ^ INVESCO or IDI, as the Fund's distributor. The Fund may
place orders for portfolio transactions with qualified ^ brokers and dealers
that recommend the Funds, or sell shares of the ^ Fund to clients, or act as
agent in the purchase of Fund shares for clients, if Fund Management believes
that the quality of execution of the transaction and level of commission are
comparable to those available from other qualified brokerage firms. ^
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided By The Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in a Fund under a federal income tax-deferred retirement plan (other
than an IRA account), or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to increase,
reduce or waive the minimum purchase requirements in its sole discretion where
it determines such action is in the best interests of the Fund.
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO ^ at 7800 E. Union
Avenue, Denver, CO 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares of
the Fund will be issued at the net asset value per share next determined after
receipt of telephone instructions. Generally, payments for telephone orders must
be received by the Fund within three business days or the transaction may be ^
<PAGE>
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. ^ INVESCO has agreed to indemnify
the Fund for any losses resulting from such cancellations of telephone
purchases.
If your check does not clear, or if a telephone purchase must be ^ canceled
due to nonpayment, you will be responsible for any related loss the Fund or ^
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a
commission or transaction fee by the broker for the handling of the transaction
if the broker so elects. Any investor may deal directly with the Fund in any
transaction. In that event, there is no such charge. IDI or ^ INVESCO may from
time to time make payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of ^ Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange (generally
4:00 p.m., New York time) and also may be computed on other days under certain
circumstances. Net asset value per share for the Fund is calculated by dividing
the market value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
that Fund. If market quotations are not readily available, a security or other
asset will be valued at fair value as determined in good faith by the board of
directors. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Company's board of directors believes that such value represents
fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the Company in connection with the distribution of the Fund's shares to
investors. These activities and services may include the payment of compensation
<PAGE>
(including incentive compensation and/or continuing compensation based on the
amount of customer assets maintained in the Fund) to securities dealers and
other financial institutions and organizations, which may include INVESCO- and
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
^ preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or ^
their affiliates or by third parties.
Under the Plan, the ^ Fund's payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets during the
month. IDI is not entitled to payment for overhead expenses under the Plan, but
may be paid for all or a portion of the compensation paid for salaries and other
employee benefits for the personnel of ^ INVESCO or IDI whose primary
responsibilities involve marketing shares of the INVESCO funds, including the
Fund. Payment amounts by the Fund under the Plan, for any month, may only be
made to compensate IDI for permissible activities engaged in and services
provided by IDI during the rolling 12-month period in which that month falls.
Therefore, any obligations incurred by IDI in excess of the limitations
described above will not be paid by the ^ Fund and will be borne by IDI. In
addition, INVESCO, IDI and ^ their affiliates may from time to time make
additional payments from ^ their revenues to securities dealers, financial
advisers and financial institutions that provide distribution-related and/or
administrative services for the Fund. No further payments will be made by the
Fund under the Plan in the event of the Plan's termination. Payments made by the
Fund may not be used to finance directly the distribution of shares of any other
Fund of the Company or other mutual fund advised by ^ INVESCO and distributed by
IDI. However, payments received by IDI which are not used to finance the
distribution of shares of the Fund become part of IDI's revenues and may be used
by IDI for ^ activities ^ that promote distribution of any of the mutual funds
advised by ^ INVESCO. Subject to review by the ^ Company's directors^, payments
made by the Fund under the Plan for compensation of marketing personnel, as
noted above, are based on an allocation formula designed to ensure that all such
payments are appropriate. IDI will bear any distribution- and service-related
expenses in excess of the amounts which are compensated pursuant to the Plan.
The Plan also authorizes any financing of distribution which may result from
<PAGE>
IDI's use of its own resources,^ provided that such fees are legitimate and not
excessive. For more information see "How Shares Can Be Purchased - ^
Distribution Plan" in the Statement of Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex-dividend or ex-distribution date. A shareholder
may, however, elect to reinvest dividends and other distributions in certain of
the other no-load mutual funds advised by ^ INVESCO and distributed by IDI, or
to receive payment of all dividends and other distributions in excess of $10.00
by check by giving written notice to ^ INVESCO at least two weeks prior to the
record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ INVESCO at least two weeks prior to the
next scheduled check. Further information regarding the Periodic Withdrawal Plan
and its requirements and tax consequences can be obtained by contacting ^
INVESCO.
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by ^ INVESCO and distributed by
IDI, on the basis of their respective net asset values at the time of the
exchange: ^ INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
<PAGE>
Inc., INVESCO Equity Funds, Inc. (formerly, INVESCO Capital Appreciation Funds,
Inc.), INVESCO Flexible Funds, Inc. (formerly, INVESCO Multiple Asset Funds,
Inc.), INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc.^, INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds,
Inc. and INVESCO Value Trust.
An exchange involves the redemption of shares in the Fund and investment of
the redemption proceeds in shares of another fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ INVESCO using the telephone number or address on the
^ back of this Prospectus. Exchanges made by telephone must be in an amount of
at least $250, if the exchange is being made into an existing account of one of
the INVESCO funds. All exchanges that establish a new account must meet the
Fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
<PAGE>
exchange policy will be given at least 60 days prior to the date of termination
or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact ^ INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis. The
minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting ^
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employer make
automatic purchases of Fund shares for them by deducting a specified amount from
their regular paychecks. This automatic investment program can be modified or
terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, ^ various individual retirement
accounts ("IRAs"), simplified employee pension plans and corporate retirement
plans. In addition, shares can be used to fund tax qualified plans established
under Section 403(b) of the Internal Revenue Code by educational institutions,
including public school systems and private schools, and certain kinds of
non-profit organizations, which provide deferred compensation arrangements for
their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ INVESCO. Institutional Trust Company d/b/a INVESCO
Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve as trustee
or custodian under these plans and provides the required services at competitive
rates. Retirement plans (other than IRAs) receive monthly statements reflecting
all transactions in their Fund accounts. IRAs receive the confirmations and
<PAGE>
quarterly statements described under "Shareholder Accounts." For complete
information, including prototype forms and service charges, call ^ INVESCO at
the telephone number listed on the ^ back of this Prospectus or send a written
request to: Retirement Services, INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not ^
post office box, of INVESCO ^ at 7800 E. Union Avenue, Denver, CO 80237. If no
certificates have been issued, a written redemption request signed by each
registered owner of the account must be submitted to ^ INVESCO at the post
office box address noted above. If shares are held in the name of a corporation,
additional documentation may be necessary. Call or write for specific
information. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, ^ INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
<PAGE>
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
INVESCO, using the telephone number on the ^ back of this Prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be modified or terminated in the future at the discretion of ^ Fund
Management.
For federal income tax-deferred retirement plans sponsored by ^ ITC, the
term "shareholders" is defined to mean plan trustees that file a written request
to be able to redeem Fund shares by telephone. Shareholders should understand
that, while the Fund will attempt to process all telephone redemption requests
on an expedited basis, there may be times, particularly in periods of severe
economic or market disruption, when (a) they may encounter difficulty in placing
a telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
^ Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a New Account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believe to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmation
of transactions initiated by telephone. As a result of this policy, the investor
may bear the risk of any loss due to unauthorized or fraudulent instructions;
provided, however, that if the Fund fails to follow these or other reasonable
procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
<PAGE>
shareholders allows the Fund to maintain its tax status as a regulated
investment company. ^ The Fund does not expect to pay any federal income or
excise taxes because of its tax status as a regulated investment company.
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes, unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a maximum rate of 28% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held more than 18 months are taxable at a maximum rate of
28% (depending on the shareholder's marginal tax rate). Beginning January 1,
1998, the IRS Restructuring and Reform Act of 1998, signed into law on July 24,
1998, lowers the holding period for long-term capital gains entitled to the 20%
capital gains tax rate from 18 months to 12 months. Accordingly, all long-term
gains realized after December 31, 1997 on the sale of securities held more than
12 months will be taxable at a maximum rate of 20%. At the end of each year,
information regarding the tax status of dividends and other distributions is
provided to shareholders. Shareholders should consult their tax advisers as to
the effect of ^ distributions by the Fund ^.
Shareholders ^ may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest received on foreign securities. Foreign taxes withheld may be treated
as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. ^ Shareholders can avoid backup withholding on ^ their
Fund account by ensuring that ^ INVESCO has a correct, certified tax
identification number, unless the shareholder is subject to backup withholding
for other reasons.^
<PAGE>
^ Shareholders should consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends ^ on its investments.
Dividends paid by the Fund will be based solely on the net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on an annual basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital ^ gain. Net realized capital gains, if any,
together with gains^ realized on certain foreign currency transactions, if any,
are distributed to shareholders at least annually, usually in December. Capital
^ gain distributions are automatically reinvested in shares of the Fund at the
net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution regardless of how long the Fund shares
have been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all Funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a Fund-by-Fund basis. When not all
Funds are affected by a matter to be voted upon, only shareholders of the Fund
or Funds affected by the matter will be entitled to vote thereon. The Company is
not generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the ^ Fund or as may be
required by applicable law or the Company's Articles of Incorporation. The
<PAGE>
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ INVESCO in substantially the same manner as the existing Fund. If permitted by
applicable laws and policies then in effect, any such investment may be made in
the sole discretion of the Company's board of directors without further approval
of the shareholders of the Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the Fund and its shareholders. In making that determination, the
board will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. No assurance
can be given that costs will be materially reduced if this option is
implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO ^, 7800 E. Union Ave.,
Denver, Colorado 80237, also acts as registrar, transfer agent, and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account, but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of ^ INVESCO, may provide sub-transfer
agency or recordkeeping services to the Fund which reduce or eliminate the need
for identical services to be provided on behalf of the Fund by ^ INVESCO. In
such cases, ^ INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to ^ INVESCO by
the Fund.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO European Small Company Fund
A no-load mutual fund
seeking capital
appreciation.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO LATIN AMERICAN GROWTH FUND
INVESCO Latin American Growth Fund (the "Fund") seeks to achieve capital
appreciation by investing, under normal circumstances, at least 65% of its total
assets in equity securities (common stocks and, to a lesser degree, depository
receipts, preferred stocks and securities convertible into common stocks, such
as rights, warrants and convertible debt securities) of Latin American issuers.
For purposes of this Fund, Latin America will include: Mexico, Central America,
South America, and the Spanish speaking islands of the Caribbean. The Fund is
not intended as a complete investment program due to risks of investing in the
Fund. For a description of risks inherent in investing in the Fund, see "Risk
Factors" and "Investment Objective And Policies - ^ Portfolio Turnover".
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, managed, no-load mutual fund consisting of seven separate
portfolios of investments. This Prospectus relates to shares of the INVESCO
Latin American Growth Fund. Separate prospectuses are available upon request
from INVESCO Distributors, Inc. for the Company's other funds, INVESCO Worldwide
Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European
Small Company Fund, INVESCO Asian Growth Fund, INVESCO Realty Fund and INVESCO
S&P 500 Index Fund. Investors may purchase shares of any or all of the Funds.
Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, ^ 1998
containing further information about the Fund has been filed with the Securities
and Exchange Commission and is incorporated by reference into this Prospectus.
To ^ request a free copy, write to INVESCO Distributors, Inc., Post Office Box
173706, Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site
^ at http://www.invesco.com.
The Fund may invest up to 35% of its assets in lower rated bonds and
foreign debt securities, commonly known as "junk bonds." Investments of this
type are subject to greater risks, including default risks, than those found in
higher rated securities. ^ Purchasers should carefully assess the risks
associated with an investment in this Fund. See "Investment Objective ^ And
Policies" and "Risk Factors."
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES 72
FINANCIAL HIGHLIGHTS 74
PERFORMANCE DATA 76
INVESTMENT OBJECTIVE AND POLICIES 76
RISK FACTORS 82
THE FUND AND ITS MANAGEMENT 90
HOW SHARES CAN BE PURCHASED 93
SERVICES PROVIDED BY THE FUND 96
HOW TO REDEEM SHARES 99
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS 101
ADDITIONAL INFORMATION 103
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares other than a fee to redeem or exchange shares held less than three
months. (See "Shareholder Transaction Expenses.") The Fund^ is authorized to pay
a ^ Rule 12b-1 distribution fee of one quarter of one percent of the Fund's
average net assets each year. (See "How Shares Can Be Purchased - ^ Distribution
Expenses.") Lower expenses benefit Fund shareholders by increasing the Fund's
total return.
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO") and INVESCO Asset Management Limited ("IAML") voluntarily
reimburse the Fund for certain expenses in excess of 2.00% (excluding excess
amounts that have been offset by the expense offset arrangement described below)
of the Fund's average net assets.
Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees 1.00%*
Exchange fees 1.00%*
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 0.99%
Transfer Agency Fee(3) ^ 0.47%
General Services, Administrative ^ 0.52%
Services, Registration, Postage (4)
Total Fund Operating Expenses(1)(2) ^ 1.99%
*There is a 1% fee retained by the Fund to offset transaction costs and other
expenses associated with short-term redemptions and exchanges, which is imposed
only on redemptions or exchanges of shares held less than three months.
(1) It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian fees were reduced
under an expense offset arrangement. However, as a result of an SEC requirement
^, the figures shown above do not reflect these reductions. In comparing
expenses for different years, please note that the ^ Ratios of Expenses to
Average Net Assets shown under "Financial Highlights" do reflect reductions for
periods prior to the fiscal year ended July 31, 1996. See "The Fund ^ And Its
Management."
(2) Ratio is based on Total Expenses of the Fund, which is before any
expense offset arrangement.
(3) Consists of the transfer agency fee described under "Additional
Information-Transfer and Dividend Disbursing Agent."
<PAGE>
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and auditors, securities pricing services, costs
of administrative services furnished under an Administrative Services Agreement,
costs of registration of Fund shares under applicable laws, and costs of
printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $20 $63 $108 $233
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See "The Fund and Its Management.") THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
^ Because the Fund pays a distribution fee, investors who own Fund shares
for a long period of time may pay more than the economic equivalent of the
maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by ^ PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's ^ 1998 Annual Report to Shareholders, which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO Distributors, Inc. at the address
or telephone number shown ^ on the back cover of the Prospectus.
INVESCO Latin American Growth Fund
<TABLE>
<CAPTION>
Period
Ended
Year Ended July 31 July 31
----------------------------------------- ---------
1998 1997 1996 1995(a)^
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $18.37 $12.86 $11.69 $10.00
----------------------------------------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)(b) 0.00 0.13 0.08 0.02
Net Gains or (Losses) on
Securities (Both
Realized and Unrealized) (5.41) 5.88 1.62 1.69
----------------------------------------- ----------
Total from Investment
Operations (5.41) 6.01 1.70 1.71
----------------------------------------- ----------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income(c) 0.00 0.14 0.09 0.02
Distributions from
Capital ^ Gains ^ 1.02 0.36 0.44 0.00
In Excess of Capital Gains 0.76 0.00 0.00 0.00
----------------------------------------- ----------
Total Distributions 1.78 0.50 0.53 0.02
----------------------------------------- ----------
Net Asset Value -
End of Period $11.18 $18.37 $12.86 $11.69
========================================= ==========
TOTAL ^ RETURN(d) (30.64%) 48.06% 15.27% 17.09%(e)^
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
RATIOS
Net Assets - End of Period
($000 Omitted) $34,725 $130,272 $32,064 $7,423
Ratio of Expenses to
Average ^ Net Assets^(f) 1.99%(g) 1.76%(g) 2.14%(g) 2.00%(h)
Ratio of Net Investment
Income (Loss) to
Average Net Assets^(f) 0.00% 1.35% 1.26% 0.79%(h)^
Portfolio Turnover Rate ^ 33% 72% 29% 30%(e)
</TABLE>
^(a) From February 15, 1995, commencement of investment operations, to July 31,
1995.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended July 31, 1998.
(c) Distributions in excess of net investment income for the year ended July
31, 1998, aggregated less than $0.01 on a per share basis. (d) The^
applicable redemption fees are not included in the Total Return
calculation.
(e)^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
^(f) Various expenses of the Fund were voluntarily absorbed by INVESCO ^ and
IAML for the period ended July 31, 1995. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have
been 4.49% (annualized)^ and ratio of net investment income to average net
assets would have been (1.70%) (annualized).
^(g) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser and Sub-Adviser, which is before any expense offset
arrangements.
^(h) Annualized
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of the Fund refers to the
annual rate of return of an investment in the Fund. This figure is computed by
calculating the percentage change in value of an investment of $1,000, assuming
reinvestment of all income dividends and other distributions, to the end of a
specified period. Periods of one year, five years, ten years and/or life of the
Fund are used if available. ^ Any given report of total return performance
should not be considered as representative of future performance. The Fund
charges no sales loads which would affect the total return computation. However,
the total return computation may be affected as a result of the 1% redemption or
exchange fee which is retained by the Fund to offset transaction costs and other
expenses associated with short-term redemptions and exchanges, which is imposed
on redemptions or exchanges of shares held less than three months.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services, may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Latin American" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
^ The Fund seeks to achieve capital appreciation by investing, under normal
circumstances, at least 65% of its total assets in equity securities (common
stocks and, to a lesser degree, depository receipts, preferred stocks and
securities convertible into common stocks, such as rights, warrants and
convertible debt securities) of Latin American issuers. The foregoing investment
objective is fundamental and may not be changed in any material respect without
the approval of the Fund's shareholders. For purposes of this Fund, Latin
<PAGE>
America will include: Mexico, Central America, South America, and the Spanish
speaking islands of the Caribbean. The Fund defines securities of Latin American
issuers as follows: (1) securities of companies organized under the laws of a
Latin American country; (2) securities of companies for which the principal
securities trading market is in Latin America; (3) securities issued or
guaranteed by a government agency, instrumentality, political subdivision, or
central bank of a Latin American country; (4) securities of issuers, wherever
organized, with at least 50% of the issuer's assets, capitalization, gross
revenues, or profit in any one of the two most recent fiscal years derived from
activities or assets in Latin America; or (5) securities of Latin American
issuers, as defined above, in the form of depository shares.
The economies of Latin American countries may vary widely in their
condition, and may be subject to certain changes that could have a positive or
negative impact on the Fund. Investments in foreign securities involve certain
risks which are discussed below under "Risk Factors."
Investment in this Fund involves above-average investment risk. It is
designed as a long-term investment and not for short-term trading purposes, and
should not be considered a complete investment program. A 1% fee, described more
fully under "Services Provided by the Fund" and "How to Redeem Shares," is
payable to the Fund for the benefit of remaining shareholders for redemption or
exchange of shares held less than three months.
Under normal conditions, the Fund will invest primarily in equity
securities (common stocks and, to a lesser degree, depository receipts,
preferred stocks and securities convertible into common stocks, such as rights,
warrants and convertible debt securities) which are discussed more fully in the
Statement of Additional Information. In selecting the equity securities in which
the Fund invests, the Fund's investment adviser and sub-adviser (collectively,
"Fund Management") attempt to identify companies that in Fund Management's
opinion have demonstrated or, are likely to demonstrate in the future, strong
earnings growth that reflects the underlying economic activity within the
country or countries in which they operate. The dividend payment records of
companies are also considered. Equity securities may be issued by either
established, well-capitalized companies or newly-formed, small-cap companies,
and may trade on regional or national stock exchanges or in the over-the-counter
market. The Fund's investments in small capitalization stocks may include
companies that have limited operating histories, product lines, and financial
and managerial resources. These companies may be subject to intense competition
from larger companies, and their stock may be subject to more abrupt or erratic
market movements than the stocks of larger, more established companies. Due to
these and other factors, small-cap companies may suffer significant losses as
well as realize substantial growth.
The balance of the Fund's assets may be invested in securities of U.S. and
other non-Latin American corporate or governmental issuers. These investments
<PAGE>
may include equity securities or fixed-income securities selected to meet the
Fund's investment objective of capital appreciation. Such equity securities may
be issued by either established, well-capitalized companies or newly-formed,
small-cap companies, and may trade on regional or national stock exchanges or in
the over-the-counter market. Such fixed-income securities must meet the quality
standards described below. The risks of investing in lower rated debt securities
and in foreign securities are discussed below under "Risk Factors." In addition,
the Fund may hold certain cash and cash equivalent securities as cash reserves
("cash securities").
As discussed above, consistent with its investment objective, the Fund may
invest in fixed-income securities (corporate bonds, commercial paper, debt
securities issued by the U.S. government, its agencies and instrumentalities, or
foreign governments and, to a lesser extent, municipal bonds, asset-backed
securities and zero coupon bonds). The Fund may invest up to 35% of its total
assets in debt securities that are rated below BBB by Standard & Poor's ^, a
division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, judged by Fund Management to be
equivalent in quality to debt securities having such ratings (commonly referred
to as "junk bonds"). The Fund expects that most foreign debt securities in which
it invests will not be rated by U.S. rating services, as discussed more fully
below. In no event will the Fund ever invest in a debt security rated below CCC
by S&P or Caa by Moody's or, if unrated, judged by Fund Management to be
equivalent in quality to debt securities having such ratings. The risks of
investing in lower rated debt securities are discussed below under "Risk
Factors."
The amounts invested in stocks, bonds and cash securities may ^ vary from
time to time, depending upon Fund Management's assessment of business, economic
and market conditions. In periods of ^ unfavorable economic and market
conditions, as determined by Fund Management, the Fund may depart from its basic
investment objective and assume a ^ defensive position, ^ by temporarily
investing up to 100% of its assets ^ in high-quality money market instruments,
such as short-term U.S. government obligations, commercial paper or repurchase
agreements ^, seeking to protect its assets until conditions stabilize. The Fund
reserves the right to hold equity, fixed-income and cash securities in whatever
proportion is deemed desirable at any given time for defensive purposes. While
the Fund is in a defensive position, the opportunity to achieve capital
appreciation will be limited; however, the ability to maintain a temporary
defensive position enables the Fund to seek to avoid capital losses during
market downturns. Under normal market conditions, the Fund does not expect to
have a substantial portion of its assets invested in cash securities.
In order to hedge its portfolio, the Fund may purchase and write options on
securities (including index options and options on foreign securities), and may
invest in futures contracts for the purchase or sale of foreign currencies,
fixed-income securities and instruments based on financial indices
(collectively, "futures contracts"), options on futures contracts, forward
<PAGE>
contracts and interest rate swaps and swap-related products. Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. These practices and securities, some of which
are known as derivatives, and their risks are discussed below under "Risk
Factors" and in the Statement of Additional Information.
Additional information on certain types of securities in which the Fund may
invest is set forth below:
When-Issued Securities,^ The Fund may make commitments in an amount of up
to 10% of the value of its total assets at the time any commitment is made to
purchase or sell equity or debt securities on a when-issued or delayed delivery
basis (i.e., securities may be purchased or sold by the Fund with settlement
taking place in the future, often a month or more later). The payment obligation
and, in the case of debt securities, the interest rate that will be received on
the securities generally are fixed at the time the Fund enters into the
commitment. During the period between purchase and settlement, no payment is
made by the Fund and no interest accrues to the Fund. At the time of settlement,
the market value of the security may be more or less than the purchase price,
and the Fund bears the risk of such market value fluctuations. The Fund
maintains cash, U.S. government securities, or other liquid securities having an
aggregate value equal to the amount of such purchase commitments in a segregated
account until payment is made.
Illiquid and Rule 144A Securities.^ The Fund may invest in securities that
are illiquid because they are subject to restrictions on their resale
("restricted securities") or because, based upon their nature or the market for
such securities, they are not readily marketable. However, the Fund will not
purchase any such security if the purchase would cause the Fund to invest more
than 15% of its net assets in illiquid securities. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes of
this restriction. Investments in illiquid securities involve certain risks to
the extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, the Fund might have to bear the expense and incur the delays
associated with effecting registration.
^ The Fund may purchase certain restricted securities that are not
registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities"), may be purchased without
regard to the foregoing 15% limitation if a liquid institutional trading market
exists. The liquidity of the Fund's investments in Rule 144A Securities could be
impaired if dealers or institutional investors become uninterested in purchasing
these securities. The Company's board of directors has delegated to Fund
Management the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board. For more information concerning
Rule 144A Securities, see the Statement of Additional Information.
<PAGE>
The settlement period of securities transactions in foreign markets may be
longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
upheaval and the dependence on foreign economic assistance may be greater in
these countries than in developed countries.
Repurchase Agreements.^ The Fund may enter into repurchase agreements with
respect to debt instruments eligible for investment by the Fund with member
banks of the Federal Reserve System, registered broker-dealers, and registered
government securities dealers, which are deemed creditworthy. A repurchase
agreement, which may be considered a "loan" under the Investment Company Act of
1940, is a means of investing monies for a short period. In a repurchase
agreement, the Fund acquires a debt instrument (generally a security issued by
the U.S. government or an agency thereof, a banker's acceptance, or a
certificate of deposit) subject to resale to the seller at an agreed-upon price
and date (normally, the next business day). In the event that the original
seller defaults on its obligation to repurchase the security, the Fund could
incur costs or delays in seeking to sell such security. To minimize risk, the
securities underlying each repurchase agreement will be maintained with the
Fund's custodian in an amount at least equal to the repurchase price under the
agreement (including accrued interest), and such agreements will be effected
only with parties that meet certain creditworthiness standards established by
the Company's board of directors. The Fund will not enter into a repurchase
agreement maturing in more than seven days if as a result more than 15% of its
total assets would be invested in such repurchase agreements and other illiquid
securities. The Fund has not adopted any limit on the amount of its net assets
that may be invested in repurchase agreements maturing in seven days or less.
Securities Lending.^ The Fund also may lend its securities to qualified
brokers, dealers, banks, or other financial institutions. This practice permits
the Fund to earn income, which, in turn, can be invested in additional
securities of the type described in this Prospectus in pursuit of the Fund's
investment objective. Loans of securities by the Fund will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
government or its agencies equal to at least 100% of the current market value of
the loaned securities, determined on a daily basis. Cash collateral will be
invested only in high quality short-term investments offering maximum liquidity.
Lending securities involves certain risks, the most significant of which is the
risk that a borrower may fail to return a portfolio security. The Fund monitors
the creditworthiness of borrowers in order to minimize such risks. The Fund will
not lend any security if, as a result of the loan, the aggregate value of
securities then on loan would exceed 33-1/3% of the Fund's total assets (taken
at market value).
Portfolio Turnover.^ There are no fixed limitations regarding portfolio
turnover for the Fund's portfolio. Although the Fund does not trade for
short-term profits, securities may be sold without regard to the time they have
<PAGE>
been held in the Fund when, in the opinion of Fund Management, investment
considerations warrant such action. In addition, portfolio turnover rates may
increase as a result of large amounts of purchases or redemptions of Fund shares
due to economic, market or other factors that are not within the control of Fund
Management. As a result, while it is anticipated that the portfolio turnover
rate for the Fund's portfolio generally will not exceed 200%, under certain
market conditions the portfolio turnover rate may exceed 200%, and may be higher
than that of other investment companies seeking capital appreciation. Increased
portfolio turnover would cause the Fund to incur greater brokerage costs than
would otherwise be the case, and may result in the acceleration of capital gains
that are taxable when distributed to shareholders. The Fund's portfolio turnover
rates are set forth under "Financial Highlights" and, along with the Fund's
brokerage allocation policies, are discussed in the Statement of Additional
Information.
Investment Restrictions.^ The Fund is subject to a variety of restrictions
regarding its investments that are set forth in this Prospectus and in the
Statement of Additional Information. Certain of the Fund's investment
restrictions are fundamental, and may not be altered without the approval of the
Fund's shareholders. Such fundamental investment restrictions include the
restrictions which prohibit the Fund from: lending more than 33-1/3% of its
total assets to other parties (excluding purchases of commercial paper, debt
securities and repurchase agreements); investing more than 25% of the value of
the Fund's total assets in any one industry (other than government securities);
with respect to 75% of its total assets, purchasing the securities of any one
issuer (other than cash items and government securities) if the purchase would
cause the Fund to have more than 5% of its total assets invested in the issuer
or to own more than 10% of the outstanding voting securities of the issuer; and
borrowing money or issuing senior securities except that the Fund may borrow
money for temporary or emergency purposes (not for leveraging or investment) and
may enter into reverse repurchase agreements in an aggregate amount not
exceeding 33-1/3% of its total assets. However, unless otherwise noted, the
Fund's investment restrictions and its investment policies are not fundamental
and may be changed by action of the Company's board of directors. Unless
otherwise noted, all percentage limitations contained in the Fund's investment
policies and restrictions apply at the time an investment is made. Thus,
subsequent changes in the value of an investment after purchase or in the value
of the Fund's total assets will not cause any such limitation to have been
violated or to require the disposition of any investment, except as otherwise
required by law. If the credit ratings of an issuer are lowered below those
specified for investment by the Fund, the Fund is not required to dispose of the
obligations of that issuer. The determination of whether to sell such an
obligation will be made by Fund Management based upon an assessment of credit
risk and the prevailing market price of the investment. If the Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is repaid. The Fund attempts to minimize such fluctuations by not purchasing
additional securities when borrowings, including reverse repurchase agreements,
are greater than 5% of the value of the Fund's total assets. As a fundamental
<PAGE>
policy in addition to the above, the Fund may, notwithstanding any other
investment policy or limitation (whether or not fundamental), invest all of its
assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
limitations as the Fund. See "Additional Information - ^ Master/Feeder Option."
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. The Fund's assets will be invested primarily
in non-U.S. issuers. Investors should recognize that investing in securities of
non-U.S. issuers involves certain risks and special considerations, including
those set forth below, which are not typically associated with investing in
securities of U.S. issuers. Further, certain investments that the Fund may
purchase, and investment techniques that the Fund may use, involve risks,
including those set forth below.
^ Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
Social, Political and Economic Risks. The Fund may make investments in
developing countries that involve exposure to economic structures that generally
are less diverse and mature than in the United States, and to political systems
that may be less stable. A developing country can be considered to be a country
that is in the initial stages of its industrialization cycle. In the past,
markets of developing countries have been more volatile than the markets of
developed countries; however, such markets often have provided higher rates of
return to investors.
The Latin American countries in which the Fund will invest may be subject
to a substantially greater degree of social, political and economic instability
than is the case in the United States, Japan and Western European countries.
Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies and terrorist activities; (iv)
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hostile relations with neighboring countries; and (v) drug trafficking. Social,
political and economic instability could significantly disrupt the principal
financial markets in which the Fund invests and adversely affect the value of
the Fund's assets.
The economies of individual Latin American countries may differ favorably
or unfavorably and significantly from the U.S. economy in such respects as the
rate of growth of gross domestic product or gross national product, rate of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, structural unemployment and balance of payments position.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In some
cases, the government owns or controls many companies, including some of the
largest in the country. Accordingly, government actions in the future could have
a significant effect on economic conditions in a Latin American country, which
could affect private sector companies and the Fund, and on market conditions,
which could have a significant effect on prices and yields of securities in the
Fund's portfolio. There may be the possibility of nationalization, asset
expropriations or future confiscatory levels of taxation affecting the Fund. In
the event of nationalization, expropriation or other confiscation, the Fund may
not be fairly compensated for its loss and could lose its entire investment in
the country involved. The economies of most Latin American countries are heavily
dependent upon international trade and accordingly are affected by protective
trade barriers and the economic conditions of their trading partners. The
enactment by the United States or other principal trading partners of
protectionist trade legislation, reduction of foreign investment in the local
economies and general declines in the international securities markets could
have a significant adverse effect upon the securities markets of these
countries. The economies of Latin American countries are vulnerable to
weaknesses in world prices for their commodity exports and natural resources.
Certain of the Latin American countries are among the largest debtors to
commercial banks and foreign governments. Currently, due to its size, Brazil is
the largest debtor among developing countries followed by Mexico. Since 1982,
certain Latin American countries, including Argentina, Brazil, Chile and Mexico,
have experienced difficulty in servicing their sovereign debt obligations in a
timely manner. Many such countries have negotiated with foreign creditors to
restructure such sovereign debt and may enter into such negotiations in the
future. Obligations arising from past restructuring agreements have affected,
and those arising from future restructuring agreements may affect, the economic
performance and political and social stability of Latin American countries.
Changes in the political leadership or policies of the governments of the
Latin American countries in which the Fund invests or in other countries that
influence them, may effect a deterioration of the current climate for foreign
investment and result in a reduction in value of the Fund's investments there.
In the past, upon the assumption of power by authoritarian regimes in particular
<PAGE>
Latin American countries, those governments expropriated significant real and
personal property holdings, without any or adequate compensation. There can be
no assurance that companies in which the Fund holds securities, property held by
such companies or the Fund's securities themselves, will not also be
expropriated, nationalized, or otherwise confiscated, resulting in substantial
losses to the Fund and its shareholders. The Fund's investments would similarly
be adversely affected by exchange control regulations in any of those countries.
Securities Markets
The market capitalizations of listed equity securities on exchanges in
Latin American nations is significantly smaller than those of the United States
and other major economies. Only a few issuers may constitute a major portion of
the market capitalization and trading equity. A large segment of the ownership
of many Latin American companies may be held by a limited number of persons and
families, which may limit the number of shares available for investment by the
Fund. As a consequence, individual Latin American securities markets are
vulnerable to the effect of large investors trading significant blocks of
securities or by large dispositions of securities, e.g., as a result of margin
calls. The resulting limitations on the liquidity of Latin American securities
will influence the Fund's capability for acquiring and disposing of such
securities at the price and time it desires to do so.
Foreign Securities.^ Due to the absence of established securities markets
in certain Latin American countries, there may be restrictions on investment by
foreigners in the securities of companies in these countries, and difficulties
in removing from certain of these countries the dollars invested in such
companies. The Fund's ability to invest may be restricted to the use of
investment vehicles authorized by the local government, investment in shares of
other investment companies; or investments in American Depository Receipts
("ADRs"); American Depository Shares, and Global Depository Shares.
ADRs are instruments, usually issued by a U.S. bank or trust company,
evidencing ownership of securities of a foreign issuer into which the ADRs may
be convertible. ADRs are designed for use in U.S. markets and may be traded on
U.S. securities exchanges or over-the-counter markets. They are denominated in
dollars rather than the currency of the country in which the underlying
securities are issued.
ADRs may be issued in sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs; in unsponsored programs, the issuer may not be directly involved
in the creation of the program. Although the regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, the issuers
of unsponsored ADRs are not obligated to disclose material information in the
U.S. and, therefore, such information may not be reflected in the market value
of the ADRs. ADRs are subject to certain of the same risks as direct investments
in foreign securities, including the risk that changes in the value of the
currency in which the security underlying an ADR is denominated relative to the
U.S. dollar may adversely affect the value of the ADR.
<PAGE>
As indicated above, the Fund may deem it most practical to invest in
certain countries through other investment companies or similar vehicles,
although there can be no assurance that any such vehicles will be available or
will themselves have invested in the securities found most desirable by the
Fund. The Fund will not invest through other entities unless, in the opinion of
Fund Management, the potential advantages of such investment justify the Fund's
bearing its ratable share of the expenses of such entity (constituting duplicate
levels of advisory fees to be borne by the Fund and its shareholders) and its
share of any premium encompassed in the market value of such entity at the time
of the Fund's investment over the market value of the entity's underlying
holdings. In addition, there may be tax ramifications relating to investment in
such entities. Investments by the Fund in other investment companies are subject
to the following limits imposed by the Investment Company Act of 1940: subject
to certain exceptions, no more than 5% of the Fund's total assets may be
invested in any one investment company (but no more than 3% of the voting stock
of the underlying investment company) and no more than 10% of the Fund's total
assets may be invested in other investment companies in the aggregate.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
^ risk (i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against a foreign currency, the returns for a U.S. investor on
foreign securities denominated in that foreign currency may decrease. By
contrast, in a period when the U.S. dollar generally declines, the returns on
foreign securities generally are enhanced. Currencies of certain Latin American
countries have undergone sudden devaluations relative to the U.S. dollar as a
result of corresponding inflationary trends or other reasons. Any such
devaluation may have a deleterious effect on the Fund's investments. Inflation
may have strong negative consequences for the economy and political stability of
a country that experiences it, and may seriously affect its securities markets.
The currencies of certain Latin American countries are not commonly traded
in foreign exchange markets. Certain Latin American countries have managed
currencies that, for foreign exchange purposes, do not float freely against the
U.S. dollar. Other governmental restrictions on the convertibility of the
country's currency may be imposed.
Securities exchanges and broker-dealers in most Latin American countries
are subject to less regulatory scrutiny than in the United States, as are Latin
American companies in such countries. The limited size of the markets for
securities may enable adverse publicity, investors' perceptions or traders'
positions or strategies to affect prices unduly, at times decreasing not only
<PAGE>
the value but also the liquidity of the Fund's investments. The Fund may invest
no more than 15% of its net assets at the time of investment in illiquid
securities. Securities the proceeds of which are subject to limitations on
repatriation of principal or profits for more than seven days, and those for
which there ceases to be a ready market, will be deemed illiquid for this
purpose.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting standards
which may result in less publicly available information than is generally
available with respect to U.S. issuers; generally higher commission rates on
foreign portfolio transactions and longer settlement periods; the smaller
trading volumes and generally lower liquidity of foreign stock markets, which
may result in greater price volatility; foreign withholding taxes payable on
income and/or gains from the Fund's investment income on foreign securities,
which may reduce dividend income or capital gains available for distribution to
shareholders; the possibility of expropriation or confiscatory taxation; adverse
changes in investment or exchange control regulations; political instability
which could affect U.S. investment in foreign countries; potential restrictions
on the flow of international capital; and the possibility of a Fund experiencing
difficulties in pursuing legal remedies and collecting judgments.
^ Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). EMU intends to establish a common
European currency for EMU countries which will be known as the "euro." Each
participating country presently plans to adopt the euro as its currency on
January 1, 1999. The old national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear entirely.
Other European countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for the Fund. As the euro is
implemented, there may be changes in the relative strength and value of the U.S.
dollar and other major currencies, as well as possible adverse tax consequences.
The euro transition by EMU countries - present and future - may impact the
fiscal and monetary policies of those participating countries. There may be
<PAGE>
increased levels of price competition among business firms within EMU countries
and between businesses in EMU and non-EMU countries. The outcome of these
uncertainties could have unpredictable effects on trade and commerce and result
in increased volatility for all financial markets.
Debt Securities. The Fund's investments in fixed-income securities
generally are subject to both credit risk and market risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments, or both, as
they come due. The ratings given a security by S&P and Moody's provide a
generally useful guide as to such credit risk. The lower the rating given a
security by such rating service, the greater the credit risk such rating service
perceives to exist with respect to such security. Increasing the amount of Fund
assets invested in unrated or lower grade securities, while intended to increase
the yield produced by those assets, also will increase the credit risk to which
those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Medium and lower rated securities (Baa or BBB and
lower) and non-rated securities of comparable quality tend to be subject to
wider fluctuations in yields and market values than higher rated securities and
may have speculative characteristics. Although Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by S&P or Moody's or, if unrated, securities
determined by Fund Management to be of equivalent quality. Of course, relying in
part on ratings assigned by credit agencies in making investments will not
protect the Fund from the risk that the securities in which it invests will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and interest payments on preferred stocks and debt
securities, not the market value of such securities, and such ratings may not be
changed on a timely basis to reflect subsequent events. The Fund is not required
to sell immediately debt securities that go into default, but may continue to
hold such securities until such time as Fund Management determines it is in the
best interests of the Fund to sell such securities. Because investment in medium
and lower rated securities involves both greater credit risk and market risk,
achievement of the Fund's investment objectives may be more dependent on Fund
Management's own credit analysis than is the case for funds investing in higher
quality securities. In addition, the share price and yield of the Fund may be
expected to fluctuate more than in the case of funds investing in higher
quality, shorter term securities. Moreover, a significant economic downturn or
major increase in interest rates may result in issuers of lower rated securities
experiencing increased financial stress, which would adversely affect their
ability to service their principal, dividend and interest obligations, meet
projected business goals, and obtain additional financing. Expenses incurred to
<PAGE>
recover an investment in a defaulted security may adversely affect the Fund's
net asset value. Finally, while Fund Management attempts to limit purchases of
medium and lower rated securities to securities having an established secondary
market, the secondary market for such securities may be less liquid than the
market for higher quality securities. The reduced liquidity of the secondary
market for such securities may adversely affect the market price of, and ability
of the Fund to value, particular securities at certain times, thereby making it
difficult to make specific valuation determinations.
Although bonds in the lowest investment grade debt category (those rated
BBB by S&P or Baa by Moody's) are regarded as having adequate capability to pay
principal and interest, they have speculative characteristics. Adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case for higher
rated bonds. Lower rated bonds by Moody's (categories Ba, B, Caa) are of poorer
quality and also have speculative characteristics. Bonds rated Caa may be in
default or there may be present elements of danger with respect to principal or
interest. Lower rated bonds by S&P (categories BB, B, CCC) include those that
are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with their
terms; BB indicates the lowest degree of speculation and CCC a high degree of
speculation. While such bonds likely will have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. For a specific description of each corporate
bond rating category, please refer to Appendix B to the Statement of Additional
Information. Note, however, that the Fund expects that most foreign debt
securities in which it will invest will not be rated by U.S. rating services.
In certain Latin American countries, the central government and its
agencies are the largest debtors to local and foreign banks and others.
Argentina, Brazil and Mexico are the three largest debtors among the developing
countries. Sovereign debt involves the risk that the government, as a result of
political considerations or cash flow difficulties, may fail to make scheduled
payments of interest or principal and may require holders to participate in
rescheduling of payments or even to make additional loans. If a Latin American
government defaults on its sovereign debt, there is likely to be no legal
proceeding under which the debt may be ordered repaid, in whole or in part. The
ability or willingness of a foreign sovereign debtor to make payments of
principal and interest in a timely manner may be influenced by, among other
factors, its cash flow, the magnitude of its foreign reserves, the availability
of foreign exchange on the payment date, the debt service burden to the economy
as a whole, the debtor's then current relationship with the International
Monetary Fund and its then current political constraints. Some of the countries
issuing such instruments have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
<PAGE>
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences, including effects on the willingness of such countries to service
their sovereign debt. A Latin American government's willingness and ability to
make timely payments on its sovereign debt are also likely to be heavily
affected by the country's balance of trade and its access to trade and other
international credits. If a country's exports are concentrated in a few
commodities, such country would be more significantly exposed to a decline in
the international prices of one or more of such commodities. A rise in
protectionism on the part of its trading partners, or unwillingness by such
partners to make payment for goods in hard currency, could also adversely affect
the country's ability to export its products and repay its debts. Sovereign
debtors may also be dependent on expected receipts from such agencies and others
abroad to reduce principal and interest arrearages on their debt. In addition,
failure by the sovereign debtor or other entity to implement economic reforms
negotiated with multilateral agencies or others, to achieve specified levels of
economic performance, or to make other debt payments when due, may cause third
parties to terminate their commitments to provide funds to the sovereign debtor,
which may further impair such debtor's willingness or ability to service its
debts. In the past, some of the Latin American countries in which the Fund
expects to invest have encountered difficulties in servicing their sovereign
debt, withholding certain payments of interest or principal. Certain of these
obligations, particularly commercial bank loans, have been restructured, usually
by rescheduling principal payments, reducing interest rates and extending new
credits to finance interest payments on existing debt. Holders of sovereign
debt, including the Fund, may be asked to participate in similar restructurings.
The Fund may invest in debt securities issued under the "Brady Plan" in
connection with restructurings in Latin American debt markets or earlier loans.
These securities, often referred to as "Brady Bonds," are, in some cases,
denominated in U.S. dollars and collateralized as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year's interest
payments, on a rolling basis, are collateralized by cash or other investments.
Brady Bonds are actively traded on an over-the-counter basis in the secondary
market for Latin American debt securities. "Brady Bonds" are lower rated bonds
and highly volatile. See "Risk Factors - Debt Securities."
Futures, Options and Other Derivative Instruments.^ The use of futures,
options, forward contracts and swaps exposes the Fund to additional investment
risks and transaction costs, and as a result, no more than 5% of the Fund's
total assets will be committed to such investments. If Fund Management seeks to
protect the Fund against potential adverse movements in the securities, foreign
currency or interest rate markets using these instruments, and such markets do
not move in a direction adverse to the Fund, the Fund could be left in a less
favorable position than if such strategies had not been used. Risks inherent in
the use of futures, options, forward contracts and swaps include (1) the risk
that interest rates, securities prices and currency markets will not move in the
<PAGE>
directions anticipated; (2) imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. Further information on the use of futures, options,
forward foreign currency contracts and swaps and swap-related products, and the
associated risks, is contained in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under ^ an
agreement with the Company, INVESCO Funds Group, Inc. (" ^ INVESCO"), 7800 E.
Union Avenue, Denver, Colorado, serves as the Fund's investment adviser. Under
this agreement, ^ INVESCO is primarily responsible for providing the Fund with
various administrative services and supervising the Fund's daily business
affairs. ^
Pursuant to an agreement with ^ INVESCO, INVESCO Asset Management Limited
("IAML") serves as the sub-adviser to the Fund. IAML also acts as sub-adviser to
the INVESCO European Fund, the INVESCO Pacific Basin Fund, the INVESCO
International Growth Fund, the INVESCO Emerging Markets Fund and the INVESCO
European Small Company Fund. IAML, subject to the supervision of ^ INVESCO, is
primarily responsible for selecting and managing the Fund's investments.
Pursuant to an agreement with the Company, ^ INVESCO Distributors, Inc.
("IDI") ^ is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by ^
INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Fund's
distributor.
^ INVESCO, IAML and IDI are indirect wholly-owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. ^ INVESCO
and IAML continued to operate under their existing names. AMVESCAP PLC ^ had
approximately ^ $261 billion in assets under management^ as of June 30, 1998.
INVESCO was established in 1932 and, as of July 31, ^ 1998, managed 14 mutual
<PAGE>
funds, consisting of ^ 49 separate portfolios, with combined assets of
approximately ^ $19.6 billion on behalf of ^ 884,099 shareholders.
The following individual serves as portfolio manager for the Fund and is
primarily responsible for determining, in consultation with the senior
investment policy group of IAML, the country-by-country allocation of the
portfolio's assets, overall stock selection methodology and the ongoing
implementation and risk control policies applicable to the portfolio:
David Manuel Portfolio manager of the Fund since 1998;
fund manager with INVESCO Asset Management
Limited since 1997 specializing in Latin
American equties. Previously, senior fund
fund manager with Abbey-Life Investment
Services (1987-1997). Mr. Manuel earned a
B.A. (Hons) from Cambridge University and
a Ph.D. from London University.
Mr. Manuel heads a team of individual country specialists who are
responsible for managing security selection for their assigned country's share
of the allocation within the parameters established by IAML's investment policy
group.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Fund or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
The Fund pays INVESCO a monthly management ^ fee which is based upon a
percentage of the Fund's average net assets ^, determined daily. The ^
management fee is computed at the annual rate of 0.75% on the first $500 million
of the Fund's average net assets, 0.65% on the next $500 million of the Fund's
average net assets and 0.55% on the Fund's average net assets over $1 billion.
Out of ^ the advisory fee which it receives from the Fund, ^ INVESCO pays
IAML, as the Fund's sub-adviser, a monthly fee based upon the average daily
value of the Fund's net assets. Based upon approval of the Company's board of
directors at a meeting held May 14, 1998, the calculation of subadvisory fees of
the Fund has been changed from 33.33% of the advisory fee (0.25% on the first
$500 million of the ^ Fund's average net assets, ^ 0.2167% on the next $500
million of the ^ Fund's average net assets and ^ 0.1833% on the ^ Fund's average
net assets in excess of $1 billion) to 40% of the advisory fee (0.30% on the
first $500 million of the Fund's average net assets, 0.26% on the next $500
<PAGE>
million of the Fund's average net assets and 0.22% on the Fund's average net
assets in excess of $1 billion). No fee is paid by the Fund to IAML.
The Company also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with ^ INVESCO. Pursuant to the Administrative
Agreement, ^ INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays ^ INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ INVESCO also is paid a fee by the Fund for providing transfer agent
services. See "Additional Information."
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
The Fund's expenses, which are accrued daily, are generally deducted from
the Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangement) of the Fund for the fiscal year ended July 31, ^
1998, including investment management fees (but excluding brokerage commissions,
which are a cost of acquiring securities), amounted to ^ 1.99% of the Fund's
average net assets. Certain expenses for the Fund are voluntarily absorbed by
INVESCO and IAML pursuant to a commitment to the Fund in order to ensure that
the Fund's total operating expenses do not exceed 2.00%. This commitment may be
changed following consultation with the Company's board of directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such ^ brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. As discussed under "How
<PAGE>
Shares Can Be Purchased - Distribution Expenses," the Company may market shares
of the Fund through intermediary brokers or dealers that have entered into
Dealer Agreements with ^ INVESCO or IDI, as the Fund's distributor. The Fund may
place orders for portfolio transactions with qualified ^ brokers and dealers
that recommend the Fund, or sell shares of the Fund to clients, or act as agent
in the purchase of Fund shares for clients, if Fund Management believes that the
quality of execution of the transaction and level of commission are comparable
to those available from other qualified brokerage firms.
^
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided By The Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in a Fund under a federal income tax-deferred retirement plan (other
than an IRA account), or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to increase,
reduce or waive the minimum purchase requirements in its sole discretion where
it determines such action is in the best interests of the Fund.
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not Post Office Box, of INVESCO ^ at 7800 E. Union
Avenue, Denver, CO 80237.
<PAGE>
Orders to purchase shares of the Fund can be placed by telephone. Shares of
the Fund will be issued at the net asset value per share next determined after
receipt of telephone instructions. Generally, payments for telephone orders must
be received by the Fund within three business days or the transaction may be ^
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. ^ INVESCO has agreed to indemnify
the Fund for any losses resulting from such cancellations of telephone
purchases.
If your check does not clear, or if a telephone purchase must be ^ canceled
due to nonpayment, you will be responsible for any related loss the Fund or ^
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a
commission or transaction fee by the broker for the handling of the transaction
if the broker so elects. Any investor may deal directly with the Fund in any
transaction. In that event, there is no such charge. IDI or ^ INVESCO may from
time to time make payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of ^ Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York Stock
Exchange is open, as of the close of regular trading on that Exchange (generally
4:00 p.m., New York time) and also may be computed on other days under certain
circumstances. Net asset value per share for the Fund is calculated by dividing
the market value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
that Fund. If market quotations are not readily available, a security or other
asset will be valued at fair value as determined in good faith by the board of
directors. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Company's board of directors believes that such value represents
fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
<PAGE>
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI, at its discretion, to engage in certain
activities and provide certain services approved by the board of directors of
the Company in connection with the distribution of the Fund's shares to
investors. These activities and services may include the payment of compensation
(including incentive compensation and/or continuing compensation based on the
amount of customer assets maintained in the Fund) to securities dealers and
other financial institutions and organizations, which may include INVESCO- and
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
the preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or ^
their affiliates or by third parties.
Under the Plan, the ^ Fund's payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of ^ INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Payment
amounts by the Fund under the Plan, for any month, may only be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls^. Therefore,
any obligations incurred by IDI in excess of the limitations described above
will not be paid by the Fund and will be borne by IDI. In addition, IDI and its
affiliates may from time to time make additional payments from ^ their revenues
to securities dealers, financial advisers and other financial institutions that
provide distribution-related and/or administrative services for the Fund. No
further payments will be made by the Fund under the Plan in the event of the
Plan's termination. Any payments made by the Fund may not be used to finance
directly the distribution of shares of any other Fund of the Company or other
mutual fund advised by ^ INVESCO and distributed by IDI. However, payments
received by IDI which are not used to finance the distribution of shares of the
Fund become part of IDI's revenues and may be used by IDI for ^ activities ^
that promote distribution of any of the mutual funds advised by ^ INVESCO.
Subject to review by the Fund's directors^, payments made by the Fund under the
<PAGE>
Plan for compensation of marketing personnel, as noted above, are based on an
allocation formula designed to ensure that all such payments are appropriate.
IDI will bear any distribution- and service-related expenses in excess of the
amounts which are compensated pursuant to the Plan. The Plan also authorizes any
financing of distribution which may result from IDI's use of its own resources,^
provided that such fees are legitimate and not excessive. For more information
see "How Shares Can Be Purchased -^ Distribution Plan" in the Statement of
Additional Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share of the Fund in effect on the ex-dividend or ex-distribution date. A
shareholder may, however, elect to reinvest dividends and other distributions in
certain of the other no-load mutual funds advised by ^ INVESCO and distributed
by IDI, or to receive payment of all dividends and other distributions in excess
of $10.00 by check by giving written notice to ^ INVESCO at least two weeks
prior to the record date on which the change is to take effect. Further
information concerning these options can be obtained by contacting ^ INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by ^ INVESCO at least two weeks prior to the
next scheduled check. Further information regarding the Periodic Withdrawal Plan
and its requirements and tax consequences can be obtained by contacting ^
INVESCO.
<PAGE>
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by ^ INVESCO and distributed by
IDI, on the basis of their respective net asset values at the time of the
exchange: INVESCO Diversified Funds, Inc., INVESCO Equity Funds, Inc. (formerly,
INVESCO Capital Appreciation Funds, Inc.), INVESCO Flexible Funds, Inc.
(formerly, INVESCO ^ Multiple Asset Funds, Inc.), INVESCO Emerging Opportunity
Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO
Industrial Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money
Market Funds, Inc.^, INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income
Funds, Inc. and INVESCO Value Trust.
Upon an exchange of shares held less than three months (other than shares
acquired through reinvestment of dividends or other distributions), a fee of 1%
of the current net asset value of the shares being exchanged will be assessed
and retained by the Fund for the benefit of the remaining shareholders. This fee
is intended to encourage long-term investment in the Fund, to avoid transaction
and other expenses caused by early redemptions, and to facilitate portfolio
management. The fee is not a deferred sales charge, is not a commission paid to
^ INVESCO, and does not benefit ^ INVESCO in any way. The fee applies to
redemptions from the Fund and exchanges into any of the other no-load mutual
funds which are also advised by ^ INVESCO and distributed by IDI. The Fund will
use the "first-in, first-out" method to determine the three month holding
period. Under this method the date of redemption or exchange will be compared
with the earliest purchase date of shares held in the account. If this holding
period is less than three months, the redemption/exchange fee will be assessed.
An exchange involves the redemption of shares in the Fund and investment of
the redemption proceeds in shares of another fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ INVESCO, using the telephone number or address on the
^ back of this Prospectus. Exchanges made by telephone must be in an amount of
at least $250, if the exchange is being made into an existing account of one of
the INVESCO funds. All exchanges that establish a new account must meet the
Fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
<PAGE>
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the Investment Company Act of
1940, or where sales of the fund into which the shareholder is exchanging are
temporarily stopped, notice of all such modifications or termination of the
exchange policy will be given at least 60 days prior to the date of termination
or the effective date of the modification.
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact ^ INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis. The
minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting ^
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employer make
automatic purchases of Fund shares for them by deducting a specified amount from
their regular paychecks. This automatic investment program can be modified or
<PAGE>
terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, ^ various individual retirement
accounts ("IRAs"), simplified employee pension plans and corporate retirement
plans. In addition, shares can be used to fund tax qualified plans established
under Section 403(b) of the Internal Revenue Code by educational institutions,
including public school systems and private schools, and certain kinds of
non-profit organizations, which provide deferred compensation arrangements for
their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ INVESCO. Institutional Trust Company d/b/a INVESCO
Trust Company^ ("ITC"), an affiliate of INVESCO, is qualified to serve as
trustee or custodian under these plans and provides the required services at
competitive rates. Retirement plans (other than IRAs) receive monthly statements
reflecting all transactions in their Fund accounts. IRAs receive the
confirmations and quarterly statements described under "Shareholder Accounts."
For complete information, including prototype forms and service charges, call ^
INVESCO at the telephone number listed on the ^ back of this Prospectus or send
a written request to: Retirement Services, INVESCO Funds Group, Inc., Post
Office Box 173706, Denver, Colorado 80217-3706.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance. Upon the redemption of shares held less than three months (other
than shares acquired through reinvestment of dividends or other distributions),
a fee of 1% of the current net asset value of the shares will be assessed and
retained by the Fund for the benefit of remaining shareholders. This fee is
intended to encourage long-term investment in the Fund, to avoid transaction and
other expenses caused by early redemptions, and to facilitate portfolio
management. The fee is not a deferred sales charge, is not a commission paid to
^ INVESCO, and does not benefit ^ INVESCO in any way. The fee applies to
redemptions from the Fund and exchanges into any of the other no-load mutual
funds, which are also advised by ^ INVESCO and distributed by IDI. The Fund will
use the "first-in, first-out" method to determine the three month holding
period. Under this method the date of redemption or exchange will be compared
with the earliest purchase date of shares held in the account. If this holding
period is less than three months, the redemption/exchange fee will be assessed
on the current net asset value of the shares being redeemed.
<PAGE>
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not ^
post office box, of INVESCO ^ at 7800 E. Union Avenue, Denver, CO 80237. If no
certificates have been issued, a written redemption request signed by each
registered owner of the account must be submitted to ^ INVESCO at the post
office box address noted above. If shares are held in the name of a corporation,
additional documentation may be necessary. Call or write for specific
information. If payment for the redeemed shares is to be made to someone other
than the registered owner(s), the signature(s) must be guaranteed by a financial
institution which qualifies as an eligible guarantor institution. Redemption
procedures with respect to accounts registered in the names of broker-dealers
may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each Fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange or an emergency as defined by the Securities and
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, ^ INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
INVESCO, using the telephone number on the ^ back of this Prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
<PAGE>
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be modified or terminated in the future at the discretion of Fund
Management.
For ITC-sponsored federal income tax-deferred retirement plans ^, the
term "shareholders" is defined to mean plan trustees that file a written request
to be able to redeem Fund shares by telephone. Shareholders should understand
that, while the Fund will attempt to process all telephone redemption requests
on an expedited basis, there may be times, particularly in periods of severe
economic or market disruption, when (a) they may encounter difficulty in placing
a telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
^ Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a New Account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believe to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone instructions and providing written confirmation
of transactions initiated by telephone. As a result of this policy, the investor
may bear the risk of any loss due to unauthorized or fraudulent instructions;
provided, however, that if the Fund fails to follow these or other reasonable
procedures, the Fund may be liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
shareholders allows the Fund to maintain its tax status as a regulated
investment company. ^ The Fund does not expect to pay any federal income or
excise taxes because of its tax status as a regulated investment company.
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
<PAGE>
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a maximum rate of 28% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held for more than 18 months are taxable at a maximum
rate of 20% (depending on the shareholder's marginal tax rate). Beginning
January 1, 1998, the IRS Restructuring and Reform Act of 1998, signed into law
on July 24, 1998, lowers the holding period for long-term capital gains entitled
to the 20% capital gains tax rate from 18 months to 12 months. Accordingly, all
long-term gains realized after December 31, 1997 on the sale of securities held
for more than 12 months will be taxable at a maximum rate of 20%. At the end of
each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
advisers as to the effect of ^ distributions by the Fund ^.
Shareholders ^ may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest received on foreign securities. Foreign taxes withheld will be treated
as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. ^ Shareholders can avoid backup withholding on ^ their
Fund account by ensuring that ^ INVESCO has a correct, certified tax
identification number unless the shareholder is subject to backup withholding
for other reasons.
Shareholders should^ consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends ^ on its investments.
Dividends paid by the Fund will be based solely on ^ net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on an annual basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
<PAGE>
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has net realized capital gains. Net realized capital gains, if any,
together with gains^ realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital ^
gain distributions are automatically reinvested in shares of the Fund at the net
asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution regardless of how long the Fund shares
have been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all Funds of the Company voting together. In other cases, such as voting upon
an investment advisory contract, voting is on a Fund-by-Fund basis. When not all
Funds are affected by a matter to be voted upon, only shareholders of the Fund
or Funds affected by the matter will be entitled to vote thereon. The Company is
not generally required, and does not expect, to hold regular annual meetings of
shareholders. However, the board of directors will call special meetings of
shareholders for the purpose, among other reasons, of voting upon the question
of removal of a director or directors when requested to do so in writing by the
holders of 10% or more of the outstanding shares of the ^ Fund or as may be
required by applicable law or the Company's Articles of Incorporation. The
Company will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of the
Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ Fund Management in substantially the same manner as the existing Fund. If
permitted by applicable laws and policies then in effect, any such investment
may be made in the sole discretion of the Company's board of directors without
further approval of the shareholders of the Fund. However, Fund shareholders
will be given at least 30 days prior notice of any such investment. Such
<PAGE>
investment would be made only if the Company's board of directors determines it
to be in the best interests of the respective Fund and its shareholders. In
making that determination, the board will consider, among other things, the
benefits to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. No assurance can be given that costs will be
materially reduced if this option is implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this Prospectus.
Transfer and Dividend Disbursing Agent. INVESCO ^, 7800 E. Union Ave.,
Denver, Colorado 80237, also acts as registrar, transfer agent, and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account, but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of ^ INVESCO, may provide sub-transfer
agency or recordkeeping services to the Fund which reduce or eliminate the need
for identical services to be provided on behalf of the Fund by ^ INVESCO. In
such cases, ^ INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to ^ INVESCO by
the Fund.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO Latin American Growth Fund
A no-load mutual fund
seeking capital
appreciation.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO ASIAN GROWTH FUND
INVESCO Asian Growth Fund (the "Fund") seeks to achieve capital
appreciation by investing, under normal circumstances, at least 65% of its total
assets in equity securities of companies domiciled or with primary operations in
Asia and the Pacific Rim, excluding Japan. For purposes of this prospectus, Asia
will include, but not necessarily be limited to: China, Hong Kong, India,
Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand,
as well as Pakistan and Indochina as their markets become more accessible
("Asian Issuers.") The Fund is not intended as a complete investment program due
to risks of investing in the Fund. For a description of risks inherent in
investing in the Fund see "Risk Factors" and "Portfolio Turnover."
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, open-end, managed, no-load mutual fund consisting of seven separate
portfolios of investments. This Prospectus relates to shares of the INVESCO
Asian Growth Fund. Separate prospectuses are available upon request from INVESCO
Distributors, Inc. for the Company's other funds: INVESCO Worldwide Capital
Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European Small
Company Fund, INVESCO Latin American Growth Fund, INVESCO Realty Fund and
INVESCO S&P 500 Index Fund. Investors may purchase shares of any or all of the
Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, ^ 1998,
containing further information about the Fund has been filed with the Securities
and Exchange Commission and is incorporated by reference into this Prospectus.
To ^ request a free copy, write to INVESCO Distributors, Inc., Post Office Box
173706, Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site
^ at http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ANNUAL FUND EXPENSES 109
FINANCIAL HIGHLIGHTS 111
PERFORMANCE DATA 113
INVESTMENT OBJECTIVE AND POLICIES 113
RISK FACTORS 118
THE FUND AND ITS MANAGEMENT 123
HOW SHARES CAN BE PURCHASED 126
SERVICES PROVIDED BY THE FUND 129
HOW TO REDEEM SHARES 133
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS 135
ADDITIONAL INFORMATION 136
<PAGE>
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares other than a fee to redeem or exchange shares held less than three
months. (See "Shareholder Transaction Expenses"). The Fund^ is authorized to pay
a ^ Rule 12b-1 distribution fee of one quarter of one percent of the Fund's
average net assets each year. (See "How Shares Can Be Purchased - ^ Distribution
Expenses.") Lower expenses benefit Fund shareholders by increasing the Fund's
total return.
Annual operating expenses are calculated as a percentage of the Fund's
average annual net assets. To keep expenses competitive, INVESCO Funds Group,
Inc. ("INVESCO") and INVESCO Asia Limited ("INVESCO Asia") voluntarily reimburse
the Fund for certain expenses in excess of 2.00% (excluding excess amounts that
have been offset by the expense offset arrangement described below) of the
Fund's average net assets.
Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees 1.00%*
Exchange fees 1.00%*
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.75%
12b-1 Fees 0.25%
Other Expenses(1)(2) ^ 1.10%
Transfer Agency Fee(3) ^ 0.90%
General Services, Administrative ^ 0.20%
Services, Registration, Postage(4)
Total Fund Operating Expenses ^ 2.10%
(after voluntary expense limitation)(1)(2)
*There is a 1% fee retained by the Fund to offset transaction costs and other
expenses associated with short-term redemptions and exchanges, which is imposed
only on redemptions or exchanges of shares held less than three months.
(1) It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian fees ^ were reduced
under an expense offset arrangement. However, as a result of an SEC requirement,
the figures shown above do not reflect these reductions. In comparing expenses
for different years, please note that the ^ Ratios of Expenses to Average Net
Assets shown under "Financial Highlights" do reflect reductions for periods
prior to the fiscal year ended July 31, 1996. See "The Fund ^ And Its
Management."
(2) Certain Fund expenses are voluntarily absorbed by INVESCO Funds Group,
Inc. and INVESCO Asia Ltd. In the absence of such absorbed expenses, the Fund's
"Other Expenses" and "Total Fund Operating Expenses" in the above table would
<PAGE>
have been ^ 1.85% and ^ 2.85%, of the Fund's average net assets based on the
actual expenses of the Fund for the fiscal year ended July 31, ^ 1998. See "The
Fund ^ And Its Management."
(3) Consists of the transfer agency fee described under "Additional
Information-Transfer and Dividend Disbursing Agent."
(4) Includes, but is not limited to, fees and expenses of directors,
custodian bank, legal counsel and independent accountants, securities pricing
services, costs of administrative services under an Administrative Services
Agreement, costs of registration of Fund shares under applicable laws, and costs
of printing and distributing reports to shareholders.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $22 $66 $114 $245
The purpose of the foregoing expense table and Example is to assist
investors in understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Such expenses are paid from the
Fund's assets. (See "The Fund ^ And Its Management.") THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual returns, which may be greater or less than the assumed amount.
^ Because the Fund pays a distribution fee, investors who own Fund shares
for a long period of time may pay more than the economic equivalent of the
maximum front-end sales charge permitted for mutual funds by the National
Association of Securities Dealers, Inc.
<PAGE>
INVESCO Specialty Funds, Inc.
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information has been audited by ^ PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's ^ 1998 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting INVESCO Distributors, Inc. at the address
or telephone number shown ^ on the back cover of this Prospecctus.
^ INVESCO Asian Growth Fund
<TABLE>
<CAPTION>
^ Period
Ended
Year Ended ^ July 31 July 31
-------------------------- --------^
^ 1998 1997 1996(a)
<S> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $11.35 $8.95 $10.00
-------------------------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.04 (0.02) 0.02
Net Gains or (Losses) on
Securities ^(Both Realized
and Unrealized) (6.68) 2.42 (1.05)
-------------------------- --------
Total from Investment Operations (6.64) 2.40 (1.03)
-------------------------- --------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.02 0.00 0.02
Distributions from Capital Gains 0.00 0.00 0.00
In Excess of Capital Gains 1.32 0.00 0.00
-------------------------- --------
Total Distributions 1.34 0.00 0.02
-------------------------- --------
Net Asset Value - End of Period $3.37 $11.35 $8.95
========================== ========
TOTAL ^ RETURN(b) (62.16%) 27.04% (10.31%)(c)^
RATIOS
Net Assets - End of Period
($000 Omitted) $12,203 $32,969 $14,315
Ratio of Expenses to Average
Net Assets^(d)(e) 2.10% 2.05% ^ 2.19%(f)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ratio of Net Investment Income
(Loss)^ to Average Net Assets^(d) 0.45% (0.20%) 0.94%(f)^
Portfolio Turnover Rate ^ 141% 161% 2%(c)
</TABLE>
^(a) From March 1, 1996, commencement of investment operations, to July 31,
1996.
^(b) The applicable redemption fees are not included in the Total Return
calculation.
(c)^ Based on operations for the period shown and, accordingly, are not
representative of a full year.
^(d) Various expenses of the Fund were voluntarily absorbed by INVESCO ^ and
INVESCO Asia for the ^ years ended July 31, 1998 and 1997 and ^ the period
ended July 31, 1996. If such expenses had not been voluntarily absorbed,
ratio of expenses to average net assets would have been 2.85%, 2.10% and
2.79% (annualized), respectively, and ratio of net investment income (loss)
to average net assets would have been (0.30%), (0.25%) and 0.34%
(annualized), respectively.
^(e) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser and Sub-Adviser, which is before any expense offset
arrangements.
^(f) Annualized
<PAGE>
PERFORMANCE DATA
From time to time, the Fund may advertise its total return performance.
These figures are based upon historical investment results and are not intended
to indicate future performance. The "total return" of the Fund refers to the
average annual rate of return of an investment in the Fund. This figure is
computed by calculating the percentage change in value of an investment of
$1,000, assuming reinvestment of all income dividends and capital gain
distributions, to the end of a specified period. Periods of one year, five
years, ten years and/or life of the Fund are used if available. ^ Any given
report of total return performance should not be considered as representative of
future performance. The Fund charges no sales loads that would affect the total
return computation. However, the total return computation may be affected as a
result of the 1% redemption or exchange fee which is retained by the Fund to
offset transaction costs and other expenses associated with short-term
redemptions and exchanges, which is imposed on redemptions or exchanges of
shares held less than three months.
In conjunction with performance reports and/or analyses of shareholder
service for the Fund, comparative data between the Fund's performance for a
given period and the performance of recognized indices of investment results for
the same period, and/or assessments of the quality of shareholder service, may
be provided to shareholders. Such indices include indices provided by Dow Jones
& Company, Standard & Poor's, Lipper Analytical Services, Inc., Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, the American Stock Exchange, Morgan
Stanley Capital International, Wilshire Associates, the Financial Times-Stock
Exchange, the New York Stock Exchange, the Nikkei Stock Average and the Deutcher
Aktienindex, all of which are unmanaged market indicators. In addition,
rankings, ratings, and comparisons of investment performance and/or assessments
of the quality of shareholder service appearing in publications such as Money,
Forbes, Kiplinger's Personal Finance, Morningstar, and similar sources which
utilize information compiled (i) internally; (ii) by Lipper Analytical Services,
Inc.; or (iii) by other recognized analytical services may be used in
advertising. The Lipper Analytical Services, Inc. mutual fund rankings and
comparisons, which may be used by the Fund in performance reports, will be drawn
from the "Pacific Region" Lipper mutual fund grouping, in addition to the
broad-based Lipper general fund grouping.
INVESTMENT OBJECTIVE AND POLICIES
^ The Fund seeks to achieve capital appreciation by investing, under normal
circumstances, at least 65% of its total assets in equity securities (common
stocks and, to a lesser degree, shares of other investment companies, preferred
stocks and securities convertible into common stocks such as rights, warrants
and convertible debt securities) of large and small companies domiciled or with
primary operations in Asia and the Pacific Rim, excluding Japan. The foregoing
<PAGE>
investment objective is fundamental and may not be changed without the approval
of the Fund's shareholders. For purposes of the Fund, Asia and Pacific Rim
territories will include, but not necessarily be limited to: China, Hong Kong,
India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and
Thailand, as well as Pakistan and Indochina as their markets become more
accessible. The Fund defines securities of Asian Issuers as any issuer which, in
the opinion of the Fund's investment adviser or sub-adviser (collectively, "Fund
Management"), issues: (1) securities of companies organized under the laws of an
Asian territory, other than Japan; (2) securities of companies for which the
principal securities trading market is in Asian territories; (3) securities
issued or guaranteed by a government agency, instrumentality, political
subdivision, or central bank of an Asian territory; (4) securities of issuers,
wherever organized, with at least 50% of the issuer's assets, gross revenues, or
profit in any one of the two most recent fiscal years derived from activities or
assets in Asian territories, other than Japan; or (5) securities of Asian
Issuers, as defined above, in the form of depository shares or receipts. Under
normal circumstances, the Fund will invest at least 65% of its total assets in
issuers domiciled in at least five different countries, although Fund Management
expects the Fund's investments to be allocated among a larger number of
countries. While more than ^ 50% of the Fund's total assets on occasion may be
invested in securities of Asian ^ Issuers domiciled in, or with primary
operations in, a single country, Fund Management does not normally intend to
manage the Fund's investments with the view of investing more than ^ 50% of the
Fund's total assets in securities of Asian Issuers domiciled in, or with primary
operations in, any one particular country.
The Fund has not established any minimum investment standards, such as
earnings history, type of industry, dividend payment history, etc. with respect
to the Fund's investments in foreign equity securities and, therefore, investors
in the Fund should consider that investments may consist of securities that may
be deemed to be speculative.
The economies of Asian countries may vary widely in their condition, and
may be subject to certain changes that could have a positive or negative impact
on the Fund. Investments in foreign securities involve certain risks which are
discussed below under "Risk Factors."
The securities in which the Fund invests will typically be listed on the
principal stock exchanges in these countries, or in the secondary or junior
markets, although the Fund may purchase securities listed on the
over-the-counter market in these countries. While Fund Management believes that
smaller companies can offer greater growth potential than larger, more
established firms, the former also involve greater risk and price volatility. To
help reduce risk, Fund Management expects, under normal market conditions, to
vary its portfolio investments by company, industry and country. Investments in
foreign securities involve certain risks which are discussed below under "Risk
Factors."
<PAGE>
Consistent with its investment objective, the balance of the Fund's assets
may be invested in debt securities (corporate bonds, commercial paper, debt
securities issued by the U.S. government, its agencies and instrumentalities,
Asian Issuers or foreign governments and, to a lesser extent, municipal bonds,
asset-backed securities and zero coupon bonds). The Fund may invest no more than
30% of its total assets in debt securities that are rated below BBB by Standard
& Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or Baa by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, judged by Fund
Management to be equivalent in quality to debt securities having such ratings
(commonly referred to as "junk bonds"). In no event will the Fund ever invest in
a debt security rated below CCC by S&P or Caa by Moody's or, if unrated, judged
by Fund Management to be equivalent in quality to debt securities having such
ratings. The risks of investing in lower rated debt securities are discussed
below under "Risk Factors."
The amounts invested in stocks, bonds and cash securities may ^ vary from
time to time, depending upon Fund Management's assessment of business, economic
and market conditions. However, the Fund does not currently intend to invest any
portion of its assets in Japan. In periods of ^ unfavorable economic and market
conditions, as determined by Fund Management, the Fund may depart from its basic
investment objective and assume a ^ defensive position^ by temporarily investing
up to 100% of its assets ^ in high-quality money market instruments, such as
short-term U.S. government obligations, commercial paper or repurchase
agreements ^, seeking to protect the assets until conditions stabilize. The Fund
reserves the right to hold equity, fixed-income and cash securities in whatever
proportion is deemed desirable at any given time for temporary defensive
purposes. While the Fund is in a defensive position, the opportunity to achieve
capital appreciation will be limited; however, the ability to maintain a
defensive position enables the Fund to seek to avoid capital losses during
market downturns. Under normal market conditions, the Fund does not expect to
have a substantial portion of its assets invested in cash securities.
As a non-fundamental policy, in order to hedge its portfolio the Fund may
purchase and write options on securities (including index options and options on
foreign securities) and may invest in futures contracts for the purchase or sale
of foreign currencies, fixed-income securities and instruments based on
financial indices (collectively, "futures contracts"), options on futures
contracts, forward contracts and interest rate swaps and swap-related products.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments. These practices and instruments, some of
which are known as derivatives, and their risks are discussed below under "Risk
Factors" and in the Statement of Additional Information.
Additional information on certain types of securities in which the Fund may
invest is set forth below:
<PAGE>
When-Issued Securities.^ The Fund may make commitments in an amount of up
to 10% of the value of its total assets at the time any commitment is made to
purchase or sell equity or debt securities on a when-issued or delayed delivery
basis (i.e., securities may be purchased or sold by the Fund with settlement
taking place in the future, often a month later or more). The payment obligation
and, in the case of debt securities, the interest rate that will be received on
the securities generally are fixed at the time the Fund enters into the
commitment. During the period between purchase and settlement, no payment is
made by the Fund and no interest accrues to the Fund. At the time of settlement,
the market value of the security may be more or less than the purchase price,
and the Fund bears the risk of such market value fluctuations. The Fund
maintains cash, U.S. government securities, or other liquid securities having an
aggregate value equal to the amount of such purchase commitments in a segregated
account until payment is made.
Illiquid and Rule 144A Securities.^ The Fund may invest in securities that
are illiquid because they are subject to restrictions on their resale
("restricted securities") or because, based upon their nature or the market for
such securities, they are not readily marketable. However, ^ the Fund will not
purchase any such security if the purchase would cause the Fund to invest more
than 15% of its net assets in illiquid securities. Repurchase agreements
maturing in more than seven days will be considered as illiquid for purposes of
this restriction. Investments in illiquid securities involve certain risks to
the extent that the Fund may be unable to dispose of such a security at the time
desired or at a reasonable price. In addition, in order to resell a restricted
security, the Fund might have to bear the expense and incur the delays
associated with effecting registration.
^ The Fund may purchase certain restricted securities that are not
registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities"), may be purchased without
regard to the foregoing 15% limitation if a liquid institutional trading market
exists. The liquidity of the Fund's investments in Rule 144A Securities could be
impaired if dealers or institutional investors become uninterested in purchasing
these securities. The Company's board of directors has delegated to Fund
Management the authority to determine the liquidity of Rule 144A Securities
pursuant to guidelines approved by the board. For more information concerning
Rule 144A Securities, see the Statement of Additional Information.
^ The settlement period of securities transactions in foreign markets may
be longer than in domestic markets. These considerations generally are more of a
concern in developing countries. For example, the possibility of political
unrest and the dependence on foreign economic assistance may be greater in these
countries than in developed countries.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to debt instruments eligible for investment by the Fund with member
<PAGE>
banks of the Federal Reserve System, registered broker-dealers, and registered
government securities dealers, which are deemed creditworthy by Fund Management.
A repurchase agreement, which may be considered a "loan" under the Investment
Company Act of 1940 (the "1940 Act"), is a means of investing monies for a short
period. In a repurchase agreement, the Fund acquires a debt instrument
(generally a security issued by the U.S. government or an agency thereof, a
banker's acceptance, or a certificate of deposit) subject to resale to the
seller at an agreed upon price and date (normally, the next business day). In
the event that the original seller defaults on its obligation to repurchase the
security, the Fund could incur costs or delays in seeking to sell such security.
To minimize risk, the securities underlying each repurchase agreement will be
maintained with the Fund's custodian in an amount at least equal to the
repurchase price under the agreement (including accrued interest), and such
agreements will be effected only with parties that meet certain creditworthiness
standards established by the Company's board of directors. The Fund will not
enter into a repurchase agreement maturing in more than seven days if as a
result more than 15% of its net assets would be invested in such repurchase
agreements and other illiquid securities. The Fund has not adopted any limit on
the amount of its net assets that may be invested in repurchase agreements
maturing in seven days or less.
Portfolio Turnover.^ There are no fixed limitations regarding portfolio
turnover for the Fund's portfolio. Although the Fund does not trade for
short-term profits, securities may be sold without regard to the time they have
been held in the Fund when, in the opinion of Fund Management, investment
considerations warrant such action. In addition, portfolio turnover rates may
increase as a result of large amounts of purchases or redemptions of Fund shares
due to economic, market or other factors that are not within the control of Fund
Management. As a result, while it is anticipated that the portfolio turnover
rate for the Fund's portfolio generally will not exceed 200%, under certain
market conditions the portfolio turnover rate may exceed 200%. A portfolio
turnover rate in excess of 100% may be considered higher than that of other
investment companies seeking capital appreciation. Increased portfolio turnover
would cause the Fund to incur greater brokerage costs than would otherwise be
the case, and may result in the acceleration of capital gains that are taxable
when distributed to shareholders. The Fund's portfolio turnover rate, along with
the Fund's brokerage allocation policies, are discussed further in the Statement
of Additional Information.
Investment Restrictions.^ The Fund is subject to a variety of restrictions
regarding its investments that are set forth in this Prospectus and in the
Statement of Additional Information. Certain of the Fund's investment
restrictions are fundamental, and may not be altered without the approval of the
Fund's shareholders. Such fundamental investment restrictions include the
restrictions which prohibit a Fund from: lending more than 33-1/3% of its total
assets to other parties (excluding purchases of commercial paper, debt
securities and repurchase agreements); investing more than 25% of the value of
the Fund's total assets in one industry (other than government securities); with
<PAGE>
respect to 75% of its total assets, purchasing the securities of any one issuer
(other than cash items and government securities) if the purchase would cause
the Fund to have more than 5% of its total assets invested in the issuer or to
own more than 10% of the outstanding voting securities of the issuer; and
borrowing money or issuing senior securities, except that the Fund may borrow
money for temporary or emergency purposes (not for leveraging or investment),
and may enter into reverse repurchase agreements in an aggregate amount not
exceeding 33-1/3% of its total assets. However, unless otherwise noted, the
Fund's investment restrictions and its investment policies are not fundamental
and may be changed by action of the Company's board of directors. Unless
otherwise noted, all percentage limitations contained in the Fund's investment
policies and restrictions apply at the time an investment is made. Thus,
subsequent changes in the value of an investment after purchase or in the value
of the Fund's total assets will not cause any such limitation to have been
violated or to require the disposition of any investment, except as otherwise
required by law. If the credit ratings of an issuer are lowered below those
specified for investment by the Fund, the Fund is not required to dispose of the
obligations of that issuer. The determination of whether to sell such an
obligation will be made by Fund Management based upon an assessment of credit
risk and the prevailing market price of the investment. If the Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is repaid. The Fund attempts to minimize such fluctuations by not purchasing
additional securities when borrowings, including reverse repurchase agreements,
are greater than 5% of the value of the Fund's total assets. The Fund does not
intend to invest more than 5% of its assets in reverse repurchase agreements. As
a fundamental policy in addition to the above, the Fund may, notwithstanding any
other investment policy or limitation (whether or not fundamental), invest all
of its assets in the securities of a single open-end management investment
company with substantially the same fundamental investment objectives, policies
and limitations as the Fund. See "Additional Information -^ Master/Feeder
Option."
RISK FACTORS
There can be no assurance that the Fund will achieve its investment
objective. The Fund's investments in common stocks and other equity securities
may, of course, decline in value. The Fund's assets will be invested primarily
in Asian Issuers. Investors should realize that investing in securities of Asian
Issuers involves certain risks and special considerations, including those set
forth below, which are not typically associated with investing in securities of
U.S. issuers. Further, certain investments that the Fund may purchase, and
investment techniques that the Fund may use, involve risks including those set
forth below.
Investment in the Fund involves above-average investment risk. It is
designed as a long-term investment and not for short-term trading purposes, and
should not be considered a complete investment program.
<PAGE>
^ Year 2000 Computer Issue. Due to the fact that many computer systems in
use today cannot recognize the Year 2000, but will, unless corrected, revert to
1900 or 1980 or cease to function at that time, the markets for securities in
which the Fund invests may be detrimentally affected by computer failures
affecting portfolio investments or trading of securities beginning January 1,
2000. Improperly functioning trading systems may result in settlement problems
and liquidity issues. In addition, corporate and governmental data processing
errors may result in production issues for individual companies and overall
economic uncertainties. Earnings of individual issuers may be affected by
remediation costs, which may be substantial. The Fund's investments may be
adversely affected.
Political and Economic Risks. The Fund may make investments in developing
countries which involve exposure to economic structures that generally are less
diverse and mature than in the United States, and to political systems which may
be less stable. A developing country can be considered to be a country which is
in the initial stages of its industrialization cycle. In the past, markets of
developing countries have been more volatile than the markets of developed
countries; however, such markets often have provided higher rates of return to
investors.
Investing in securities of issuers in Asian countries involves certain
considerations not typically associated with investing in securities of United
States companies, including (1) restrictions on foreign investment and on
repatriation of capital invested in Asian countries, (2) currency fluctuations,
(3) the cost of converting foreign currency into United States dollars, (4)
potential price volatility and lesser liquidity of shares traded on Asian
country securities markets and (5) political and economic risks, including the
risk of nationalization or expropriation of assets and the risk of war.
Certain Asian countries are more vulnerable to the ebb and flow of
international trade, trade barriers and other protectionist or retaliatory
measures. Investments in countries that have recently opened their capital
market, including China, which appear to have relaxed their central planning
requirement and those that have privatized some of their state-owned industries
toward free markets, should be regarded as speculative.
Securities Markets.^ The settlement period of securities transactions in
foreign markets may be longer than in domestic markets. These considerations are
generally more of a concern in developing countries. For example, the
possibility of political upheaval and the dependence on foreign economic
assistance may be greater in these countries than developed countries.
Securities exchanges and broker-dealers in some Asian countries are subject
to less regulatory scrutiny than in the United States, as are Asian Issuers in
such countries. The limited size of the markets for securities may enable
adverse publicity, investors' perceptions or traders' positions or strategies to
<PAGE>
affect prices unduly, at times decreasing not only the value but also the
liquidity of the Fund's investments. The Fund may invest no more than 15% of its
net assets at the time of investment in illiquid securities. Securities the
proceeds of which are subject to limitations on repatriation of principal or
profits for more than seven days, and those for which there ceases to be a ready
market, will be deemed illiquid for this purpose.
Foreign Securities.^ Due to the absence of established securities markets
in certain Asian countries there may be restrictions on investment by foreigners
in the securities of companies in these countries, and difficulties in removing
from certain of these countries the dollars invested in such companies; the
Fund's ability to invest in certain countries may be restricted to the use of
investment vehicles authorized by the local government, investment in shares of
other investment companies; or investments in American Depository Receipts
("ADRs"), American Depository Shares, and Global Depository Shares.
ADRs are instruments, usually issued by a U.S. bank or trust company,
evidencing ownership of securities of a foreign issuer into which the ADRs may
be convertible. ADRs are designed for use in United States markets and may be
traded on U.S. securities exchanges or over-the-counter. They are denominated in
dollars rather than the currency of the country in which the underlying
securities are issued.
ADRs may be issued in sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs; in unsponsored programs, the issuer may not be directly involved
in the creation of the program. Although the regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, the issuers
of unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, such information may not be reflected in the
market value of the ADRs. ADRs are subject to certain of the same risks as
direct investments in foreign securities, including the risk that changes in the
value of the currency in which the security underlying an ADR is denominated
relative to the U.S. dollar may adversely affect the value of the ADR.
As indicated above, the Fund may deem it most practical to invest in
certain countries through other investment companies or similar vehicles,
although there can be no assurance that any such vehicles will be available or
will themselves have invested in the securities found most desirable by the
Fund. The Fund will not invest through other entities unless, in the opinion of
Fund Management, the potential advantages of such investment justify the Fund's
bearing its ratable share of the expenses of such entity (constituting duplicate
levels of advisory fees to be borne by the Fund and its shareholders) and its
share of any premium encompassed in the market value of such entity at the time
of the Fund's investment over the market value of the entity's underlying
holdings. In addition, there may be tax ramifications relating to investment in
such entities. Investments by the Fund in other investment companies are subject
<PAGE>
to the following limits imposed by the 1940 Act: subject to certain exceptions,
no more than 5% of the Fund's total assets may be invested in any one investment
company (but no more than 3% of the voting stock of the underlying investment
company may be purchased) and no more than 10% of the Fund's total assets may be
invested in other investment companies in the aggregate.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
^ risk (i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against a foreign currency, the returns for a U.S. investor on
foreign securities denominated in that foreign currency may decline. By
contrast, in a period when the U.S. dollar generally declines, the returns on
foreign securities generally ^ are enhanced.
Other risks and considerations of international investing include the
following: differences in accounting, auditing and financial reporting
standards, which may result in less publicly available information than is
generally available with respect to U.S. issuers; generally higher commission
rates on foreign portfolio transactions and longer settlement periods; the
smaller trading volumes and generally lower liquidity of foreign stock markets,
which may result in greater price volatility; foreign withholding taxes payable
on income and/or gains from the Fund's investment income on foreign securities,
which may reduce dividend and/or interest income or capital gains available for
distribution to shareholders; the possibility of expropriation or confiscatory
taxation; adverse changes in investment or exchange control regulations;
political instability which could affect U.S. investment in foreign countries;
potential restrictions on the flow of international capital; and the possibility
of the Fund experiencing difficulties in pursuing legal remedies and collecting
judgments.
^ Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal and Spain are presently members of the European
Economic and Monetary Union (the "EMU"). EMU intends to establish a common
European currency for EMU countries which will be known as the "euro." Each
participating country presently plans to adopt the euro as its currency on
January 1, 1999. The old national currencies will be sub-currencies of the euro
until July 1, 2002, at which time the old currencies will disappear entirely.
Other European countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
<PAGE>
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
After January 1, 1999, the introduction of the euro is expected to impact
European capital markets in ways that it is impossible to quantify at this time.
For example, investors may begin to view EMU countries as a single market, and
that may impact future investment decisions for the Fund. As the euro is
implemented, there may be changes in the relative strength and value of the U.S.
dollar and other major currencies, as well as possible adverse tax consequences.
The euro transition by EMU countries - present and future - may impact the
fiscal and monetary policies of those participating countries. There may be
increased levels of price competition among business firms within EMU countries
and between businesses in EMU and non-EMU countries. The outcome of these
uncertainties could have unpredictable effects on trade and commerce and result
in increased volatility for all financial markets.
Debt Securities. The Fund's investments in debt securities generally are
subject to both credit risk and market risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments, or both, as they come due.
The ratings given a security by S&P or Moody's provide a generally useful guide
to such credit risk. The lower rating given a security by said rating service,
the greater the credit risk such rating service perceives to exist with respect
to such seurity. Increasing the amount of Fund assets invested in unrated or
lower grade securities, while intended to increase the yield produced by these
assets, also will increase the credit risk to which those assets are subject.
Market risk relates to the fact that the market values of the debt
securities in which the Fund invests generally will be affected by changes in
the level of interest rates. An increase in interest rates will tend to reduce
the market values of debt securities, whereas a decline in interest rates will
tend to increase their values. Although Fund Management limits the Fund's
investments in fixed-income securities to securities it believes are not highly
speculative, both kinds of risk are increased by investing in debt securities
rated below the top three grades by S&P or Moody's or, if unrated, securities
determined by Fund Management to be of equivalent quality. Although bonds in the
lowest investment grade debt category (those rated BBB by S&P or Baa by Moody's)
are regarded as having adequate capability to pay principal and interest, they
have speculative characteristics. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case for higher rated bonds. Lower rated bonds
by Moody's (categories Ba, B, Caa) are of poorer quality and also have
speculative characteristics. Bonds rated Caa may be in default or there may be
present elements of danger with respect to principal or interest. Lower rated
bonds by S&P (categories BB, B, CCC) include those which are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with their terms; BB indicates
<PAGE>
the lowest degree of speculation and CCC a high degree of speculation. While
such bonds likely will have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. For a specific description of each corporate bond rating category,
please refer to Appendix B to the Statement of Additional Information. Note,
however, that the Fund expects that most foreign debt securities in which it
would invest will not be rated by U.S. rating services.
Futures, Options and Other Derivative Instruments.^ The use of futures,
options, forward contracts and swaps exposes the Fund to additional investment
risks and transaction costs and, as a result, no more than 5% of the Fund's
total assets will be committed to such investments. If Fund Management seeks to
protect the Fund against potential adverse movements in the securities, foreign
currency or interest rate markets using these instruments, and such markets do
not move in a direction adverse to the Fund, the Fund could be left in a less
favorable position than if such strategies had not been used. Risks inherent in
the use of futures, options, forward contracts and swaps include (1) the risk
that interest rates, securities prices and currency markets will not move in the
directions anticipated; (2) imperfect correlation between the price of futures,
options and forward contracts and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. Further information on the use of futures, options,
forward foreign currency contracts and swaps and swap-related products, and the
associated risks, is contained in the Statement of Additional Information.
Securities Lending.^ The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as an open-end, diversified, management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund, and reviews the services provided by the adviser. Under ^ an
agreement with the Company, INVESCO ^, 7800 E. Union Avenue, Denver, Colorado,
serves as the Fund's investment adviser. Under this agreement, ^ INVESCO is
primarily responsible for providing the Fund with various administrative
services and supervising the Fund's daily business affairs. These services are
subject to review by the Company's board of directors.
<PAGE>
Pursuant to an agreement with ^ INVESCO, INVESCO Asia Limited ("INVESCO
Asia") serves as the sub-adviser to the Fund. ^ INVESCO Asia, subject to the
supervision of ^ INVESCO, is primarily responsible for selecting and managing
the Fund's investments.
Pursuant to an agreement with the Company, ^ INVESCO Distributors, Inc.
("IDI") ^ is the Fund's distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by ^
INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Fund's
distributor.
^ INVESCO, INVESCO Asia and IDI are indirect wholly-owned subsidiaries of
AMVESCAP PLC. AMVESCAP PLC is a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. ^ INVESCO
and INVESCO Asia continued to operate under their existing names. AMVESCAP PLC ^
had approximately ^ $261 billion in assets under management^ as of June 30,
1998. INVESCO was established in 1932 and, as of July 31, ^ 1998, managed 14
mutual funds, consisting of ^ 49 separate portfolios, with combined assets of
approximately ^ $19.6 billion on behalf of ^ 884,099 shareholders.
The following individual serves as lead portfolio manager for the Fund and,
as a member of the INVESCO Asia Regional Strategies Team headed by William
Barron, is primarily responsible for determining, in accordance with ^ the
Regional Strategies Team, the country-by-country allocation of the ^ portfolio's
assets. For portfolio construction, the lead portfolio manager relies on stock
recommendations of the country specialists as per the "Buylist" or model
portfolio, based on the ongoing implementation and risk control policies
applicable to the portfolio:
^ Sam Lau Portfolio manager of the Fund since ^
1998; portfolio manager for INVESCO Asia
Limited since ^ 1994; formerly
(1988-1990), investment analyst for W. I.
Carr and (1990-1994) asset manager for
Barings and Morgan Guaranty Trust; began
investment career in ^ 1988; B.S. in
Computer Science and Mathematics from the
University of Illinois and M.B.A. from
the Chinese University of Hong Kong.
^ Mr. Lau heads a team of individual country specialists who are
responsible for managing security selections for their assigned country's share
of the allocation within the parameters established by INVESCO Asia's investment
policy group.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
<PAGE>
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that Fund Management
believes is not detrimental to the Funds or Fund Management's other advisory
clients. See the Statement of Additional Information for more detailed
information.
The Fund pays INVESCO a monthly management ^ fee which is based upon a
percentage of the Fund's average net assets ^, determined daily. The ^
management fee is computed at the annual rate of 0.75% on the first $500 million
of the Fund's average net assets, 0.65% on the next $500 million of the Fund's
average net assets and 0.55% on the Fund's average net assets over $1 billion.
Out of ^ the advisory fee which it receives from the Fund, ^ INVESCO pays
INVESCO Asia, as ^ the Fund's sub-adviser, a monthly fee based upon the average
daily value of the Fund's net assets. Based upon approval of the Company's board
of directors at a meeting held May 14, 1998, the calculation of sub-advisory
fees of the Fund has been changed from 33.33% of the advisory fee (0.25% on the
first $500 million of the ^ Fund's average net assets, ^ 0.2167% on the next
$500 million of the ^ Fund's average net assets and ^ 0.1833% on the ^ Fund's
average net assets in excess of $1 billion) to 40% of the advisory fee (0.30% on
the first $500 million of the Fund's average net assets, 0.26% on the next $500
million of the Fund's average net assets and 0.22% on the Fund's average net
assets in excess of $1 billion). No fee is paid by the Fund to INVESCO Asia.
The Company also has entered into an Administrative Services Agreement (the
"Administrative Agreement") with ^ INVESCO. Pursuant to the Administrative
Agreement, ^ INVESCO performs certain administrative, recordkeeping and internal
sub-accounting services, including without limitation, maintaining general
ledger and capital stock accounts, preparing a daily trial balance, calculating
net asset value daily, providing selected general ledger reports and providing
sub-accounting and recordkeeping services for Fund shareholder accounts
maintained by certain retirement and employee benefit plans for the benefit of
participants in such plans. For such services, the Fund pays ^ INVESCO a fee
consisting of a base fee of $10,000 per year, plus an additional incremental fee
computed at the annual rate of 0.015% per year of the average net assets of the
Fund. ^ INVESCO also is paid a fee by the Fund for providing transfer agent
services. See "Additional Information."
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
<PAGE>
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
The Fund's expenses, which are accrued daily, are ^ deducted from the
Fund's total income before dividends are paid. Total expenses (prior to any
expense offset arrangement) of the Fund for the fiscal year ended July 31, ^
1998, including investment management fees (but excluding brokerage commissions,
which are included as a cost of acquiring securities), amounted to ^ 2.10% of
the Fund's average net assets. Certain expenses of the Fund are voluntarily
absorbed by ^ INVESCO and INVESCO Asia pursuant to a commitment to the Fund in
order to ensure that the Fund's total operating expenses do not exceed 2.00%.
This commitment may be changed following consultation with the Company's board
of directors. In the absence of such voluntary expense limitation, the Fund's
total expenses for the fiscal year ended July 31, ^ 1998 would have been ^ 2.85%
of the Fund's average net assets.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such ^ brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. As discussed under "How
Shares Can Be Purchased - Distribution Expenses," the Company may market shares
of the Fund through intermediary brokers or dealers that have entered into
Dealer Agreements with ^ INVESCO or IDI, as the Fund's distributor. The Fund may
place orders for portfolio transactions with qualified ^ brokers and dealers
that recommend the Fund, or sell shares of the Fund, to clients, or act as agent
in the purchase of Fund shares for clients, if Fund Management believes that the
quality of the execution of the transaction and level of commission are
comparable to those available from other qualified brokerage firms.
^
HOW SHARES CAN BE PURCHASED
Shares of the Fund are sold on a continuous basis by IDI, as the Fund's
distributor, at the net asset value per share next calculated after receipt of a
purchase order in good form. No sales charge is imposed upon the sale of shares
of the Fund. To purchase shares of the Fund, send a check made payable to
INVESCO Funds Group, Inc., together with a completed application form, to:
INVESCO Funds Group, Inc.
Post Office Box 173706
Denver, Colorado 80217-3706
Purchase orders must specify the Fund in which the investment is to be
made.
<PAGE>
The minimum initial purchase must be at least $1,000, with subsequent
investments of not less than $50, except that: (1) those shareholders
establishing an EasiVest or direct payroll purchase account, as described below
in the section entitled "Services Provided By The Fund," may open an account
without making any initial investment if they agree to make regular, minimum
purchases of at least $50; (2) those shareholders investing in an Individual
Retirement Account ("IRA"), or through omnibus accounts where individual
shareholder recordkeeping and sub-accounting are not required, may make initial
minimum purchases of $250; (3) Fund Management may permit a lesser amount to be
invested in a Fund under a federal income tax-deferred retirement plan (other
than an IRA account), or under a group investment plan qualifying as a
sophisticated investor; and (4) Fund Management reserves the right to increase,
reduce or waive the minimum purchase requirements in its sole discretion where
it determines such action is in the best interests of the Fund.
The purchase of Fund shares can be expedited by placing bank wire,
overnight courier or telephone orders. Overnight courier orders must meet the
above minimum requirements. In no case can a bank wire order or telephone order
be in an amount less than $1,000. For further information, the purchaser may
call the Fund's office by using the telephone number on the cover of this
Prospectus. Orders sent by overnight courier, including Express Mail, should be
sent to the street address, not ^ post office box, of INVESCO ^ at 7800 E. Union
Avenue, Denver, CO 80237.
Orders to purchase shares of the Fund can be placed by telephone. Shares of
the Fund will be issued at the net asset value next determined after receipt of
telephone instructions. Generally, payments for telephone orders must be
received by the Fund within three business days or the transaction may be ^
canceled. In the event of such cancellation, the purchaser will be held
responsible for any loss resulting from a decline in the value of the shares. In
order to avoid such losses, purchasers should send payments for telephone
purchases by overnight courier or bank wire. ^ INVESCO has agreed to indemnify
the Fund for any losses resulting from the cancellation of telephone purchases.
If your check does not clear, or if a telephone purchase must be ^ canceled
due to nonpayment, you will be responsible for any related loss the Fund or ^
INVESCO incurs. If you are already a shareholder in the INVESCO funds, the Fund
has the option to redeem shares from any identically registered account in the
Fund or any other INVESCO fund as reimbursement for any loss incurred. You also
may be prohibited or restricted from making future purchases in any of the
INVESCO funds.
Persons who invest in the Fund through a securities broker may be charged a
commission or transaction fee by the broker for the handling of the transaction
if the broker so elects. Any investor may deal directly with the Fund in any
transaction. In that event, there is no such charge. IDI or ^ INVESCO may from
<PAGE>
time to time make payments from its revenues to securities dealers and other
financial institutions that provide distribution-related and/or administrative
services for the Fund.
The Fund reserves the right in its sole discretion to reject any order for
purchase of its shares (including purchases by exchange) when, in the judgment
of Fund Management, such rejection is in the best interest of the Fund.
Net asset value per share is computed once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange (generally
4:00 p.m., New York time) and also may be computed on other days under certain
circumstances. Net asset value per share for the Fund is calculated by dividing
the market value of the Fund's securities plus the value of its other assets
(including dividends and interest accrued but not collected), less all
liabilities (including accrued expenses), by the number of outstanding shares of
the Fund. If market quotations are not readily available, a security or other
asset will be valued at fair value as determined in good faith by the board of
directors. Debt securities with remaining maturities of 60 days or less at the
time of purchase will be valued at amortized cost, absent unusual circumstances,
so long as the Company's board of directors believes that such value represents
fair value.
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the 1940 Act (the "Plan") to use its
assets to finance certain activities relating to the distribution of its shares
to investors. Under the Plan, monthly payments may be made by the Fund to IDI to
permit IDI, at its discretion, to engage in certain activities and provide
certain services approved by the board of directors of the Company in connection
with the distribution of the Fund's shares to investors. These activities and
services may include the payment of compensation (including incentive
compensation and/or continuing compensation based on the amount of customer
assets maintained in the Fund) to securities dealers and other financial
institutions and organizations, which may include INVESCO- and IDI-affiliated
companies, to obtain various distribution-related and/or administrative services
for the Fund. Such services may include, among other things, processing new
shareholder account applications, preparing and transmitting to the Fund's
Transfer Agent computer processable tapes of all transactions by customers, and
serving as the primary source of information to customers in answering questions
concerning the Fund and their transactions with the Fund.
In addition, other permissible activities and services include advertising,
^ preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or ^
their affiliates or by third parties.
<PAGE>
Under the Plan, the ^ Fund's payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets during the
month. IDI is not entitled to payment for overhead expenses under the Plan, but
may be paid for all or a portion of the compensation paid for salaries and other
employee benefits for the personnel of ^ INVESCO or IDI whose primary
responsibilities involve marketing shares of the INVESCO funds, including the
Fund. Payment amounts by the Fund under the Plan, for any month, may only be
made to compensate IDI for permissible activities engaged in and services
provided by IDI during the rolling 12-month period in which that month falls^.
Therefore, any obligations incurred by IDI in excess of the limitations
described above will not be paid by the Fund and will be borne by IDI. In
addition, INVESCO, IDI and ^ their affiliates may from time to time make
additional payments from ^ their revenues to securities dealers, financial
advisers and other financial institutions that provide distribution-related
and/or administrative services for the Fund. No further payments will be made by
the Fund under the Plan in the event of the Plan's termination. ^ Payments made
by the Fund may not be used to finance directly the distribution of shares of
any other Fund of the Company or other mutual fund advised by ^ INVESCO and
distributed by IDI. However, payments received by IDI which are not used to
finance the distribution of shares of the Fund become part of IDI's revenues and
may be used by IDI for ^ activities ^ that promote distribution of any of the
mutual funds advised by ^ INVESCO. Subject to review by the ^ Company's
directors^, payments made by the Fund under the Plan for compensation of
marketing personnel, as noted above, are based on an allocation formula designed
to ensure that all such payments are appropriate. IDI will bear any
distribution- and service-related expenses in excess of the amounts which are
compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources,^ provided
that such fees are legitimate and not excessive. For more information see "How
Shares Can Be Purchased - ^ Distribution Plan" in the Statement of Additional
Information.
SERVICES PROVIDED BY THE FUND
Shareholder Accounts. ^ INVESCO maintains a share account that reflects the
current holdings of each shareholder. Share certificates will be issued only
upon specific request. Since certificates must be carefully safeguarded, and
must be surrendered in order to exchange or redeem Fund shares, most
shareholders do not request share certificates in order to facilitate such
transactions. Each shareholder is sent a detailed confirmation of each
transaction in shares of the Fund. Shareholders whose only transactions are
through the EasiVest, direct payroll purchase, automatic monthly exchange or
periodic withdrawal programs, or are reinvestments of dividends or capital gains
in the same or another fund, will receive confirmations of those transactions on
their quarterly statements. These programs are discussed below. For information
regarding a shareholder's account and transactions, the shareholder may call the
Fund's office by using the telephone number on the cover of this Prospectus.
<PAGE>
Reinvestment of Distributions. Dividends and other distributions are
automatically reinvested in additional shares of the Fund at the net asset value
per share in effect on the ex-dividend or ex-distribution date. A shareholder
may, however, elect to reinvest dividends and other distributions in certain of
the other no-load mutual funds advised by ^ INVESCO and distributed by IDI, or
to receive payment of all dividends and other distributions in excess of $10.00
by check by giving written notice to ^ INVESCO at least two weeks prior to the
record date on which the change is to take effect. Further information
concerning these options can be obtained by contacting ^ INVESCO.
Periodic Withdrawal Plan. A Periodic Withdrawal Plan is available to
shareholders who own or purchase shares of any mutual funds advised by ^ INVESCO
having a total value of $10,000 or more; provided, however, that at the time the
Plan is established, the shareholder owns shares having a value of at least
$5,000 in the fund from which the withdrawals will be made. Under the Periodic
Withdrawal Plan, ^ INVESCO, as agent, will make specified monthly or quarterly
payments of any amount selected (minimum payment of $100) to the party
designated by the shareholder. Notice of all changes concerning the Periodic
Withdrawal Plan must be received by INVESCO at least two weeks prior to the next
scheduled check. Further information regarding the Periodic Withdrawal Plan and
its requirements and tax consequences can be obtained by contacting ^ INVESCO.
Exchange Policy. Shares of the Fund may be exchanged for shares of any
other fund of the Company, as well as for shares of any of the following other
no-load mutual funds, which are also advised by ^ INVESCO and distributed by
IDI, on the basis of their respective net asset values at the time of the
exchange: ^ INVESCO Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Equity Funds, Inc. (formerly, INVESCO Capital Appreciation Funds,
Inc.), INVESCO Flexible Funds, Inc. (formerly, INVESCO Multiple Asset Funds,
Inc.), INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Strategic Portfolios,
Inc., INVESCO Tax-Free Income Funds, Inc. and INVESCO Value Trust.
Upon an exchange of shares held less than three months (other than shares
acquired through reinvestment of dividends or other distributions), a fee of 1%
of the current net asset value of the shares being exchanged will be assessed
and retained by the Fund for the benefit of the remaining shareholders. This fee
is intended to encourage long-term investment in the Fund, to avoid transaction
and other expenses caused by early redemptions or exchanges, and to facilitate
portfolio management. The fee is not a deferred sales charge, is not a
commission paid to ^ INVESCO, and does not benefit ^ INVESCO in any way. The fee
applies to redemptions from the Fund and exchanges into any of the other no-load
mutual funds which are also advised by ^ INVESCO and distributed by IDI. The
Fund will use the "first-in, first-out" method to determine the three-month
holding period. Under this method the date of redemption or exchange will be
<PAGE>
compared with the earliest purchase date of shares held in the account. If this
holding period is less than three months as to any shares, the
redemption/exchange fee will be assessed on the current net asset value of those
shares.
An exchange involves the redemption of shares in the Fund and investment of
the redemption proceeds in shares of another fund of the Company or in shares of
one of the funds listed above. Exchanges will be made at the net asset value per
share next determined after receipt of an exchange request in proper order. Any
gain or loss realized on such an exchange is recognizable for federal income tax
purposes by the shareholder. Exchange requests may be made either by telephone
or by written request to ^ INVESCO, using the telephone number or address on the
^ back of this Prospectus. Exchanges made by telephone must be in an amount of
at least $250, if the exchange is being made into an existing account of one of
the INVESCO funds. All exchanges that establish a new account must meet the
Fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
Fund's applicable minimum subsequent investment requirements.
The option to exchange Fund shares by telephone is available to
shareholders automatically unless expressly declined. By signing the New Account
Application, a Telephone Transaction Authorization Form or otherwise utilizing
the telephone exchange option, the investor has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that exchange instructions are genuine. These
may include recording telephone instructions and providing written confirmations
of exchange transactions. As a result of this policy, the investor may bear the
risk of any loss due to unauthorized or fraudulent instructions; provided,
however, that if the Fund fails to follow these or other reasonable procedures,
the Fund may be liable.
In order to prevent abuse of this policy to the disadvantage of other
shareholders, the Fund reserves the right to terminate the exchange option of
any shareholder who requests more than four exchanges in a year. The Fund will
determine whether to do so based on a consideration of both the number of
exchanges any particular shareholder or group of shareholders has requested and
the time period over which those exchange requests have been made, together with
the level of expense to the Fund which will result from effecting additional
exchange requests. The exchange policy also may be modified or terminated at any
time. Except for those limited instances where redemptions of the exchanged
security are suspended under Section 22(e) of the 1940 Act, or where sales of
the fund into which the shareholder is exchanging are temporarily stopped,
notice of all such modifications or termination of the exchange policy will be
given at least 60 days prior to the date of termination or the effective date of
the modification.
<PAGE>
Before making an exchange, the shareholder should review the prospectuses
of the funds involved and consider their differences. Shareholders interested in
exercising the exchange option may contact ^ INVESCO for information concerning
their particular exchanges.
Automatic Monthly Exchange. Shareholders who have accounts in any one or
more of the mutual funds distributed by IDI may arrange for a fixed dollar
amount of their fund shares to be automatically exchanged for shares of any
other INVESCO mutual fund listed under "Exchange Policy" on a monthly basis. The
minimum monthly exchange in this program is $50.00. This automatic exchange
program can be changed by the shareholder at any time by notifying ^ INVESCO at
least two weeks prior to the date the change is to be made. Further information
regarding this service can be obtained by contacting ^ INVESCO.
EasiVest. For shareholders who want to maintain a schedule of monthly
investments, EasiVest uses various methods to draw a preauthorized amount from
the shareholder's bank account to purchase Fund shares. This automatic
investment program can be changed by the shareholder at any time by contacting ^
INVESCO at least two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Direct Payroll Purchase. Shareholders may elect to have their employer make
automatic purchases of Fund shares for them by deducting a specified amount from
their regular paychecks. This automatic investment program can be modified or
terminated at any time by the shareholder, by notifying the employer. Further
information regarding this service can be obtained by contacting ^ INVESCO.
Tax-Deferred Retirement Plans. Shares of the Fund may be purchased for
self-employed individual retirement plans, ^ various individual retirement plans
("IRAs"), simplified employee pension plans and corporate retirement plans. In
addition, shares can be used to fund tax qualified plans established under
Section 403(b) of the Internal Revenue Code of 1986 by educational institutions,
including public school systems and private schools, and certain kinds of
non-profit organizations, which provide deferred compensation arrangements for
their employees.
Prototype forms for the establishment of these various plans, including,
where applicable, disclosure statements required by the Internal Revenue
Service, are available from ^ INVESCO. Institutional Trust Company d/b/a INVESCO
Trust Company ("ITC"), an affiliate of INVESCO, is qualified to serve as trustee
or custodian under these plans and provides the required services at competitive
rates. Retirement plans (other than IRAs) receive monthly statements reflecting
all transactions in their Fund accounts. IRAs receive the confirmations and
quarterly statements described under "Shareholder Accounts." For complete
information, including prototype forms and service charges, call ^ INVESCO at
the telephone number listed on the ^ back of this prospectus or send a written
request to: Retirement Services, INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706.
<PAGE>
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed at any time at their current net asset
value per share next determined after a request in proper form is received at
the Fund's office. (See "How Shares Can Be Purchased.") Net asset value per
share at the time of redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance. Upon the redemption of shares held less than three months (other
than shares acquired through reinvestment of dividends or other distributions),
a fee of 1% of the current net asset value of the shares will be assessed and
retained by the Fund for the benefit of remaining shareholders. This fee is
intended to encourage long-term investment in the Fund, to avoid transaction and
other expenses caused by early redemptions or exchanges, and to facilitate
portfolio management. The fee is not a deferred sales charge, is not a
commission paid to ^ INVESCO, and does not benefit ^ INVESCO in any way. The fee
applies to redemptions from the Fund and exchanges into any of the other no-load
mutual funds which are also advised by ^ INVESCO and distributed by IDI. The
Fund will use the "first-in, first-out" method to determine the three-month
holding period. Under this method the date of redemption or exchange will be
compared with the earliest purchase date of shares held in the account. If this
holding period is less than three months as to any shares, the
redemption/exchange fee will be assessed on the current net asset value of those
shares.
If the shares to be redeemed are represented by stock certificates, a
written request for redemption signed by the registered shareholder(s) and the
certificates must be forwarded to INVESCO Funds Group, Inc., Post Office Box
173706, Denver, Colorado 80217-3706. Redemption requests sent by overnight
courier, including Express Mail, should be sent to the street address, not ^
post office box, of INVESCO Funds Group, Inc. at 7800 E. Union Avenue, Denver,
CO 80237. If no certificates have been issued, a written redemption request
signed by each registered owner of the account must be submitted to ^ INVESCO at
the post office box address noted above. If shares are held in the name of a
corporation, additional documentation may be necessary. Call or write for
specific information. If payment for the redeemed shares is to be made to
someone other than the registered owner(s), the signature(s) must be guaranteed
by a financial institution which qualifies as an eligible guarantor institution.
Redemption procedures with respect to accounts registered in the names of
broker-dealers may differ from those applicable to other shareholders.
Be careful to specify the account from which the redemption is to be made.
Shareholders have a separate account for each fund in which they invest.
Payment of redemption proceeds will be mailed within seven days following
receipt of the required documents. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, or an emergency as defined by the Securities and
<PAGE>
Exchange Commission exists. If the shares to be redeemed were purchased by check
and that check has not yet cleared, payment will be made promptly upon clearance
of the purchase check (which will take up to 15 days).
If a shareholder participates in EasiVest, the Fund's automatic monthly
investment program, and redeems all of the shares in a Fund account, ^ INVESCO
will terminate any further EasiVest purchases unless otherwise instructed by the
shareholder.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to effect the involuntary redemption of all
shares in such account, in which case the account would be liquidated and the
proceeds forwarded to the shareholder. Prior to any such redemption, a
shareholder will be notified and given 60 days to increase the value of the
account to $250 or more.
Fund shareholders (other than shareholders holding Fund shares in accounts
of IRA plans) may request expedited redemption of shares having a minimum value
of $250 (or redemption of all shares if their value is less than $250) held in
accounts maintained in their name by telephoning redemption instructions to ^
INVESCO, using the telephone number on the ^ back of this prospectus. The
redemption proceeds, at the shareholder's option, either will be mailed to the
address listed for the shareholder's Fund account, or wired (minimum of $1,000)
or mailed to the bank which the shareholder has designated to receive the
proceeds of telephone redemptions. The Fund charges no fee for effecting such
telephone redemptions. Unless Fund Management permits a larger redemption
request to be placed by telephone, a shareholder may not place a redemption
request by telephone in excess of $25,000. These telephone redemption privileges
may be modified or terminated in the future at the discretion of Fund
Management.
For ITC-sponsored federal income tax-deferred retirement plans ^, the term
"shareholders" is defined to mean plan trustees that file a written request to
be able to redeem Fund shares by telephone. Shareholders should understand that,
while the Fund will attempt to process all telephone redemption requests on an
expedited basis, there may be times, particularly in periods of severe economic
or market disruption, when (a) they may encounter difficulty in placing a
telephone redemption request, and (b) processing telephone redemptions will
require up to seven days following receipt of the redemption request, or
additional time because of the unusual circumstances set forth above.
^ Redeeming Fund shares by telephone is available to shareholders
automatically unless expressly declined. By signing a New Account Application, a
Telephone Transaction Authorization Form or otherwise utilizing telephone
redemption privileges, the shareholder has agreed that the Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine. The Fund employs procedures, which it believes are
reasonable, designed to confirm that telephone instructions are genuine. These
may include recording telephone
<PAGE>
instructions and providing written confirmation of transactions initiated by
telephone. As a result of this policy, the investor may bear the risk of any
loss due to unauthorized or fraudulent instructions; provided, however, that if
the Fund fails to follow these or other reasonable procedures, the Fund may be
liable.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
shareholders allows the Fund to maintain its tax status as a regulated
investment company. ^ The Fund does not expect to pay any federal income or
excise taxes because of its tax status as a regulated investment company.
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a maximum rate of 28% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held for more than 18 months are taxable at a maximum
rate of 20% (depending on the shareholder's marginal tax rate). Beginning
January 1, 1998, the IRS Restructuring and Reform Act of 1998, signed into law
on July 24, 1998, lowers the holding period for long-term capital gains entitled
to the 20% capital gains tax rate from 18 months to 12 months. Accordingly, all
long-term gains realized after December 31, 1997 on the sale of securities held
for more than 12 months will be taxable at a maximum rate of 20%. At the end of
each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
^ adviser as to the effect of ^ distributions by the Fund ^.
Shareholders ^ may realize capital gains or losses when they sell their
Fund shares at more or less than the price originally paid. Capital gains on
shares held for more than one year will be long-term capital gains, in which
event they will be subject to federal income tax at the rates indicated above.
<PAGE>
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital gains and other distributions
and redemption proceeds. ^ Shareholders can avoid backup withholding on ^ their
Fund account by ensuring that ^ INVESCO has a correct, certified tax
identification number unless the shareholder is subject to backup withholding
for other reasons.
Shareholders should^ consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends ^ on its investments.
Dividends paid by the Fund will be based solely on the net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on a quarterly basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains^ realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital
gains distributions are automatically reinvested in shares of the Fund at the
net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution regardless how long the Fund shares
have been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the Fund have equal voting rights, based on
one vote for each share owned and a corresponding fractional vote for each
fractional share owned. Voting with respect to certain matters, such as
ratification of independent accountants and the election of directors, will be
by all funds of the Company voting together. In other cases, such as voting upon
<PAGE>
the investment advisory contract, voting is on a fund-by-fund basis. To the
extent permitted by law, when not all funds are affected by a matter to be voted
upon, only shareholders of the Fund or funds affected by the matter will be
entitled to vote thereon. The Company is not generally required, and does not
expect, to hold regular annual meetings of shareholders. However, the board of
directors will call special meetings of shareholders for the purpose, among
other reasons, of voting upon the question of removal of a director or directors
when requested to do so in writing by the holders of 10% or more of the
outstanding shares of the ^ Fund or as may be required by applicable law or the
Company's Articles of Incorporation. The Company will assist shareholders in
communicating with other shareholders as required by the 1940 Act. Directors may
be removed by action of the holders of a majority or more of the outstanding
shares of the Company.
Master/Feeder Option. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company or partnership having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. It is expected that any such investment company would be managed by
^ INVESCO in substantially the same manner as the existing Fund. If permitted by
applicable laws and policies then in effect, any such investment may be made in
the sole discretion of the Company's board of directors without further approval
of the shareholders of the Fund. However, Fund shareholders will be given at
least 30 days prior notice of any such investment. Such investment would be made
only if the Company's board of directors determines it to be in the best
interests of the Fund and its shareholders. In making that determination, the
board will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiencies. No assurance
can be given that costs will be materially reduced if this option is
implemented.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or mailing address set forth on the cover
page of this prospectus.
Transfer and Dividend Disbursing Agent. INVESCO ^, 7800 E. Union Ave.,
Denver, Colorado 80237, also acts as registrar, transfer agent, and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement which
provides that the Fund will pay an annual fee of $20.00 per shareholder account
or, where applicable, per participant in an omnibus account. The transfer agency
fee is not charged to each shareholder's or participant's account, but is an
expense of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third party administrators of tax-qualified retirement plans and
other entities, including affiliates of ^ INVESCO, may provide sub-transfer
agency or recordkeeping services to the Fund which reduce or eliminate the need
for identical services to be provided on behalf of the Fund by ^ INVESCO. In
such cases, ^ INVESCO may pay the third party an annual sub-transfer agency or
recordkeeping fee out of the transfer agency fee which is paid to ^ INVESCO by
the Fund.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO Asian Growth Fund
A no-load mutual fund
seeking capital
appreciation.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities & Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO REALTY FUND
INVESCO Realty Fund (the "Fund") seeks to provide above-average current
income. Long-term capital growth potential is an additional consideration in
selecting securities for the Fund's investment portfolio. The Fund normally
invests at least 65% of its total assets in dividend-paying, publicly-traded
stocks of companies in the real estate industry. The remaining assets are
invested in other income-producing securities such as corporate bonds.
The Fund is a series of INVESCO Specialty Funds, Inc. (The "Company"), a
diversified, managed no-load mutual fund consisting of seven separate portfolios
of investments. Separate prospectuses are available upon request from INVESCO
Distributors, Inc. for the Company's other funds: INVESCO Worldwide Capital
Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European Small
Company Fund, INVESCO Asian Growth Fund, INVESCO Latin American Growth Fund and
INVESCO S&P 500 Index Fund. Investors may purchase shares of any and all of the
Funds. Additional funds may be offered in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information dated December 1, ^ 1998,
containing further information about the Fund has been filed with the Securities
and Exchange Commission and is incorporated by reference into this Prospectus.
To ^ request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ESSENTIAL INFORMATION........................................................141
ANNUAL FUND EXPENSES.........................................................142
FINANCIAL HIGHLIGHTS.........................................................144
INVESTMENT OBJECTIVE AND STRATEGY............................................146
INVESTMENT POLICIES AND RISKS................................................147
THE FUND AND ITS MANAGEMENT..................................................154
FUND PRICE AND PERFORMANCE...................................................156
HOW TO BUY SHARES............................................................157
FUND SERVICES................................................................163
HOW TO SELL SHARES...........................................................165
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS.....................................167
ADDITIONAL INFORMATION.......................................................169
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy: ^ The Fund seeks to provide above-average
current income. Long-term capital growth potential is an additional
consideration in selecting securities for the Fund's investment portfolio. The
Fund normally invests at least 65% of its total assets in publicly-traded stocks
of companies primarily engaged in the real estate industry. The remaining assets
are invested in other income-producing securities such as mortgage-backed
securities and corporate bonds. There is no guarantee that the Fund will meet
its objective. See "Investment Objective and Strategy" ^ And "Investment
Policies ^ And Risks."
Designed For: Investors primarily seeking above-average current income
consistent with reasonable risk, without sacrificing the potential for long-term
capital growth. While not a complete investment program, the Fund may be a
valuable element of your investment portfolio. You also may wish to consider the
Fund as part of a Uniform Gifts/Transfer To Minors Act Account or systematic
investing strategy. The Fund may be a suitable investment for many types of
retirement programs, including various Individual Retirement ^ Accounts
("IRAs"), 401(k), Profit Sharing, Money Purchase Pension, and 403(b) plans.
Time Horizon: Since stock prices fluctuate on a daily basis, the Fund's
price per share varies daily. Potential shareholders should consider this a
long-term investment.
Risks: The Fund focuses on equity securities of companies principally
engaged in the real estate industry. As such, in addition to the normal market
risks associated with investments in securities generally, the Fund is
particularly sensitive to conditions in the real estate industry. Real estate is
a cyclical industry that is sensitive to, among other things, interest rates,
property tax rates, national, regional and local economic conditions and
availability of materials. The Fund's investments in debt securities are subject
to credit risk and market risk, both of which are increased by investing in
lower-rated securities. The returns on foreign investments may be influenced by
the risks of investing overseas. Rapid portfolio turnover may result in higher
brokerage commissions and the acceleration of taxable capital gains. These
policies make the Fund unsuitable for that portion of your savings dedicated to
preservation of capital over the short term. See "Investment Objective And
Strategy" and "Investment Policies And Risks."
Organization and Management: The Fund is a series of ^ the Company. The
Fund is owned by its shareholders. ^ It employs INVESCO Funds Group, Inc. (" ^
INVESCO"), founded in 1932, to serve as investment adviser, administrator and
transfer agent. INVESCO Realty Advisors, Inc. ("IRAI") serves as the Fund's
sub-adviser. Together, ^ INVESCO and IRAI constitute "Fund Management." ^
INVESCO Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned subsidiary
of ^ INVESCO, is the Fund's distributor.
<PAGE>
The Fund's investments are selected by a team of IRAI portfolio managers
that is collectively responsible for the investment decisions relating to the
Fund.
^ INVESCO, IRAI and IDI are subsidiaries of AMVESCAP PLC, an international
investment management company that ^ managed approximately ^ $261 billion in
assets as of June 30, 1998. AMVESCAP PLC is based in London, with money managers
located in Europe, North America, Latin America and the Far East.
This Fund offers all of the following services at no charge:
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Regular investment plans, such as EasiVest (the Fund's automatic
monthly investment program), Direct Payroll Purchase, and Automatic
Monthly Exchange Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans.
Minimum Subsequent Investment: $50 (Minimums are lower for certain
retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares. The Fund^ is authorized to pay a Rule 12b-1 distribution fee of one
quarter of one percent of the Fund's average net assets each year. (See "How To
Buy Shares -^ Distribution Expenses.")
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts and other expenses. These expenses are paid from the Fund's assets.
Lower expenses benefit investors by increasing the Fund's total return.
We calculate annual operating expenses as a percentage of the Fund's
average annual net assets. To keep expenses competitive, ^ INVESCO voluntarily
reimburses the Fund for expenses in excess of 1.20% of the Fund's average net
assets (excluding expense offset arrangement described below).
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.75%^
12b-1 Fees 0.25%^
Other Expenses (after expense ^ limitation)(1)(2) 0.22%
Total Fund Operating Expenses
(after expense ^ limitation)(1)(2) 1.22%
<PAGE>
^(1) It should be noted that the Fund's actual operating expenses were lower
than the figures shown because the Fund's custodian fees were reduced under an
expense offset arrangement. However, as a result of an SEC requirement ^,the
figures shown above do not reflect these reductions.
^(2) Certain expenses of the Fund are absorbed voluntarily by ^ INVESCO. In the
absence of such absorbed expenses the Fund's "Other Expenses" and "Total Fund
Operating Expenses" would have been ^ 0.97% (annualized) and ^ 1.97%,
respectively, of the Fund's actual expenses for the ^ fiscal year ended July 31,
1998.
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
^ $13 $39 $67 $148
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE ^ EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR
EXPENSES, AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. For more information on the Fund's expenses, see "The Fund And Its
Management" and "How To Buy Shares -- Distribution Expenses."
Because the Fund pays a distribution fee, investors who own Fund shares for
a long period of time may pay more than the economic equivalent of the maximum
front-end sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout the Period)
The following information ^ has been audited by PricewaterhouseCoopers LLP,
independent accountants. This information should be read in conjunction with the
audited financial statements and the ^ Report of Independent Accountants thereon
appearing in the Company's ^ 1998 Annual Report to Shareholders which is
incorporated by reference into the Statement of Additional Information. Both are
available without charge by contacting ^ IDI at the address or telephone number
^ on the back cover of this Prospectus. The Annual Report also contains more
information about the Fund's performance.
INVESCO Realty Fund
<TABLE>
<CAPTION>
<S> <C> <C>
Year Period
Ended Ended
July 31 July 31
--------- ---------^
^ 1998 1997(a)
PER SHARE DATA
Net Asset Value - Beginning of Period $10.99 $10.00
--------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ^ 0.38 0.22
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.96) 0.99
--------- ---------
Total from Investment Operations (0.58) 1.21
--------- ---------
LESS DISTRIBUTIONS
Dividends from Net Investment Income ^ 0.39 0.22
^ Distributions from Capital Gains 0.87 0.00
--------- ---------
Total Distributions 1.26 0.22
--------- ---------
Net Asset Value - End of Period $9.15 $10.99
========= =========
TOTAL RETURN ^(6.49%) 12.24%(b)
RATIOS
Net Assets - End of Period
($000 Omitted) $23,548 $36,658
Ratio of Expenses to Average
Net Assets^(c)(d) 1.22% 1.20%(e)
Ratio of Net Investment Income to
^ Average Net Assets^(c) 3.53% 4.08%(e)
Portfolio Turnover Rate ^ 258% 70%(b)
<PAGE>
^(a) From January 1, 1997, commencement of investment operations, to July 31,
1997.
^(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
^(c) Various expenses of ^ the Fund were voluntarily absorbed by INVESCO ^ for
the year ended July 31, 1998 and the period ended July 31, 1997. If such
expenses had not been voluntarily absorbed, ratio of expenses to average
net assets would have been 1.97% and 1.83% (annualized), respectively, and
ratio of net investment income to average net assets would have been 2.78%
and 3.45% (annualized), respectively.^
^(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset ^ arrangement.
^(e) Annualized
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to provide above-average current income while following
sound investment practices. This investment objective is fundamental and cannot
be changed without the approval of the Fund's shareholders. Long-term capital
growth potential is an additional, but secondary, consideration in the selection
of portfolio securities. There is no assurance that the Fund's investment
objective will be met.
The Fund normally invests at least 65% of its total assets in equity
securities of companies principally engaged in the real estate industry. A
company is "principally engaged" in that industry if at least 50% of its assets,
gross income or net profits are attributable to the ownership, construction,
management or sale of residential, commercial or industrial real estate. Such
companies may include, for example, real estate investment trusts ("REITs"),
real estate brokers, home builders or real estate developers, companies with
substantial real estate holdings (such as paper and lumber producers,
agricultural businesses and lodging and entertainment companies) and companies
with significant involvement in the real estate industry, such as building
supply companies and financial institutions that write real estate mortgages. In
addition to common stocks, "equity securities" may include preferred stocks,
securities convertible into common stock and warrants.
The Fund's investments in equity securities are diversified by both
property type and geographic region. Under normal circumstances, no one property
type will represent more than 50% of the Fund's total assets. The remaining
assets of the Fund are invested in debt securities, including mortgage-backed
securities and debt or equity securities of companies which may or may not be
principally involved in the real estate industry, including non-investment grade
and unrated debt securities. The Fund may invest up to 25% of its total assets
in foreign securities.
Although the Fund seeks to invest for the long term, the Fund retains the
right to sell portfolio securities without regard to how long they have been in
the Fund's portfolio. The Fund anticipates a portfolio turnover rate of between
60% and 75%. A portfolio turnover rate of 75% would occur if three-quarters of
the Fund's portfolio securities were sold within one year.
When the Fund believes market or economic conditions are unfavorable, the
Fund may assume a defensive position by temporarily investing up to 100% of its
total assets in high-quality money market instruments, such as short-term U.S.
government obligations, commercial paper or repurchase agreements, seeking to
protect its assets until conditions stabilize.
<PAGE>
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see ^ the price per share of the Fund
vary with movements in the securities markets, changes in economic conditions
and interest rates, and other factors.
Year 2000 Computer Issue. Due to the fact that many computer systems in use
today cannot recognize the Year 2000, but will, unless corrected, revert to 1900
or 1980 or cease to function at that time, the markets for securities in which
the Fund invests may be detrimentally affected by computer failures affecting
portfolio investments or trading of securities beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production issues for individual companies and overall economic
uncertainties. Earnings of individual issuers may be affected by remediation
costs, which may be substantial. The Fund's investments may be adversely
affected.
Concentration. The Fund's performance is tied closely to conditions
affecting the real estate industry, which has historically been cyclical. The
real estate industry is highly sensitive to national, regional and local
economic conditions, in addition to such factors as interest rates, changes in
property taxes and real estate values, overbuilding, and changes in rental
income. The structure, management and cash flow of many of the companies in the
industry also may heavily impact their performance. Although the Fund does not
intend to invest directly in private real estate assets, it conceivably could
own real estate directly as a result of default on debt securities that it holds
in its portfolio. Therefore, the Fund may be subject to certain risks associated
with the direct ownership of real estate, including, among others, difficulties
in valuing and trading real estate and declines in the value of real estate.
Debt Securities. When we assess an issuer's ability to meet its interest
rate obligations and repay its debt when due, we are referring to "credit risk."
Debt obligations are rated based on their estimated credit risk by independent
services such as Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("S&P") or Moody's Investors Services, Inc. ("Moody's"). "Market risk"
refers to sensitivity to changes in interest rates. For instance, when interest
rates go up, the market value of a previously issued bond generally declines; on
the other hand, when interest rates go down, the prices of bonds generally
increase.
The lower a bond's quality, the more it is subject to credit risk and
market risk and the more speculative it becomes. This is also true of most
unrated securities. No more than 15% of the total assets of the Fund may be
invested in issues rated below investment grade quality (commonly called "junk
bonds," and rated BB or lower by S&P or Ba or lower by Moody's or, if unrated,
are judged by Fund Management to be of equivalent quality). These include issues
which are of poorer quality and may have some speculative characteristics,
<PAGE>
according to the ratings services. Investments in unrated securities may not
exceed 25% of the Fund's total assets. Never, under any circumstances, is the
Fund permitted to purchase bonds which are rated below B by Moody's or B- by S&P
or, if unrated, judged by INVESCO and IRAI (collectively, "Fund Management") to
be of equivalent quality. Bonds rated B or B-generally lack characteristics of a
desirable investment and are deemed speculative with respect to the issuer's
capacity to pay interest and repay principal over a long period of time. While
Fund Management continuously monitors all of the corporate bonds in the Fund's
investment portfolio for the issuer's ability to make required principal and
interest payments and other quality factors, it may retain a bond whose rating
is changed to one below the minimum rating required for purchase of the
security.
Because investment in medium- and lower-rated securities involves both
greater credit risk and market risk, achievement of the Fund's investment
objective may be more dependent on Fund Management's own credit analysis than is
the case for funds investing in higher quality securities. In addition, the
share price and yield of the Fund may be expected to fluctuate more than in that
of funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower-rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend and
interest obligations; meet projected business goals; and obtain additional
financing. In this regard, it should be noted that while the market for high
yield corporate bonds has been in existence for many years and from time to time
has experienced economic downturns, this market has experienced a significant
increase in the use of high yield corporate debt securities to fund highly
leveraged corporate acquisitions and restructurings. Past experience may not,
therefore, provide an accurate indication of future performance of the high
yield bond market, particularly during periods of economic recession.
Furthermore, expenses incurred to recover an investment in a defaulted security
may adversely affect the Fund's net asset value. Finally, while Fund Management
attempts to limit purchases of medium- and lower-rated securities to securities
having an established secondary market, the secondary market for such securities
may be less liquid than the market for higher-quality securities. The reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and ability of the Fund to value, particular securities at
certain times, thereby making it difficult to make specific valuation
determinations.
For a detailed description of corporate bond ratings, refer to Appendix B
to the Statement of Additional Information.
REITs. Real estate investment trusts (REITs) are pooled investment vehicles
that invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as either equity or mortgage,
or a combination of the two. An equity REIT invests the majority of its assets
directly in real estate and derives most of its income from rents. A mortgage
REIT invests the majority of its assets in real estate mortgages and derives
<PAGE>
most of its income from interest payments. In addition to the risks inherent in
any investment in the real estate industry, investments in REITs have certain
unique risks. Equity REITs can be affected by changes in the value of the
underlying property owned by them; mortgage REITs are affected by the quality of
the credit extended. REITs are not diversified, and are subject to the risks of
real estate financing, including cash flow dependency and defaults by borrowers.
REITs attempt to qualify for beneficial tax treatment by distributing 95% of
their taxable income to their interest holders. If a REIT fails to qualify for
such beneficial tax treatment, it would be taxed as a corporation, and
distributions to its shareholders (including the Fund) would be reduced. By
investing in REITs indirectly through the Fund, a Fund shareholder will bear not
only a proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REIT. For taxable shareholders, a portion of the
dividends paid by a REIT may be considered return on capital and would not
currently be regarded as taxable income. Therefore, depending upon an
individual's tax bracket, the dividend yield may have a higher tax-effective
yield.
Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities issued or guaranteed by the U.S. government or federal agencies such
as Government National Mortgage Association ("GNMA"), Fannie Mae (formerly known
as the Federal National Mortgage Association) and Federal Home Loan Mortgage
Corporation ("FHLMC"). Some of these securities, such as GNMA certificates, are
backed by the full faith and credit of the U.S. Treasury while others, such as
FHLMC certificates, are not. Mortgage-backed securities represent interests in
pools of mortgages which have been purchased from loan institutions such as
banks and savings & loans, and packaged for resale in the secondary market.
Interest and principal are "passed through" to the holders of the securities.
The timely payment of interest and principal is guaranteed by a federal agency,
but the market value of the security is not guaranteed and will vary. The Fund
also may invest in mortgage-backed securities issued by private,
non-governmental issuers such as banks and broker-dealers. When interest rates
drop, many home buyers choose to refinance their mortgages. These resulting
prepayments of the initial margin may shorten the average weighted lives of
mortgage-backed securities and may lower their returns. Prepayment rates cannot
be predicted with any accuracy. Under certain interest rate and prepayment rate
structures, it is possible that the Fund may fail to recoup the full amount of
its investment in mortgage-backed securities, despite any direct or indirect
governmental or agency guarantee. When the Fund reinvests amounts received
representing unscheduled prepayments of principal, it likely will receive a rate
of interest that is lower than the rate on then-existing adjustable rate
mortgage pass-through securities.
Collateralized mortgage obligations ("CMOs") may be issued by, among
others, U.S. government agencies and instrumentalities. CMOs are issued in
classes, with the principal of, and interest on, the underlying mortgage assets
allocated among the several classes. Each class is commonly referred to as a
"tranche," and is issued at a specific or adjustable interest rate. Each tranche
<PAGE>
must be fully retired no later than its final distribution date. Generally,
interest is paid or accrued monthly. CMOs typically are collateralized by GNMA,
Fannie Mae or FHLMC certificates. They also may be collateralized by other
mortgage assets, including whole loans or private mortgage pass-through
securities. CMOs are paid from payments of principal and interest on collateral
of mortgaged assets and any reinvestment income thereon. Risks of investing in
CMOs, in addition to the general risks of investing in the real estate industry,
include failure of the counter-party to meet its commitments, the effects of
prepayment on mortgage cash flows and adverse interest rate changes. Investing
in the lower tranches of CMOs presents risks similar to investments in equity
securities. The yield of CMOs may be affected by adjustability of interest rates
and the possibility that prepayments of principal may be made significantly
earlier than the final distribution dates. These practices and risks are
discussed under "Investment Policies and Restrictions" in the Statement of
Additional Information.
Interest Rate Futures Contracts. The Fund may buy and sell interest rate
futures contracts relating to U.S. government securities for the purpose of
hedging the value of its securities portfolio. These practices and their risks
are discussed under "Investment Policies and Restrictions" in the Statement of
Additional Information.
Foreign Securities. ^ Up to 25% of the Fund's total assets, measured at the
time of purchase, may be invested directly in foreign equity and corporate debt
securities. Securities of Canadian issuers are not subject to this 25%
limitation.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
^ risk (i.e., changes in the value of the currencies in which the securities are
denominated relative to the U.S. dollar). In a period when the U.S. dollar
generally rises against a foreign currency, the returns for a U.S. investor on
foreign securities denominated in that foreign currency may ^ decline. By
contrast, in a period when the U.S. dollar generally declines, ^ the foreign
securities generally are enhanced.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
<PAGE>
-^ investment income on certain foreign securities may be subject to
foreign withholding taxes, which may reduce dividends or capital gains payable
to shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
instability; potential restrictions on the flow of international capital; and
the possibility ^ that the Fund ^ may experience difficulties in pursuing legal
remedies and collecting judgments.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal and Spain are presently members of the European Economic
and Monetary Union (the "EMU"). EMU intends to establish a common European
currency for EMU countries which will be known as the "euro." Each participating
country presently plans to adopt the euro as its currency on January 1, 1999.
The old national currencies will be sub-currencies of the euro until July 1,
2002, at which time the old currencies will disappear entirely. Other European
countries may adopt the euro in the future.
The planned introduction of the euro presents some uncertainties and
possible risks, including whether the payment and operational systems of banks
and other financial institutions will be ready by January 1, 1999; whether
exchange rates for existing currencies and the euro will be adequately
established; and whether suitable clearing and settlement systems for the euro
will be in operation. These and other factors may cause market disruptions
before or after January 1, 1999 and could adversely affect the value of
securities held by the Fund.
Illiquid and Rule 144A Securities. The Fund may invest up to 15% of its net
assets, measured at the time of purchase, in securities which are illiquid
because they are subject to restrictions on their resale ("restricted
securities") or because, based upon the nature of the market for such
securities, they are not readily marketable. Investments in illiquid securities
involve the risk that the Fund may not be able to sell such securities at the
time or price desired. In addition, in order to resell a restricted security,
the Fund might have to bear the expense and incur the delays associated with
registration of the security. The Fund may purchase certain securities that are
not registered for sale to the general public, but that can be resold to
institutional investors ("Rule 144A Securities"), without regard to the
foregoing 15% limitation, if a liquid trading market exists. The Company's board
of directors has delegated to Fund Management the authority to determine the
liquidity of Rule 144A Securities pursuant to guidelines approved by the board.
In the event that a Rule 144A Security held by the Fund is subsequently
determined to be illiquid, the security will be sold as soon as that can be done
in an orderly fashion consistent with the best interests of the Fund's
shareholders. For more information concerning Rule 144A Securities, see
"Investment Policies ^ And Restrictions" in the Statement of Additional
Information.
<PAGE>
Delayed Delivery or When-Issued Purchases. ^ Up to 10% of the value of the
Fund's net assets may be committed to the purchase or sale of debt securities on
a when-issued or delayed-delivery basis -- that is, with settlement taking place
in the future. The ^ payment obligation and the interest rate received on the
securities generally are fixed at the time the Fund enters into the commitment.
Between the date of purchase and the settlement date, the market value of the
securities ^ may vary. No interest is payable to the Fund prior to ^ settlement.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price and date. The Fund could incur costs or delays in seeking
to sell the instrument if the prior owner defaults on its repurchase obligation.
To reduce that risk, the securities which are the subject of the repurchase
agreement will be maintained as collateral with the Fund's custodian in an
amount at least equal to the repurchase price under the agreement (including
accrued interest). These agreements are entered into only with member banks of
the Federal Reserve System, registered broker-dealers, and registered U.S.
government securities dealers that are deemed creditworthy under standards set
by the Company's board of directors.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Futures Contracts and Options. The Fund may enter into futures contracts
for hedging or other non-speculative purposes within the meaning and intent of
applicable rules of the Commodity Futures Trading Commission ("CFTC"). For
example, futures contracts may be purchased or sold to attempt to hedge against
the effects of interest or exchange rate changes on the Fund's current or
intended investments. If an anticipated decrease in the value of portfolio
securities occurs as a result of a general increase in interest rates or a
change in exchange rates, the adverse effects of such changes may be offset, in
whole or part, by gains on the sale of futures contracts. Conversely, an
increase in the cost of portfolio securities to be acquired caused by a general
decline in interest rates or a change in exchange rates may be offset, in whole
or part, by gains on futures contracts purchased by the Fund. The Fund will
incur brokerage fees when it purchases and sells futures contracts, and it will
be required to maintain margin deposits.
The Fund also may use options to buy or sell futures contracts or debt
securities. Such investment strategies will be used as a hedge and not for
speculation.
Put and call options on futures contracts or securities may be traded by
the Fund in order to protect against declines in the values of portfolio
<PAGE>
securities or against increases in the cost of securities to be acquired.
Purchases of options on futures contracts may present less dollar risk in
hedging the Fund's portfolio than the purchase and sale of the underlying
futures contracts, since the potential loss is limited to the amount of the
premium plus related transaction costs. The premium paid for such a put or call
option plus any transaction costs will reduce the benefit, if any, realized by
the Fund upon exercise or liquidation of the option; and, unless the price of
the underlying futures contract changes sufficiently, the option may expire
without value to the Fund. The writing of covered options does not present less
risk than the trading of futures contracts and will constitute only a partial
hedge, up to the amount of the premium received. Additionally, if an option is
exercised, the Fund may suffer a loss on the transaction.
The Fund may purchase put or call options in anticipation of changes in
interest rates or other factors which may adversely affect the value of its
portfolio or the prices of securities which the Fund anticipates purchasing at a
later date. The Fund may be able to offset such adverse effects on its
portfolio, in whole or in part, through the options purchased.
The Fund may, from time to time, also sell ("write") covered call options
or cash secured puts in order to attempt to increase the yield on its portfolio
or to protect against declines in the value of its portfolio securities. By
writing a covered call option, the Fund, in return for the premium income
realized from the sale of the option, gives up the opportunity to profit from a
price increase in the underlying security above the option exercise price, if
the price increase occurs while the option is in effect. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect. By writing a cash secured put, the Fund, which receives the premium, has
the obligation during the option period, upon assignment of an exercise notice,
to buy the underlying security at a specified price. A put is secured by cash if
the Fund maintains at all times cash, Treasury bills or other high grade
short-term obligations with a value equal to the option exercise price in a
segregated account with its custodian.
Although the Fund will enter into options and futures contracts solely for
hedging or other non-speculative purposes, within the meaning and intent of
applicable rules of the CFTC, their use does involve certain risks. For example,
a lack of correlation between the value of an instrument underlying an option or
futures contract and the assets being hedged, or unexpected adverse price
movements, could render the Fund's hedging strategy unsuccessful and could
result in losses. In addition, there can be no assurance that a liquid secondary
market will exist for any contract purchased or sold, and the Fund may be
required to maintain a position until exercise or expiration, which could result
in losses. Transactions in futures contracts and options are subject to other
risks as well.
<PAGE>
The risks related to transactions in options and futures to be entered into
by the Fund are set forth in greater detail in the Statement of Additional
Information, which should be reviewed in conjunction with the foregoing
discussion.
^
Investment Restrictions. Certain restrictions, which are ^ identified in
the Statement of Additional Information, may not be altered without the approval
of the Fund's shareholders. For example, with respect to 75% of the Fund's total
assets, the Fund limits to 5% of its total assets the amount which may be
invested in a single issuer. The Fund's ability to borrow money is limited to
borrowings from banks for temporary or emergency purposes, and reverse
repurchase agreements, in amounts as aggregated not exceeding 33-1/3% of total
assets.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies And Restrictions" in the Statement of Additional
Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission as ^ a diversified, open-end^ management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund and reviews the services provided by the investment adviser and
investment sub-adviser. Under an agreement with the Company, ^ INVESCO, 7800 E.
Union Avenue, Denver, Colorado 80237, serves as the Fund's investment adviser;
it is primarily responsible for providing the Fund with various administrative
services. IRAI is the Fund's sub-adviser and is primarily responsible for
managing the Fund's investments.
INVESCO, IRAI and IDI are indirect wholly owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. INVESCO
and IRAI continued to operate under their existing names. AMVESCAP PLC had
approximately $261 billion in assets under management as of June 30, 1998.
INVESCO was established in 1932 and, as of July 31, 1998, managed 14 mutual
funds, consisting of 49 separate portfolios, with combined assets of
approximately $19.6 billion on behalf of 884,099 shareholders. IRAI, founded in
1983, is a registered investment adviser that currently manages $___ billion of
assets (both securities and direct investments in real estate) for its clients.
IRAI's clients include corporate plans and public pension funds, as well as
endowment and foundation accounts. It presently serves as sub-adviser to two
other mutual fund portfolios as well as other collective investment vehicles. As
<PAGE>
of July 31, 1998, the portfolio of direct investments in real estate managed by
IRAI for its clients contained __ properties totalling more than 25 million
square feet of commercial real estate and ______ apartment units.
The Fund's investments are selected by a team of IRAI portfolio managers
that is collectively responsible for the investment decisions relating to the
Fund.
Fund Management permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires Fund Management's personnel to conduct
their personal investment activities in a manner that Fund Management believes
is not detrimental to the Fund or Fund Management's other advisory clients. See
the Statement of Additional Information for more detailed information concerning
this policy.
The Fund pays ^ INVESCO a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.75% of the Fund's average net assets. Out of
this advisory fee, ^ INVESCO pays to IRAI, as sub-adviser to the Fund, a monthly
fee based upon the average daily value of the Fund's net assets. Based upon
approval of the Company's board of directors at a meeting held May 14, 1998, the
calculation of sub-advisory fees of the Fund has been changed from 33.33% of the
advisory fee (0.25% of the Fund's average net assets) to 40% of the advisory fee
(0.30% of the Fund's average net assets.) No fee is paid by the Fund to IRAI.
Under a Distribution Agreement ^, IDI provides services relating to the
distribution and sale of the Fund's shares. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail funds advised
by ^ INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Fund's
distributor.
Under a Transfer Agency Agreement, ^ INVESCO acts as registrar, transfer
agent and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of ^
INVESCO, may provide equivalent services to the Fund. In these cases, ^ INVESCO
may pay, out of the fee it receives from the Fund, an annual sub-transfer agency
or recordkeeping fee to the third party.
^ Under an Administrative Services Agreement, ^ INVESCO handles additional
administrative, recordkeeping^ and internal sub-accounting services for the
Fund. For ^ the fiscal year ended July 31, 1998, the Fund paid INVESCO a fee
equal to 0.04% of the Fund's average net assets (prior to the absorption of
certain Fund expenses).
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
<PAGE>
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
The Fund's expenses, which are accrued daily, are deducted from total
income before dividends are paid. Total expenses of the Fund for the ^ fiscal
year ended July 31, 1998, including investment management fees (but excluding
brokerage commissions, which are a cost of acquiring securities), amounted to ^
1.22% of the Fund's average net assets. Certain Fund expenses were absorbed
voluntarily by ^ INVESCO in order to ensure that the Fund's total operating
expenses did not exceed ^ 1.20% of the Fund's average net assets. This
commitment may be changed following consultation with the Company's board of
directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such ^ brokers' and dealers' financial responsibility coupled with their ability
to effect transactions at the best available prices. As discussed under "How to
Buy Shares -^ Distribution Expenses," the Fund may market its shares through
intermediary brokers or dealers that have entered into Dealer Agreements with ^
INVESCO or IDI, as the Fund's distributor. The Fund may place orders for
portfolio transactions with qualified ^ brokers and dealers that recommend the
Fund, or sell shares of the Fund, to clients, or act as agent in the purchase of
Fund shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms. For further information, see
"Investment Practices - ^ Placement of Portfolio Brokerage" in the Statement of
Additional Information.
^
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund ^ may vary
daily. The price per share is also known as the Net Asset Value ("NAV"). ^
INVESCO prices the Fund every day that the New York Stock Exchange is open, as
of the close of regular trading (generally, 4:00 p.m., New York time). NAV is
calculated by adding together the current market value of the Fund's assets,
<PAGE>
including accrued interest and dividends; then subtracting liabilities,
including accrued expenses; and finally dividing that dollar amount by the total
number of shares outstanding.
Performance Data. To keep shareholders and potential investors informed, we
will occasionally advertise the Fund's total return and yield for one-, five-,
and ten-year periods (or since inception). Total return figures show the rate of
return on a $1,000 investment in the Fund, assuming reinvestment of all
dividends and capital gain distributions for ^ the periods cited. Cumulative
total return shows the actual rate of return on an investment for the periods
cited; average annual total return represents the average annual percentage
change in the value of an investment. Both cumulative and average annual total
returns tend to "smooth out" fluctuations in the Fund's investment results,
because they do not show interim variations in performance that occur during the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one-month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding. More information about the Fund's performance is
contained in the Company's Annual Report to Shareholders. You can get a free
copy by calling or writing IDI using the phone number or address on the ^ back
of this Prospectus.
When we quote mutual fund rankings published by Lipper Analytical Services,
Inc., we may compare the Fund to others in its category of Real Estate Funds, as
well as the broad-based Lipper general fund groupings. These rankings allow you
to compare the Fund to its peers. Other independent financial media also produce
performance- or service-related comparisons, which you may see in our
promotional materials. For more information see "Fund Performance" in the
Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest, exchange or redeem
shares when you make transactions directly through ^ INVESCO. However, if you
invest in the Fund through a securities broker, you may be charged a commission
or transaction fee. INVESCO may from time to time make payments from its
revenues to securities dealers and other financial institutions that provide
distribution-related and/or administrative services for the Fund. For all new
accounts, please send a completed application form.
Fund Management reserves the right to increase, reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
<PAGE>
is in the best interests of the Fund. Further, ^ INVESCO reserves the right in
its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
HOW TO BUY SHARES
=====================================================================================================
<S> <C> <C>
Method Investment Minimum Please Remember
- -----------------------------------------------------------------------------------------------------
By Check
Mail to: $1,000 for regular If your check does
INVESCO Funds account; not clear, you will
Group, Inc. $250 for an IRA; be responsible for
P.O. Box 173706 $50 minimum for any related loss
Denver, CO each subsequent the Fund or ^
80217-3706. investment. INVESCO incurs. If
Or you may send you are already a
your check by shareholder in the
overnight courier INVESCO funds, the
to: 7800 E. Union Fund may seek
Ave., Denver, CO reimbursement from
80237. your existing
account(s) for any
loss incurred.
- -----------------------------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 $1,000. Payment must be
to request your received within 3
purchase. Then send business days, or
your check by the transaction may
overnight courier be ^ canceled. If a
to our street telephone purchase
address: is ^ canceled due
7800 E. Union Ave., to nonpayment, you
Denver, CO 80237. will be responsible
Or you may transmit for any related
your payment by loss the Fund or ^
bank wire (call ^ INVESCO incurs. If
INVESCO for you are already a
instructions). shareholder in
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
With EasiVest or
Direct Payroll
Purchase
You may enroll on $50 per month for Like all regular
the fund EasiVest; $50 per investment plans,
application, or pay period for neither EasiVest
call us for the Direct Payroll nor Direct Payroll
correct form and Purchase. You may Purchase ensures a
more details. start or stop your profit or protects
Investing the same regular investment against loss in a
amount on a monthly plan at any time, falling market.
basis allows you to with two weeks' Because you'll
buy more shares notice to ^ invest continually,
when prices are low INVESCO. regardless of
and fewer shares varying price
when prices are levels, consider
high. This your financial
"dollar-cost ability to keep
averaging" may help buying through low
offset market price levels. And
fluctuations. Over remember that you
a period of time, will lose money if
your average cost you redeem your
per share may be shares when the
less than the market value of all
actual average your shares is less
price per share. than their cost.
- -----------------------------------------------------------------------------------------------------
By PAL
Your "Personal $1,000; $250 for an Be sure to write
Account Line" is IRA. down the
available for confirmation number
subsequent provided by PAL.
purchases and Payment must be
exchanges 24 hours received within 3
a day. Simply call business days, or
1-800-424-8085. the transaction may
be ^ canceled. If a
telephone purchase
is ^ canceled due
to nonpayment, you
will be responsible
for any related
loss the Fund or ^
INVESCO incurs. If
you are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy" below.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
Automatic Monthly minimum is $250 for
Exchange service purchases requested
between two INVESCO by telephone.)
funds; call ^
INVESCO for further
details and the
correct form.
====================================================================================================
</TABLE>
Exchange Policy. You may exchange your shares in this Fund for those in
another INVESCO fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Please note these policies regarding exchanges of fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each calendar
year.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on
the exchange is recognizable for federal income tax purposes (unless,
of course, your account is tax-deferred).
4) ^ In order to prevent abuse of this policy to the disadvantage of
other shareholders, the Fund reserves the right to ^ temporarily or
permanently terminate the exchange ^ option of any shareholder who
requests more than four exchanges in a year, or at any time the Fund
determines the actions of the shareholder are detrimental to Fund
performance and shareholders. The Fund will determine whether to do so
based on a consideration of both the number of exchanges any
particular shareholder, or group of shareholders, has requested and
the time period over which those exchange requests have been made,
together with the level of expense to the Fund which will result from
effecting additional exchange requests. The Fund is intended to be a
long-term investment vehicle and is not designed to provide investors
the means of speculation on short-term market movements.
<PAGE>
(5) Notice of all modifications or terminations that would affect all Fund
shareholders will be given at least 60 days prior to the effective
date of the change in policy, except ^ in unusual ^ circumstances
(such as when redemptions of the exchanged shares are suspended under
Section 22(e) of the Investment Company Act of 1940, or when sales of
the fund into which you are exchanging are temporarily ^ suspended).
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the ^ Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its shares to investors. Under the Plan, monthly payments may be
made by the Fund to IDI to permit IDI at its discretion, to engage in certain
activities, and provide certain services approved by the board of directors of
the Company in connection with the distribution of the Fund's shares to
investors. These activities and services may include the payment of compensation
(including incentive compensation and/or continuing compensation based on the
amount of customer assets maintained in the Fund) to securities dealers and
other financial institutions and organizations, which may include INVESCO- and
IDI-affiliated companies, to obtain various distribution-related and/or
administrative services for the Fund. Such services may include, among other
things, processing new shareholder account applications, preparing and
transmitting to the Fund's Transfer Agent computer processable tapes of all
transactions by customers, and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund.
In addition, other permissible activities and services include advertising,
^ preparation, printing and distribution of sales literature, printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or ^
their affiliates or by third parties.
Under the Plan, the ^ Fund's payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets. IDI is not
entitled to payment for overhead expenses under the Plan, but may be paid for
all or a portion of the compensation paid for salaries and other employee
benefits for the personnel of ^ INVESCO or IDI whose primary responsibilities
involve marketing shares of the INVESCO funds, including the Fund. Payment
amounts by the Fund under the Plan, for any month, may only be made to
compensate IDI for permissible activities engaged in and services provided by
IDI during the rolling 12-month period in which that month falls, although this
period is expanded to 24 months for obligations incurred during the first 24
months of the Fund's operations. Therefore, any obligations incurred by IDI in
<PAGE>
excess of the limitations described above will not be paid by the Fund under the
Plan, and will be borne by IDI. In addition, IDI and its affiliates may from
time to time make additional payments from ^ their revenues to securities
dealers, financial advisers and financial institutions that provide
distribution-related and/or administrative services for the Fund. No further
payments will be made by the Fund under the Plan in the event of the Plan's
termination. Payments made by the Fund may not be used to finance directly the
distribution of shares of any other Fund of the Company or other mutual fund
advised by ^ INVESCO and distributed by IDI. However, payments received by IDI
which are not used to finance the distribution of shares of the Fund become part
of IDI's revenues and may be used by IDI for ^ activities ^ that promote
distribution of any of the mutual funds advised by ^ INVESCO. Subject to review
by the ^ Company's directors^, payments made by the Fund under the Plan for
compensation of marketing personnel, as noted above, are based on an allocation
formula designed to ensure that all such payments are appropriate. IDI will bear
any distribution- and service-related expenses in excess of the amounts which
are compensated pursuant to the Plan. The Plan also authorizes any financing of
distribution which may result from IDI's use of its own resources, ^ providing
that such fees are legitimate and not excessive. For more information see "How
Shares Can Be Purchased -Distribution Plan" in the Statement of Additional
Information.
FUND SERVICES
Shareholder Accounts. ^ INVESCO will maintain a share account that reflects
your current holdings. Share certificates will be issued only upon specific
request. You will have greater flexibility to conduct transactions if you do not
request certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges, and redemptions. If you choose certain
recurring transaction plans (for instance, EasiVest), your transactions will be
confirmed on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions are
automatically ^ reinvested in additional Fund shares at the NAV on the
ex-dividend or ex-distribution date, unless you choose to have dividends and/or
capital gain distributions automatically reinvested in another INVESCO fund or
paid by check (minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application, a Telephone Transaction Authorization Form, or
<PAGE>
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephone instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for IRAs and many
types of tax-deferred retirement plans. ^ INVESCO can supply you with
information and forms to establish or transfer your existing plan or account.
<PAGE>
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of the Fund may be redeemed at any time at their current NAV next
determined after a request in proper form is received at the Fund's office. The
NAV at the time of the redemption may be more or less than the price you paid to
purchase your shares, depending primarily upon the Fund's investment
performance.
Please specify from which fund you wish to redeem shares. Shareholders have
a separate account for each fund in which they invest.
<TABLE>
<CAPTION>
HOW TO SELL SHARES
=====================================================================================================
<S> <C> <C>
Method Minimum Redemption Please Remember
- -----------------------------------------------------------------------------------------------------
By Telephone
Call us toll-free $250 (or, if less, These telephone
at 1-800-525-8085. full liquidation of redemption
the account) for a privileges may be
redemption check; modified or
$1,000 for a wire terminated in the
to bank of record. future at ^
The maximum amount INVESCO's
which may be discretion ^.
redeemed by
telephone is
generally $25,000.
- -----------------------------------------------------------------------------------------------------
In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered ^ stock certificates,
Denver, CO account owners. the certificates
80217-3706. You may Payment will be must be sent to ^
also send your mailed to your INVESCO.
request by address of record
overnight courier or to a ^
to 7800 E. Union designated bank.
Ave., Denver, CO
80237.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
By Exchange
Between this and $1,000 to open a See "Exchange
another of the new account; $50 Policy" page ^ 161.
INVESCO funds. Call for written
1-800-525-8085 for requests to
prospectuses of purchase additional
other INVESCO shares for an
funds. You may also existing account.
establish an (The exchange
automatic monthly minimum is $250 for
exchange service exchanges requested
between two INVESCO by telephone.)
funds; call ^
INVESCO for further
details and the
correct form.
- -----------------------------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at check may be made at least $5,000 of
1-800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- -----------------------------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered ^
to INVESCO Funds account owners must
Group, Inc., P.O. sign the request,
Box 173706 with a signature
Denver, CO guarantee from an
80217-3706. eligible guarantor
financial
institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
=====================================================================================================
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
<PAGE>
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $250 as a result of shareholder
action, the Fund reserves the right to involuntarily redeem all shares in such
account, in which case the account would be liquidated and the proceeds
forwarded to the shareholder. Prior to any such redemption, a shareholder will
be notified and given 60 days to increase the value of the account to $250 or
more.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
shareholders allows the Fund to maintain its tax status as a regulated
investment company. ^ The Fund does not expect to pay any federal income or
excise taxes because of its tax status as a regulated investment company.
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a maximum rate of 28% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held for more than 18 months are taxable at a maximum
rate of 20% (depending on the shareholder's marginal tax rate). Beginning
January 1, 1998, the IRS Restructuring and Reform Act of 1998, signed into law
on July 24, 1998, lowers the holding period for long-term capital gains entitled
to the 20% capital gains tax rate from 18 months to 12 months. Accordingly, all
long-term gains realized after December 31, 1997 on the sale of securities held
for more than 12 months will be taxable at a maximum rate of 20%. At the end of
<PAGE>
each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
^ adviser as to the effect of ^ distributions by the Fund ^.
Shareholders ^ may realize capital gains or losses when they sell their ^
shares at more or less than the price originally paid. Capital gains on shares
held for more than one year will be long-term capital gains, in which event they
will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital ^ gain distributions and other
distributions and redemption proceeds. ^ You can avoid backup withholding on
your Fund account by ensuring that we have a correct, certified tax
identification number, unless you are subject to backup withholding for other
reasons.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional
Information.
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends ^ on investments.
Dividends paid by the Fund will be based solely on the net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on a quarterly basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains^ realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital
gains distributions are automatically reinvested in additional shares of the
Fund at the net asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution regardless how long the Fund shares
have been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
<PAGE>
purchase price, a portion of which is then returned in the form of a taxable
distribution.
ADDITIONAL INFORMATION
Voting Rights. All shares of the ^ Company have equal voting rights based
on one vote for each share owned and a corresponding fractional vote for each
fractional share owned. The Fund is not generally required and does not expect
to hold regular annual meetings of shareholders. However, when requested to do
so in writing by the holders of 10% or more of the outstanding shares of the
Fund or as may be required by applicable law or the ^ Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders. Directors may be removed by action of the holders of a majority of
the outstanding shares of the Fund. The Company will assist shareholders in
communicating with other shareholders as required by the Investment Company Act
of 1940.
Master/Feeder Option. As a matter of fundamental policy, the Company may,
in the future, seek to achieve the Fund's investment objective by investing all
of the Fund's assets in another investment company having substantially the same
investment objectives, policies and limitations. It is expected that any such
investment company would be managed by INVESCO in substantially the same manner
as the Fund. If permitted by applicable law, any such investment may be made in
the sole discretion of the Company's board of directors without a vote of the
Fund's shareholders. However, shareholders will be given at least 30 days prior
notice of any such investment. Such an investment would be made only if the
board of directors determines it to be in the best interests of the Fund and its
shareholders based on potential cost savings, operational efficiencies or other
factors. No assurance can be given that costs would be materially reduced if
these options were implemented.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO Realty Fund
A no-load mutual fund seeking to
provide above-average current
income.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities and Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
PROSPECTUS
December 1, ^ 1998
INVESCO S&P 500 INDEX FUND
Class I and Class II Shares
INVESCO S&P 500 Index Fund (the "Fund") seeks to provide both price
performance and income comparable to the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500" or the "Index"), which is composed of 500 selected
large capitalization stocks. In pursuing this objective, the Fund will invest in
the equity securities that comprise the S&P 500 in approximately the same
proportions that they are represented in the Index, and in other instruments
that are based upon the value of the Index.
The Fund offers two classes of shares. Class I shares are not subject to
any distribution fee; Class II shares are subject to an annual distribution fee
of 0.25% of the Fund's average daily net assets attributable to Class II shares.
Both Class I and Class II shares may be subject to a redemption fee.
The Fund is a series of INVESCO Specialty Funds, Inc. (the "Company"), a
diversified, open-end managed no-load mutual fund consisting of seven separate
portfolios of investments. Separate prospectuses are available upon request from
INVESCO Distributors, Inc. for the Company's other funds: INVESCO Worldwide
Capital Goods Fund, INVESCO Worldwide Communications Fund, INVESCO European
Small Company Fund, INVESCO Latin American Growth Fund, INVESCO Asian Growth
Fund and INVESCO Realty Fund. Investors may purchase shares of any or all of the
Funds. Additional funds may be offered by the Company in the future.
This Prospectus provides you with the basic information you should know
before investing in the Fund. You should read it and keep it for future
reference. A Statement of Additional Information containing further information
about the Fund, dated December 1, ^ 1998, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. To ^
request a free copy, write to INVESCO Distributors, Inc., P.O. Box 173706,
Denver, Colorado 80217-3706; call 1-800-525-8085; or visit our web site at
http://www.invesco.com.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ^, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. THE SHARES OF THE FUND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Page
ESSENTIAL INFORMATION........................................................174
ANNUAL FUND EXPENSES.........................................................175
FINANCIAL HIGHLIGHTS.........................................................178
INVESTMENT OBJECTIVE AND STRATEGY............................................180
INVESTMENT POLICIES AND RISKS................................................181
THE FUND AND ITS MANAGEMENT..................................................185
FUND PRICE AND PERFORMANCE...................................................188
HOW TO BUY SHARES............................................................189
FUND SERVICES................................................................195
HOW TO SELL SHARES...........................................................196
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS.....................................199
ADDITIONAL INFORMATION.......................................................202
<PAGE>
ESSENTIAL INFORMATION
Investment Goal And Strategy: ^ The Fund seeks to provide price performance
and income comparable to that of the S&P 500, an index comprised of common
stocks of U.S. companies that is weighted to companies with large market
capitalizations. The Fund also may invest in other instruments whose value
depends upon or derives from the value of the S&P 500. There is no guarantee
that the Fund will meet its objective. See "Investment Objective ^ And Strategy"
and "Investment Policies ^ And Risks."
Designed For: Investors primarily seeking a competitive long-term
investment return through a diversified portfolio. While not a complete
investment program, the Fund may be a valuable element of your investment
portfolio. You also may wish to consider the Fund as part of a Uniform
Gifts/Transfers To Minors Act Account or systematic investing strategy. The Fund
may be a suitable investment for many types of retirement programs, including
various Individual Retirement ^ Accounts ("IRAs"), 401(k), Profit Sharing, Money
Purchase Pension, and 403(b) plans.
Time Horizon: Since stock prices fluctuate on a daily basis, the Fund's
price per share varies daily. Stock prices may decline for extended periods.
Potential shareholders should consider this a long-term investment.
Risks: The Fund's investment strategy seeks to track the investment
composition and performance of the S&P 500 by investing in the common stocks
that comprise the Index in approximately the same proportions as they are
represented in the S&P 500 Index or in other instruments whose value depends
upon or derives from the value of the S&P 500. Accordingly, the Fund does not
employ traditional methods of investment management to select the securities
held in its portfolio. Since the Fund will attempt to track the Index, when the
overall stock market rises or falls, the price of shares in the Fund can be
expected to rise and fall at the same time. The Fund does not eliminate market
risk; rather, it attempts to ensure that its returns will be comparable to those
of the overall stock market. These policies make the Fund unsuitable for that
portion of your savings dedicated to preservation of capital over the short
term. See "Investment Objective And Strategy" and "Investment Policies And
Risks."
Organization and Management: The Fund is a series of ^ INVESCO Specialty
Funds, Inc. The Fund is owned by its shareholders. It employs INVESCO Funds
Group, Inc. (" ^ INVESCO"), founded in 1932, to serve as investment adviser,
administrator and transfer agent. World Asset Management ("World") serves as
sub-adviser. Together, ^ INVESCO and World constitute "Fund Management." INVESCO
Distributors, Inc. ("IDI"), founded in 1997 as a wholly-owned subsidiary of ^
INVESCO, is the Fund's distributor.
^ INVESCO and IDI are subsidiaries of AMVESCAP PLC, an international
investment management company that ^ managed approximately ^ $261 billion in
assets as of June 30, 1998. AMVESCAP PLC is based in London with money managers
located in Europe, North America, South America and the Far East.
<PAGE>
Under an agreement with ^ INVESCO, World serves as sub-advisor to the Fund.
In that capacity, World has the primary responsibility, under the supervision of
^ INVESCO, for providing portfolio management services to the Fund. See "The
Fund And Its Management."
This Fund offers all of the following services at no charge:
Class I and II Shares
- ---------------------
Telephone purchases
Telephone exchanges
Telephone redemptions
Automatic reinvestment of distributions
Class II Shares Only
- --------------------
Regular investment plans, such as EasiVest (the Fund's automatic monthly
investment program), Direct Payroll Purchase, and Automatic Monthly Exchange
Periodic withdrawal plans
See "How To Buy Shares" and "How To Sell Shares."
Minimum Initial Investment: For Class I shares, the minimum initial
investment is $250,000. For Class II shares, the minimum initial investment is ^
$5,000 for individual accounts and $2,000 for IRAs which is waived for regular
investment plans, including EasiVest and Direct Payroll Purchase.
Minimum Subsequent Investment: For Class I shares, the minimum subsequent
investment is $25,000 and for Class II shares, the minimum subsequent investment
is $1,000. (Minimums are lower for certain retirement plans.)
ANNUAL FUND EXPENSES
The Fund is no-load; there are no fees to purchase, exchange or redeem
shares, other than a fee to redeem or exchange shares held less than three
months. See "Shareholder Transaction Expenses." The Fund is^ authorized to pay a
Rule 12b-1 distribution fee of one quarter of one percent of the average net
assets attributable to Class II shares of the Fund each year. See "How To Buy
Shares -^ Distribution Expenses."
Like any company, the Fund has operating expenses -- such as portfolio
management, accounting, shareholder servicing, maintenance of shareholder
accounts and other expenses. These expenses are paid from the Fund's assets.
Lower expenses therefore benefit investors by increasing the Fund's total
return.
We calculate annual operating expenses as a percentage of the Fund's ^
average annual net assets. To keep expenses competitive, ^ INVESCO voluntarily ^
<PAGE>
reimburses the Fund for ^ certain expenses in excess of 0.30% of average net
assets relating to Class I shares and 0.55% of average net assets relating to
Class II shares.
Class I Class II
------- --------
Shareholder Transaction Expenses
- --------------------------------
Sales load "charge" on purchases None None
Sales load "charge" on reinvested
dividends None None
Redemption fees 1.00%* 1.00%*
Exchange fees 1.00%* 1.00%*
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Management Fee 0.25%~ 0.25%~
12b-1 Fees None 0.25%~
Other Expenses (1) ^(2) 0.21%~ 0.12%~
Total Fund Operating Expenses ^(2) 0.46%~ 0.62%~
~Annualized
*There is a 1% fee retained by the Fund to offset transaction costs and other
expenses associated with short-term redemptions and exchanges, which is imposed
only on redemptions or exchanges of shares held less than three months.
(1) ^ It should be noted that the Fund's actual total operating expenses were
lower than the figures shown because the Fund's custodian fees were reduced
under an expense offset arrangement. However, as a result of an SEC requirement
for mutual funds to state their total operating expenses without crediting any
such expense offset arrangements, the figures shown above do not reflect these
reductions. See "The Fund And Its Management."
(2) Certain Fund expenses will be absorbed voluntarily by ^ INVESCO in order to
ensure that expenses for the Fund will not exceed 0.30% of average daily net
assets relating to Class I shares and 0.55% of average daily net assets relating
to Class II shares. If such voluntary expense limits were not in effect, the
Fund's "Other Expenses" and "Total Fund Operating Expenses" for the ^ period
December 23, 1997 (commencement of operations)through July 31, 1998, would have
been 2.26% and 2.51%, respectively, of Class I shares average net assets and ^
1.21% and ^ 1.71%, respectively, of Class II shares average net assets.^
Example
A shareholder would pay the following expenses on a $1,000 investment for
the periods shown, assuming a hypothetical 5% annual return and redemption at
the end of each time period. (Of course, actual operating expenses are paid from
the Fund's assets, and are deducted from the amount of income available for
distribution to shareholders; they are not charged directly to shareholder
accounts.)
<PAGE>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class I ^ $5 $15 $26 $58
Class II $6 ^ $20 $35 $77
The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. THE ^ EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR
EXPENSES, AND ACTUAL ANNUAL RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN. For more information on the Fund's expenses, see "The Fund And Its
Management" and "How To Buy Shares - ^ Distribution Expenses."
Because the Fund pays a distribution fee on Class II shares, investors who
own Class II shares of the Fund for a long period of time may pay more than the
economic equivalent of the maximum front-end sales charge permitted for mutual
funds by the National Association of Securities Dealers, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Fund Share Outstanding Throughout Each Period)
The following information for the period December 23, 1997 through July 31,
1998 has been audited by PricewaterhouseCoopers LLP, independent accountants.
This information should be read in conjunction with the audited financial
statements and the Report of Independent Accountants thereon appearing in the
Company's 1998 Annual Report to Shareholders, which is incorporated by reference
into the Statement of Additional Information. Both are available without charge
by contacting IDI at the address or telephone number on the back of this
Prospectus. The Annual Report also contains more information about the Fund's
performance.
INVESCO S&P 500 Index Fund
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Period Period
Ended Ended
July 31 July 31
---------- ----------
1998(a) 1998(a)
Class I Class II
PER SHARE DATA
Net Asset Value - Beginning of Period $10.00 $10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.11 0.07
Net Gains on Securities (Both
Realized and Unrealized) 1.98 2.14
---------- ----------
Total from Investment Operations 2.09 2.21
LESS DISTRIBUTIONS FROM NET
INVESTMENT INCOME 0.08 0.07
---------- ----------
Net Asset Value - End of Period $12.01 $12.14
========== ==========
TOTAL RETURN(b) 20.93%(c) 22.11%(c)
RATIOS
Net Assets - End of Period
($000 Omitted) $3,259 $15,065
Ratio of Expenses to Average
Net Assets(d)(e) 0.46%(f) 0.62%(f)
Ratio of Net Investment Income to
Average Net Assets(e) 1.96%(f) 1.52%(f)
Portfolio Turnover Rate 0%(g) 0%(g)
</TABLE>
<PAGE>
(a) From December 23, 1997, commencement of investment operations, to July 31,
1998.
(b) The applicable redemption fees are not included in the Total Return
calculation.
(c) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any offset arrangement.
(e) Various expenses of the Fund were voluntarily absorbed by INVESCO for the
period ended July 31, 1998. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 2.51%
(annualized) for Class I and 1.71% (annualized) for Class II and ratio of
net investment income (loss) to average net assets would have been (0.09%)
(annualized) for Class I and 0.42% (annualized) for Class II.
(f) Annualized
(g) Portfolio Turnover Rate calculated to less than 0.10% for the period ended
July 31, 1998.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to track the aggregate price and income performance of the
S&P 500, an index comprised of common stocks of U.S. companies that emphasizes
large-capitalization companies. This investment objective is fundamental and
cannot be changed without the approval of the Fund's shareholders. The Fund ^
seeks to achieve its objective by investing in the common stocks that comprise
the Index in approximately the same proportions as they are represented in the
S&P 500. The Fund also may invest in other instruments that are based upon the
value of the Index, including Standard & Poor's Depository Receipts ("SPDRs"),
and it may also purchase and sell futures contracts and options on the Index.
There is no assurance that the Fund's investment objective will be met.
The S&P 500 is comprised of 500 common stocks that are chosen by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") for inclusion in
the Index. As of ^ July 31, 1998, the S&P 500 represented approximately ^__% of
the market capitalization of publicly-traded common stocks in the United States.
The Index is weighted by market value. Because of this weighting, the 144
largest companies in the S&P 500 accounted for approximately ^__% of the Index
at ^ July 31, 1998. Typically, companies included in the S&P 500 are dominant
firms in their industries, and approximately ^__% of them trade on the New York
Stock Exchange.
The Fund is managed through the use of an "indexing" investment style,
which attempts to track the investment composition of the S&P 500 through
statistical methods. Therefore, the Fund does not employ typical methods of
mutual fund investment management, such as selecting securities on the basis of
economic, financial or market analysis. The Fund is managed without regard to
potential tax ramifications.
The Fund cannot precisely duplicate the investment composition or
performance of the Index because, unlike the Fund, the Index is unmanaged and
has no expenses. Moreover, the Fund must take into account sales and redemptions
of Fund shares and other factors that are inapplicable to the Index itself.
Although the Fund at any given time may not hold securities of all 500 companies
represented in the Index, and at commencement of operations it will hold
securities of a relatively small number of those companies. As assets in the
Fund increase, it normally will hold securities of at least 95% of those
companies. Because at any given time the Fund likely will not precisely mirror
the S&P 500, the Fund would ordinarily place heavier concentration on industry
sectors dominated by large corporations, such as communications or automobiles.
Until the Fund's portfolio is fully invested (except for cash), the Fund will
attempt to identify sectors that are underrepresented in the Fund's portfolio
and purchase balancing securities until the Fund's portfolio sector weightings
closely match those of the Index.
<PAGE>
Redemptions of large numbers of shares of the Fund could reduce the number
of issuers represented in the Fund's portfolio, which could adversely affect the
accuracy with which the Fund tracks the performance of the S&P 500.
The Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no
representation or warranty, express or implied, to the owners of the Fund or any
member of the public regarding the advisability of investing in securities
generally or in the Fund particularly or the ability of the S&P 500 to trace
general stock market performance. S&P's only relationship to the Company is the
licensing of certain trademarks and trade names of S&P and of the S&P 500 which
is determined, composed and calculated by S&P without regard to the Company or
the Fund. S&P has no obligation to take the needs of the Company or the owners
of the Fund into consideration in determining, composing or calculating the S&P
500. S&P is not responsible for and has not participated in the determination of
the prices and amount of the Fund or the timing of the issuance or sale of Fund
shares or in the determination of calculation of the equation by which the Fund
is to be converted into cash. S&P has no obligation or liability in connection
with administration, marketing or trading of the Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500
or any data included therein and S&P shall have no liability for any errors,
omissions, or interruptions therein. S&P makes no warranty, express or implied,
as to results to be obtained by the Company, owners of the Fund, or any other
person or entity from the use of the S&P 500 or any data included therein. S&P
makes no express or implied warranty, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
S&P 500 Index or any data included therein. Without limiting any of the
foregoing, in no event shall S&P have any liability for any special, punitive,
indirect or consequential damages (including lost profits), even if notified of
the possibility of such damages.
INVESTMENT POLICIES AND RISKS
Investors generally should expect to see ^ the price per share of the Fund
vary with movements in the securities markets, changes in economic conditions
and other factors. Due to the composition of the Index, the Fund invests in many
different companies in a variety of industries; this diversification reduces the
Fund's overall exposure to particular investment and market risks, but cannot
eliminate them.
Year 2000 Computer Issue. Due to the fact that many computer systems in use
today cannot recognize the Year 2000, but will, unless corrected, revert to 1900
or 1980 or cease to function at that time, the markets for securities in which
the Fund invests may be detrimentally affected by computer failures affecting
portfolio investments or trading of securities beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production issues for individual companies and overall economic
<PAGE>
uncertainties. Earnings of individual issuers may be affected by remediation
costs, which may be substantial. The Fund's investments may be adversely
affected.
Limited Portfolio. While the S&P 500 includes the majority of large market
capitalization stocks in the U.S. stock market, it excludes the stocks of most
medium and smaller sized companies that comprise the remaining capitalization of
the U.S. stock market. Similarly, it excludes securities of most foreign
issuers. The Fund's portfolio, therefore, will exclude securities excluded from
the Index. While the large capitalization stocks that comprise the S&P 500
historically have shown less price volatility than the stocks excluded from the
Index and the Fund, the excluded stocks may or may not offer better price
performance and income than those included in the Index and the Fund.
From time to time, the Fund may receive securities that are not included in
the Index as a result of a corporate reorganization of a S&P 500 company. Such
securities will be disposed of in due course in accordance with the Fund's
investment objective. Conversely, if an issuer included in the S&P 500 has a
change in rank within the Index, or is dropped from it entirely, the Fund may be
required to sell some or all of the common stock of that issuer held by the
Fund. Such sales may result in the Fund realizing lower prices, or losses, that
might not have been incurred if the Fund were not required to effect such sales.
Indexing. In the event of a decline in the S&P 500, the Fund and its shares
will sustain a similar decline. Since the Fund's investment objective is to
track the aggregate price and income performance of the Index, the Fund will not
be actively managed in an attempt to reduce the risk inherent in the Index or
the stock market. Due to purchases and sales of portfolio securities to meet
investor purchases and redemptions, the Fund will not have a 100% correlation to
the Index. At commencement of operations, the Fund expects that the composition
of its portfolio will have approximately an 80% correlation to the composition
of the S&P 500. Under ordinary circumstances, the Fund expects that the
composition of its portfolio will have at least a 95% correlation to the
composition of the S&P 500.
Investment Company Securities. To manage its daily cash positions, the Fund
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Fund also may invest in SPDRs and shares of
other investment companies that are structured to seek a similar correlation to
the performance of the S&P 500. SPDRs are traded on the American Stock Exchange.
SPDR holders such as the Fund are paid a "Dividend Equivalent Amount" that
corresponds to the amount of cash dividends accruing to the securities held by
the SPDR Trust, net of certain fees and expenses. Therefore, the dividend yield
of SPDRs may be less than that of the Index. The Investment Company Act of 1940
limits investments in securities of other investment companies, such as the SPDR
<PAGE>
Trust. These limitations include, among others, that, subject to certain
exceptions, no more than 10% of the Fund's total assets may be invested in
securities of other investment companies, and, with respect to 75% of the Fund's
total assets, no more than 5% of its total assets may be invested in the
securities of any one investment company. As a shareholder of another investment
company, the Fund would bear its pro rata portion of the other investment
company's expenses, including advisory fees, in addition to the expenses the
Fund bears directly in connection with its own operations.
Repurchase Agreements. The Fund may invest money, for as short a time as
overnight, using repurchase agreements ("repos"). With a repo, the Fund buys a
debt instrument, agreeing simultaneously to sell it back to the prior owner at
an agreed-upon price. The Fund could incur costs or delays in seeking to sell
the instrument if the prior owner defaults on its repurchase obligation. To
reduce that risk, securities that are the subject of the repurchase agreement
will be maintained as collateral with the Fund's custodian in an amount at least
equal to the repurchase price under the agreement (including accrued interest).
These agreements are entered into only with member banks of the Federal Reserve
System, registered broker-dealers, and registered U.S. government securities
dealers that are deemed creditworthy under standards set by the Company's board
of directors.
Securities Lending. The Fund may seek to earn additional income by lending
securities to qualified brokers, dealers, banks, or other financial
institutions, on a fully collateralized basis. For further information on this
policy, see "Investment Policies and Restrictions" in the Statement of
Additional Information.
Futures Contracts and Options. The Fund may enter into futures contracts
for hedging or other non-speculative purposes within the meaning and intent of
applicable rules of the Commodity Futures Trading Commission ("CFTC"), or for
liquidity.
For example, futures contracts may be purchased or sold to attempt to hedge
against a price movement in the S&P 500 at times when the Fund is not fully
invested in stocks included in the S&P 500. In such circumstances, purchasing a
futures contract may reduce the potential that cash inflows to the Fund will
interfere with its ability to track the Index, since futures contracts may serve
as a temporary substitute for stocks until the stocks can be purchased by the
Fund in a cost-effective manner. Inasmuch as futures contracts require a
comparatively small initial margin deposit, the Fund may be able to be fully
exposed to price movements in the S&P 500 while still keeping a cash reserve to
meet potential redemptions.
The Fund also may use options to buy or sell futures contracts with respect
to the Index or securities comprising the Index. Put and call options on futures
contracts or securities may be traded by the Fund in order to protect against
declines in the values of portfolio securities or against increases in the cost
<PAGE>
of securities to be acquired. Purchases of options on futures contracts may
present less dollar risk in hedging the Fund's portfolio than the purchase and
sale of the underlying futures contracts, since the potential loss is limited to
the amount of the premium plus related transaction costs. The premium paid for
such a put or call option plus any transaction costs will reduce the benefit, if
any, realized by the Fund upon exercise or liquidation of the option; and,
unless the price of the underlying futures contract changes sufficiently, the
option may expire without value to the Fund. The writing of covered options does
not present less risk than the trading of futures contracts and will constitute
only a partial hedge, up to the amount of the premium received. Additionally, if
an option is exercised, the Fund may suffer a loss on the transaction.
The Fund also may purchase put or call options on the Index and on the
Standard & Poor's 100 Composite Index (the "S&P 100") in order to have fuller
exposure to price movements in the Index pending investment of purchase orders
or to maintain liquidity in anticipation of potential Fund shareholder
redemptions.
The Fund may, from time to time, also sell ("write") covered call options
or cash secured puts in order to attempt to increase the yield on its portfolio
or to protect against declines in the value of its portfolio securities. By
writing a covered call option, the Fund, in return for the premium income
realized from the sale of the option, gives up the opportunity to profit from a
price increase in the underlying security above the option exercise price, if
the price increase occurs while the option is in effect. In addition, the Fund's
ability to sell the underlying security will be limited while the option is in
effect. By writing a cash secured put, the Fund, which receives the premium, has
the obligation during the option period, upon assignment of an exercise notice,
to buy the underlying security at a specified price. A put is secured by cash if
the Fund maintains at all times cash, Treasury bills or other liquid obligations
with a value equal to the option exercise price in a segregated account with its
custodian.
Although the Fund will enter into options and futures contracts solely for
hedging, liquidity or other non-speculative purposes, their use does involve
certain risks. For example, a lack of correlation between the value of an
instrument underlying an option or futures contract and the assets being hedged,
or unexpected adverse price movements, could render the Fund's hedging strategy
unsuccessful and could result in losses. In addition, there can be no assurance
that a liquid secondary market will exist for any contract purchased or sold,
and the Fund may be required to maintain a position until exercise or
expiration, which could result in losses. Transactions in futures contracts and
options are subject to other risks as well.
The risks related to transactions in options and futures to be entered into
by the Fund are set forth in greater detail in the Statement of Additional
Information, which should be reviewed in conjunction with the foregoing
discussion.
<PAGE>
^
Portfolio Turnover. Although the Fund seeks to invest for the long term,
the Fund retains the right to sell portfolio securities regardless of the length
of time they have been in the Fund's portfolio. The indexing method of portfolio
management is expected to generate a portfolio turnover rate of less than 50%,
which would occur if one-half of the Fund's portfolio securities were sold
within one year. Ordinarily, portfolio investments are sold by the Fund only to
reflect changes in the S&P 500 (for example, mergers involving companies
included in the Index, or new weightings of securities within the Index) or to
accommodate cash flows in and out of the Fund while attempting to maintain the
similarity of the Fund's portfolio to the composition of the S&P 500.
^
Investment Restrictions. Certain restrictions, which are ^ identified in
the Statement of Additional Information, are fundamental and may not be altered
without the approval of the Fund's shareholders. For example, with respect to
75% of the Fund's total assets, the Fund limits to 5% of its total assets the
amount which may be invested in a single issuer. The Fund's ability to borrow
money is limited to borrowings from banks for temporary or emergency purposes in
amounts not exceeding 33-1/3% of net assets.
For a further discussion of risks associated with an investment in the
Fund, see "Investment Policies And Restrictions" and "Investment Practices" in
the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
The Company is a no-load mutual fund, registered with the Securities and
Exchange Commission ^ a diversified, open-end, ^ management investment company.
It was incorporated on April 12, 1994, under the laws of Maryland.
The Company's board of directors has responsibility for overall supervision
of the Fund and reviews the services provided by the investment adviser and
investment sub-adviser. Under an agreement with the Company, ^ INVESCO, 7800 E.
Union Avenue, Denver, Colorado 80237, serves as the Fund's investment adviser;
it is primarily responsible for providing the Fund with various administrative
services.
INVESCO and IDI are indirect wholly-owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC is a publicly-traded holding company that, through its
subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997 and to AMVESCAP PLC on May 8, 1997, as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world. INVESCO
<PAGE>
continued to operate under its existing name. AMVESCAP PLC had approximately
$261 billion in assets under management as of June 30, 1998. INVESCO was
established in 1932 and, as of July 31, 1998, managed 14 mutual funds,
consisting of 49 separate portfolios, with combined assets of approximately
$19.6 billion on behalf of 884,099 shareholders.
World is the Fund's sub-adviser and is primarily responsible for managing
the Fund's investments. Under the terms of the sub-advisory agreement, World
provides the Fund with certain recordkeeping and management services in
connection with the Fund, including monitoring the Index and determining which
securities to purchase and sell in order to keep the Fund's portfolio in balance
with the Index.^
World is a general partnership organized by Munder Capital Management
("MCM"), a general partnership formed in December 1994 which engages in
investment management and advisory services. As of ^_________________, World's
total assets under management were approximately ^ $__ billion (including index
mutual fund portfolios), and MCM's total assets under management were
approximately ^ $__ billion. The principal business address for World is 255
Brown Street Centre, 2nd Floor, Birmingham, Michigan 48009.
The Fund's investments are selected by a team of World portfolio managers
that is collectively responsible for the investment decisions relating to the
Fund.
^ INVESCO permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires ^ INVESCO's personnel to conduct their
personal investment activities in a manner that ^ INVESCO believes is not
detrimental to the Fund or ^ INVESCO's other advisory clients. See the Statement
of Additional Information for more detailed information.
The Fund pays ^ INVESCO a monthly management fee which is based upon a
percentage of the Fund's average net assets determined daily. The management fee
is computed at the annual rate of 0.25% of the Fund's average net assets. ^ For
the period ended July 31, 1998, investment advisory fees paid by the Fund
amounted to 0.25% (annualized) of the Fund's average net assets. Out of this
fee, INVESCO pays to World, as sub-adviser to the Fund, an amount computed at
the following annual rates: 0.07% on the first $10 million of the Fund's average
net assets, 0.05% on the next $40 million of the Fund's average net assets, and
0.03% on the Fund's average net assets in excess of ^ $50 million. No fee is
paid by the Fund to World.
^ Under a Distribution Agreement, IDI provides services relating to the
distribution and sale of the Fund's shares. IDI, established in 1997, is a
registered broker-dealer that acts as distributor for all retail funds advised
by ^ INVESCO. Prior to September 30, 1997, INVESCO served as the Fund's
distributor.
<PAGE>
Under a Transfer Agency Agreement, ^ INVESCO acts as registrar, transfer
agent and dividend disbursing agent for the Fund. The Fund pays an annual fee of
$20.00 per shareholder account or, where applicable, per participant in an
omnibus account. Registered broker-dealers, third party administrators of
tax-qualified retirement plans and other entities, including affiliates of ^
INVESCO, may provide equivalent services to the Fund. In these cases, ^ INVESCO
may pay, out of the fee it receives from the Fund, an annual sub-transfer agency
or recordkeeping fee to the third party.
^ Under an Administrative Services Agreement, ^ INVESCO handles additional
administrative, recordkeeping^ and internal sub-accounting services for the
Fund. For the period December 23, 1997 (commencement of operations) through July
31, 1998, INVESCO was paid a fee equal to 0.07% of the Fund's average net assets
(prior to the absorption of certain Fund expenses).
The management and custodial services provided to the Fund by INVESCO and
the Fund's custodian, and the services provided to shareholders by INVESCO and
IDI, depend on the continued functioning of their computer systems. Many
computer systems in use today cannot recognize the Year 2000, but will revert to
1900 or 1980 or will cease to function due to the manner in which dates were
encoded and are calculated. That failure could have a negative impact on the
handling of the Fund's securities trades, its share pricing and its account
services. The Fund and its service providers have been actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
expect that their systems will be adapted before that date, but there can be no
assurance that they will be successful. Furthermore, services may be impaired at
that time as a result of the interaction of their systems with noncomplying
computer systems of others. INVESCO plans to test as many such interactions as
practicable prior to December 31, 1999 and to develop contingency plans for
reasonably anticipated failures.
The expenses of each class of the Fund, which are accrued daily, are
deducted from total income before dividends are paid. ^ Total expenses of the
Fund for the period December 23, 1997 (commencement of operations) through July
31, 1998, including investment management fees (but excluding brokerage
commissions, which are a cost of acquiring securities), amounted to 0.46%
(annualized) of the Fund's average net assets held in Class I shares and 0.62%
(annualized) of the Fund's average net assets held in Class II shares. Certain
Fund expenses were absorbed voluntarily by ^ INVESCO in order to ensure that the
Fund's total operating expenses ^ did not exceed 0.30% for Class I shares and
0.55% for Class II shares. This commitment may be changed following consultation
with the Company's board of directors.
Fund Management places orders for the purchase and sale of portfolio
securities with brokers and dealers based upon Fund Management's evaluation of
such ^ brokers' and dealers' financial responsibility coupled with their ability
<PAGE>
to effect transactions at the best available prices. As discussed under "How to
Buy Shares -^ Distribution Expenses," the Fund may market its shares through
intermediary brokers or dealers that have entered into Dealer Agreements with ^
INVESCO or IDI, as the Fund's distributor. The Fund may place orders for
portfolio transactions with qualified ^ brokers and dealers that recommend the
Fund, or sell shares of the Fund, to clients, or act as agent in the purchase of
Fund shares for clients, if Fund Management believes that the quality of the
execution of the transaction and level of commission are comparable to those
available from other qualified brokerage firms. For further information, see
"Investment Practices - ^ Placement of Portfolio Brokerage" in the Statement of
Additional Information.
^
FUND PRICE AND PERFORMANCE
Determining Price. The value of your investment in the Fund ^ may vary
daily. The price per share of each class of the Fund is also known as the Net
Asset Value ("NAV"). ^ INVESCO prices each class of the Fund every day that the
New York Stock Exchange is open, as of the close of regular trading (generally,
4:00 p.m., New York time). NAV for each class of shares is calculated separately
by adding together the current market value of all of the class' assets,
including accrued interest and dividends; ^ subtracting liabilities, including
accrued expenses attributable to the class; and ^ dividing that dollar amount by
the total number of shares of the class outstanding.
Performance Data. To keep shareholders and potential investors informed, we
will occasionally advertise the Fund's total return and yield for one-, five-,
and ten-year periods (or since inception). Total return figures show the rate of
return on a $1,000 investment in the Fund, assuming reinvestment of all
dividends and capital gain distributions for ^ the periods cited. Cumulative
total return shows the actual rate of return on an investment for the periods
cited; average annual total return represents the average annual percentage
change in the value of an investment. Both cumulative and average annual total
returns tend to "smooth out" fluctuations in the Fund's investment results,
because they do not show interim variations in performance that occur during the
periods cited.
The yield of the Fund refers to the income generated by an investment in
the Fund over a 30-day or one-month period, and is computed by dividing the net
investment income per share earned during the period by the net asset value per
share at the end of the period, then adjusting the result to provide for
semi-annual compounding.
When we quote mutual fund rankings published by Lipper Analytical Services,
Inc., we may compare the Fund to others in its category of large-cap funds
and/or S&P 500 indices, as well as the broad-based Lipper general fund
groupings. These rankings allow you to compare the Fund to its peers. Other
<PAGE>
independent financial media also produce performance- or service-related
comparisons, which you may see in our promotional materials. For more
information see "Fund Performance" in the Statement of Additional Information.
Performance figures are based on historical investment results and are not
intended to suggest future performance.
HOW TO BUY SHARES
The Fund offers two classes of shares. Each class represents an identical
interest in the investment portfolio of the Fund and has the same rights, except
that each class bears its own distribution and shareholder servicing charges.
The income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee or service fee,
if applicable, payable by that class.
In deciding which class of shares to purchase, you should consider, among
other things, (i) the length of time you expect to hold your shares, (ii) the
charges of the distribution plan applicable to the class, if any, and (iii) the
eligibility requirements that apply to purchases of a particular class.
Generally, the minimum initial investment in Class I shares is $250,000 and
the minimum subsequent investment is $25,000, except that ^ INVESCO may permit a
lesser amount to be invested in the Fund under a federal income tax-deferred
retirement plan (other than an IRA, or under a group investment plan qualifying
as a sophisticated investor. Generally, the minimum initial investment in Class
II shares is $5,000 ($2,000 for IRA accounts) and the minimum subsequent
investment is $1,000.
The following chart shows several convenient ways to invest in the Fund.
Your new Fund shares will be priced at the NAV next determined after your order
is received in proper form. There is no charge to invest when you do so directly
through ^ INVESCO, although in some circumstances a fee may be charged on
exchanges or redemptions. However, if you invest in the Fund through a
securities broker, you may be charged a commission or transaction fee. INVESCO
may from time to time make payments from its revenues to securities dealers and
other financial institutions that provide distribution-related and/or
administrative services for the Fund. For all new accounts, please send a
completed application form. Please specify which Fund and which class of shares
you wish to purchase.
^ INVESCO reserves the right to increase, reduce or waive the minimum
investment requirements in its sole discretion, where it determines this action
is in the best interests of the Fund. Further, ^ INVESCO reserves the right in
its sole discretion to reject any order for the purchase of Fund shares
(including purchases by exchange) when, in its judgment, such rejection is in
the Fund's best interests.
<PAGE>
<TABLE>
<CAPTION>
HOW TO BUY SHARES
=====================================================================================================
<S> <C> <C>
Method Investment Minimum Please Remember
- -----------------------------------------------------------------------------------------------------
By Check
Mail to: Class I If your check does
------- not clear, you will
INVESCO Funds $250,000; $25,000 be responsible for
Group, Inc. for each subsequent any related loss
P.O. Box 173706 investment. the Fund or ^
Denver, CO INVESCO incurs. If
80217-3706. Class II you are already a
Or you may send -------- shareholder in the
your check by $5,000 for regular INVESCO funds, the
overnight courier account; Fund may seek
to: 7800 E. Union $2,000 for an IRA; reimbursement from
Ave., Denver, CO $1,000 minimum for your existing
80237. each subsequent account(s) for any
investment. loss incurred.
- -----------------------------------------------------------------------------------------------------
By Telephone or
Wire
Call 1-800-525-8085 Class I Payment must be
------- received within 3
to request your $250,000; $25,000 business days, or
purchase. Then send for each subsequent the transaction may
your check by investment. be ^ canceled. If a
overnight courier telephone purchase
to our street Class II is ^ canceled due
address: -------- to nonpayment, you
7800 E. Union Ave., $5,000 for regular will be responsible
Denver, CO 80237. account; for any related
Or you may transmit $2,000 for an IRA; loss the Fund or ^
your payment by $1,000 minimum for INVESCO incurs. If
bank wire (call ^ each subsequent you are already a
INVESCO for investment. shareholder in the
instructions). INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
With EasiVest or
Direct Payroll
Purchase
You may enroll on Class I Like all regular
the fund ------- investment plans,
application, or EasiVest and Direct neither EasiVest
call us for the Payroll Purchase nor Direct Payroll
correct form and plans are not Purchase ensures a
more details. available to Class profit or protects
Investing the same I purchasers or against loss in a
amount on a monthly shareholders. falling market.
basis allows you to Because you'll
buy more shares Class II invest continually,
when prices are low -------- regardless of
and fewer shares $50 per month for varying price
when prices are EasiVest; $50 per levels, consider
high. This pay period for your financial
"dollar-cost Direct Payroll ability to keep
averaging" may help Purchase. You may buying through low
offset market start or stop your price levels. And
fluctuations. Over regular investment remember that you
a period of time, plan at any time, will lose money if
your average cost with two weeks' you redeem your
per share may be notice to ^ shares when the
less than the INVESCO. You must market value of all
actual average fulfill the minimum your shares is less
price per share. initial investment than their cost.
requirements
($5,000 for regular
account; $2,000 for
an IRA) before
using one of these
options.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
By PAL
<S> <C> <C>
Your "Personal Class I Be sure to write
Account Line" ------- down the
available for $25,000 confirmation number
subsequent provided by PAL.
purchases and Class II Payment must be
exchanges 24 hours -------- received within 3
a day. Simply call $1,000 ^ ; $250 for an business days, or
1-800-424-8085. IRA. the transaction may
be ^ canceled. If a
telephone purchase
is ^ canceled due
to nonpayment, you
will be responsible
for any related
loss the Fund or ^
INVESCO incurs. If
you are already a
shareholder in the
INVESCO funds, the
Fund may seek
reimbursement from
your existing
account(s) for any
loss incurred.
- -----------------------------------------------------------------------------------------------------
By Exchange
Between this and Class I ^See "Exchange
another of the $250,000 to open a Policy" below.
INVESCO funds. Call new account;
1-800-525-8085 for $25,000 for written
prospectuses of requests to
other INVESCO purchase additional
funds. You may also shares. The
establish an exchange minimum is
Automatic Monthly $1,000 for
Exchange service purchases requested
between two INVESCO by telephone.
funds; call ^
INVESCO for further Class II
details and the --------
correct form. $5,000 to open a
new account; $2,000
for IRAs; $1,000
for written
requests to
purchase additional
shares. The
exchange minimum is
$1,000 for
purchases requested
by telephone.
=====================================================================================================
</TABLE>
Exchange Policy. You may exchange your shares in this Fund for those in
another INVESCO fund on the basis of their respective net asset values at the
<PAGE>
time of the exchange. Before making any exchange, be sure to review the
prospectuses of the funds involved and consider their differences.
Upon the exchange of shares of the Fund held less than three months (other
than shares acquired through reinvestment of dividends or other distributions),
a fee of 1% of the current net asset value of the shares will be assessed and
retained by the Fund for the benefit of remaining shareholders. This fee is
intended to encourage long-term investments in the Fund, to avoid transaction
and other expenses caused by early redemptions, and to facilitate portfolio
management. The fee is not a deferred sales charge, is not a commission paid to
^ INVESCO, or otherwise results in a direct payment to ^ INVESCO. The fee
applies to redemptions from the Fund and exchanges into any of the other no-load
mutual funds that are advised by ^ INVESCO and distributed by IDI. The Fund will
use the "first in, first out" method to determine the three-month holding
period. Under this method, the date of exchange will be compared with the
earliest purchase date of shares held in the account. If this method results in
the redemption of shares deemed held for less than three months, the redemption
fee will be assessed against such shares. ^ INVESCO reserves the right, in the
sole determination of ^ INVESCO, to waive the redemption fee.
Please note these policies regarding exchanges of Fund shares:
1) The fund accounts must be identically registered.
2) You may make four exchanges out of each fund during each calendar
year, subject to a charge of 1% of the NAV of Fund shares held for
less than three months discussed above.
3) An exchange is the redemption of shares from one fund followed by the
purchase of shares in another. Therefore, any gain or loss realized on
the exchange is recognizable for federal income tax purposes (unless,
of course, your account is tax-deferred).
4) ^ In order to prevent abuse of this policy to the disadvantage of
other shareholders, the Fund reserves the right to ^ temporarily or
permanently terminate the exchange ^ option of any shareholder who
requests more than four exchanges in a year, or at any time the Fund
determines the actions of the shareholder are detrimental to Fund
performance and shareholders. The Fund will determine whether to do so
based on a consideration of both the number of exchanges any
particular shareholder, or group of shareholders, has requested and
the time period over which those exchange requests have been made,
together with the level of expense to the Fund which will result from
effecting additional exchange requests. The Fund is intended to be a
long-term investment vehicle and is not designed to provide investors
the means of speculation on short-term market movements.
<PAGE>
(5) Notice of all modifications or terminations that would affect all Fund
shareholders will be given at least 60 days prior to the effective
date of the change in ^ policy, except ^ in unusual ^ circumstances
(such as when redemptions of the exchanged shares are suspended under
Section 22(e) of the Investment Company Act of 1940, or when sales of
the fund into which you are exchanging are temporarily ^ suspended).
Distribution Expenses. The Fund is authorized under a Plan and Agreement of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940
(the "Plan") to use its assets to finance certain activities relating to the
distribution of its Class II shares to investors. Under the Plan, monthly
payments may be made by the Fund to IDI to permit IDI, at its discretion, to
engage in certain activities and provide certain services approved by the board
of directors of the Company in connection with the distribution of the Fund's
Class II shares to investors. These activities and services may include the
payment of compensation (including incentive compensation and/or continuing
compensation based on the amount of customer assets maintained in the Fund) to
securities dealers and other financial institutions and organizations, which may
include INVESCO- and IDI-affiliated companies, to obtain various
distribution-related and/or administrative services for the Fund. Such services
may include, among other things, processing new shareholder account
applications, preparing and transmitting electronically to the Fund's Transfer
Agent all transactions by customers, and serving as the primary source of
information to customers in answering questions concerning the Fund and their
transactions with the Fund.
In addition, other permissible activities and services include advertising,
^ preparation, printing and distribution of sales literature and printing and
distribution of prospectuses to prospective investors, and such other services
and promotional activities for the Fund as may from time to time be agreed upon
by the Company and its board of directors, including public relations efforts
and marketing programs to communicate with investors and prospective investors.
These services and activities may be conducted by the staff of INVESCO, IDI or ^
their affiliates or by third parties.
Under the Plan, the ^ Fund's payments to IDI ^ are limited to an amount
computed at an annual rate of 0.25% of the Fund's average net assets
attributable to the Fund's Class II shares. IDI is not entitled to payment for
overhead expenses under the Plan, but may be paid for all or a portion of the
compensation paid for salaries and other employee benefits for the personnel of
^ INVESCO or IDI whose primary responsibilities involve marketing shares of the
INVESCO funds, including the Fund. Payment amounts by the Fund under the Plan,
<PAGE>
for any month, may be made to compensate IDI for permissible activities engaged
in and services provided by IDI during the rolling 12-month period in which that
month falls, although this period is expanded to 24 months for obligations
incurred during the first 24 months of the Fund's operations. Therefore, any
obligations incurred by IDI in excess of the limitations described above will
not be paid by the Fund under the Plan and will be borne by IDI. In addition,
IDI and its affiliates may from time to time make additional payments from ^
their revenues to securities dealers, financial advisers and financial
institutions that provide distribution-related and/or administrative services
for the Fund. No further payments will be made by the Fund under the Plan in the
event of the Plan's termination. Payments made by the Fund may not be used to
finance directly the distribution of shares of any other Fund of the Company or
other mutual fund advised by ^ INVESCO and distributed by IDI. However, payments
received by IDI which are not used to finance the distribution of shares of the
Fund become part of IDI's revenues and may be used by IDI for ^ activities ^
that promote distribution of any of the mutual funds advised by ^ INVESCO.
Subject to review by the ^ Company's directors^, payments made by the Fund under
the Plan for compensation of marketing personnel, as noted above, are based on
an allocation formula designed to ensure that all such payments are appropriate.
IDI will bear any distribution- and service-related expenses in excess of the
amounts which are compensated pursuant to the Plan. The Plan also authorizes any
financing of distribution which may result from IDI's use of its own resources,
^ providing that such fees are legitimate and not excessive. For more
information see "How Shares Can Be Purchased -^ Distribution Plan" in the
Statement of Additional Information.
There is no distribution fee applicable to Class I shares.
FUND SERVICES
Shareholder Accounts. ^ INVESCO will maintain a separate share account that
reflects your current holdings. Share certificates will be issued only upon
specific request. You will have greater flexibility to conduct transactions if
you do not request certificates.
Transaction Confirmations. You will receive detailed confirmations of
individual purchases, exchanges and redemptions. If you choose certain recurring
transaction plans (for instance, EasiVest), your transactions will be confirmed
on your quarterly Investment Summary.
Investment Summaries. Each calendar quarter, shareholders receive a written
statement which consolidates and summarizes account activity and value at the
beginning and end of the period for each of their INVESCO funds.
Reinvestment of Distributions. Dividends and capital gain distributions are
automatically ^ reinvested in additional fund shares at the NAV on the
<PAGE>
ex-dividend or ex-distribution date, unless you choose to have dividends and/or
capital gain distributions automatically reinvested in another INVESCO fund or
paid by check (minimum of $10.00).
Telephone Transactions. All shareholders may exchange and redeem Fund
shares by telephone, unless they expressly decline these privileges. By signing
the new account Application or a Telephone Transaction Authorization Form, or
otherwise using these privileges, the investor has agreed that, if the Fund has
followed reasonable procedures, such as recording telephone instructions and
sending written transaction confirmations, it will not be liable for following
telephone instructions that it believes to be genuine. As a result of this
policy, the investor may bear the risk of any loss due to unauthorized or
fraudulent instructions.
Retirement Plans And IRAs. Fund shares may be purchased for IRAs and many
types of tax-deferred retirement plans. ^ INVESCO can supply you with
information and forms to establish or transfer your existing plan or account.
HOW TO SELL SHARES
The following chart shows several convenient ways to redeem your Fund
shares. Shares of each class of the Fund may be redeemed at any time at their
current NAV next determined after a request in proper form is received at the
Fund's office. The NAV at the time of the redemption may be more or less than
the price you paid to purchase your shares, depending primarily upon the Fund's
investment performance.
Upon the redemption of shares held less than three months (other than
shares acquired through reinvestment of dividends or other distributions), a fee
of 1% of the current net asset value of the shares will be assessed and retained
by the Fund for the benefit of remaining shareholders. This fee is intended to
encourage long-term investments in the Fund, to avoid transaction and other
expenses caused by early redemptions, and to facilitate portfolio management.
The fee is not a deferred sales charge, is not a commission paid to ^ INVESCO,
and does not benefit ^ INVESCO in any way. The fee applies to redemptions from
the Fund and exchanges into any of the other no-load mutual funds that are
advised by ^ INVESCO and distributed by IDI. The Fund will use the "first in,
first out" method to determine the three-month holding period. Under this
method, the date of redemption or exchange will be compared with the earliest
purchase date of shares held in the account. If this holding period is less than
three months, the redemption/exchange fee will be assessed on the current net
asset value of the shares being redeemed. ^ INVESCO reserves the right, in its
sole discretion, to waive the redemption fee.
Please specify from which fund and class, if any, you wish to redeem
shares. Shareholders have a separate account for each fund in which they invest.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
HOW TO SELL SHARES
=====================================================================================================
Method Minimum Redemption Please Remember
By Telephone
- -----------------------------------------------------------------------------------------------------
Call us toll-free Class I These telephone
at 1-800-525-8085. $1,000 (or, if redemption
less, full privileges may be
liquidation of the modified or
account) for a terminated in the
redemption check; future at the
no minimum for a discretion of ^
wire to bank of INVESCO.
record.
Class II
$250 (or, if less,
full liquidation of
the account) for a
redemption check;
$1,000 for a wire to
bank of record. The
maximum amount which
may be redeemed
by telephone is
generally $25,000.
- -----------------------------------------------------------------------------------------------------
^ In Writing
Mail your request Any amount. The If the shares to be
to INVESCO Funds redemption request redeemed are
Group, Inc., P.O. must be signed by represented by
Box 173706 all registered ^ stock certificates,
Denver, CO account owners. the certificates
80217-3706. You may Payment will be must be sent to ^
also send your mailed to your INVESCO.
request by address of record
overnight courier or to a
to 7800 E. Union pre-designated
Ave., Denver, CO bank.
80237.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
By Exchange
Between this and Class I See "Exchange
another of the $250,000 to open a Policy," page ^
INVESCO funds. Call new account in the 192.
1-800-525-8085 for Fund; $1,000 to
prospectuses of open a new account
other INVESCO in the other
funds. You may also INVESCO funds;
establish an $25,000 for written
automatic monthly requests to
exchange service purchase additional
between two INVESCO shares for an
funds; call ^ existing account.
INVESCO for further
details and the Class II
correct form. $5,000 to open a
new account in the
Fund; $1,000 to open
a new account in
the other INVESCO
funds; $2,000 for
IRAs; $1,000 for
written requests to
purchase additional
shares for an existing
account. The exchange
minimum is $1,000 for
purchases requested by
telephone.
- -----------------------------------------------------------------------------------------------------
Periodic Withdrawal
Plan
You may call us to $100 per payment, You must have at
request the on a monthly or least $10,000 total
appropriate form quarterly basis. invested with the
and more The redemption INVESCO funds, with
information at check may be made at least $5,000 of
1-800-525-8085. payable to any that total invested
party you in the fund from
designate. which withdrawals
will be made.
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Payment To Third
Party
Mail your request Any amount. All registered ^
to INVESCO Funds account owners must
Group, Inc., P.O. sign the request,
Box 173706 with a signature
Denver, CO guarantee from an
80217-3706. eligible guarantor
financial
institution, such
as a commercial
bank or recognized
national or
regional securities
firm.
=====================================================================================================
</TABLE>
While the Fund will attempt to process telephone redemptions promptly,
there may be times -- particularly in periods of severe economic or market
disruption -- when you may experience delays in redeeming shares by phone.
Payments of redemption proceeds will be mailed within seven days following
receipt of the redemption request in proper form. However, payment may be
postponed under unusual circumstances -- for instance, if normal trading is not
taking place on the New York Stock Exchange or during an emergency as defined by
the Securities and Exchange Commission. If your shares were purchased by a check
which has not yet cleared, payment will be made promptly upon clearance of the
purchase check (which will take up to 15 days).
If you participate in EasiVest, the Fund's automatic monthly investment
program, and redeem all of the shares in your account, we will terminate any
further EasiVest purchases unless you instruct us otherwise.
Because of the high relative costs of handling small accounts, should the
value of any shareholder's account fall below $50,000 for Class I shares, or
$5,000 for Class II shares ($2,000 for IRAs) as a result of shareholder action,
the Fund reserves the right to involuntarily redeem all shares in such account,
in which case the account would be liquidated and the proceeds forwarded to the
shareholder. Prior to any such redemption, a shareholder will be notified and
given 60 days to increase the value of the account to the above minimums.
TAXES, DIVIDENDS AND OTHER DISTRIBUTIONS
Taxes. The Fund intends to distribute to shareholders substantially all of
its net investment income, net capital gains and net gains from certain foreign
currency transactions, if any^. Distribution of all net investment income to
shareholders allows the Fund to maintain its tax status as a regulated
investment company. ^ The Fund does not expect to pay any federal income or
excise taxes because of its tax status as a regulated investment company.
<PAGE>
Shareholders^ must include all dividends and other distributions ^ as
taxable income for federal, state and local income tax purposes unless they are
exempt from income taxes. Dividends and other distributions are taxable whether
they are received in cash or automatically reinvested in shares of the Fund or
another fund in the INVESCO group.
Net realized capital gains of the Fund are classified as short-term and
long-term gains depending upon how long the Fund held the security that gave
rise to the gains. Short-term capital gains are included in income from
dividends and interest as ordinary income and are taxed at the taxpayer's
marginal tax rate. ^ Long-term gains realized between May 7, 1997 and July 28,
1997 on the sale of securities held for more than ^ 12 months are taxable at a ^
maximum rate of 20% (depending on the shareholder's marginal tax rate).
Long-term gains realized between July 29, 1997 and December 31, 1997 on the sale
of securities held for more than one year but not for more than 18 months are
taxable at a maximum rate of 28% (depending on the shareholder's marginal tax
rate). Long-term gains realized between July 29, 1997 and December 31, 1997 on
the sale of securities held for more than 18 months are taxable at a maximum
rate of 20% (depending on the shareholder's marginal tax rate). Beginning
January 1, 1998, the IRS Restructuring and Reform Act of 1998, signed into law
on July 24, 1998, lowers the holding period for long-term capital gains entitled
to the 20% capital gains tax rate from 18 months to 12 months. Accordingly, all
long-term gains realized after December 31, 1997 on the sale of securities held
for more than 12 months will be taxable at a maximum rate of 20%. At the end of
each year, information regarding the tax status of dividends and other
distributions is provided to shareholders. Shareholders should consult their tax
^ adviser as to the effect of ^ distributions by the Fund ^.
Shareholders ^ may realize capital gains or losses when they sell their ^
shares at more or less than the price originally paid. Capital gains on shares
held for more than one year will be long-term capital ^ gain, in which event
they will be subject to federal income tax at the rates indicated above.
The Fund may be subject to withholding of foreign taxes on dividends or
interest it receives on foreign securities. Foreign taxes withheld will be
treated as an expense of the Fund.
Individuals and certain other non-corporate shareholders may be subject to
backup withholding of 31% on dividends, capital ^ gain distributions and other
distributions and redemption proceeds. ^ You can avoid backup withholding on
your Fund account by ensuring that we have a correct, certified tax
identification number, unless you are subject to backup withholding for other
reasons.
We encourage you to consult a tax adviser with respect to these matters.
For further information see "Dividends, Other Distributions ^ And Taxes" in the
Statement of Additional Information.
<PAGE>
Dividends and Other Distributions. The Fund earns ordinary or net
investment income in the form of interest and dividends ^ on investments.
Dividends paid by the Fund will be based solely on the net investment income
earned by it. The Fund's policy is to distribute substantially all of this
income, less ^ expenses, to shareholders on a quarterly basis, at the discretion
of the ^ Company's board of directors. Dividends are automatically reinvested in
additional shares of the Fund at the net asset value on the payable date unless
otherwise requested.
In addition, the Fund realizes capital gains and losses when it sells
securities or derivatives for more or less than it paid. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any,
together with gains^ realized on foreign currency transactions, if any, are
distributed to shareholders at least annually, usually in December. Capital ^
gain distributions are automatically reinvested in shares of the Fund at the net
asset value on the payable date unless otherwise requested.
Dividends and other distributions are paid to ^ shareholders who hold
shares on the record date of distribution regardless how long the Fund shares
have been held by the shareholder. The Fund's share price will then drop by the
amount of the distribution on the ex-dividend or ex-distribution date. If a
shareholder purchases shares immediately prior to the distribution, the
shareholder will, in effect, have "bought" the distribution by paying the full
purchase price, a portion of which is then returned in the form of a taxable
distribution.
<PAGE>
ADDITIONAL INFORMATION
Voting Rights. All shares ^ of the Company have equal voting rights based
on one vote for each share owned and a corresponding fractional vote for each
fractional share owned, except that only shares of a class are entitled to vote
on matters concerning only that class of shares, and holders of each class of
shares have separate voting rights on matters in which the interests of the
class differ from the interests of the other class, to the extent required by
applicable law, regulation and regulatory interpretation. The Company is not
generally required and does not expect to hold regular annual meetings of
shareholders. However, when requested to do so in writing by the holders of 10%
or more of the outstanding shares of the Fund or as may be required by
applicable law or the ^ Company's Articles of Incorporation, the board of
directors will call special meetings of shareholders. Directors may be removed
by action of the holders of a majority of the outstanding shares of the Company.
The Fund will assist shareholders in communicating with other shareholders as
required by the Investment Company Act of 1940.
Master/Feeder Option. As a matter of fundamental policy, the Company may,
in the future, seek to achieve the Fund's investment objective by investing all
of the Fund's assets in another investment company having substantially the same
investment objectives, policies and limitations. It is expected that any such
investment company would be managed by ^ INVESCO in substantially the same
manner as the Fund. If permitted by applicable law, any such investment may be
made in the sole discretion of the Company's board of directors without a vote
of the Fund's shareholders. However, shareholders will be given at least 30 days
prior notice of any such investment. Such an investment would be made only if
the board of directors determines it to be in the best interests of the Fund and
its shareholders based on potential cost savings, operational efficiencies or
other factors. No assurance can be given that costs would be materially reduced
if the option were implemented.
<PAGE>
^ INVESCO SPECIALTY FUNDS, INC.
INVESCO S&P 500 Index Fund
A no-load mutual fund seeking to
provide price performance and income
comparable to the Standard & Poor's
500 Composite Stock Index.
PROSPECTUS
December 1, 1998
INVESCO FUNDS
INVESCO Distributors, ^ Inc.(SM)
Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
1-800-525-8085
PAL(R): 1-800-424-8085
http://www.invesco.com
In Denver, visit one of our
convenient Investor Centers:
Cherry Creek
155-B Fillmore Street;
Denver Tech Center
7800 East Union Avenue
Lobby Level
In addition, all documents
filed by the Company with the
Securities and Exchange Commission
can be located on a ^ web site
maintained by the Commission at
http://www.sec.gov.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 1, ^ 1998
INVESCO SPECIALTY FUNDS, INC.
INVESCO Asian Growth Fund
INVESCO European Small Company Fund
INVESCO Latin American Growth Fund
INVESCO Realty Fund
INVESCO S&P 500 Index Fund
INVESCO Worldwide Capital Goods Fund
INVESCO Worldwide Communications Fund
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
- -----------------------------------------------------------------
INVESCO SPECIALTY FUNDS, INC. (the "Company") is a ^ no-load, open-end,
diversified, management investment company currently consisting of seven
separate portfolios of investments^: INVESCO Asian Growth Fund (the "Asian
Growth Fund"); INVESCO European Small Company Fund (the "European Small Company
Fund"); INVESCO Latin American Growth Fund (the "Latin American Growth Fund"); ^
INVESCO Realty Fund (the "Realty Fund"); and INVESCO S&P 500 Index Fund (the
"S&P 500 Index Fund"); INVESCO Worldwide Capital Goods Fund (the "Capital Goods
Fund") and INVESCO Worldwide Communications Fund (the "Communications Fund")
(collectively, the "Funds" and individually, a "Fund").
The ^ Asian Growth Fund seeks to achieve capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in ^ equity
securities of companies domiciled or with primary operations in Asia and the
Pacific Rim, excluding Japan. For purposes of this Statement of Additional
Information, Asia and Pacific Rim territories will include, but not necessarily
be limited to: China, Hong Kong, India, Indonesia, Malaysia, Philippines,
Singapore, South Korea, Taiwan and Thailand, as well as Pakistan and Indochina
as their markets become more accessible.
<PAGE>
The European Small Company Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
equity securities of European companies whose individual equity market
capitalizations would place them (at the time of purchase) in the same size
range of companies in approximately the lowest 25% of market capitalization of
companies that have equity securities listed on a U.S. national securities
exchange. Under normal circumstances, the European Small Company Fund will
invest at least 65% of its total assets in securities of issuers domiciled in at
least five different countries, although the European Small Company Fund's
investment adviser expects the European Small Company Fund's investments to be
allocated among a larger number of countries. In this regard, no more than 50%
of the European Small Company Fund's total assets will be invested in issuers
domiciled in any one country.
The Latin American Growth Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
securities of issuers domiciled in Latin America. For purposes of this Fund,
Latin America will include: Mexico, Central America, South America, and the
Spanish speaking islands of the Caribbean.
^
The Realty Fund seeks to achieve above average current income by investing,
under normal circumstances, at least 65% of its total assets in publicly-traded
stocks of companies primarily engaged in the real estate industry.
The S&P 500 Index Fund seeks to provide both price performance and income
comparable to the Standard & Poor's 500 Composite Index (the "Index" or the "S&P
500") by investing in the equity securities that comprise the S&P 500 in
approximately the same proportion that they are represented in the Index and in
other instruments whose value depends upon or derives from the value of the
Index.
The Capital Goods Fund seeks to achieve capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in companies that
are primarily engaged in the design, development, manufacture, distribution,
sale or service of capital goods, or in the mining, processing, manufacture or
distribution of raw materials and intermediate goods used by industry and
agriculture. The Communications Fund seeks to achieve a high total return on
investment through capital appreciation and current income by investing, under
normal circumstances, at least 65% of its total assets in companies that are
primarily engaged in the design, development, manufacture, distribution or sale
of communications services and equipment. Up to 35% of the Communication Fund's
total assets will be invested, under normal circumstances, in companies that are
engaged in developing, constructing or operating communications infrastructure
projects throughout the world, or in supplying equipment or services to such
<PAGE>
companies. Under normal circumstances, the Capital Goods Fund and Communications
Fund will each invest at least 65% of their total assets in securities of
issuers of at least three different countries, one of which may be the United
States, although the Funds' investment adviser expects the Funds investments to
be allocated among a larger number of countries. The percentage of the Capital
Goods Fund's and Communication Fund's assets invested in securities of issuers
domiciled in the United States normally will be higher than the percentage
invested in securities issued by companies domiciled in any other single
country. However, it is possible that at times either Fund may have 65% or more
of its total assets invested in foreign securities.
Investors may purchase shares of any or all of the Funds. Additional funds
may be added in the future.
Prospectuses for the Funds, dated December 1, ^ 1998, which provide the
basic information you should know before investing in a Fund, may be obtained
without charge from INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706. This Statement of Additional Information is not a
prospectus, but contains information in addition to and more detailed than that
set forth in the ^ Prospectus. It is intended to provide you with additional
information regarding the activities and operations of the Funds and should be
read in conjunction with the Prospectus.
Investment Adviser: INVESCO FUNDS GROUP, INC.
Distributor: INVESCO DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS 208
THE FUNDS AND THEIR MANAGEMENT 222
HOW SHARES CAN BE PURCHASED 239
HOW SHARES ARE VALUED 243
FUND PERFORMANCE 244
SERVICES PROVIDED BY THE FUNDS 246
TAX-DEFERRED RETIREMENT PLANS 248
HOW TO REDEEM SHARES 248
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES 249
INVESTMENT PRACTICES 251
ADDITIONAL INFORMATION 255
APPENDIX A 261
APPENDIX B 265
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As discussed in each Fund's Prospectus, the Funds may invest in a variety
of securities, and employ a broad range of investment techniques in seeking to
achieve their respective investment objectives. Such securities and techniques
include the following:
^ Equity Securities. As described in the Prospectuses, equity securities
which may be purchased by the Funds consist of common, preferred and convertible
preferred stocks, and securities having equity characteristics such as rights,
warrants and convertible debt securities. Common stocks and preferred stocks
represent equity ownership interests in a corporation and participate in the
corporation's earnings through dividends which may be declared by the
corporation. Unlike common stocks, preferred stocks are entitled to stated
dividends payable from the corporation's earnings, which in some cases may be
"cumulative" if prior stated dividends have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have preferences on the distribution of assets in the
event of the corporation's liquidation. Preferred stocks may be "participating,"
which means that they may be entitled to dividends in excess of the stated
dividend in certain cases. The rights of common and preferred stocks are
generally subordinate to rights associated with a corporation's debt securities.
Rights and warrants are securities which entitle the holder to purchase the
securities of a company (generally, its common stock) at a specified price
during a specified time period. Because of this feature, the values of rights
and warrants are affected by factors similar to those which determine the prices
of common stocks and exhibit similar behavior (although often more volatile
behavior). Rights and warrants may be purchased directly or acquired in
connection with a corporate reorganization or exchange offer.
Convertible securities which may be purchased by the Funds include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is ^ their worth in market value if the securities were exchanged for
their underlying equity securities. Conversion value fluctuates directly with
the price of the underlying security. If conversion value is substantially below
investment value, the price of the convertible security is governed principally
by its investment value. If the conversion value is near or above investment
value, the price of the convertible security generally will rise above
<PAGE>
investment value and may represent a premium over conversion value due to the
combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels above their investment values or conversion values.
However, there is no assurance that any premium above investment value or
conversion value will be recovered because prices change and, as a result, the
ability to achieve capital appreciation through conversion may be eliminated.
Foreign Securities. Up to 25% of ^ the Realty and S&P 500 Index Funds'
total assets, measured at the time of purchase, may be invested directly in
foreign equity or corporate debt securities. An unlimited percentage of the
Worldwide Capital Goods, Worldwide Communications, European Small Company, Latin
American Growth and Asian Growth Funds' total assets may be invested directly in
foreign equity or corporate debt securities. Securities of Canadian issuers and
American Depository Receipts ("ADRs") are not subject to this 25% limitation.
ADRs are receipts representing shares of a foreign corporation held by a U.S.
bank that entitle the holder to all dividends and capital gains. ADRs are
denominated in U.S. dollars and trade in the U.S. securities markets.
For U.S. investors, the returns on foreign securities are influenced not
only by the returns on the foreign investments themselves, but also by currency
fluctuations. That is, when the U.S. dollar generally rises against a foreign
currency, returns for a U.S. investor on foreign securities denominated in that
foreign currency may decrease. By contrast, in a period when the U.S. dollar
generally declines, those returns may increase.
Other aspects of international investing to consider include:
-less publicly available information than is generally available about U.S.
issuers;
-differences in accounting, auditing and financial reporting standards;
-generally higher commission rates on foreign portfolio transactions and
longer settlement periods;
-smaller trading volumes and generally lower liquidity of foreign stock
markets, which may cause greater price volatility; and
-^ investment income on certain foreign securities may be subject to
foreign withholding taxes, which may reduce dividend or interest income or
capital gains payable to shareholders.
There is also the possibility of expropriation or confiscatory taxation;
adverse changes in investment or exchange control regulations; political
<PAGE>
instability; foreign currencies fluctuations; potential restrictions on the flow
of international capital; and the possibility of the Fund experiencing
difficulties in pursuing legal remedies and collecting judgments.
ADRs are subject to some of the same risks as direct investments in foreign
securities, including the risk that material information about the issuer may
not be disclosed in the United States and the risk that currency fluctuations
may adversely affect the value of the ADR.
Restricted/144A Securities. As discussed in ^ the Funds' Prospectuses, each
Fund may invest in restricted securities, including restricted securities that
can be resold to institutional investors pursuant to Rule 144A under the
Securities Act of 1933^, as amended (the "1933 Act") (hereinafter referred to as
"Rule 144A Securities"), if a liquid institutional trading market exists.
In recent years, a large institutional market has developed for Rule 144A
Securities. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend on an efficient
institutional market in which Rule 144A Securities can readily be resold or on
an issuer's ability to honor a demand for repayment. Therefore, the fact that
there are contractual or legal restrictions on resale to the general public or
certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for Rule 144A Securities
may provide both readily ascertainable values for Rule 144A Securities and the
ability to liquidate an investment in order to satisfy share redemption orders.
An insufficient number of qualified institutional buyers interested in
purchasing a Rule 144A Security held by a Fund, however, could affect adversely
the marketability of such security and the Fund might be unable to dispose of
such security promptly or at reasonable prices.
^ The board of directors has delegated to INVESCO the authority to
determine whether a liquid market exists for securities eligible for resale
pursuant to Rule 144A under the 1933 Act, or any successor to such rule, and
whether such securities are subject to the Fund's restriction against investing
more than 10% of its total assets in illiquid securities. Under guidelines
established by the board of directors, INVESCO will consider the following
factors, among others, in making this determination: (1) the unregistered nature
of a Rule 144A security; (2) the frequency of trades and quotes for the
security; (3) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers; (4) dealer undertakings to make a
market in the security; and (5) the nature of the security and the nature of
market place trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer.
<PAGE>
Municipal Bonds. Except for the S&P 500 Index Fund, the Funds may invest in
municipal bonds, the interest from which is exempt from federal income taxes,
when their investment adviser and sub-adviser (collectively, "Fund Management")
believes that the potential total return on the investment is better than the
return that otherwise would be achieved by investing in fixed-income securities
issued by corporations or the U.S. government or its agencies, the interest from
which is not exempt from federal income taxes. Municipal bonds are issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies and
instrumentalities, to obtain funds for various public purposes, including: the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets, and water
and sewer works; refunding outstanding obligations; and obtaining funds for
general operating expenses. The Funds' investments in municipal bonds, as is
true for any investments in debt securities, generally will be subject to both
credit risk and market risk. See the section of the Prospectuses entitled "Risk
Factors."
Obligations of Domestic Banks.^ These obligations consist of certificates
of deposit ("CDs") and banker's acceptances issued by domestic banks (including
their foreign branches) having total assets in excess of $5 billion, which meet
the Funds' minimum rating requirements. CDs are issued against deposits in a
commercial bank for a specified period and rate and are normally negotiable.
Eurodollar CDs are certificates issued by a foreign branch (usually London) of a
U.S. domestic bank, and, as such, the credit is deemed to be that of the
domestic bank.
Bankers' acceptances are short-term credit instruments evidencing the
promise of the bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
^ Commercial Paper. The Funds may invest in these obligations, which are
short-term promissory notes issued by domestic corporations to meet current
working capital requirements. Such paper may be unsecured or backed by a letter
of credit. Commercial paper issued with a letter of credit is, in effect, "two
party paper," with the issuer directly responsible for payment, plus a bank's
guarantee that if the note is not paid at maturity by the issuer, the bank will
pay the principal and interest to the buyer. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days. The Funds will only invest in commercial paper which at the date of
purchase is rated A-2 or higher by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") or Prime-2 or higher by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, commercial paper that is judged by
Fund Management to be equivalent in quality to commercial paper having such
<PAGE>
ratings. A commercial paper rating of A-2 or Prime-2 indicates a strong capacity
for repayment of short-term promissory obligations.
Mortgage-Backed Securities.^ Except for the S&P 500 Index Fund, the Funds
may invest in mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or institutions such as banks,
insurance companies, and savings and loans. Some of these securities, such as
Government National Mortgage Association ("GNMA") certificates, are backed by
the full faith and credit of the U.S. Treasury while others, such as Federal
Home Loan Mortgage Corporation ("Freddie Mac") certificates, are not. The Funds,
with the exception of the Realty Fund, currently do not intend to invest more
than 5% of their respective net assets in mortgage-backed securities.
Mortgage-backed securities represent interests in a pool of mortgages.
Principal and interest payments made on the mortgages in the underlying mortgage
pool are passed through to the Funds. Unscheduled prepayments of principal
shorten the securities' weighted average life and may lower their total return.
The value of these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency or private institution
that issued them. In addition, the mortgage securities market in general may be
adversely affected by changes in interest rates, governmental regulation or tax
policies.
The Realty Fund also may invest in a variety of mortgage-backed securities
known as commercial mortgage-backed securities ("CMBs"). CMBs are derivative
multiple-class mortgage-backed securities. CMBs are generally structured with
two classes, each receiving a different proportion of interest and principal
distributions on a pool of mortgage assets. In general, one class will receive
most of the principal payments and some of the interest, with the other class
receiving some of the principal and most of the interest payments.
^ Asset-Backed Securities. Except for the S&P 500 Index Fund, the Funds may
invest in asset-backed securities. Asset-backed securities represent interests
in pools of consumer loans (other than mortgage loans) and most often are
structured as pass-through securities. Interest and principal payments
ultimately depend on payment of the underlying loans by individuals, although
the securities may be supported by letters of credit or other credit
enhancements. The underlying assets (e.g., loans) are subject to prepayments
which shorten the securities' weighted average life and may lower their returns.
If the credit support or enhancement is exhausted, losses or delays in payment
may result if the required payments of principal and interest are not made. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the pool, the
originator of the pool, or the financial institution providing the credit
support or enhancement. The Funds currently do not intend to invest more than 5%
of their respective net assets in asset-backed securities.
<PAGE>
The Realty Fund may invest in real estate mortgage investment conduit
certificates ("REMICs"). REMICs are a specialized form of Collateralized
Mortgage Obligations ("CMOs") that qualify for favorable tax treatment because
they invest in certain mortgages secured by interests in real estate and other
permitted investments. Investors may purchase "regular" and "residual" shares of
beneficial interest in REMICs. REMICs are subject to the same general risks as
CMOs.
Zero Coupon Bonds and Pay-In-Kind Bonds. Except for the S&P 500 Index Fund,
the Funds may invest in zero coupon bonds or "strips." Zero coupon bonds do not
make regular interest payments; rather, they are sold at a discount from face
value. Principal and accredited discount (representing interest accrued but not
paid) are paid at maturity. "Strips" are debt securities that are stripped of
their interest after the securities are issued, but otherwise are comparable to
zero coupon bonds. The issuers of all zero coupon bonds, and the obligor of all
"strips" purchased by the Funds, will be the U.S. government or its agencies or
instrumentalities. The market value of "strips" and zero coupon bonds generally
fluctuates in response to changes in interest rates to a greater degree than
interest-paying securities of comparable term and quality. In order for a Fund
to maintain its qualification as a regulated investment company, it may be
required to distribute income recognized on zero coupon bonds or "strips" even
though no cash may be paid to the Fund until the maturity or call date of the
bond, and any such distribution could reduce the amount of cash available for
investment by the Fund. The Funds currently do not intend to invest more than 5%
of their respective net assets in zero coupon bonds or "strips."
The Realty Fund may invest in zero coupon bonds and pay-in-kind ("PIK")
bonds if Fund Management determines that the risk of a default on the security,
which could result in adverse tax consequences, is not significant. PIK bonds
pay interest in cash or additional securities, at the issuer's option, for a
specified period. Because they are extremely responsive to changes in interest
rates, the market price of zero coupon and PIK bonds may be more volatile than
other bonds. The Realty Fund may be required to distribute income recognized on
these bonds, even though no cash interest payments are received, which could
reduce the amount of cash available for investment by the Fund.
^ Securities Lending. The Funds also may lend their securities to qualified
brokers, dealers, banks, or other financial institutions. This practice permits
a Fund to earn income, which, in turn, can be invested in additional securities
of the type described in the Fund's Prospectus in pursuit of the Fund's
investment objective. Loans of securities by the Funds will be collateralized by
cash, letters of credit, or securities issued or guaranteed by the U.S.
government or its agencies equal to at least 100% of the current market value of
the loaned securities, plus accrued interest and dividends, determined on a
daily basis. Cash collateral will be invested only in high quality short-term
<PAGE>
investments offering maximum liquidity. Lending securities involves certain
risks, the most significant of which is the risk that a borrower may fail to
return a portfolio security. Fund Management monitors the creditworthiness of ^
borrowers in order to minimize such risks. The Funds will not lend any security
if, as a result of the loan, the aggregate value of securities then on loan
would exceed 33-1/3% of each Fund's total assets (taken at market value).
^ Futures and Options on Futures, Securities and Indices. As described in
each Fund's Prospectus, the Funds may enter into futures contracts, and purchase
and sell ("write") options to buy or sell futures contracts and other securities
or indices, which are included in the types of instruments sometimes referred to
as "derivatives," because their value depends upon or derives from the value of
an underlying asset, reference rate or index. The Funds will comply with and
adhere to all limitations in the manner and extent to which they effect
transactions in futures and options on such futures currently imposed by the
rules and policy guidelines of the Commodity Futures Trading Commission (the
"CFTC") as conditions for exemption of a mutual fund, or investment advisers
thereto, from registration as a commodity pool operator. A Fund will not, as to
any positions, whether long, short or a combination thereof, enter into futures
and options thereon for which the aggregate initial margins and premiums exceed
5% of the fair market value of the Fund's total assets after taking into account
unrealized profits and losses on options it has entered into. In the case of an
option that is "in-the-money," as defined in the Commodity Exchange Act (the
"CEA"), the in-the-money amount may be excluded in computing such 5%. (In
general a call option on a future is "in-the-money" if the value of the future
exceeds the exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) The Funds may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA. The S&P
500 Fund may also use futures and options for liquidity.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in a segregated asset account an amount of cash
or qualifying securities (currently U.S. Treasury bills). This is called
"initial margin." Such initial margin is in the nature of a performance bond or
good faith deposit on the contract. However, since losses on open contracts are
required to be reflected in cash in the form of variation margin payments, the
Fund may be required to make additional payments during the term of the
contracts to its broker. Such payments would be required, for example, where,
during the term of an interest rate futures contract purchased by a Fund, there
was a general increase in interest rates, thereby making the Fund's portfolio
securities less valuable. In all instances involving the purchase of financial
futures contracts by a Fund, an amount of cash together with such other
securities as permitted by applicable regulatory authorities to be utilized for
such purpose, at least equal to the market value of the futures contracts, will
<PAGE>
be deposited in a segregated account with the Fund's custodian to collateralize
the position. At any time prior to the expiration of a futures contract, the
Fund may elect to close its position by taking an opposite position which will
operate to terminate the Fund's position in the futures contract. For a more
complete discussion of the risks involved in futures and options on futures and
other securities, refer to Appendix A ("Description of Futures and Options
Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before a Fund is able in an orderly fashion to invest in the
security, it is possible that the market may decline instead. If the Fund, as a
result, determined not to make the planned investment at that time because of
concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contract and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the underlying securities and the
value of the futures contract. Moreover, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market and
may therefore cause increased participation by speculators in the futures
market. Such increased participation may also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the value of the underlying
securities and movements in the prices of futures contracts, the value of
futures contracts as a hedging device may be reduced.
In addition, if a Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time which may be disadvantageous to the Fund.
Options on Futures Contracts.^ The Funds may buy and write options on
futures contracts for hedging purposes; options are also included in the types
of instruments sometimes known as derivatives. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call option
on an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying instrument, ownership of the option may or may not be less risky
than ownership of the futures contract or the underlying instrument. As with the
<PAGE>
purchase of futures contracts, when a Fund is not fully invested it may buy a
call option on a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
a Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option a Fund has written is exercised, the
Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between change in the value of
its portfolio securities and changes in the value of the futures positions, a
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
Forward Foreign Currency Contracts.^ The Funds may enter into forward
currency contracts, which are included in the types of instruments sometimes
known as derivatives, to purchase or sell foreign currencies (i.e., non-U.S.
currencies) as a hedge against possible variations in foreign exchange rates. A
forward foreign currency contract ("forward contract") is an agreement between
the contracting parties to exchange an amount of currency at some future time at
an agreed-upon rate. The rate can be higher or lower than the spot rate between
the currencies that are the subject of the contract. A forward contract
generally has no deposit requirement, and such transactions do not involve
commissions. By entering into a forward contract for the purchase or sale of the
amount of foreign currency invested in a foreign security transaction, a Fund
can hedge against possible variations in the value of the dollar versus the
subject currency either between the date the foreign security is purchased or
<PAGE>
sold and the date on which payment is made or received or during the time the
Fund holds the foreign security. Hedging against a decline in the value of a
currency in the foregoing manner does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. Furthermore, such hedging transactions preclude the opportunity for
gain if the value of the hedged currency should rise. The Funds will not
speculate in forward contracts. Although the Funds have not adopted any
limitations on their ability to use forward contracts as a hedge against
fluctuations in foreign exchange rates, the Funds do not attempt to hedge all of
their non-U.S. portfolio positions and will enter into such transactions only to
the extent, if any, deemed appropriate by their investment adviser or
sub-adviser. The Funds will not enter into forward contracts for a term of more
than one year.
Swaps and Swap-Related Products.^ Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments.
The exchange commitments can involve payments to be made in the same currency or
in different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the party selling the interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the interest rate
floor.
The Funds may enter into interest rate swaps, caps and floors, which are
included in the types of instruments sometimes known as derivatives, on either
an asset-based or liability-based basis, depending upon whether they are hedging
their assets or their liabilities, and usually will enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of a Fund's obligations over its
entitlement with respect to each interest rate swap will be calculated on a
daily basis, and an amount of cash or liquid assets having an aggregate net
asset value at least equal to the accrued excess will be maintained in a
segregated account by the Funds' custodian. If a Fund enters into an interest
rate swap on other than a net basis, the Fund would maintain a segregated
account in the full amount accrued on a daily basis of the Fund's obligations
with respect to the swap. The Funds will not enter into any interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in one of the three highest rating
categories of at least one nationally recognized statistical rating organization
at the time of entering into such transaction. The Funds' adviser or sub-adviser
will monitor the creditworthiness of all counterparties on an ongoing basis. If
<PAGE>
there is a default by the other party to such a transaction, a Fund would have
contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. Caps and floors are more recent
innovations for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps. To the extent a Fund sells (i.e.,
writes) caps and floors, it will maintain in a segregated account cash or liquid
assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of the Fund's obligations with respect to any caps or
floors.
There is no limit on the amount of interest rate swap transactions that may
be entered into by a Fund. These transactions may in some instances involve the
delivery of securities or other underlying assets by a Fund or its counterparty
to collateralize obligations under the swap. The documentation currently used in
those markets attempts to limit the risk of loss with respect to interest rate
swaps to the net amount of the payments that a party is contractually obligated
to make. If the other party to an interest rate swap that is not collateralized
defaults, the Fund would anticipate losing the net amount of the payments that
the Fund contractually is entitled to receive over the payments that the Fund is
contractually obligated to make. The Funds may buy and sell (i.e., write) caps
and floors without limitation, subject to the segregated account requirement
described above as well as the Funds' other investment restrictions set forth
below.
Investment Restrictions
As described in the Funds' Prospectuses, the Funds operate under certain
investment restrictions.^ For purposes of the following investment restrictions,
all percentage limitations apply immediately after a purchase or initial
investment. Any subsequent change in a particular percentage resulting from
fluctuations in value does not require elimination of any security from a Fund.
^ The following restrictions are fundamental and may not be changed with
respect to a particular Fund without the prior approval of the holders of a
majority, as defined in the Investment Company Act of 1940 (the "1940 Act"), of
the outstanding voting securities of that Fund. Under these restrictions each
Fund may not:
1. With respect to seventy-five percent (75%) of its Fund's total assets,
purchase the securities of any one issuer (except cash items and
"government securities" as defined under the 1940 Act), if the
purchase would cause the Fund to have more than 5% of the value of its
total assets invested in the securities of such issuer or to own more
than 10% of the outstanding voting securities of such issuer;
<PAGE>
2. Borrow money or issue senior securities (as defined in the 1940 Act),
except that the Fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) and may enter into reverse
repurchase agreements in an aggregate amount not exceeding 33-1/3% of
the value of its total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that come to
exceed 33-1/3% of the value of the Fund's total assets by reason of a
decline in total assets will be reduced within three business days to
the extent necessary to comply with the 33-1/3% limitation. This
restriction shall not prohibit deposits of assets to margin or
guarantee positions in futures, options, swaps or forward contracts,
or the segregation of assets in connection with such contracts.
3. Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies engaged
in those businesses. This restriction shall not prohibit the Realty
Fund from directly holding real estate if such real estate is acquired
by that Fund as a result of a default on debt securities held by that
Fund.
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this shall
not prevent the Fund from purchasing or selling options, futures,
swaps and forward contracts or from investing in securities or other
instruments backed by physical commodities.)
5. Lend any security or make any other loan if, as a result, more than
33-1/3% of its total assets would be lent to other parties (but this
limitation does not apply to purchases of commercial paper, debt
securities or to repurchase agreements.)
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
7. The European Small Company Fund, the Latin American Growth Fund and
the Asian Growth Fund may not invest more than 25% of the value of
their respective total assets in any particular industry (other than
government securities). The Realty Fund may invest more than 25% of
the value of its total assets in securities of the Real Estate
Industry.
As a fundamental policy in addition to the above, each Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
<PAGE>
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
In applying restriction 2 above, if the Fund has borrowed money in an
amount exceeding 5% of the value of the Fund's net assets, the Fund will not
purchase additional securities while any such borrowings exist.
In applying restriction 7 above, the European Small Company Fund, the Latin
American Growth Fund and the Asian Growth Fund use an industry classification
system for international securities based on the information obtained from
Bloomberg L.P., Moody's International and a modified S&P industry code
classification schema which uses various sources to classify securities.
Furthermore, the board of directors has adopted additional investment
restrictions for each Fund, unless specifically noted to the contrary. These
restrictions are operating policies of each Fund and may be changed by the board
of directors without shareholder approval. The additional investment
restrictions adopted by the board of directors to date with respect to each Fund
include the following:
^(1) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired by the Fund in units or
attached to securities shall be deemed to be without value unless such
warrants are separately transferable and current market prices are
available, or unless otherwise determined by the board of directors.
^(2) The Fund will not (i) enter into any futures contracts or options on
futures contracts if immediately thereafter the aggregate margin
deposits on all outstanding futures contracts positions held by the
Fund and premiums paid on outstanding options on futures contracts,
after taking into account unrealized profits and losses, would exceed
5% of the market value of the total assets of the Fund, or (ii) enter
into any futures contracts if the aggregate net amount of the Fund's
commitments under outstanding futures contracts positions of the Fund
would exceed the market value of the total assets of the Fund.
^(3) The Fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short without the payment of any
additional consideration therefor, and provided that transactions in
futures, options, swaps and forward contracts are not deemed to
constitute selling securities short.
<PAGE>
^(4) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments and other deposits in connection with transactions in
options, futures, swaps and forward contracts shall not be deemed to
constitute purchasing securities on margin.
^(5) The Fund does not currently intend to (i) purchase securities of
closed end investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market funds
or to securities received as dividends, through offers of exchange, or
as a result of a reorganization, consolidation, or merger. If the Fund
invests in a money market fund, the Fund's investment adviser will
waive its advisory fee on the assets of the Fund which are invested in
the money market fund during the time that those assets are so
invested.
^(6) The Fund may not mortgage or pledge any securities owned or held by
the Fund in amounts that exceed, in the aggregate, 15% of the Fund's
net assets, provided that this limitation does not apply to reverse
repurchase agreements or in the case of assets deposited to margin or
guarantee positions in futures, options, swaps or forward contracts or
placed in a segregated account in connection with such contracts.
^(7) The Fund does not currently intend to purchase securities of any
issuer (other than U.S. Government agencies and instrumentalities or
instruments guaranteed by an entity with a record of more than three
years' continuous operation, including that of predecessors) with a
record of less than three years' continuous operation (including that
of predecessors) if such purchase would cause the Fund's investments
in all such issuers to exceed 5% of the Fund's total assets taken at
market value at the time of such purchase.
^(8) The Fund does not currently intend to invest directly in oil, gas, or
other mineral development or exploration programs or leases; however,
the Fund may own debt or equity securities of companies engaged in
those businesses.
^(9) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement if, as a result, more than 15% of its net
assets would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual
<PAGE>
restrictions on resale or the absence of a readily available market.
The board of directors, or the Fund's investment adviser acting
pursuant to authority delegated by the board of directors, may
determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the ^ 1933 Act, or any
successor to such rule, and therefore that such securities are not
subject to the foregoing limitation.
^(10)The Fund may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the Fund
of its rights under agreements related to portfolio securities would
be deemed to constitute such control.
With respect to investment restriction ^(9) above, under the guidelines
established by the board of directors, Fund Management will consider the
following factors, among others, in making this determination: (1) the
unregistered nature of a Rule 144A security, (2) the frequency of trades and
quotes for the security; (3) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (4) dealer
undertakings to make a market in the security; and (5) the nature of the
security and the nature of marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of transfer).
The Company has voluntarily undertaken that the Worldwide Capital Goods and
Worldwide Communications Funds will invest no more than 15%, the European Small
Company Fund will invest in no more than 15%, the Latin American Growth Fund
will invest no more than 25%, the Asian Growth Fund will invest no more than 30%
and the Realty Fund will invest no more than 15% of their respective total
assets in lower rated debt securities, commonly known as "junk bonds."
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated on April 12, 1994, under the laws
of Maryland.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
(" ^ INVESCO"), is employed as the Company's investment adviser. ^ INVESCO was
established in 1932 and also serves as an investment adviser to ^ INVESCO
Diversified Funds, Inc., INVESCO Emerging Opportunity Funds, Inc., INVESCO
Equity Funds, Inc. (formerly, INVESCO Capital Appreciation Funds, Inc.), INVESCO
Flexible Funds, Inc. (formerly, INVESCO Multiple Asset Funds, Inc.), INVESCO
Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial Income Fund,
Inc., INVESCO International Funds, Inc., INVESCO Money Market Funds, Inc.^,
INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO
Value Trust, and INVESCO Variable Investment Funds, Inc.
<PAGE>
The Investment Sub-Advisers. INVESCO ^ has contracted with INVESCO Asset
Management Limited ("IAML") to provide investment advisory and research services
on behalf of the European Small Company Fund and Latin American Growth Fund.
IAML has the primary responsibility for providing portfolio investment
management services to these Funds. IAML is an indirect, wholly-owned subsidiary
of AMVESCAP PLC.
^ INVESCO has contracted with INVESCO Asia Ltd. ("INVESCO Asia") to provide
investment advisory and research services on behalf of the Asian Growth Fund.
INVESCO Asia has primary responsibility for providing portfolio investment
management services to this Fund. INVESCO Asia is an indirect wholly-owned
subsidiary of AMVESCAP PLC.
^ INVESCO has contracted with INVESCO Realty Advisors, Inc. ("IRAI") to
provide investment advisory and research services on behalf of the Realty Fund.
IRAI has the primary responsibility for providing portfolio investment
management services to the Fund. IRAI is an indirect, wholly-owned subsidiary of
AMVESCAP PLC.
^ INVESCO has contracted with World Asset Management ("World") to provide
investment advisory and certain recordkeeping services to the S&P 500 Index
Fund. World has the primary responsibility for providing portfolio investment
management services to this Fund. World is unaffiliated with any ^ INVESCO
entity.
Prior to February 3, 1998, Institutional Trust Company d/b/a INVESCO Trust
Company ("ITC") provided sub-advisory services to the Capital Goods and
Communications Funds. Effective February 3, 1998, ITC no longer provided
sub-advisory services to those Funds and INVESCO provides such day-to-day
portfolio management services as the investment adviser to the Funds. This
change did not affect the basis upon which investment advice is provided to the
Capital Goods and Communications Funds, the cost of those services to those
Funds or the persons actually performing the investment advisory and other
services previously provided by ITC.
The Distributor. Effective September 30, 1997, INVESCO Distributors, Inc.
("IDI") became the Funds' distributor. IDI, established in 1997, is a registered
broker-dealer that acts as distributor for all retail mutual funds advised by ^
INVESCO. Prior to September 30, 1997, ^ INVESCO served as the Funds'
distributor.
^ INVESCO ^, IAML, INVESCO Asia, IRAI and IDI are indirect, wholly-owned
subsidiaries of AMVESCAP PLC, a publicly-traded holding company that, through
its subsidiaries, engages in the business of investment management on an
international basis. INVESCO PLC changed its name to AMVESCO PLC on March 3,
1997, and to AMVESCAP PLC on May 8, 1997 as part of a merger between a direct
subsidiary of INVESCO PLC and A I M Management Group Inc., that created one of
the largest independent investment management businesses in the world with
approximately ^ $261 billion in assets under management^ as of June 30, 1998.
INVESCO was established in 1932 and as of July 31, ^ 1998, managed 14 mutual
funds, consisting of ^ 49 separate portfolios, on behalf of over ^ 884,099
shareholders.
<PAGE>
AMVESCAP PLC's other North American subsidiaries include the following:
--INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution retirement
plan services to plan sponsors, institutional retirement plan sponsors,
institutional plan providers and foreign governments.
--INVESCO Retirement Plan Services, Atlanta, Georgia, a division of IRBS,
provides recordkeeping and investment selection services to defined contribution
plan sponsors of plans with between $2 million and $200 million in assets.
Additionally, IRPS provides investment consulting services to institutions
seeking to provide INVESCO products and services in their retirement plan
products and services.
--ITC of Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts (IRAs) and
other retirement plan accounts. This includes services such as recordkeeping,
tax reporting and compliance. ITC acts as trustee or custodian to these plans.
ITC accepts contributions and provides, through INVESCO, complete transfer
agency functions: correspondence, subaccounting, telephone communications and
processing of distributions.
--INVESCO Capital Management, Inc. ^, Atlanta, Georgia manages
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker-dealer whose primary business is the
distribution of shares of ^ one registered investment ^ company.
--INVESCO Management & Research, Inc. of Boston, Massachusetts, primarily
manages pension and endowment accounts.
--INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans, Taft-Hartley
Plans, insurance companies, charitable institutions and private individuals.
INVESCO NY also offers the opportunity for its clients to invest both directly
and indirectly through partnerships in primarily private investments or
privately negotiated transactions. INVESCO NY further serves as investment
adviser to several closed-end investment companies, and as sub-adviser with
respect to certain commingled employee benefit trusts. INVESCO NY specializes in
the fundamental research investment approach, with the help of quantitative
tools, and currently has approximately $26 billion in assets under management.
<PAGE>
--PRIMCO Capital Management, Inc. of Louisville, Kentucky specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.
--A I M Advisors, Inc. of Houston, Texas provides investment advisory and
administrative services for retail and institutional mutual funds.
--A I M Capital Management, Inc. of Houston, Texas provides investment
advisory services to individuals, corporations, pension plans and other private
investment advisory accounts and also serves as a sub-adviser to certain retail
and institutional mutual funds, one Canadian mutual fund and one portfolio of an
open-end registered investment company that is offered to separate accounts of
insurance companies offering variable annuities and ^ life insurance products
that issue variable annuity and/or variable life products.
--A I M Distributors, Inc. and Fund Management Company of Houston, Texas
are registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.
The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England.
As indicated in the Funds' Prospectuses, ^ INVESCO ^ and IRAI permit
investment and other personnel to purchase and sell securities for their own
accounts in accordance with a compliance policy governing personal investing by
directors, officers and employees of ^ INVESCO and its North American
affiliates. The policy requires officers, inside directors, investment and other
personnel of ^ INVESCO and its North American affiliates to pre-clear all
transactions in securities not otherwise exempt under the policy. Requests for
trading authority will be denied if, among other reasons, the proposed personal
transaction would be contrary to the provisions of the policy or would be deemed
to adversely affect any transaction then known to be under consideration for or
to have been effected on behalf of any client account, including the Funds.
INVESCO Asia, IAML and World are subject to similar policies.
In addition to the pre-clearance requirement described above, the policy
subjects officers, inside directors, investment and other personnel of ^ INVESCO
^, and ^ its North American affiliates to various trading restrictions and
reporting obligations. All reportable transactions are reviewed for compliance
with the policy. The provisions of this policy are administered by and subject
to exceptions authorized by ^ INVESCO.
Investment Advisory Agreement. ^ INVESCO serves as investment adviser to
each of the Funds pursuant to an investment advisory agreement dated February
28, 1997 (the "Agreement") with the Company which was approved by the board of
directors on November 6, 1996 by a vote cast in person by a majority of the
<PAGE>
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or ^ INVESCO at a meeting called for such
purpose. Shareholders of the Capital Goods Fund, the Communications Fund, the
European Small Company Fund, the Latin American Growth Fund and the Asian Growth
Fund approved the Agreement on January 31, 1997 for an initial term expiring
February 28, 1999. On May 13, 1998, this period was extended by the Company's
board of directors to May 15, 1999. With respect to the Realty Fund, the
Agreement was approved by ^ INVESCO on December 9, 1996 for an initial term
expiring December 9, 1998. On May 13, 1998, this period was extended by the
Company's board of directors to May 15, 1999. With respect to the S&P 500 Index
Fund, the Agreement was approved by ^ INVESCO on October 1, 1997 for an initial
term ending October 1, 1999. Thereafter, the Agreement may be continued from
year to year as to each Fund as long as each such continuance is specifically
approved at least annually by the board of directors of the Company, or by a
vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the applicable Fund. Any such continuance also must be
approved by a majority of the Company's directors who are not parties to the
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
continuance. The Agreement may be terminated at any time without penalty by
either party^ or by a Fund with respect to that Fund, upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the 1940 Act and the rules thereunder.
The Agreement provides that ^ INVESCO shall manage the investment
portfolios of the Funds in conformity with each Fund's investment policies
(either directly or by delegation to a sub-adviser, which may be a party
affiliated with ^ INVESCO). Further, ^ INVESCO shall perform all administrative,
internal accounting (including computation of net asset value), clerical,
statistical, secretarial and all other services necessary or incidental to the
administration of the affairs of the Funds excluding, however, those services
that are the subject of any separate agreement between the Company and ^ INVESCO
or any affiliate thereof, including the distribution and sale of Fund shares and
provision of transfer agency, dividend disbursing agency, and registrar
services, and services furnished under an Administrative Services Agreement with
^ INVESCO discussed below. Services provided under the Agreement include, but
are not limited to: supplying the Company with officers, clerical staff and
other employees, if any, who are necessary in connection with the Funds'
operations; furnishing office space, facilities, equipment, and supplies;
providing personnel and facilities required to respond to inquiries related to
shareholder accounts; conducting periodic compliance reviews of the Funds'
operations; preparation and review of required documents, reports and filings by
^ INVESCO's in-house legal and accounting staff (including the prospectus,
statement of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds), except
insofar as the assistance of independent accountants or attorneys is necessary
or desirable; supplying basic telephone service and other utilities; and
<PAGE>
preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act. Expenses not assumed by
^ INVESCO are borne by the Funds.
As full compensation for its advisory services to the Company, ^ INVESCO
receives a monthly fee. The fee is based upon a percentage of each Fund's
average net assets, determined daily. With respect to the Capital Goods Fund and
the Communications Fund, the fee is calculated at the annual rate of: 0.65% on
the first $500 million of each Fund's average net assets; 0.55% on the next $500
million of each Fund's average net assets; and 0.45% on each Fund's average net
assets over $1 billion. With respect to the European Small Company Fund, the
Latin American Growth Fund and the Asian Growth Fund, the fee is calculated at
the annual rate of: 0.75% on the first $500 million of each Fund's average net
assets; 0.65% on the next $500 million of each Fund's average net assets; and
0.55% on each Fund's average net assets over $1 billion. With respect to the
Realty Fund, the fee is calculated at the annual rate of 0.75% of the Fund's
average net assets. With respect to the S&P 500 Index Fund, the fee is
calculated at the annual rate of 0.25% of the Fund's average net assets.
Sub-Advisory Agreements. ^ IAML serves as sub-adviser to the ^ European
Small Company Fund and the Latin American Growth Fund pursuant to a sub-advisory
agreement with INVESCO dated February 28, 1997 (the " ^ European and Latin
American Sub-Agreement"). The European and Latin American Sub-Agreement was
approved by the board of directors of the Company on November 6, 1996^ by a vote
cast in person by a majority of the directors of the Company, including a
majority of the directors who are not ^"interested persons^" of the Company, ^
INVESCO ^ or IAML at a meeting called for such purpose. Shareholders of the ^
European Small Company and Latin American Growth Funds approved the ^ European
and Latin American Sub-Agreement on January 31, 1997 for an initial term
expiring February 28, 1999. On May 13, 1998, this period was extended by the
Company's board of directors to May 15, 1999. Thereafter, the ^ European and
Latin American Sub-Agreement may be continued from year to year as to each Fund
as long as each such continuance is specifically approved by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the ^ Investment Company Act of 1940, of the outstanding shares of the Fund.
Each such continuance also must be approved by a majority of the directors who
are not parties to the ^ European and Latin American Sub-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 continuance. The ^ European and
Latin American Sub-Agreement may be terminated ^ at any time without penalty by
either party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
^
<PAGE>
INVESCO Asia serves as sub-adviser to the Asian Growth Fund pursuant to a
sub-advisory agreement dated February 28, 1997 (the "Asian Growth
Sub-Agreement") with ^ INVESCO. The Asian Growth Sub-Agreement was approved by
the board of directors of the Company on November 6, 1996 by a vote cast in
person by a majority of the directors, including a majority of the directors who
are not "interested persons" of the Company, ^ INVESCO or INVESCO Asia at a
meeting called for such purpose. Shareholders of the Asian Growth Fund approved
the Asian Growth Sub-Agreement on January 31, 1997 for an initial term expiring
February 28, 1999. On May 13, 1998, this period was extended by the Company's
board of directors to May 15, 1999. Thereafter the Asian Growth Sub-Agreement
may be continued from year to year as long as it is specifically approved by the
board of directors of the Company, or by a vote of the holders of a majority, as
defined in the 1940 Act, of the outstanding shares of the Fund. ^ Any such
continuance also must be approved by a majority of directors who are not parties
to the Asian Growth Sub-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 continuance. The Asian Growth Sub-Agreement may be terminated at
any time without penalty by either party or the Company upon sixty (60) days'
written notice, and terminates automatically in the event of an assignment to
the extent required by the 1940 Act and the rules thereunder.
IRAI serves as sub-adviser to the Realty Fund pursuant to a sub-advisory
agreement dated December 9, 1996 (the "Realty Sub-Agreement") with ^ INVESCO.
The Realty Sub-Agreement was approved by the board of directors of the Company
on November 6, 1996 by a vote cast in person by a majority of the directors
including a majority of the directors who are not "interested persons" of the
Company, ^ INVESCO or IRAI at a meeting called for such purpose and approved by
^ INVESCO as the then sole shareholder of the Realty Fund on December 9, 1996.
The Realty Sub-Agreement was approved for an initial term expiring December 9,
1998. On May 13, 1998, this period was extended by the Company's board of
directors to May 15, 1999. Thereafter, the Realty Sub-Agreement may be continued
from year-to-year as long as it is specifically approved by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding shares of the Fund. ^ Any such continuance
also must be approved by a majority of directors who are not parties to the
Realty Sub-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
continuance. The Realty Sub-Agreement may be terminated at any time without
penalty by either party or the Company upon sixty (60) days' written notice, and
terminates automatically in the event of an assignment to the extent required by
the 1940 Act and the rules thereunder.
World serves as sub-adviser to the S&P 500 Index Fund pursuant to a
sub-advisory agreement dated October 1, 1997 (the "S&P 500 Index Sub-Agreement")
with ^ INVESCO which was approved by the board of directors on August 12, 1996,
by a vote cast in person by a majority of the directors, including a majority of
<PAGE>
the directors who are not "interested persons" of the Company, ^ INVESCO or
World at a meeting called for such purpose. ^ INVESCO approved the S&P 500 Index
Sub-Agreement on October 1, 1997, for an initial term expiring October 1, 1999.
Thereafter, the S&P 500 Index Sub-Agreement may be continued from year to year
as long as it is specifically approved by the board of directors of the Company,
or by a vote of the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund. ^ Any such continuance also must be approved by
a majority of directors who are not parties to the S&P 500 Index Sub-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 continuance. The
S&P 500 Index Sub-Agreement may be terminated at any time without penalty by
either party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the 1940
Act and the rules thereunder.
The Sub-Agreements provide that ^ IAML, INVESCO Asia, IRAI and World,
subject to the supervision of ^ INVESCO, shall manage the investment portfolios
of the respective Funds in conformity with each Fund's investment policies.
These management services include: (a) managing the investment and reinvestment
of all the assets, now or hereafter acquired, of the Funds, and executing all
purchases and sales of portfolio securities; (b) maintaining a continuous
investment program for the Funds, consistent with (i) each Fund's investment
policies as set forth in the Company's Articles of Incorporation, Bylaws, and
Registration Statement, as from time to time amended, under the 1940 Act, and in
any prospectus and/or statement of additional information of the Company, as
from time to time amended and in use under the 1933 Act, and (ii) the Company's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended; (c) determining what securities are to be purchased or sold
for each of the Funds, unless otherwise directed by the directors of the Company
or ^ INVESCO, and executing transactions accordingly; (d) providing the Funds
the benefit of all of the investment analysis and research, the reviews of
current economic conditions and trends, and the consideration of long-range
investment policy now or hereafter generally available to investment advisory
customers of the Sub-Advisers; (e) determining what portion of each of the Funds
should be invested in the various types of securities authorized for purchase by
each Fund; and (f) making recommendations as to the manner in which voting
rights, rights to consent to Company action and any other rights pertaining to
the portfolio securities of each Fund shall be exercised.
The ^ European and Latin American Sub-Agreement provides that as
compensation for its services, ^ IAML shall receive from ^ INVESCO, at the end
of each month, a fee based upon the average daily value of the ^ European Small
Company Fund's and Latin American Growth Fund's net assets. Based upon approval
of the Company's board of directors at a meeting held May 13, 1998, the
calculation of the sub-advisory fees of each Fund has been changed from 33.33%
of the advisory fee (0.25% on the first $500 million of each ^ Fund's average
<PAGE>
net assets, ^ 0.2167% on the next $500 million of ^ the Fund's average net
assets and 0.1833% on each Fund's average net assets in excess of $1 billion) to
40% of the advisory fee (0.30% on the first $500 million of each Fund's average
net assets, 0.26% on the next $500 million of each Fund's average net assets and
0.22% of each Fund's average net assets in excess of $1 billion). The Asian
Growth Sub-Agreement provides that as compensation for its services, ^ INVESCO
Asian shall receive from ^ INVESCO at the end of each month, a fee based upon
the average daily value of the ^ Asian Growth Fund's net assets. Based upon
approval of the Company's board of directors at a meeting held May 13, 1998, the
calculation of the sub-advisory fees of each Fund has been changed from 33.33%
of the advisory fee (0.25% on the first $500 million of ^ the Fund's average net
assets, ^ 0.2167% on the next $500 million of ^ the Fund's average net assets
and ^ 0.1833% on ^ the Fund's average net assets in excess of $1 billion^) to
40% of the advisory fee (0.30% on the first $500 million of the ^ Fund's average
net assets, ^ 0.26% on the next $500 million of the ^ Fund's average net assets
and ^ 0.22% on the ^ Fund's average net assets in excess of $1 billion). The
Realty Sub-Agreement provides that as compensation for its services, IRAI shall
receive ^ from INVESCO at the end of each month, a fee based upon the average
daily value of the Realty Fund's net assets. Based upon approval of the
Company's board of directors at a meeting held May 13, 1998, the calculation of
the sub-advisory fees of each Fund has been changed from 33.33% of the advisory
fee (0.25% on the Fund's average daily net assets) to 40% of the advisory fee
(0.25% on the Fund's average daily net assets). The S&P 500 Index Fund
Sub-Agreement provides that as compensation for its services, World shall
receive from INVESCO, at the end of each month, ^ a fee based upon the average
daily value of the S&P 500 Index Fund's net assets at the rate of 0.07% on the
first $10 million of the Fund's average net assets ^, 0.05% on the next $40
million of the Fund's average net assets ^, and 0.03% ^ on the Fund's average
net assets in excess of ^ $50 million. The Sub-Advisory fees are paid by ^
INVESCO, NOT the Funds.
Administrative Services Agreement. ^ INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated February 28, 1997 (the "Administrative Agreement"). The
Administrative Agreement was approved by the board of directors on November 6,
1996, by a vote cast in person by all of the directors of the Company, including
all of the directors who are not "interested persons" of the Company or ^
INVESCO at a meeting called for such purpose. The Administrative Agreement was
for an initial term expiring February 28, 1998 and has been extended by action
of the board of directors until May 15, ^ 1999. The Administrative Agreement may
be continued from year to year thereafter as long as each such continuance is
specifically approved by the board of directors of the Company, including a
majority of the directors who are not parties to the Administrative 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 continuance. The
<PAGE>
Administrative Agreement may be terminated at any time without penalty by ^
INVESCO on sixty (60) days' written notice, or by the Company upon thirty (30)
days' written notice, and terminates automatically in the event of an assignment
unless the Company's board of directors approves such assignment.
The Administrative Agreement provides that ^ INVESCO shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of ^ INVESCO, as are
reasonably necessary for the operation of Fund shareholder accounts maintained
by certain retirement plans and employee benefit plans for the benefit of
participants in such plans.
As full compensation for services provided under the Administrative
Agreement, each Fund pays a monthly fee to ^ INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund.
Transfer Agency Agreement. ^ INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement dated February 28, 1997 which was approved by the board of
directors of the Company, including a majority of the Company's directors who
are not parties to the Transfer Agency Agreement or "interested persons" of any
such party, on November 6, 1996. The Transfer Agency Agreement was for an
initial term expiring February 28, 1998 and has been extended by the board of
directors until May 15, ^ 1999. Thereafter, the Transfer Agency Agreement may be
continued from year to year as to each Fund as long as such continuance is
specifically approved at least annually by the board of directors of the
Company, or by a vote of the holders of a majority of the outstanding shares of
the Fund. Any such continuance also must be approved by a majority of the
Company's directors who are not parties to the Transfer Agency Agreement or
interested persons (as defined by the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such continuance. The
Transfer Agency Agreement may be terminated at any time without penalty by
either party upon sixty (60) days' written notice and terminates automatically
in the event of assignment.
The Transfer Agency Agreement provides that each Fund will pay to ^ INVESCO
an annual fee of $20.00 per shareholder account or, where applicable, per
participant in an omnibus account. This fee is paid monthly at a rate of 1/12 of
the annual fee and is based upon the actual number of shareholder accounts and
omnibus account participants in existence during each month.
Rule 18f-3 under the 1940 Act ("Rule 18f-3") permits a fund to use a
multiclass system, including separate class arrangements for distribution of
shares and related exchange privileges applicable to the classes. The S&P 500
Index Fund's Plan Pursuant to Rule 18f-3 provides that advisory and
administrative services fees that are expenses of the Fund but are not otherwise
attributable to a particular class of Fund shares shall be allocated to each
class on the basis of its net asset value relative to the net asset value of
the Fund.
<PAGE>
Set forth below is a table showing the advisory fees, administrative
services fees, and transfer agency fees paid by each of the Funds for the period
shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended July 31, 1998 Year Ended July 31, 1997 Year Ended July 31, 1996(1) ^
--------------------------- -------------------------- -------------------------------
Adminis- Adminis- Adminis-
Transfer trative Transfer trative Transfer trative
Advisory Agency Services Advisory Agency Services Advisory Agency Services
Fees Fees Fees Fees Fees Fees Fees Fees Fees
-------- -------- -------- -------- -------- -------- -------- -------- --------
Worldwide Capital Goods $117,345 $86,976 $12,708 $48,575 $42,296 $11,121 $52,495 $35,801 $11,211 ^
Worldwide
Communications $917,111 $405,886 $31,164 $358,300 $261,010 $18,269 $255,873 $151,435 $15,905 ^
European Small Company $499,912 $382,417 $19,998 $928,226 $353,726 $28,565 $271,008 $66,181 $15,420 ^
Latin American Growth $552,409 $338,846 $21,048 $485,690 $177,930 $19,714 $130,913 $47,581 $12,618
^ Asian Growth Fund $130,604 $156,273 $12,612 $218,813 $113,451 $14,376 $26,564 ^(2) $16,399(2) $3,031(2)
^ Realty Fund(3) $275,574 $215,561 $15,511 $112,846 $74,155 $7,257 -0- -0- -0-
^ S&P 500 Index Fund(4) $13,759 $7,897 $6,874 -0- -0- -0- -0- -0- -0-
</TABLE>
(1) These amounts do not reflect the voluntary expense limitations described in
the Funds' prospectuses.
(2) For the five month period beginning ^ March 1, 1996 (commencement of
operations).
^(3) For the period January ^ 1, 1997 (commencement of operations) through July
31, 1997.
^(4) For the period December 23, 1997 (commencement of operations) through July
31, 1998.
<PAGE>
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of each of the Funds are carried out and that the ^ Funds are properly
administered. The officers of the Company, all of whom are officers and
employees of, and are paid by, ^ INVESCO, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment sub-adviser
for each Fund for which a sub-adviser has been approved has the primary
responsibility for making investment decisions on behalf of that Fund. These
investment decisions are reviewed by the investment committee of ^ INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO ^ Diversified Funds, Inc., INVESCO Emerging Opportunity Funds,
Inc., INVESCO Equity Funds, Inc. (formerly, INVESCO Capital Appreciation Funds,
Inc.), INVESCO Flexible Funds, Inc. (formerly, INVESCO Multiple Asset Funds,
Inc.), INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc., INVESCO Industrial
Income Fund, Inc., INVESCO International Funds, Inc., INVESCO Money Market
Funds, Inc.^, INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds,
Inc. and INVESCO Variable Investment Funds, Inc. All of the officers and
directors of the Company also ^ hold comparable positions with INVESCO Value
Trust and INVESCO Treasurer's Series Trust. Set forth below is information with
respect to each of the Company's officers and directors. Unless otherwise
indicated, the address of the directors and officers is Post Office Box 173706,
Denver, Colorado 80217-3706. Their affiliations represent their principal
occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of AMVESCAP PLC, London, England, and of various subsidiaries thereof^,
Chairman of the Board of INVESCO ^ Global Health Sciences Fund. Address: 1315
Peachtree Street, NE, Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. ^ Trustee of INVESCO Global
Health Sciences Fund. Formerly, Chairman of the Executive Committee and Chairman
of the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Director of ING America Life Insurance Company^. Address: Security Life Center,
1290 Broadway, Denver, Colorado. Born: January 12, 1928. ^
VICTOR L. ANDREWS,**@ Director. Professor Emeritus, Chairman Emeritus and
Chairman of the CFO Roundtable of the Department of Finance at Georgia State
University, Atlanta, Georgia; President, Andrews Financial Associates, Inc.
(consulting firm); since October 1984, Director of the Center for the Study of
Regulated Industry of Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a director of the Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: ^ 34 Seawatch Drive, ^ Savannah,
Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
<PAGE>
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
LAWRENCE H. BUDNER,#@@ Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas,
Texas. Address: 7608 Glen Albens Circle, Dallas, Texas. Born: July 25, 1930.
^
WENDY L. GRAMM, Ph.D.,**@ Director. Self-employed (since 1993); Professor
of Economics and Public Administration, University of Texas at Arlington.
Formerly, Chairman, Commodity Futures Trading Commission from 1988 to 1993,
administrator for Information and Regulatory Affairs at the Office of Management
and Budget from 1985 to 1988, Executive Director of the Presidential Task Force
on Regulatory Relief and Director of the Federal Trade Commission's Bureau of
Economics. Dr. Gramm is also a director of the Chicago Mercantile Exchange,
Enron Corporation, IBP, Inc., State Farm Insurance Company, State Farm Life
Insurance Company, ^ Independent Women's Forum, International Republic
Institute, and the Republican Women's Federal Forum. Dr. Gramm is also a member
of the Board of Visitors, College of Business Administration, University of
Iowa, and a member of the Board of Visitors, Center for Study of Public Choice,
George Mason University. Address: 4201 Yuma Street, N.W., Washington, D.C. Born:
January 10, 1945.
^ KENNETH T. KING,#+@@ Director. Formerly, Chairman of the Board of The
Capitol Life Insurance Company, Providence Washington Insurance Company, and
Director of numerous subsidiaries thereof in the U.S. Formerly, Chairman of the
Board of The Providence Capitol Companies in the United Kingdom and Guernsey.
Chairman of the Board of the Symbion Corporation (a high technology company)
until 1987. Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born:
November 16, 1925.
JOHN W. MCINTYRE,#+@@ Director. Retired. Formerly, Vice Chairman of the
Board of Directors of The Citizens and Southern Corporation and Chairman of the
Board and Chief Executive Officer of The Citizens and Southern Georgia ^
Corporation and Citizens and Southern National Bank. ^ Trustee of INVESCO Global
Health Sciences Fund and Gables Residential Trust. Address: 7 Piedmont Center,
Suite 100, Atlanta, GA. Born: September 14, 1930.
LARRY SOLL, Ph.D.,**@ Director. Retired. Formerly, Chairman of the Board
(1987 to 1994), Chief Executive Officer (1982 to 1989 and 1993 to 1994) and
President (1982 to 1989) of Synergen Corp. Director of Synergen since its
incorporation in 1982. Director of ISI Pharmaceuticals, Inc. Trustee of INVESCO
Global Health Sciences Fund. Address: 345 Poorman Road, Boulder, Colorado. Born:
April 26, 1942.
MARK H. WILLIAMSON,+* President, CEO and Director. President, CEO and
Director of IDI; President, CEO and Director of INVESCO and President of INVESCO
<PAGE>
Global Health Sciences Fund. Formerly, Chairman and CEO of NationsBanc Advisors,
Inc. (1995 to 1997) and Chairman of NationsBanc Investments, Inc. (1997 to
1998). Born: May 24, 1951.
GLEN A. PAYNE, Secretary. Senior Vice President (since 1995), General
Counsel ^(since 1989) and Secretary (since 1989) of INVESCO and Senior Vice
President, General Counsel and Secretary of IDI (since 1997); Vice President
(May 1989 to April 1995)^ of INVESCO; Senior Vice President, (since 1995),
General Counsel (since 1989) and Secretary (1989 to 1998) of ITC. Formerly,
employee of a U.S. regulatory agency, Washington, D.C. (June 1973 through May
1989). Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
^(since 1988). Senior Vice President and Treasurer of ^ IDI (since 1997). Senior
Vice President and Treasurer of ITC (1988 to 1998) Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Senior Vice President of
INVESCO ^(since 1995) and of ^ IDI (since 1997) and Trust Officer of ^ ITC (1995
to 1998) and formerly (August 1992 to July 1995) Vice President of INVESCO ^.
Formerly, Vice President of 440 Financial Group from June 1990 to August 1992
and Assistant Vice President of Putnam Companies from November 1986 to June
1990. Born: August 21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO ^(since
1984) ^. Formerly, Trust Officer of ^ ITC. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO ^(since 1984)
and of ^ IDI (since 1997) ^. Formerly, Trust Officer of ^ ITC. Born: February 3,
1948.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
#Member of the audit committee of the Company.
@Member of the derivatives committee of the Company.
@@Member of the soft dollar brokerage committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
^
**Member of the management liaison committee of the Company.
<PAGE>
As of ^ September 16, 1998, officers and directors of the Company, as a
group, beneficially owned less than 1% of the Company's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ending July 31, ^ 1998:
the compensation paid by the Company to its eligible independent directors for
services rendered in their capacities as directors of the Company; the benefits
accrued as Company expenses with respect to the Defined Benefit Deferred
Compensation Plan discussed below; and the estimated annual benefits to be
received by these directors upon retirement as a result of their service to the
Company. In addition, the table sets forth the total compensation paid by all of
the mutual funds distributed by IDI and advised by INVESCO (including the
Company), INVESCO Treasurer's Series Trust and INVESCO Global Health Sciences
Fund (collectively, the "INVESCO Complex") to these directors for services
rendered in their capacities as directors or trustees during the year ended
December 31, ^ 1997. As of December 31, ^ 1997, there were 49 funds in the
INVESCO Complex. ^
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total
Compensa-
Benefits Estimated tion From
Aggregate Accrued Annual INVESCO
Name of Compensa- As Part Benefits Complex
Person, tion From of Fund Upon Re- Paid To
Position Fund(1) Expenses(2) tirement(3) Directors(1)
Fred ^ A. Deering, $6,892 $862 $553 $113,350
Vice Chairman of
the Board
Victor L. Andrews ^ 6,845 815 640 92,700
Bob R. Baker ^ 6,920 727 858 96,050
Lawrence H. Budner ^ 6,793 815 640 91,000
Daniel D. Chabris(4) 6,852 880 478 89,350
Wendy L. Gramm 6,700 0 0 39,000
Kenneth T. King 6,753 895 502 94,350
John W. McIntyre 6,744 0 0 104,000
Larry Soll 6,744 0 0 78,000
------- ------ ------ --------
Total $61,243 $4,994 $3,671 $797,800
% of Net Assets 0.0136%(5) 0.0011%(5) 0.0046%(6)
(1)The vice chairman of the board, the chairmen of the audit, management
liaison, derivatives, soft dollar brokerage and compensation committees, and the
members of the executive and valuation committees, ^ each receive compensation
<PAGE>
for serving in such capacities in addition to the compensation paid to all
independent directors.
(2)Represents estimated benefits accrued with respect to the Defined
Benefit Deferred Compensation Plan discussed below, and not compensation
deferred at the election of the directors.
(3)These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding INVESCO Global Health
Sciences Fund^ which does not participate in ^ this retirement plan) upon the
directors' retirement, calculated using the current method of allocating
director compensation among the funds in the INVESCO Complex. These estimated
benefits assume retirement at age 72 and that the basic retainer payable to the
directors will be adjusted periodically for inflation, for increases in the
number of funds in the INVESCO Complex, and for other reasons during the period
in which retirement benefits are accrued on behalf of the respective directors.
This results in lower estimated benefits for directors who are closer to
retirement and higher estimated benefits for directors who are further from
retirement. With the exception of ^ Mr. McIntyre and Drs. Gramm and Soll, each
of these directors has served as a director/trustee of one or more of the funds
in the INVESCO Complex for the minimum five-year period required to be eligible
to participate in the Defined Benefit Deferred Compensation Plan.
^ (4)Mr. Chabris retired as a director effective September 30, 1998.
(5)Totals as a percentage of the Company's net assets as of July 31, ^
1998.
(6)Total as a percentage of the net assets of the INVESCO Complex as of
December 31, ^ 1997.
Messrs. Brady^ and Williamson, as "interested persons" of the Company and
of the other funds in the INVESCO Complex, receive compensation as officers or
employees of ^ INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or the other funds in the
INVESCO Complex for their service as directors.
The boards of directors/trustees of the mutual funds managed by ^ INVESCO
and INVESCO Treasurer's Series Trust have adopted a Defined Benefit Deferred
Compensation Plan for the non-interested directors and trustees of the funds.
Under this plan, each director or trustee who is not an interested person of the
funds (as defined in the 1940 Act) and who has served for at least five years (a
"qualified director") is entitled to receive, upon termination of service as a
director (normally upon retiring from the boards at the retirement age of 72^,
the retirement age of 73 to 74, if the retirement date is extended by the boards
for one or two years, but less than three years) continuation of payment for one
year (the "first year retirement benefit") of the annual basic retainer and
annualized board meeting fees payable by the funds to the qualified director at
the time of his retirement (the "basic retainer"). Commencing with any such
director's second year of retirement, and commencing with the first year of
<PAGE>
retirement of a director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly payments at an annual
rate equal to ^ 50% of the basic retainer and annualized board meeting fees.
These payments will continue for the remainder of the qualified director's life
or ten years, whichever is longer (the "reduced retainer payments"). If a
qualified director dies or becomes disabled after age 72 and before age 74 while
still a director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or her or to ^ his or her beneficiary or
estate. If a qualified director becomes disabled or dies either prior to age 72
or during his/her 74th year while still a director of the funds, the director
will not be entitled to receive the first year retirement benefit; however, the
reduced retainer payments will be made to his/her beneficiary or estate. The
plan is administered by a committee of three directors who are also participants
in the plan and one director who is not a plan participant. The cost of the plan
will be allocated among the ^ INVESCO and INVESCO Treasurer's Series Trust funds
in a manner determined to be fair and equitable by the committee. The Company ^
began making ^ payments to ^ Mr. Chabris under the plan as of ^ October 1, 1998.
The Company has no stock options or other pension or retirement plans for
management or other personnel and pays no salary or compensation to any of its
officers.
The independent directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. The deferred amounts are being invested in the shares of all of the
INVESCO and INVESCO Treasurer's Series Trust Funds. Each independent director
is, therefore, an indirect owner of shares of each INVESCO Fund.
The Company has an audit committee that is comprised of ^ four of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of ^ INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal and operational matters which have been assigned to the committee by the
board of directors in furtherance of the board of directors' overall duty of
supervision.
The Company also has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar brokerage transactions by the Funds, and to
review policies and procedures of the Funds' adviser with respect to soft dollar
brokerage transactions. It reports on these matters to the Company's board of
directors.
The Company also has a derivatives committee. The committee meets
periodically to review derivatives investments made by the Funds. It monitors
<PAGE>
derivatives usage by the Funds and the procedures utilized by the Funds' adviser
to ensure that the use of such instruments follows the policies on such
instruments adopted by the Company's board of directors. It reports on these
matters to the Company's board of directors.
HOW SHARES CAN BE PURCHASED
^ The shares of each Fund are sold on a continuous basis at the respective
net asset value per share of the Fund next calculated after receipt of a
purchase order in good form. The net asset value per share is computed
separately for each Fund and is determined once each day that the New York Stock
Exchange is open as of the close of regular trading on that Exchange, but may
also be computed at other times. See "How Shares Are Valued."
The Company has authorized one or more brokers to accept purchase orders on
each Fund's behalf. Such brokers are authorized to designate other
intermediaries to accept purchase orders on the Funds' behalf. A Fund will be
deemed to have received a purchase order when an authorized broker, or, if
applicable, a broker's authorized designee, accepts the order. A purchase order
will be priced at a Fund's net asset value next calculated after the order has
been accepted by an authorized broker or the broker's authorized designee.
IDI acts as the Funds' distributor under a distribution agreement with the
Company ^ and bears all expenses, including the costs of printing and
distributing prospectuses, incident to ^ direct sales and distribution of Fund
shares on a no-load basis.
^ Distribution Plan. As discussed in the Prospectuses, the Company has
adopted a Plan and Agreement of Distribution (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. There is no distribution fee applicable to Class I shares of
the S&P 500 Index Fund. The Plan provides that each Fund may make monthly
payments to IDI of amounts computed at an annual rate no greater than 0.25% of a
Fund's average net assets to permit IDI, at its discretion, to engage in certain
activities and provide certain services in connection with the distribution of
each Fund's shares to investors. Payment ^ by a Fund under the Plan, for any
month, may be made to compensate IDI for permissible activities engaged in and
services provided by IDI during the rolling 12-month period in which that month
falls, although this period is extended to 24 months for obligations incurred
during the first 24 months of a Fund's operations. All distribution expenses
paid by the Funds for the fiscal year ended July 31, ^ 1998, were paid to ^
INVESCO (the predecessor of IDI^ as distributor of shares of the Funds^) and
IDI. For the fiscal year ended July 31, ^ 1998, the Capital Goods Fund,
Communications Fund, European Small Company Fund, Latin American Growth Fund,
Asian Growth Fund ^, Realty Fund and Class II shares of the S&P 500 Index Fund
incurred $46,220, $309,783, $169,748, $204,643, $47,724, $92,862 and $6,942 in
distribution expenses, respectively, prior to the voluntary absorption of
certain Fund expenses by ^ INVESCO and the applicable sub-adviser, if any. In
addition, as of July 31, ^ 1998 the ^ Capital Goods Fund, ^ Communications Fund,
European Small Company Fund, Latin American Growth Fund ^, Asian Growth Fund,
Realty Fund and Class II shares of the S&P 500 Index Fund incurred $3,024,
<PAGE>
$57,894, $16,122, $7,703, $2,769, $6,349 and $3,071, respectively, of additional
distribution accruals had been incurred for the Funds, and will be paid during
the fiscal year ended July 31, ^ 1999. As noted in the Prospectuses, one type of
expenditure is the payment of compensation to securities companies and other
financial institutions and organizations, which may include ^ INVESCO-affiliated
companies, in order to obtain various distribution-related and/or administrative
services for the Funds. Each Fund is authorized by the Plan to use its assets to
finance the payments made to obtain those services. Payments will be made by IDI
to broker-dealers who sell shares of the Funds and may be made to banks, savings
and loan associations and other depository institutions. Although the
Glass-Steagall Act limits the ability of certain banks to act as underwriters of
mutual fund shares, the Company does not believe that these limitations would
affect the ability of such banks to enter into arrangements with IDI, but can
give no assurance in this regard. However, to the extent it is determined
otherwise in the future, arrangements with banks might have to be modified or
terminated, and, in that case, the size of one or more of the Funds possibly
could decrease to the extent that the banks would no longer invest customer
assets in a particular Fund. Neither the Company nor its investment adviser will
give any preference to banks or other depository institutions which enter into
such arrangements when selecting investments to be made by each Fund.
For the fiscal year ended July 31, ^ 1998, allocation of 12b-1 amounts paid
by the Capital Goods Fund for the following categories of expenses were:
advertising--^ $3,352; sales literature, printing and postage--^ $10,621; direct
mail--^ $17,599; public relations/promotion--^ $4,190; compensation to
securities dealers and other organizations--^ $4,295; marketing personnel--^
$6,163. For the fiscal year ended July 31, ^ 1998, allocation of 12b-1 amounts
paid by the Communications Fund for the following categories of expenses were:
advertising--^ $42,160; sales literature, printing and postage--^ $2,870; direct
mail--^ $49,009; public relations/promotion--^ $17,219; compensation to
securities dealers and other organizations--^ $82,690; marketing personnel--^
$55,835. For the fiscal year ended July 31, ^ 1998, allocation of 12b-1 amounts
paid by the European Small Company Fund for the following categories of expenses
were: advertising--^ $37,844; sales literature, printing and postage--^ $38,990;
direct mail--^ $13,216; public relations/promotion--^ $6,672; compensation to
securities dealers and other organizations--^ $45,765; marketing personnel--^
$27,261. For the fiscal year ended July 31, ^ 1998, allocation of 12b-1 amounts
paid by the Latin American Growth Fund for the following categories of expenses
were: advertising--^ $59,450; sales literature, printing and postage--^ $26,392;
direct mail--^ $9,511; public relations/promotion--^ $9,405; compensation to
securities dealers and other organizations--^ $67,797; marketing personnel--^
$32,089. For the fiscal year ended July 31, ^ 1998, allocation of 12b-1 amounts
paid by the Asian Growth Fund for the following categories of expenses were:
advertising--^ $25,619; sales literature, printing and postage--^ $7,092; direct
mail--^ $1,591; public relations/promotion--^ $1,284; compensation to securities
dealers and other organizations--^ $6,169; marketing personnel--^ $5,969. For
the fiscal year ended July 31, 1998, allocation of 12b-1 amounts paid by the
<PAGE>
Realty Fund for the following categories of expenses were: advertising--$6,080;
sales literature, printing and postage--$29,155; direct mail--$22,680; public
relations/promotion--$6,368; compensation to securities dealers and other
organizations--$15,216; marketing personnel--$13,363. For the period December
23, 1997 (commencement of operations) through July 31, ^ 1998, allocation of
12b-1 amounts paid by ^ Class II shares of the S&P 500 Index Fund for the
following categories of expenses were: advertising--^ $1,393; sales literature,
printing and postage--^ $3,067; direct mail--^ $364; public
relations/promotion--^ $405; compensation to securities dealers and other
organizations--^ $472; marketing personnel--^ $1,241.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer ^ processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on April 20, 1994, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("independent directors"). The
Plan was approved by INVESCO on July 12, 1994, as the then sole shareholder of
the Capital Goods Fund and Communications Fund for an initial term expiring
April 30, 1995 and has been continued by action of the board of directors until
May 15, 1999. With respect to the INVESCO European Small Company Fund and Latin
American Growth Fund, the Plan was approved by INVESCO on February 8, 1995 as
the then sole shareholder of each Fund and has been continued by action of the
board of directors until May 15, 1999. With respect to the Asian Growth Fund,
the Plan was approved by INVESCO on September 12, 1995 as the then sole
shareholder of the Fund and has been continued by action of the board of
directors until May 15, 1999. With respect to the Realty Fund, the Plan was
approved by INVESCO on December 9, 1996 as the then sole shareholder of the Fund
and has been continued by action of the board of directors until May 15, 1999.
The board of directors on February 4, 1997, approved amending the Plan,
effective January 1, 1997, to convert the Plan to a compensation type Rule 12b-1
plan. This amendment of the Plan did not result in increasing the amount of any
Fund's payments thereunder. With respect to Class II shares of the S&P 500 Index
Fund, the Plan was approved by action of the board of directors of the Company
on August 12, 1996, and has been continued by action of the board of directors
to May 15, 1999. Pursuant to authorization granted by the Company's board of
directors on September 2, 1997, IDI assumed all obligations related to
distribution from INVESCO.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan also can be terminated at
<PAGE>
any time with respect to any Fund, without penalty, if a majority of the ^
independent directors, or shareholders of such Fund, vote to terminate the Plan.
The Company may, in its absolute discretion, suspend, discontinue or limit the
offering of the shares of any Fund at any time. In determining whether any such
action should be taken, the board of directors intends to consider all relevant
factors including, without limitation, the size of the Funds, the investment
climate for any particular Fund, general market conditions, and the volume of
sales and redemptions of Fund shares. The Plan may continue in effect and
payments may be made under the Plan following any such temporary suspension or
limitation of the offering of a Fund's shares; however, the Company is not
contractually obligated to continue the Plan for any particular period of time.
Suspension of the offering of a Fund's shares would not, of course, affect a
shareholder's ability to redeem his or her shares. So long as the Plan is in
effect, the selection and nomination of persons to serve as independent
directors of the Company shall be committed to the independent directors then in
office at the time of such selection or nomination. The Plan may not be amended
to increase materially the amount of any Fund's payments thereunder without
approval of the shareholders of that Fund, and all material amendments to the
Plan must be approved by the board of directors of the Company, including a
majority of the ^ independent directors. Under the agreement implementing the
Plan, IDI or the Funds, the latter by vote of a majority of the ^ independent
directors or of the holders of a majority of any Fund's outstanding voting
securities, may terminate such agreement without penalty upon 30 days' written
notice to the other party. No further payments will be made by any Fund under
the Plan in the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the Act, it shall remain in effect as such, so as
to authorize the use of each Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the Act, and rules thereunder. To the extent it constitutes an agreement
pursuant to a plan, each Fund's obligation to make payments to IDI shall
terminate automatically, in the event of such "assignment," in which event the
Funds may continue to make payments, pursuant to the Plan, to IDI or another
organization only upon the approval of new arrangements, which may or may not be
with IDI, regarding the use of the amounts authorized to be paid by it under the
Plan, by the directors, including a majority of the ^ independent directors, by
a vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. On an annual basis, the directors consider the continued
appropriateness of the Plan at the level of compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed under "The Funds ^ And Their Management -- Officers and
Directors of the Company" who are also officers either of ^ IDI or companies
<PAGE>
affiliated with ^ IDI. The benefits which the Company believes will be
reasonably likely to flow to the Funds and their shareholders under the Plan
include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment ^
objective(s) of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow ^ INVESCO and its affiliated companies:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from ^ INVESCO and its affiliated companies (and
support them in their infancy), and thereby expand the investment
choices available to all shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share of
certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially offsetting
the costs of the Plan.
HOW SHARES ARE VALUED
As described in the Funds' Prospectuses, the net asset value of shares or
class of shares of each Fund of the Company is computed once each day that the
New York Stock Exchange is open as of the close of regular trading on that
Exchange ^(generally 4:00 p.m., New York time) and applies to purchase and
redemption orders received prior to that time. Net asset value per share is also
computed on any other day on which there is a sufficient degree of trading in
the securities held by a Fund that the current net asset value per share of such
Fund might be materially affected by changes in the value of the securities
held, but only if on such day that Fund receives a request to purchase or redeem
shares. Net asset value per share is not calculated on days the New York Stock
Exchange is closed, such as federal holidays, including New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving, and Christmas.
<PAGE>
The net asset value per share or class of shares of each Fund is calculated
by dividing the value of all securities held by the Fund and its other assets
(including dividends and interest accrued but not collected), less the
liabilities of the Fund or class (including accrued expenses), by the number of
outstanding shares of the Fund. ^ Securities traded on national securities
exchanges, the NASDAQ National Market System, the NASDAQ Small Cap market and
foreign markets are valued at their last sale prices on the exchanges or markets
where such securities are primarily traded. Securities traded in the
over-the-counter market for which last sale prices are not available, and listed
securities for which no sales were reported on a particular date, are valued at
their highest closing bid prices (or, for debt securities, yield equivalents
thereof) obtained from one or more dealers making markets for such securities.
If market quotations are not readily available, securities or other assets will
be valued at their fair values as determined in good faith by the Company's
board of directors or pursuant to procedures adopted by the board of directors.
The above procedures may include the use of valuations furnished by a pricing
service which employs a matrix to determine valuations for normal
institutional-size trading units of debt securities. Prior to utilizing a
pricing service, the Company's board of directors reviews the methods used by
such service to assure itself that securities will be valued at their fair
values. The Company's board of directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
The ^ values of securities and other assets held by each Fund used in
computing net asset value generally are determined as of the time regular
trading in such securities or assets is completed each day. Because regular
trading in most foreign securities markets is completed simultaneously with, or
prior to, the close of regular trading on the New York Stock Exchange, closing
prices for foreign securities usually are available for purposes of computing
the Funds' net asset value. However, in the event that the closing price of a
foreign security is not available in time to calculate a Fund's net asset value
on a particular day, the Company's board of directors has authorized the use of
the market price for the security obtained from an approved pricing service at
an established time during the day which may be prior to the close of regular
trading in the security. The value of all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the spot
rate of such currencies against U.S. dollars provided by an approved pricing
service.
FUND PERFORMANCE
As discussed in the Funds' Prospectuses, the Company advertises the total
return performance of the Funds. The total return performance for the Capital
Goods, Communications, European Small Company, Latin American Growth, Asian
Growth and Realty Funds for the fiscal year or period ended July 31, ^ 1998,
were as follows:
<PAGE>
Fund One Year Life of Fund
---- -------- ------------
Capital Goods Fund^(1) (2.06)% 9.91%
Communications Fund^(1) 36.79% 26.98%
European Small Company Fund^(2) 24.15% 23.75%
Latin American Growth Fund^(2) (30.64)% 9.78%
^ Asian Growth Fund(3) (62.16)% (29.40)%
^ Realty Fund(4) (6.49)% 3.10%
^ S&P 500 Index Fund(5)
- Class I~ N/A 32.98%
- Class II(5)~ N/A 34.94%
(1)Commencement of Operations: August 1, 1994
^(2)Commencement of Operations: February 15, 1995
^(3)Commencement of Operations: March 1, 1996
^(4)Commencement of Operations: January 2, 1997
(5)Commencement of Operations: December 23, 1997
~Annualized
Average annual total return performance is computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T) exponent n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The average annual total return performance figures shown above were
determined by solving the above formula for "T" for each time period shown.
In conjunction with performance reports, comparative data between the
Funds' performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.
From time to time, evaluations of performance made by independent sources
may also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
<PAGE>
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund
Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
No-Load Fund X
Personal Investor
Smart Money
The New York Times
The No-Load Fund Investor
U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
Worth
SERVICES PROVIDED BY THE FUNDS
Periodic Withdrawal Plan. As described in the Funds' Prospectuses, each
Fund offers a Periodic Withdrawal Plan. All dividends and distributions on
shares owned by shareholders participating in this Plan are reinvested in
additional shares. Because withdrawal payments represent the proceeds from sales
of shares, the amount of shareholders' investments in a Fund will be reduced to
the extent that withdrawal payments exceed dividends and other distributions
paid and reinvested. Any gain or loss on such redemptions must be reported for
tax purposes. In each case, shares will be redeemed at the close of business on
or about the 20th day of each month preceding payment and payments will be
mailed within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under the Periodic Withdrawal Plan do not represent
income or a return on investment.
Participation in the Periodic Withdrawal Plan may be terminated at any time
by sending a written request to ^ INVESCO. Upon termination, all future
dividends and capital gain distributions will be reinvested in additional shares
unless the shareholder requests otherwise.
Exchange Policy. As discussed in the Funds' Prospectuses, the Funds offer
shareholders the ability to exchange shares of the Funds for shares of another
fund or for shares of certain other no-load mutual funds advised by ^ INVESCO.
Exchange requests may be made either by telephone or by written request to ^
INVESCO, using the telephone number or address on the cover of this Statement of
Additional Information. Exchanges made by telephone must be in an amount of at
least $250, if the exchange is being made into an existing account of one of the
INVESCO funds. All exchanges that have established a new account must meet the
<PAGE>
fund's applicable minimum initial investment requirements. Written exchange
requests into an existing account have no minimum requirements other than the
fund's applicable minimum subsequent investment requirements. Any gain or loss
realized on such an exchange is recognized for federal income tax purposes. This
^ ability is not an option or right to purchase securities^ and is not available
in any state or other jurisdiction where the shares of the mutual fund into
which transfer is to be made are not qualified for sale, or when the net asset
value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
<PAGE>
TAX-DEFERRED RETIREMENT PLANS
As described in the Funds' Prospectuses, shares of a Fund may be purchased
as the investment medium for various tax-deferred retirement plans. Persons who
request information regarding these plans from ^ INVESCO will be provided with
prototype documents and other supporting information regarding the type of plan
requested. Each of these plans involves a long-term commitment of assets and is
subject to possible regulatory penalties for excess contributions, premature
distributions or for insufficient distributions after age 70-1/2. The legal and
tax implications may vary according to the circumstances of the individual
investor. Therefore, the investor is urged to consult with an attorney or other
tax adviser prior to the establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven (7) days
following receipt of the required documents as described in the Funds'
Prospectuses. The right of redemption may be suspended and payment postponed
when: (a) the New York Stock Exchange is closed for other than customary
weekends and holidays; (b) trading on that exchange is restricted; (c) an
emergency exists as a result of which disposal by a Fund of securities owned by
it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets; or (d) the SEC by order so
permits.
The Company has authorized one or more brokers to accept redemption orders
on the Funds' behalf. Such brokers are authorized to designate other
intermediaries to accept redemption orders on the Funds' behalf. A Fund will be
deemed to have received a redemption order when an authorized broker or, if
applicable, a broker's authorized designee, accepts the order. A redemption
order will be priced at a Fund's Net Asset Value next calculated after the order
has been accepted by an authorized broker or the broker's authorized designee.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the 1940 Act to redeem for cash
all shares of a Fund presented for redemption by any one shareholder having a
value up to $250,000 (or 1% of the Fund's net assets if that is less) in any
three-month period. Securities delivered in payment of redemptions are selected
entirely by the investment adviser based on what is in the best interests of the
Fund and its shareholders, and are valued at the value assigned to them in
computing the Fund's net asset value per share. Shareholders receiving such
securities are likely to incur brokerage costs on their subsequent sales of the
securities.
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund intends to continue to conduct its business and satisfy the
applicable diversification of assets and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). Each Fund so qualified for the
taxable year ended July 31, ^ 1998, and intends to continue to qualify during
its current taxable year. As a result, ^ it is anticipated that none of the ^
Funds will pay ^ federal income or excise taxes and that the Funds will be
accorded conduit or "pass through" treatment for federal income tax purposes.
Dividends paid by each Fund from net investment income as well as
distributions of net realized short-term capital gains and net realized gains
from certain foreign currency transactions are, for federal income tax purposes,
taxable as ordinary income to shareholders. After the end of each calendar year,
each Fund sends shareholders information regarding the amount and character of
dividends paid in the year.
Distributions by each Fund of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are, for federal income tax
purposes, taxable to the shareholder as long-term capital gains regardless how
long a shareholder has held shares of the Fund. Long-term gains realized between
May 7, 1997 and July 8, 1997 on the sale of securities held for more than 12
months are taxable at a maximum rate of 20% (depending on the shareholders'
marginal tax rate).^ Long-term gains realized between July 29, 1997 and December
31, 1997 on the sale of securities held for more than one year but not for more
than 18 months are taxable at ^ the maximum rate of 28% (depending on the
shareholder's marginal tax rate). Long-term gains realized between July 29, 1997
and December 31, 1997 on the sale of securities held for more than 18 months are
taxable at a maximum rate of 20% (depending on the shareholder's marginal tax
rate). Beginning January 1, 1998, the IRS Restructuring and Reform Act of 1998,
signed into law on July 24, 1998, lowers the holding period for long-term
capital gains entitled to the 20% capital gains tax rate from 18 months to 12
months. Accordingly, all long-term gains realized after December 31, 1997 on the
sale of securities held for more than 12 months will be taxable at a maximum
rate of 20%. At the end of each year, information regarding the tax status of
dividends and other distributions is provided to shareholders. Shareholders
should consult their tax ^ adviser as to the effect of ^ distributions by a Fund
^.
All dividends and other distributions are regarded as taxable to the
investor, regardless whether such dividends and distributions are reinvested in
additional shares of one of the ^ Funds or another fund in the INVESCO group.
The net asset value of Fund shares reflects accrued net investment income and
undistributed realized capital and foreign currency gains; therefore, when a
distribution is made, the net asset value is reduced by the amount of the
distribution. If the net asset value of Fund shares were reduced below a
shareholder's cost as a result of a distribution, such distribution would be
taxable to the shareholder although a portion would be, in effect, a return of
invested capital. If shares are purchased shortly before a distribution, the
full price for the shares will be paid and some portion of the price may then be
<PAGE>
returned to the shareholder as a taxable dividend or capital gain. However, the
net asset value per share will be reduced by the amount of the distribution,
which would reduce any gains (or increase any ^ loss) for tax purposes on any
subsequent redemption of shares ^.
^ INVESCO may provide shareholders of the Funds with information concerning
the average cost basis of their shares in order to help them prepare their tax
returns. This information is intended as a convenience to shareholders and will
not be reported to the Internal Revenue Service (the "IRS"). The IRS permits the
use of several methods to determine the cost basis of mutual fund shares. The
cost basis information provided by ^ INVESCO will be computed using the
single-category average cost method, although neither ^ INVESCO nor a Fund
recommends any particular method of determining cost basis. Other methods may
result in different tax consequences. If a shareholder has reported gains or
losses with respect to shares a Fund in past years, the shareholder must
continue to use the cost basis method previously used unless the shareholder
applies to the IRS for permission to change the method.
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as a long-term, instead of short-term, capital loss to
the extent of any capital gains distributions received on those shares.
Each Fund will be subject to a non-deductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of it
ordinary income for that year and net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.
Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. Foreign taxes withheld will be
treated as an expense of the Fund.
Each Fund, except the S&P 500 Index Fund, may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation (other than a controlled foreign corporation) that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, ^ a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if a Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to a Fund to the extent that income is
distributed to its shareholders.
Each Fund may elect to "mark-to-market" its stock in any PFIC.
Marking-to-market, in this context, means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the PFIC stock over
<PAGE>
a Fund's adjusted tax basis therein as of the end of that year. Once the
election has been made, a Fund also will be allowed to deduct from ordinary
income the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the end of the year, but only to the extent of any
net mark-to-market gains with respect to that PFIC stock included by a Fund for
prior taxable years. A Fund's adjusted tax basis in each PFIC's stock with
respect to which it makes this election will be adjusted to reflect the amounts
of income included and deductions taken under the election.
Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time each Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and other
distributions generally will be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Code for federal
income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Funds. Brokerage costs to these Funds are commensurate with the
rate of portfolio activity. Portfolio turnover rates for the fiscal years ended
July 31, 1998, 1997^ and 1996 ^ were 219%, 192%^ and 247% ^, respectively, for
the Worldwide Capital Goods Fund; 55%, 96% and ^ 157% ^, respectively, for the
Worldwide Communications Fund; 98%, 87% and 141%, respectively, for the European
Small Company Fund; and 33%, 72% and 29%, respectively, for the Latin American
Growth Fund. Portfolio turnover rates for the fiscal years ended July 31, ^ 1998
and 1997 and the period March 1, 1996 (inception) through July 31, 1996 for the
Asian Growth Fund were ^ 141%, 161% and 2%, respectively. For the fiscal year
ended July 31, 1998 and the period January 1, 1997 (commencement of operations)
through July 31, 1997, the portfolio turnover rates for the Realty Fund were
258% and 70%, respectively. For the period ^ December 23, 1997 (commencement of
operations) through July 31, ^ 1998, the portfolio turnover rate for the ^ S&P
500 Index Fund was 0%. Portfolio Turnover Rate calculated to less than 0.10% for
the period ended July 31, 1998. The higher portfolio turnover rate for the
Worldwide Capital Goods Fund was primarily due to a repositioning of the Fund's
portfolio. The high portfolio turnover rate for the Realty Fund was primarily
<PAGE>
due to the increase in the size of the Fund. In computing portfolio turnover
rates, all investments with maturities or expiration dates at the time of
acquisition of one year or less are excluded. Subject to this exclusion, the
turnover rate is calculated by dividing (A) the lesser of purchases or sales of
portfolio securities for the fiscal year by (B) the monthly average of the value
of portfolio securities owned by the Fund during the fiscal year.
Placement of Portfolio Brokerage. Either ^ INVESCO, as the Company's
investment adviser, or ^ IAML, INVESCO Asia, IRAI or World, as certain of the
Funds' sub-advisers, places orders for the purchase and sale of securities with
brokers and dealers based upon ^ INVESCO's, IAML's, INVESCO Asia's, IRAI's or
World's evaluation of such ^ brokers' and dealers' financial responsibility,
subject to their ability to effect transactions at the best available prices.
Fund Management evaluates the overall reasonableness of brokerage commissions or
underwriting discounts (the difference between the full acquisition price to
acquire the new offering and the discount offered to members of the underwriting
syndicate) paid by reviewing the quality of executions obtained on each Fund's
portfolio transactions, viewed in terms of the size of transactions, prevailing
market conditions in the security purchased or sold, and general economic and
market conditions. In seeking to ensure that any commissions or discounts
charged the Funds are consistent with prevailing and reasonable commissions,
each Fund's adviser or sub-adviser, if applicable, also endeavors to monitor
brokerage industry practices with regard to the commissions charged by
broker-dealers on transactions effected for other comparable institutional
investors. While each Fund's adviser or sub-adviser, if applicable, seeks
reasonably competitive rates, the Funds do not necessarily pay the lowest
commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, Fund Management may select brokers that provide research
services to effect such transactions. Research services consist of statistical
and analytical reports relating to issuers, industries, securities and economic
factors and trends, which may be of assistance or value to Fund Management in
making informed investment decisions. Research services prepared and furnished
by brokers through which the Funds effect securities transactions may be used by
Fund Management in servicing all of their respective accounts and not all such
services may be used by Fund Management in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, Fund Management, consistent with the
standard of seeking to obtain the best execution on portfolio transactions, may
place orders with such brokers for the execution of transactions for the Funds
on which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
Portfolio transactions may be effected through qualified ^ brokers and
dealers that recommend the Funds to their clients or that act as agent in the
purchase of any of the Fund's shares for their clients. When a number of brokers
and dealers can provide comparable best price and execution on a particular
transaction, the Company's adviser may consider the sale of Fund shares by a
broker or dealer in selecting among qualified ^ brokers and dealers.
<PAGE>
Certain financial institutions (including brokers who may sell shares of
the Funds, or affiliates of such brokers) are paid a fee (the "Services Fee")
for recordkeeping, shareholder communications and other services provided by the
brokers to investors purchasing shares of the Funds through no transaction fee
programs ("NTF Programs") offered by the financial institution or its ^
affiliated broker (an "NTF Program Sponsor"). The Services Fee is based on the
average daily value of the investments in each Fund made in the name of such NTF
Program Sponsor and held in omnibus accounts maintained on behalf of investors
participating in the NTF Program. With respect to certain NTF Programs, the
directors of the Company have authorized the Funds to apply dollars generated
from the Company's Plan and Agreement of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan") to pay the entire Services Fee, subject to the
maximum Rule 12b-1 fee permitted by the Plan. With respect to other NTF
Programs, the Company's directors have authorized the Funds to pay transfer
agency fees to ^ INVESCO based on the number of investors who have beneficial
interests in the NTF Program Sponsor's omnibus accounts in the Funds. ^ INVESCO,
in turn, pays these transfer agency fees to the NTF Program Sponsor as a
sub-transfer agency or recordkeeping fee in payment of all or a portion of the
Services Fee. In the event that the sub-transfer agency or recordkeeping fee is
insufficient to pay all of the Services Fee with respect to these NTF Programs,
the directors of the Company have authorized the Company to apply dollars
generated from the Plan to pay the remainder of the Services Fee, subject to the
maximum Rule 12b-1 fee permitted by the Plan. ^ INVESCO itself pays the portion
of each Fund's Services Fee, if any, that exceeds the sum of the sub-transfer
agency or recordkeeping fee and Rule 12b-1 fee. The Company's directors have
further authorized ^ INVESCO to place a portion of each Fund's brokerage
transactions with certain NTF Program Sponsors or their affiliated brokers, if ^
INVESCO reasonably believes that, in effecting the Fund's transactions in
portfolio securities, the broker is able to provide the best execution of orders
at the most favorable prices. A portion of the commissions earned by such a
broker from executing portfolio transactions on behalf of the Funds may be
credited by the NTF Program Sponsor against its Services Fee. Such credit shall
be applied first against any sub-transfer agency or recordkeeping fee payable
with respect to the Funds, and second against any Rule 12b-1 fees used to pay a
portion of the Services Fee, on a basis which has resulted from negotiations
between ^ INVESCO or IDI and the NTF Program Sponsor. Thus, the Funds pay
sub-transfer agency or recordkeeping fees to the NTF Program Sponsor in payment
of the Services Fee only to the extent that such fees are not offset by a Fund's
credits. In the event that the transfer agency fee paid by the Funds to ^
INVESCO with respect to investors who have beneficial interests in a particular
NTF Program Sponsor's omnibus accounts in a Fund exceeds the Services Fee
applicable to the Fund, after application of credits, ^ INVESCO may carry
forward the excess and apply it to future Services Fees payable to that NTF
Program Sponsor with respect to a Fund. The amount of excess transfer agency
fees carried forward will be reviewed for possible adjustment by ^ INVESCO prior
to each fiscal year-end of the Funds. The Company's board of directors has also
<PAGE>
authorized the Funds to pay to IDI the full Rule 12b-1 fees contemplated by the
Plan ^ for expenses incurred by IDI in engaging in the activities and providing
the services on behalf of the Funds contemplated by the Plan, subject to the
maximum Rule 12b-1 fee permitted by the Plan, notwithstanding that credits have
been applied to reduce the portion of the 12b-1 fee that would have been used to
compensate IDI for payments to such NTF Program Sponsor absent such credits.
The aggregate amount of brokerage commissions paid for the fiscal years
ended July 31, 1998, 1997^ and 1996 ^ were $409,666, $109,449^ and $141,314 ^,
respectively, for the Worldwide Capital Goods Fund ^; $1,506,116, $397,609^ and
$239,095 ^ for the Worldwide Communications Fund^; $104,573, $479,539 and
$417,140, respectively, for the European Small Company Fund ^; $187,853,
$400,001^ and $102,029 ^, respectively, for the Latin American Growth Fund. The
aggregate amount of brokerage commission paid for the fiscal ^ years ended July
31, 1998 and 1997 and the period March 1, 1996 (inception) through July 31, 1996
for the Asian Growth Fund was $74,318, $341,623 and $105,714, respectively. The
aggregate amount of brokerage commissions paid for the fiscal year ended July
31, 1998 and the period January 2, 1997 (commencement of operations) through
July 31, 1997 for the Realty Fund ^ were $315,807 and $182,397. The aggregate
amount of brokerage commissions paid for the period December 23, 1997 through
July 31, 1998 for the S&P Fund was $0. For the fiscal years ended July 31, 1998,
1997^ and 1996 ^, brokers providing research services received commissions on
portfolio transactions of $80,403, $23,278^ and $32,164 ^, respectively, for the
Worldwide Capital Goods Fund ^ $290,690, $75,818^ and $64,810 ^, respectively,
for the Worldwide Communications Fund; $0, $0 and $0, respectively, for the
European Small Company Fund; and $0, $0, and $0, respectively, for the Latin
American Growth Fund. For the fiscal years ended July 31, 1998 and 1997 ^ and
the period ^ March 1, 1996 (inception) through July 31, ^ 1996, brokers
providing research services received commissions on portfolio transactions of
$0, ^ $0 and $0 for the Asian Growth Fund. For the fiscal year ended July 31, ^
1998 and the period January ^ 1, 1997 (commencement of operations) through July
31, 1997, brokers providing research services received commissions on portfolio
transactions of $600 and $0 for the Realty Fund. For the period December 23,
1997 (commencement of operations) through July 31, 1998, brokers providing
research services received no commissions on portfolio transactions of the S&P
500 Index Fund. The aggregate amount of such portfolio transactions was
$36,685,259, $11,523,672^ and $15,731,437 ^, respectively, for the Worldwide
Capital Goods Fund; $147,183,683, $36,516,217^ and $27,956,526 ^, respectively,
for the Worldwide Communications Fund; $0, ^ $0 and $0, respectively, for the
European Small Company Fund; and $0, ^ $0 and $0, respectively, for the Latin
American Growth Fund. For the fiscal ^ years ended July 31, 1998 and 1997 and
the period March 1, 1996 (inception) through July 31, 1996, the aggregate amount
of such portfolio transactions was $0, $0 and $0, respectively, for Asian Growth
Fund. For the fiscal year ended July 31, 1998 and the period January 2, 1997
(commencement of operations) through July 31, 1997, the aggregate amount of such
portfolio transactions for the Realty Fund were $269,413 and $0. For the period
December 23, 1997 (commencement of operations) through July 31, 1998, the
<PAGE>
aggregate amount of such portfolio transactions for the S&P 500 Index Fund was
$0. For the fiscal year ended July 31, ^ 1998, the Worldwide Capital Goods,
Worldwide Communications, European Small Company, Latin American Growth ^, Asian
Growth, Realty and S&P 500 Index Funds paid ^ $0, $162, $0, $0, $0, $0 and $0,
respectively, as compensation to brokers for the sales of shares of the Funds.
^ At July 31, 1998, the Funds held securities of their regular brokers
or dealers, or their parent companies, as follows:
Value of
Securities
Fund Broker or Dealer at ^ 7/31/98
- ---- ---------------- ------------
Capital Goods Fund State Street Bank & ^ Trust ^ $668
Communications Fund State Street Bank & ^ Trust ^ $28,957
Latin American ^ State Street Bank & Trust $553
^ Growth Fund
Asian Growth Fund State Street Bank ^ & Trust $2,442
^ Realty Fund State Street Bank & Trust $400
^ S&P 500 Index Fund State Street Bank & Trust $1,907
J. P. Morgan & Co. $39
Bear Stearns $11
Lehman Brothers Holdings $7
Merrill Lynch Pierce $51
Morgan Stanley Dean Witter $104
Neither INVESCO, IAML, INVESCO Asia, IRAI nor World receives any brokerage
commissions on portfolio transactions effected on behalf of the Funds, and there
is no affiliation between ^ INVESCO ^ IAML, INVESCO Asia, IRAI and World, or any
person affiliated with ^ INVESCO ^, IAML, INVESCO Asia, IRAI and World, or the
Funds and any broker or dealer that executes transactions for the Funds.
ADDITIONAL INFORMATION
Common Stock. The Company has 800,000,000 authorized shares of common stock
with a par value of $0.01 per share. Of the Company's authorized shares,
100,000,000 shares have been allocated to each of the Capital Goods,
Communications, European Small Company, Latin American Growth, Asian Growth and
Realty Funds, and 200,000,000 shares have been allocated to the S&P 500 Index
Fund --100,000,000 to each class. As of July 31, ^ 1998, 1,172,201 shares of the
Capital Goods Fund, ^ 14,114,148 shares of the Communications Fund, ^ 4,567,442
shares of the European Small Company Fund, ^ 3,105,195 shares of the Latin
American Growth Fund, ^ 3,622,146 shares of the Asian Growth Fund, ^ 2,573,024
shares of the Realty Fund ^, 271,329 shares of Class I of the S&P 500 Index
Fund^ and 1,241,163 shares of Class II of the S&P 500 Index Fund were
outstanding. The board of directors has the authority to designate additional
series of common stock without seeking the approval of shareholders, and may
classify and reclassify any authorized but unissued shares.
<PAGE>
Shares of each series represent the interests of the shareholders of such
series or class of series in a particular portfolio of investments of the
Company. Each series or class of series of the Company's shares is preferred
over all other series or classes of series with respect to the assets
specifically allocated to that series or class, and all income, earnings,
profits and proceeds from such assets, subject only to the rights of creditors,
are allocated to shares of that series or class. The assets of each series or
class are segregated on the books of account and are charged with the
liabilities of that series or class of series and with a share of the Company's
general liabilities. The board of directors determines those assets and
liabilities deemed to be general assets or liabilities of the Company, and these
items are allocated among series and classes in a manner deemed by the board of
directors to be fair and equitable. Generally, such allocation will be made
based upon the relative total net assets of each series or class. In the
unlikely event that a liability allocable to one series or class exceeds the
assets belonging to the series or class, all or a portion of such liability may
have to be borne by the holders of shares of the Company's other series or
class.
All Fund shares, regardless of series, have equal voting rights. Voting
with respect to certain matters, such as ratification of independent accountants
or election of directors, will be by all series of the Company. When not all
series or classes are affected by a matter to be voted upon, such as approval of
an investment advisory contract or changes in a Fund's investment policies, only
shareholders of the series or class affected by the matter may be entitled to
vote. Company shares have noncumulative voting rights, which means that the
holders of a majority of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining shares voting for the election of directors will not be able to
elect any person or persons to the board of directors. After they have been
elected by shareholders, the directors will continue to serve until their
successors are elected and have qualified or they are removed from office, in
either case by a shareholder vote, or until death, resignation, or retirement.
Directors may appoint their own successors, provided that always at least a
majority of the directors have been elected by the Company's shareholders. It is
the intention of the Company not to hold annual meetings of shareholders. The
directors will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or the Company's Articles of
Incorporation, or at their discretion.
Principal Shareholders. As of ^ August 31, 1998, the following entities
held more than 5% of the Funds' outstanding equity securities.
Amount and Nature Percent
Name and Address of Ownership of Class
- ---------------- ----------------- --------
INVESCO Worldwide
Capital Goods Fund
- ------------------
Charles Schwab & Co. Inc. ^ 219,962.4520 20.80%
<PAGE>
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
^
INVESCO Worldwide
Communications Fund
- -------------------
Charles Schwab & Co. Inc. ^ 3,021,442.1000 23.09%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
Nat'l Financial Services Corp. 850,591.9900 6.50%
The Exclusive Benefit of Cust.
One World Financial Center
200 Liberty Street 5th Floor
Attn: Kate Recon
New York, NY 10281-5500
<PAGE>
INVESCO European
Small Company Fund
- ------------------
Charles Schwab & Co. Inc. ^ 1,260,273.8250 31.76%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
^ Nat'l Financial Services Corp. 283,814.1440 7.15%
The Exclusive Benefit of Cust.
One World Financial Center
200 Liberty Street 5th Floor
Attn: Kate Recon
New York, NY 10281-5500
INVESCO Latin American Growth Fund
- ----------------------------------
Charles Schwab & Co. Inc. ^ 1,088,001.4410 38.49%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO Asian Growth Fund
- -------------------------
Charles Schwab & Co. Inc. ^ 955,967.5380 27.11%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO Realty Fund
- -------------------
Charles Schwab & Co. Inc. ^ 467,235.9840 18.51%
Special Custody Acct. for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104
INVESCO S&P 500 Index Fund
Class I
- --------------------------
INVESCO Trust Co. Cust. 119,931.9630 43.20%
Right Choice Mgd. Care Inc.
Supp Exec Retirement Plan
1831 Chestnut St.
St. Louis, MO 63103-2231
Ronald L. Grooms 53,571.9560 19.30%
7800 E. Union Ave. #800
Denver, CO 80237-2715
<PAGE>
David Backstrom 32,943.3320 11.87%
12630 Gift Rd.
Bridgeton, MO 63044-1413
James V. Johnson 20,414.5710 7.35%
Evelyn L. Johnson Co-Trs
Johnson Living Trust
UA 10/23/96
4700 Aberfeldy Rd.
Reno, NV 89509-0943
INVESCO S&P 500 Index Fund
Class II
- --------------------------
Harvey Manes 83,611.6490 5.54%
256 N. Wellwood Ave.
Lindenhurst, NY 11757-3758
Independent Accountants. ^ PricewaterhouseCoopers LLP, 950 Seventeenth
Street, Denver, Colorado, has been selected as the independent accountants of
the Company. The independent accountants are responsible for auditing the
financial statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Under the contract with the Company, the custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Company to be held outside the United States in branches of U.S. banks and,
to the extent permitted by applicable regulations, in certain foreign banks and
foreign securities depositories.
Transfer Agent. The Company is provided with transfer agent, registrar and
dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E. Union
Avenue, Denver, Colorado 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Funds, and the maintenance of records regarding the ownership
of such shares.
Reports to Shareholders. The Company's fiscal year ends on July 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
Legal Counsel. The firm of Kirkpatrick & Lockhart LLP, Washington, D.C., is
legal counsel for the Company. The firm of Moye, Giles, O'Keefe, Vermeire &
Gorrell LLP, Denver, Colorado, acts as special counsel to the Company.
Financial Statements. The audited financial statements for the Worldwide
Communications, Worldwide Capital Goods, European Small Company ^, Latin
<PAGE>
American Growth ^, Asian Growth and Realty Funds for the fiscal year ended July
31, ^ 1998 and for the ^ S&P 500 Index Fund for the period ended July 31, ^
1998, and the notes thereto, and the report of ^ PricewaterhouseCoopers LLP with
respect to such financial statements, are incorporated by reference from the
Company's Annual Report to Shareholders for the fiscal ^ year ended July 31, ^
1998.
^ Prospectuses. The Company will furnish, without charge, a copy of any
Fund's Prospectus upon request. Such requests should be made to the Company at
the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and the
related Prospectuses do not contain all of the information set forth in the
Registration Statement the Company has filed with the Securities and Exchange
Commission. The complete Registration Statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by the
rules and regulations of the Commission.
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such as
the Chicago Board of Options Exchange and the New York Stock Exchange, which are
regulated by the Securities and Exchange Commission. The Options Clearing
Corporation ("OCC") guarantees the performance of each party to an
exchange-traded option, by in effect taking the opposite side of each such
option. A holder or writer may engage in transactions in exchange-traded options
on securities and options on indices of securities only through a registered
broker/dealer which is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only on
an exchange which provides a secondary market for an option of the same series.
Although the Funds will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option at
any particular time. In such event it might not be possible to effect closing
transactions in a particular option with the result that the Funds would have to
exercise the option in order to realize any profit. This would result in the
<PAGE>
Funds incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If these Funds as
covered call option writers are unable to effect a closing purchase transaction
in a secondary market, unless the Funds are required to deliver the securities
pursuant to the assignment of an exercise notice, they will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the ^ OCC, based on forecasts provided by the U.S.
exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and such exchanges have advised
such clearing corporation that they believe their facilities will also be
adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter ("OTC")
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with Company on
behalf of the Funds. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the Funds and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities
underlying an option it has written, in accordance with the terms of that option
as written, the Funds would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with primary U.S. Government securities dealers recognized by
the Federal Reserve Bank of New York.
<PAGE>
Futures Contracts
A ^ futures contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options in that they are bilateral agreements,
with both the purchaser and the seller equally obligated to complete the
transaction. In addition, Futures Contracts call for settlement only on the
expiration date, and cannot be "exercised" at any other time during their term.
The purchase or sale of a ^ futures contract also differs from the purchase
or sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalent, which varies
but may be as low as 5% or less of the value of the contract, must be deposited
with the broker as "initial margin." Subsequent payments to and from the broker,
referred to as "variation margin," are made on a daily basis as the value of the
index or instrument underlying the ^ futures contract fluctuates, making
positions in the ^ futures contract more or less valuable, a process known as
"marking to market."
A ^ futures contract may be purchased or sold only on an exchange, known as
a "contract market," designated by the Commodity Futures Trading Commission for
the trading of such contract, and only through a registered futures commission
merchant which is a member of such contract market. A commission must be paid on
each completed purchase and sale transaction. The contract market clearing house
guarantees the performance of each party to a ^ futures contract, by in effect
taking the opposite side of such Contract. At any time prior to the expiration
of a ^ futures contract, a trader may elect to close out its position by taking
an opposite position on the contract market on which the position was entered
into, subject to the availability of a secondary market, which will operate to
terminate the initial position. At that time, a final determination of variation
margin is made and any loss experienced by the trader is required to be paid to
the contract market clearing house while any profit due to the trader must be
delivered to it.
Interest rate futures contracts currently are traded on a variety of fixed
income securities, including long-term U.S. Treasury ^ bonds, Treasury ^ notes,
Government National Mortgage Association modified pass-through mortgage-backed
securities, U.S. Treasury ^ bills, bank certificates of deposit and commercial
paper. In addition, interest rate futures contracts include contracts on indices
of municipal securities. Foreign currency futures contracts currently are traded
<PAGE>
on the British pound, Canadian dollar, Japanese yen, Swiss franc, West German
mark and on Eurodollar deposits.
Options on Futures Contracts
An ^ option on a ^ futures contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying ^ futures contract, in
the case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of ^ futures contracts, such as
payment of variation margin deposits. In addition, the writer of an Option on a
^ futures contract, unlike the holder, is subject to initial and variation
margin requirements on the option position.
A position in an ^ option on a ^ futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a ^ futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
<PAGE>
APPENDIX B
BOND RATINGS
The following is a description of the Moody's and S&P bond rating
categories:
Moody's Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
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 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
both 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 maintenance of other
terms of the contract over any longer 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.
<PAGE>
S&P Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Page in
Prospectus
----------
(1) Financial statements and
schedules included
in ^ the Prospectuses
(Part A):
Financial Highlights 9
for the Worldwide
Capital Goods and
Worldwide Communications
Funds for each of the ^
four years ended
July 31, ^ 1998.
Financial Highlights for 43
the European Small
Company Fund for each of
the ^ three years
ended July 31, ^ 1998
and the period
February 15, 1995
^(commencement of
operations) through July
31, 1995.
Financial Highlights for 74
the Latin American
Growth Fund for each of
the ^ three years
ended July 31, ^ 1998
and the period
February 15, 1995
^(commencement of
operations) through July 31,
1995.
Financial Highlights for 111
the Asian Growth
Fund for each of the ^ two
years ended July
31, ^ 1998 and the period
March 1, 1996
(commencement of operations)
through July 31, 1996.
Financial Highlights for 144
the Realty Fund for
the fiscal year ended
July 31, 1998 and the
period January 1, 1997
(commencement of
operations) through July
31, 1997.
<PAGE>
Financial Highlights for 178
the S&P 500 Index
Fund for the period
December 23, 1997
(commencement of operations)
through July 31, 1998.
Page in
Statement
of Addi-
tional In-
formation
----------
(2) The following financial
statements for the Worldwide
Communications, Worldwide
Capital Goods, European Small
Company, Latin American
Growth, Asian Growth ^, Realty
and S&P 500 Index Funds and
the notes thereto for the year
or period ended July 31, ^
1998, and the report of ^
PricewaterhouseCoopers LLP
with respect to such financial
statements, are incorporated
herein by reference from the
Company's Annual Report to
Shareholders for the fiscal
year or period ended July 31,
^ 1998: Statement of
Investment Securities as of
July 31, ^ 1998; Statement of
Assets and Liabilities as of
July 31, ^ 1998; Statement of
Operations for the year or
period ended July 31, ^ 1998
for the European Small
Company, Latin American
Growth, Worldwide Capital
Goods, Worldwide
Communications ^, Statement of
Changes in Net Assets for the
two years in the period ended
July 31, ^ 1998 for the
Worldwide Capital Goods,
Worldwide Communications,
European Small Company ^,
Latin American Growth ^ and
Asian Growth Funds, and for
the year ended July 31, ^ 1998
and the period ended July 31,
^ 1997 for the ^ Realty Fund;
and the period ended July 31,
^ 1998 for the ^ S&P 500 Index
Fund; and Financial Highlights
for the year ended July 31,
1998, July 31, 1997, July 31,
1996 and July 31, 1995 for the
Worldwide Capital Goods and
Worldwide Communications
Funds; for the ^ year ended
July 31, 1998, July 31, 1997,
July 31, 1996 and the period
<PAGE>
ended July 31, 1995 for the
European Small
Company and Latin American
Growth Funds; for
the ^ fiscal years ended
July 31, 1998 and
July 31, 1997 and the period
ended July 31, 1996 for the
Asian Growth Fund ^; for the
fiscal year ended July
31, 1998 and the
period ended July 31,
1997 for the Realty
Fund and for the period
ended July 31, 1998
for the S&P 500 Index Fund.
(3) Financial statements and
schedules included in Part C:
None
(b) Exhibits:
(1) (a) Articles of Incorporation
(Charter).(3)
(b) Articles Supplementary to
the Company's Articles of
Incorporation dated January 6,
1995.(3)
(c) Articles supplementary to
the Company's Articles of
Incorporation dated June 20,
1995.(3)
(d) Articles Supplementary to
the Company's Articles of
Incorporation dated November
7, 1996.(4)
(e) Articles Supplementary to
the Company's Articles of
Incorporation dated September
25, 1997.(6)
(2) Bylaws.(3)
(3) Not applicable.
(4) Not required to be filed on
EDGAR.
(5) (a) Investment Advisory
Agreement Between Registrant
and INVESCO Funds Group, Inc.
dated February 28, 1997.(5)
<PAGE>
(i) Amendment to
Investment Advisory
Agreement dated October
1, 1997.(6)
(b)^ Sub-advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Asia Ltd.
dated February 28, 1997.(4)
^(c) Sub-advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Asset
Management Limited dated
February 28, 1997.(4)
^(d) Sub-Advisory Agreement
between INVESCO Funds Group,
Inc. and INVESCO Realty
Advisors dated February 28,
1997.(4)
^(e) Sub-Advisory Agreement
between INVESCO Funds Group,
Inc. and World Asset
Management.(6)
(6) (a) Distribution Agreement
Between Registrant and INVESCO
Funds Group, Inc. dated
February 28, 1997.(4)
(b) Distribution Agreement
Between Registrant and INVESCO
Distributors, Inc. dated
September 30, ^ 1997.(7)
(7) (a) Defined Benefit Deferred
Compensation Plan for
Non-Interested Directors and
Trustees.(4)
(b) Form of Amended Defined
Benefit Deferred Compensation
Plan for Non-Interested
Directors and Trustees.
(8) Custody Agreement Between
Registrant and State Street
Bank and Trust Company dated
May 2, 1994.(3)
(a) Amendment to Custody
Agreement dated October 25,
1995.(3)
(b) Data Access Services
Addendum.(5)
<PAGE>
(c) Additional Fund Letter
dated December 9, 1994.
(d) Additional Fund Letter
dated May 19, 1997.
(e) Additional Fund Letter
dated July 23, 1998.
(9) (a) Transfer Agency Agreement
Between Registrant and INVESCO
Funds Group, Inc. dated
February 28, 1997.(4)
(b) Administrative Services
Agreement between Registrant
and INVESCO Funds Group, Inc.
dated February 28, 1997.(4)
(10) Opinion and consent of counsel
as to the legality of the
securities being registered,
indicating whether they will,
when sold, be legally issued,
fully paid and nonassessable
dated May 18, 1994.(4)
(11) Consent of Independent
Accountants.
(12) Not applicable.
(13) Not applicable.
(14) Copies of model plans
used in the
establishment of
retirement plans as
follows:
^(a) Nonstandardized Profit
Sharing Plan;
(b) Non-standardized Money
Purchase Pension Plan;
(c) Standardized Profit
Sharing Plan Adoption
Agreement;
(d) Standardized Money
Purchase Pension Plan;
(e) Non-standardized 401(k)
Plan Adoption Agreement;
(f) Standardized 401(k) Paired
Profit Sharing Plan;
<PAGE>
(g) Standardized Simplified
Profit Sharing Plan;
^(h) Defined Contribution
Master Plan & Trust
Agreement^.
(15) (a) Plan and Agreement of
Distribution dated
May 2, 1994 adopted
pursuant to Rule 12b-1
under the Investment Company
Act of 1940.(1)
(b) Amendment of Plan and
Agreement of Distribution
dated July 19, 1995.(1)
(c) Amended Plan and Agreement
of Distribution Pursuant to
12b-1 dated January 1, 1997.(4)
(d) Amended Plan and
Agreement of
Distribution between the
Applicant and
INVESCO Distributors, Inc.
adopted pursuant
to Rule 12b-1 under the
Investment Company
Act of 1940 dated September
30, 1997.
(16) (a) Schedule for Computation
of Performance Data for
Worldwide Capital Goods Fund.(4)
(b) Schedule for Computation
of Performance Data for
Worldwide Communications
Fund.(4)
(c) Schedule for Computation
of Performance Data for
European Small Company ^
Fund.(7)
(d) Schedule for Computation
of Performance Data for Latin
American Growth ^ Fund.(7)
(e) Schedule for Computation
of Performance Data for Asian
Growth ^ Fund.(7)
(f) Schedule for Computation
of Performance Data for Realty
Fund.(7)
<PAGE>
(g) Schedule for Computation
of Performance
Data for S&P 500 Index Fund.
(17) (a) Financial Data Schedule
for Worldwide Capital Goods
Fund for the fiscal year ended
July 31, ^ 1998.
(b) Financial Data Schedule
for Worldwide Communications
Fund for the fiscal year
ended July 31, ^ 1998.
(c) Financial Data Schedule
for Latin American Growth
Fund for the fiscal year
ended July 31, ^ 1998.
(d) Financial Data Schedule
for European Small Company
Fund for the fiscal year
ended July 31, ^ 1998.
(e) Financial Data Schedule
for Asian Growth
Fund for the fiscal year
ended July 31, ^
1998.
(f) Financial Data Schedule
for Realty Fund
for the ^ fiscal year
ended July 31, 1997.
(g) Financial Data Schedule
for S&P 500
Index Fund - Class I for
the period December
23, 1997 through July 31, 1998.
(h) Financial Data Schedule
for S&P 500
Index Fund - Class II
for the period
December 23, 1997 through July
31, 1998.
(18) Plan Pursuant to Rule
18f-3 under the
Investment Company Act of
1940 by the Registrant adopted
by the Board of Directors
May 16, ^ 1997.(7)
^---------------
^ (1)Previously filed on EDGAR with Post-Effective Amendment No. 6 to the
Registration Statement on August 30, 1995, and incorporated by reference herein.
(2)Previously filed on EDGAR with Post-Effective Amendment No. ^ 9 to the
Registration Statement on ^ October 11, 1996, and incorporated by reference
herein.
<PAGE>
^ (3)Previously filed on EDGAR with Post-Effective Amendment No. ^ 10 to
the Registration Statement on ^ November 22, 1996, and incorporated by reference
herein.
^ (4)Previously filed on EDGAR with Post-Effective Amendment No. ^ 11 to
the Registration Statement on ^ June 27, 1997, and incorporated by reference
herein.
^ (5)Previously filed on EDGAR with Post-Effective Amendment No. ^ 12 to
the Registration Statement on ^ July 16, 1997, and incorporated by reference
herein.
^ (6)Previously filed on EDGAR with Post-Effective Amendment No. ^ 13 to
the Registration Statement on ^ October 1, 1997, and incorporated by reference
herein.
^(7)Previously filed on EDGAR with Post-Effective Amendment No. ^ 14 to the
Registration Statement on ^ November 24, 1997, and incorporated by reference
herein.
Item 25. Persons Controlled by or Under Common Control With
Registrant
No person is presently controlled by or under common control
with Registrant.
<PAGE>
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class ^ August 31, ^ 1998
-------------- -------------------
INVESCO Worldwide Capital Goods Fund ^ 2,305
INVESCO Worldwide Communications Fund ^ 25,581
INVESCO European Small Company Fund ^ 7,423
INVESCO Latin American Growth Fund ^ 6,072
INVESCO Asian Growth Fund ^ 3,906
INVESCO Realty Fund ^ 4,384
INVESCO S&P 500 Index Fund - Class I 22
INVESCO S&P 500 Index Fund - Class II 1,520
Item 27. Indemnification
Indemnification provisions for officers and directors of Registrant are set
forth in Article VII, Section 2 of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) above. Under these Articles,
officers and directors will be indemnified to the fullest extent permitted to
directors by the Maryland General Corporation Law, subject only to such
limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
Fund directors and officers cannot be protected against liability to the Company
or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.
Item 28. Business and Other Connections of Investment Adviser
See "The Funds and Their Management" in the Funds' Prospectuses and in the
Statement of Additional Information for information regarding the business of
the investment adviser.
^ Following are the names and principle occupations of each director and
officer of the investment adviser, INVESCO. Certain of these persons hold
positions with IDI, a subsidiary of INVESCO, and, during the past two fiscal
years, have held positions with Institutional Trust Company d.b.a. INVESCO Trust
Company ("ITC"), an affiliate of INVESCO.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- -------------------------------
Dan J. Hesser Chairman Chairman
and INVESCO Funds Group, Inc.
Director 7800 East Union Avenue
Denver, CO 80237
Mark H. Williamson Officer & President & Chief
Director Executive Officer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ronald L. Grooms Officer Senior Vice President &
Treasurer
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Richard W. Healey Officer Senior Vice President
INVESCO Funs Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Daniel B. Leonard Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Timothy J. Miller Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Glen A. Payne Officer Senior Vice President,
Secretary & General
Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- ------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Gerard F. Hallaren, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
James F. Lummanick Officer Vice President &
Assistant General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- ------------------------
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Frederick R. (Fritz) Officer Vice President
Meyer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ronald C. Lively Officer Senior Regional Vice
President
INVESCO Funds Group, Inc.
17406 Brown Road
Odessa, FL 33556
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Position
with Principal Occupation and
Name Adviser Company Affiliation
---- -------- ------------------------
Scott E. Stapley Officer Senior Regional Vice
President
INVESCO Funds Group, Inc.
1615 Arch Bay Drive
Newport Beach, CA 92660
David B. McElroy Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Ryland K. Pruett, Jr. Officer Regional Vice President
INVESCO Funds Group, Inc.
2337 Mirow Place
Charlotte, NC 28270
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Stephen A. Moran Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Kent T. Schmeckpeper Office Assistant Vice President
Account Relationship
Manager
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Tane' T. Tyler Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
</TABLE>
Item 29. Principal Underwriters
(a)^ INVESCO Diversified Funds, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Equity Funds, Inc.
<PAGE>
INVESCO Flexible Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
^ INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
- ------------------ ------------- -------------
William J. Galvin, Jr. Senior Vice Assistant
7800 E. Union Avenue President & Secretary
Denver, CO 80237 Assistant
Secretary
Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President & Chief Fin'l
Denver, CO 80237 Treasurer Officer, and
Chief Acctg.
Off.
^ Richard W. Healey Senior Vice
7800 E. Union Avenue ^ President
Denver, CO 80237
Dan J. Hesser Chairman of
7800 E. Union Avenue the Board
Denver, CO 80237 & Director
Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237
Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel
Judy P. Wiese Vice President Asst. Treas.
7800 E. Union Avenue & Assistant
Denver, CO 80237 Treasurer
Mark H. Williamson President, President,
7800 E. Union Avenue Chief Executive CEO &
Denver, CO 80237 Officer & Director
Director ^
<PAGE>
(c) Not applicable.
Item 30. Location of Accounts and Records
^ Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) The Registrant shall furnish each person to whom a
prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant ^ and has duly caused this
post-effective amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, County of Denver, and State of
Colorado, on the ^ 29th day of ^ September, 1998.
Attest: INVESCO Specialty Funds, Inc.
/s/ Glen A. Payne /s/ ^ Mark H. Williamson
- ------------------------- -----------------------------
Glen A. Payne, Secretary ^ Mark H. Williamson, President
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to Registrant's Registration Statement has been signed
by the following persons in the capacities indicated on this ^ 29th day of
September, 1998.
^/s/ Mark H. Williamson /s/ Lawrence H. Budner
- ------------------------- -------------------------------
^ Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)
/s/ Ronald L. Grooms /s/ ^ Fred A. Deering
- ------------------------- -------------------------------
Ronald L. Grooms, Treasurer ^ Fred A. Deering, Director
(Chief Financial and
Accounting Officer)
/s/ Victor L. Andrews ^/s/Daniel D. Chabris
- ------------------------- -------------------------------
Victor L. Andrews, Trustee ^ Daniel D. Chabris, Director
/s/ Bob R. Baker /s/ Larry Soll
- ------------------------- -------------------------------
Bob R. Baker, Director Larry Soll, Director
/s/ Charles W. Brady /s/ Kenneth T. King
- ------------------------- -------------------------------
Charles W. Brady, Director Kenneth T. King, Director
/s/ ^ Wendy L. ^ Gramm /s/ John W. McIntyre
- ------------------------- -------------------------------
^ Wendy L. Gramm, Director John W. McIntyre, Director
By* By* /s/ Glen A. Payne
---------------------- --------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact
* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
May 23, 1994, June 22, 1995, August 25, 1995, August 30, 1996, November 22,
1996, June 27, 1997 and October 1, 1997.
<PAGE>
Exhibit Index
Page in
Exhibit Number Registration Statement
7(b) 285
8(c) 292
8(d) 293
8(e) 294
11 295
14(a) 296
14(b) 334
14(c) 370
14(d) 403
14(e) 433
14(f) 487
14(g) 530
14(h) 539
16(g) 642
17(a) 643
17(b) 644
17(c) 645
17(d) 646
17(e) 647
17(f) 648
^ 17(g) 649
17(h) 650
</TABLE>
FORM OF
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
The registered, open-end management investment companies referred to on
Schedule A as the Schedule may hereafter be revised by the addition and deletion
of investment companies (the "Funds") have adopted this Defined Benefit Deferred
Compensation Plan ("Plan") for the benefit of those directors and trustees of
the Funds who are not interested directors or trustees thereof as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended ("Independent
Directors").
1. Eligibility
Each Independent Director who has served as such ("Eligible Service") on
the boards of any of the Funds and their predecessor and successor entities, if
any, or as an Independent Director of the now-defunct investment management
company known as FG Series for an aggregate of at least five years at the time
of his Service Termination Date (as defined in paragraph 2) will be entitled to
receive benefits under the Plan. An Independent Director's period of Eligible
Service commences on the date of election to the board of directors or trustees
of any one or more of the Funds ("Board"). Hereafter, references in this Plan to
Independent Directors shall be deemed to include only those Directors who have
met the Eligible Service requirement for Plan participation.
2. Service Termination and Service Termination Date
a. Service Termination. Service Termination means termination of service
(other than by disability or death) of an Independent Director which results
from the Director's having reached his Service Termination Date.
b. Service Termination Date. An Independent Director's Service Termination
Date is normally the last day of the calendar quarter in which such Director's
seventy-second birthday occurs. A majority of the Board of a Fund may annually
extend a Director's Service Termination Date for a maximum period of three
years, through the date not later than the last day of the calendar quarter in
which such Director's seventy-fifth birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean an Independent Director's normal Service Termination Date, or the
Director's extended Service Termination Date, whichever may be applicable to the
Independent Director.
<PAGE>
3. Defined Payments and Benefit
a. Payments. If an Independent Director's Service Termination Date occurs
on a date not later than the last day of the calendar quarter in which such
Director's seventy-fourth birthday occurs, the Independent Director will receive
four quarterly payments during the first twelve months subsequent to his Service
Termination Date (the "First Year Retirement Payments"), with each payment to be
equal to 50 percent of the annual basic retainer and annualized board meeting
fees payable by each Fund to the Independent Director on his Service Termination
Date (excluding any fees relating to chairing committees).
b. Benefit. Commencing with the first anniversary of the Service
Termination Date of any Independent Director who has received the First Year
Retirement Payments, and commencing as of the Service Termination Date of an
Independent Director whose Service Termination Date is subsequent to the date of
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurred, the Independent Director will receive, for the remainder of
his life, a benefit (the "Benefit"), payable quarterly, with each quarterly
payment to be equal to 50 percent of the annual basic retainer and annualized
board meeting fees payable by each Fund to the Independent Director on his
Service Termination Date (excluding any fees relating to chairing committees).
c. Death Provisions. If an Independent Director's service as a Director is
terminated because of his death subsequent to the last day of the calendar
quarter in which such Director's seventy-second birthday occurred and prior to
the last day of the calendar quarter in which such Director's seventy-fourth
birthday occurs, the designated beneficiary of the Independent Director shall
receive the First Year Retirement Payments and shall, commencing with the
quarter following the quarter in which the last First Year Retirement Payment is
made, receive the Benefit for a period of ten years, with quarterly payments to
be made to the designated beneficiary.
If an Independent Director's service as a Director is terminated because
of his death prior to the last day of the calendar quarter in which such
<PAGE>
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
designated beneficiary of the Independent Director shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary commencing in the first quarter following the Director's death.
d. Disability Provisions. If an Independent Director's service as a
Director is terminated because of his disability subsequent to the last day of
the calendar quarter in which such Director's seventy-second birthday occurred
and prior to the last day of the calendar quarter in which such Director's
seventy-fourth birthday occurs, the Independent Director shall receive the First
Year Retirement Payments and shall, commencing with the quarter following the
quarter in which the last First Year Retirement Payment is made, receive the
Benefit for the remainder of his life, with quarterly payments to be made to the
disabled Independent Director. If the disabled Independent Director should die
before the First Year Retirement Payments are completed and before forty
quarterly Benefit payments are made, such payments will continue to be made to
the Independent Director's designated beneficiary until the aggregate of the
First Year Retirement Payments and forty quarterly Benefit payments have been
made to the disabled Independent Director and the Director's designated
beneficiary.
If an Independent Director's service as a Director is terminated because of
his disability prior to the last day of the calendar quarter in which such
Director's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Director's seventy-fourth birthday occurred, the
Independent Director shall receive the Benefit for the remainder of his life,
with quarterly payments to be made to the disabled Independent Director
commencing in the first quarter following the Director's termination for
disability. If the disabled Independent Director should die before forty
quarterly payments are made, payments will continue to be made to the
Independent Director's designated beneficiary until the aggregate of forty
quarterly payments has been made to the disabled Independent Director and the
Director's designated beneficiary.
e. Death of Independent Director and Beneficiary. If the Independent
Director and his designated beneficiary should die before the First Year
Retirement Payments and/or a total of forty quarterly Benefit payments are made,
the remaining value of the Independent Director's First Year Retirement Payments
<PAGE>
and/or Benefit shall be determined as of the date of the death of the
Independent Director's designated beneficiary and shall be paid to the estate of
the designated beneficiary in one lump sum or in periodic payments, with the
determinations with respect to the value of the First Year Retirement Payments
and/or Benefit and the method and frequency of payment to be made by the
Committee (as defined in paragraph 8.a.) in its sole discretion.
4. Designated Beneficiary
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Director without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee before the Independent Director's death. If no such beneficiary shall
have been designated, or if no designated beneficiary shall survive the
Independent Director, the value or remaining value of the Independent Director's
First Year Retirement Payments and/or Benefit shall be determined as of the date
of the death of the Independent Director by the Committee and shall be paid as
promptly as possible in one lump sum to the Independent Director's estate.
5. Disability
An Independent Director shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Director is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Director
in fulfilling his responsibilities as such.
6. Time of Payment
The First Year Retirement Payments and/or the Benefit for each year will be
paid in quarterly installments that are as nearly equal as possible.
7. Payment of First Year Retirement Payments and/or Benefit: Allocation of
Costs
Each Fund is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Fund, as well as its
proportionate share of all expenses of administration of the Plan, including
<PAGE>
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of each Fund to pay such First Year
Retirement Payments and/or Benefit and expenses will not be secured or funded in
any manner, and such obligations will not have any preference over the lawful
claims of each Fund's creditors and shareholders. To the extent that the First
Year Retirement Payments and/or Benefit is paid by more than one Fund, such
costs and expenses will be allocated among such Funds in a manner that is
determined by the Committee to be fair and equitable under the circumstances. To
the extent that one or more of such Funds consist of one or more separate
portfolios, such costs and expenses allocated to any such Fund will thereafter
be allocated among such portfolios by the Board of the Fund in a manner that is
determined by such Board to be fair and equitable under the circumstances.
8. Administration
a. The Committee. Any question involving entitlement to payments under or
the administration of the Plan will be referred to a four-person committee (the
"Committee") composed of three Independent Directors designated by all of the
Independent Directors of the Funds and one director of the Funds who is not an
Independent Director, designated by the non-Independent Directors. Except as
otherwise provided herein, the Committee will make all interpretations and
determinations necessary or desirable for the Plan's administration, and such
interpretations and determinations will be final and conclusive. Committee
members will be elected annually.
b. Powers of the Committee. The Committee will represent and act on behalf
of the Funds in respect of the Plan and, subject to the other provisions of the
Plan, the Committee may adopt, amend or repeal bylaws or other regulations
relating to the administration of the Plan, the conduct of the Committee's
affairs, its rights or powers, or the rights or powers of its members. The
Committee will report to the Independent Directors and to the Boards of the
Funds from time to time on its activities in respect of the Plan. The Committee
or persons designated by it will cause such records to be kept as may be
necessary for the administration of the Plan.
9. Miscellaneous Provisions
a. Rights Not Assignable. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
<PAGE>
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Director.
b. Amendment, etc. The Committee, with the concurrence of the Board of any
Fund, may as to the specific Fund at any time amend or terminate the Plan or
waive any provision of the Plan; provided, however, that subject to the
limitations imposed by paragraph 7, no amendment, termination or waiver will
impair the rights of an Independent Director to receive the payments which would
have been made to such Independent Director had there been no such amendment,
termination, or waiver.
c. No Right to Reelection. Nothing in the Plan will create any obligation
on the part of the Board of any Fund to nominate any Independent Director for
reelection.
d. Consulting. Subsequent to his Service Termination Date, an Independent
Director may render such services for any Fund, for such compensation, as may be
agreed upon from time to time by such Independent Director and the Board of the
Fund which desires to procure such services.
e. Effectiveness. The Plan will be effective for all Independent Directors
who have Service Termination Dates occurring on and after October 20, 1993.
Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board of a Fund, the Plan will
become effective as to that Fund on the date when the Committee determines that
any regulatory approval or advice that may be necessary or appropriate in
connection with the Plan have been obtained.
Adopted October 20, 1993. Amended October 19, 1994. Amended May 1, 1996,
effective July 1, 1996. Amended May 14, 1998, effective July 14, 1998.
<PAGE>
SCHEDULE A
TO
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
INVESCO Diversified Funds, Inc.
INVESCO Dynamics Fund, Inc.
INVESCO Emerging Opportunity Funds, Inc.
INVESCO Growth Fund, Inc.
INVESCO Income Funds, Inc.
INVESCO Industrial Income Fund, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Multiple Asset Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Strategic Portfolios, Inc.
INVESCO Tax-Free Income Funds, Inc.
INVESCO Value Trust
INVESCO Variable Investment Funds, Inc.
The INVESCO Advisor Funds, Inc.
INVESCO Treasurer's Series Trust
INVESCO FUNDS INVESCO FUNDS GROUP, INC.
7800 East Union Avenue
Denver, Colorado 80237
Post Office Box 173706
Denver, Colorado 80217-3706
Telephone: 303-930-6300
December 9, 1994
Mr. Christopher J. Meyers
Assistant Vice President
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: INVESCO Specialty Funds, Inc.
Dear Chris:
This is to advise you that INVESCO Specialty Funds, Inc. (the "Company") has
established two new series of shares to be known as INVESCO Small Company Fund
and INVESCO Latin America Growth Fund. In accordance with the Additional Funds
provision in Paragraph 17 of the Custodian Contract dated May 2, 1994, between
the Company and State Street Bank and Trust Company, the Company hereby requests
that you act as Custodian for the new series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for your
records.
Sincerely,
/s/ Glen A. Payne
Glen A. Payne
Secretary
Agreed to this 15th day of December, 1994.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Vice President
INVESCO FUNDS INVESCO FUNDS GROUP, INC.
7800 East Union Avenue
Denver, Colorado 80237
Post Office Box 173706
Denver, Colorado 80217-3706
Telephone: 303-930-6300
May 19, 1997
Mr. Christopher J. Meyers
Assistant Vice President
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: INVESCO Specialty Funds, Inc.
Dear Chris:
This is to advise you that INVESCO Specialty Funds, Inc. (the "Company") has
established two new series of shares to be known as INVESCO Asian Growth Fund
and INVESCO Realty Fund. In accordance with the Additional Funds provision in
Paragraph 17 of the Custodian Contract dated May 2, 1994, between the Company
and State Street Bank and Trust Company, the Company hereby requests that you
act as Custodian for the new series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for your
records.
Sincerely,
/s/ Glen A. Payne
Glen A. Payne
Secretary
Agreed to this 19th day of May, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Vice President
INVESCO FUNDS INVESCO FUNDS GROUP, INC.
7800 East Union Avenue
Denver, Colorado 80237
Post Office Box 173706
Denver, Colorado 80217-3706
Telephone: 303-930-6300
July 23, 1998
Mr. Christopher J. Meyers
Assistant Vice President
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: INVESCO Specialty Funds, Inc.
Dear Chris:
This is to advise you that INVESCO Specialty Funds, Inc. (the "Company") has
established a new series of shares known as the INVESCO S&P 500 Index Fund. In
accordance with the Additional Funds provision in Paragraph 17 of the Custodian
Contract dated May 2, 1994, between the Company and State Street Bank and Trust
Company, the Company hereby requests that you act as Custodian for the new
series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for your
records.
Sincerely,
/s/ Glen A. Payne
Glen A. Payne
Secretary
Agreed to this 4th day of August, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
------------------------------
Vice President
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 15 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 9, 1998, relating to the financial
statements and financial highlights appearing in the July 31, 1998 Annual Report
to Shareholders of INVESCO Specialty Funds, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
September 28, 1998
Adoption Agreement #001
Letter Serial No. D346278a
Nonstandardized Profit Sharing Plan
Nonstandardized Profit Sharing Plan Features
- - Flexible Employer Contributions
- - Ability to exclude classifications of employees
- - May enforce last day requirement for employer contribution
- - Allows integrated contribution formula
Provided by:
The Financial Funds
Managed & Distributed by
INVESCO Funds Group, Inc.
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
Your Adoption Agreement and Basic Plan Document together constitute the rules
and parameters under which your retirement program will operate. Each section of
the Adoption Agreement requires the employer to make a selection. Whenever
possible (balancing complexity and space constraints) we have provided
instructions to the left of key selections. These instructions are intended to
assist you, the employer, in choosing the optional provisions for your
retirement program. They are not intended to substitute or replace competent
advice from your legal counsel or accountant. If further clarification is
necessary, contact your advisors or INVESCO Trust Company. We recommend that you
obtain the advice of your legal or tax advisor before you sign this Adoption
Agreement.
<PAGE>
ADOPTION AGREEMENT #001
NONSTANDARDIZED PROFIT SHARING PLAN
The undersigned, __________________________ ("Employer"), by executing this
Adoption Agreement, elects to become a participating Employer in the INVESCO
Trust Company Defined Contribution Master Plan (basic plan document #01) by
adopting the accompanying Plan and Trust in full as if the Employer were a
signatory to that Agreement. The employer makes the following elections granted
under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is:
(Choose (a) or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the
Plan. [Note: The Employer may not elect Option (b) if a Custodian
executes the Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is:
_________________________________________________.
1.07 EMPLOYEE. The following Employees are not eligible to
participate in the Plan: (Choose (a) or at least one of (b)
through (g))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the Plan).
[Note: If the Employer excludes union employees from the Plan, the Employer must
be able to provide evidence that retirement benefits were the subject of good
faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in Code
ss.911(d)(2)) from the Employer which constitutes United States source income
(as defined in Code ss.861(a)(3)).
(d) Commission Salesmen.
(e) Any Employee compensated on a salaried basis.
(f) Any Employee compensated on an hourly basis.
(g) (Specify) ____________________________________________
Leased Employees. Any Leased Employee treated as an Employee
under Section 1.31 of the Plan, is: (Choose (h) or (i)
(h) Not eligible to participate in the Plan.
<PAGE>
(i) Eligible to participate in the Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section 1.07.
Related Employers. If any member of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement to this Adoption
Agreement, such member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification elected under this
Adoption Agreement Section 1.07. In addition: (Choose (j) or (k))
(j) No other related group member's Employees are eligible to participate in the
Plan.
(k) The following nonparticipating related group member's Employees are eligible
to participate in the Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section
1.07:___________________________________________________________________________
________________________________________________________________________________
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b)
(a) "Compensation" includes elective contributions made by the
Employer on the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least
one of (d) through (j))
(c) No modifications other than as elected under Options (a) or (b).
(d) The Plan excludes Compensation in excess of $___________.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation means
any earnings reportable as W-2 wages for Federal income tax withholding purposes
subject to any other election under this Adoption Agreement Section 1.12.
(f) The Plan excludes bonuses.
(g) The Plan excludes overtime.
(h) The Plan excludes Commissions.
(i) The Plan excludes Compensation from a related employer (as defined in
Section 1.30 of the Plan) that has not executed a Participation Agreement in
this Plan unless, pursuant to Adoption Agreement Section 1.07, the Employees of
that related employer are eligible to participate in this Plan.
<PAGE>
(j) (Specify) _____________________________________________.
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every ___________.
(b) (Specify) ___________________________________________
Limitation Year. The Limitation year is: (Choose (C) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every __________.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is _______________.
Restated Plan. The restated Effective Date is ______________.
This Plan is a substitution and amendment of an existing
retirement plan(s) originally established __________________.
(Note: See the Effective Date Addendum.)
1.27 HOUR OF SERVICE. The crediting method for Hours of Service
is: (Choose (a) or (b))
(a) The actual method.
(b) The ____________________________ equivalency method, except:
(1) No exceptions.
(2) The actual method applies for purposes of: (Choose at least
one)
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii)Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly
payroll periods" or "monthly.")
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the
predecessor service the Plan must credit by reason of Section
1.29 of the Plan, the Plan credits Service with the following
<PAGE>
predecessor employer(s): _______________________________________________________
_______________________________________________________________________________.
Service with the designated predecessor employer(s) applies:
(Choose at least one of (a) or (b); (C) is available only in
addition to (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
(c) Except the following Service: ____________________________.
[Note: If the Plan does not credit any predecessor service under
this provision, insert "N/A" in the first blank line. The
Employer may attach a schedule to this Adoption Agreement, in the
same format as this Section 1.29, designating additional
predecessor employers and the applicable service crediting
elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in
the Plan and also participates in a Plan maintained by the
leasing organization: (Choose (a) or (b))
(a) The Advisory Committee will determine the Leased Employee's allocation of
Employer contributions under Article III without taking into account the Leased
Employee's allocation, if any, under the leasing organization's plan.
(b) The Advisory Committee will reduce a Leased Employee's allocation of
Employer contributions under this Plan by the Leased Employee's allocation under
the leasing organization's plan, but only to the extent that allocation is
attributable to the Leased Employee's service provided to the Employer. The
leasing organization's plan:
(1) Must be a money purchase plan which would satisfy the definition
under Section 1.31 of a safe harbor plan, irrespective of whether the
safe harbor exception applies.
(2) Must satisfy the features and, if a defined benefit plan, the
method of reduction described in an addendum to this Adoption
Agreement, numbered 1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions:
(Choose (a) or (b) or both)
(a) Attainment of age _____________ (Specify age, not exceeding 21).
<PAGE>
(b) Service requirement. (Choose one of (1) through (4))
(1) One Year of Service.
(2) Two Years of Service, without an intervening Break in Service. See
Section 2.03(A) of the Plan.
(3) _____________ months (not exceeding 24) following the Employee's
Employment Commencement Date.
(4) One Hour of Service.
Plan Entry Date. "Plan Entry Date" means the Effective Date and:
(Choose (c), (d) or (e))
(c) Semi-annual Entry Dates. The first day of the Plan Year and the first day of
the seventh month of the Plan Year.
(d) The first day of the Plan Year.
(e) (Specify entry dates) ___________________________________.
Time of Participation. An Employee will become a Participant, unless excluded
under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on
that date):
(f) immediately following
(g) immediately preceding
(h) nearest __________________________________________ the date the
Employer completes the eligibility conditions described in Options (a) and (b)
of this Adoption Agreement Section 2.01. [Note: The Employer must coordinate the
selection of (f), (g) or (h) with the "Plan Entry Date" selection in (c), (d) or
(e). Unless otherwise excluded under Section 1.07, the Employee must become a
Participant by the earlier of: (1) the first day of the Plan Year beginning
after the date the Employee completes the age and service requirements of Code
ss.410(a); or (2) 6 months after the date the Employee completes those
requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01
apply to: (Choose (I) or (j))
(i) All Employees of the Employer, except: (Choose (1) or (2))
(1) No exceptions.
(2) Employees who are Participants in the Plan as of the Effective
Date.
(j) Solely to an Employee employed by the Employer after ____________. If
<PAGE>
If the Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1), (2) or (3))
(1) On the latest of the Effective Date, his Employment Commencement
Date or the date he attains age ___________ (not to exceed 21).
(2) Under the eligibility conditions in effect under the Plan prior to
the restated Effective Date. [For restated plans only]
(3) (Specify) _____________________________________.
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) ____________________ Hours of Service
during an eligibility computation period to receive credit
for a Year of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
Eligibility computation period. After the initial eligibility computation period
described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
(c) The 12 consecutive month period beginning with each anniversary
of an Employee's Employment Commencement Date.
(d) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule
described in Section 2.03(B) of the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
(a) Does not permit an eligible Employee or a Participant to elect not to
participate.
(b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
(Complete (1), (2), (3) and (4))
(1) An election is effective for Plan Year if filed no later than
_________________________.
<PAGE>
(2) An election not to participate must be effective for at least
___________________ Plan Year(s).
(3) Following a re-election to participate, the Employee or
Participant:
(i) May not again elect not to participate for any subsequent
Plan Year.
(ii) May again elect not to participate, but not earlier than
the __________ Plan Year following the Plan Year in which the
re-election first was effective.
(Specify) ____________________________________________ [Insert "N/A" if
no other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT. The amount of the Employer's annual contribution to the Trust will
equal: (Choose (a), (b), (c), (d) or (e))
(a) The amount (or additional amount) the Employer may from time to time
deem advisable.
(b) The amount (or additional amount) the Employer may from time to time
deem advisable, separately determined for each of the following classifications
of Participants: (Choose (1) or (2))
(1) Nonhighly Compensated Employees and Highly Compensated Employees.
(2) (Specify classifications) _________________________________________
_______________________________________________________________________
Under this Option (b), the Advisory Committee will allocate the amount
contributed for each Participant classification in accordance with Adoption
Agreement Section 3.04, as if the Participants in that classification were the
only Participants in the Plan.
(c) _________% of the Compensation of all Participants under the
Plan, determined for the Employer's taxable year for which it
makes the contribution. [Note: The percentage selected may not
exceed 15%.]
(d) _________% of Net Profits but not more than $___________.
(e) This Plan is a frozen Plan effective ____________________. The Employer will
not contribute to the Plan with respect to any period following the stated date.
<PAGE>
Net Profits. The Employer: (Choose (f) or (g))
(f) Need not have Net Profits to make its annual contribution under this Plan.
(g) Must have current or accumulated Net Profits exceeding $____________ to make
the contributions described in Option _______.
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. If more than one member of a related group
(as defined in Section 1.30) execute this Adoption Agreement, each participating
member separately will determine Net Profits. "Net Profits" include both current
and accumulated Net Profits. The term "Net Profits" specifically excludes ______
_______________________________________________________________________________.
[Note: Enter "N/A" if no exclusions apply.
3.04 CONTRIBUTION ALLOCATION.
Method of Allocation. Subject to any restoration allocation required under
Section 5.04, the Advisory Committee will allocate and credit each annual
Employer contribution (and Participant forfeitures, if any) to the Account of
each Participant who satisfies the conditions of Section 3.06, in accordance
with the allocation method selected under this Section 3.04. If the Employer
elects Option (a)(2) or Option (d), for the first 3% of Compensation allocated
to all Participants, "Compensation" does not include any exclusion of elective
contributions), and the Advisory Committee must take into account the
Participant's Compensation for the entire Plan Year. (Choose an allocation
method under (a), (b), (c) or (d); (e) is mandatory of the Employer elects (b),
(c) or (d); (f) is optional in addition to any other election.)
(a) Nonintegrated Allocation Formula. (Choose (1) or (2))
(1) The Advisory Committee will allocate the annual Employer
contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
(2) The Advisory Committee will allocate the annual Employer
contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year. For purposes of
this Option (2), "Participant" means, in addition to a participant who
<PAGE>
satisfies the requirements of Section 3.06 for the Plan Year, any other
Participant entitled to a top heavy minimum allocation under Section
3.04(B), but such Participant's allocation will not exceed 3% of his
Compensation for the Plan Year.
(b) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the
Advisory Committee will allocate the annual Employer contributions (and
Participant forfeitures) in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (e).
The Advisory Committee then will allocate any remaining Employer contributions
(and Participant forfeitures) in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(c) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer contributions (and Participant forfeitures) in
the same ratio that each Participant's Compensation for the plan Year bears to
the total Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Compensation may not
exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum
Disparity Table following Option (e). Solely for purposes of the allocation in
this first paragraph, "Participant" means, in addition to a Participant who
satisfies the requirements of Section 3.06 for the Plan Year. (Choose (1) or
(2))
(1) No other Participant.
(2) Any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B), but such Participant's allocation under this
Option (c) will not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Excess Compensation, may not
exceed the allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining annual Employer
contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year.
<PAGE>
(d) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer contributions (and Participant forfeitures) in
the same ratio that each Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan Year, but not exceeding
3% of each Participant's Compensation. Solely for purposes of this first tier
allocation, a "Participant" means, in addition to any Participant who satisfies
the requirements of Section 3.06 for the Plan Year, any other Participant
entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan.
As a second tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year, but not exceeding 3% of each
Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation plus Excess Compensation for the Plan Year bears to
the total Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed the applicable percentage
(2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option
(e).
The Advisory Committee then will allocate any remaining Employer contributions
(and Participant forfeitures) in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(e) Excess Compensation. For purposes of Option (b), (c) or (d), "Excess
Compensation" means Compensation in excess of the following Integration Level:
(Choose (1) or (2))
(1) ______% (not exceeding 100%) of the taxable wage base, as
determined under Section 230 of the Social Security Act, in effect on
the first day of the Plan Year: (Choose any combination of (I) and (ii)
or choose (iii))
(i) Rounded to ________ (but not exceeding the taxable
wage base).
(ii) But not greater than $_____________.
(iii)Without any further adjustment or limitation.
(2) $_______________ [Note: Not exceeding the taxable wage base for the
Plan Year in which this Adoption Agreement first is effective.]
<PAGE>
Maximum Disparity Table. For purpose of Options (b), (c) and (d),
the applicable percentage is:
Integration Level Applicable Applicable
(as percentage of Percentages for Percentages
taxable wage base) Option (b) or Option (c) for Option (d)
100% 5.7% 2.7%
More than 80% but
less than 100% 5.4% 2.4%
More than 20% (but
not less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10,000, if
greater) or less 5.7% 2.7%
(f) Allocation offset. The Advisory Committee will reduce a Participant's
allocation otherwise made under this Section 3.04 by the Participant's
allocation under the following qualified plan(s) maintained by the Employer:
________________________.
The Advisory Committee will determine this allocation reduction:
(Choose (1) or (2))
(1) By treating the term "Employer contribution" as including all
amounts paid or accrued by the Employer during the plan Year to the
qualified plan(s) referenced under this Option (f). If a Participant
under this Plan also participates in that other plan, the Advisory
Committee will treat the amount the Employer contributes for or during
a Plan Year on behalf of a particular Participant under such other plan
as an amount allocated under this Plan to that Participant's Account
for that Plan Year. The Advisory committee will make the computation of
allocation required under the immediately preceding sentence before
making any allocation required by this Section 3.04.
(2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(f).
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (Choose (g) or (h))
(g) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section e.04(B)(7)(a) of the Plan.
<PAGE>
(h) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains: ___________________. However, the Employer will
make any necessary additional contribution to satisfy the top heavy minimum
allocation for an Employee covered only under this Plan and not under the other
plan(s) designated in this Option (h). See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code 416.
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04: (Choose i) or (j))
(i) Without regard to which contributing related group member employs the
Participant.
(j) Only to the Participants directly employed by the contributing Employer. If
a Participant receives Compensation from more than one contributing Employer,
the Advisory Committee will determine the allocations under this Adoption
Agreement Section 3.04 by prorating among the participating Employers the
Participant's Compensation and, if applicable, the Participant's Integration
Level under Option (e).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under
Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b))
(a) As an Employer contribution for the Plan Year in which the forfeiture
occurs, as if the Participant forfeiture were an additional Employer
contribution for that Plan Year.
(b) To reduce the Employer contribution for the Plan Year: (Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the forfeiture occurs.
(c) First to reduce the Plan's ordinary and necessary administrative expenses
for the Plan Year and then will allocate any remaining forfeitures in the manner
described in Option (a) or in Option (b), whichever applies.
<PAGE>
3.06 ACCRUAL OF BENEFIT.
Compensation Taken Into Account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation
under Adoption Agreement Section 3.04 by taking into account: (Choose (a) or
(b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation only for the portion of the Plan Year in
which the Employee actually is a Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of Employer contributions
and Participant forfeitures, if any, for the Plan Year, a Participant must
satisfy the conditions described in the following elections: (Choose (c) or at
least one of (d) through (f))
(c) Safe Harbor rule. If the Participant is employed by the Employer on the last
day of the Plan Year, the Participant must complete at least one Hour of Service
for that Plan Year. If the Participant is not employed by the Employer on the
last day of the Plan Year, the Participant must complete at least 501 Hours of
Service during the Plan Year.
(d) Hours of Service condition. The Participant must complete the following
minimum number of Hours of Service for the Plan Year: (Choose at least one of (1
through (4))
(1) 1,000 Hours of Service.
(2) (Specify, but the number of Hours of Service may not exceed 1,000)
______________.
(3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of:
(Choose (i) through (iii)
(i) Death.
(ii) Disability.
(iii) Attainment of Normal Retirement Age in the current Plan
Year or in a prior Plan Year.
(4) _________ Hours of Service (not exceeding 1,000) if the Participant
terminates employment with the Employer during the Plan Year, subject
to any election in Option (3).
(e) Employment conditions. The Participant must be employed by the Employer on
the last day of the Plan year, irrespective of whether he satisfies any Hours of
Service condition under Option (d), unless his employment terminates because of:
(Choose (1) or at least one of (2) through (4))
<PAGE>
(1) No exceptions.
(2) Death.
(3) Disability.
(4) Attainment of Normal Retirement Age in the current Plan Year or in
a prior Plan Year.
(f) (Specify other conditions, if applicable): ________________.
Suspension of Accrual Requirements. The suspension of accrual
requirements of Section 3.06(E) of the Plan: (Choose (g), (h) or
(i))
(g) Applies to the Employer's Plan.
(h) Does not apply to the Employer's Plan.
(i) Applies in modified form to the Employer's Plan, as described in an addendum
to this Adoption Agreement, numbered Section 3.06(E).
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply, the
Excess Amount attributed to this Plan equals:
(Choose (a), (b) or (c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415) times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount allocated as
of such date under all qualified defined contribution plans (determined
without regard to the limitations of Code ss.415).
(b) The total Excess Amount.
(c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
<PAGE>
(1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under
the defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section 3.18
do not apply to the Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications:
(Choose (c) or at least one of (d) or (e))
(c) No modifications.
(d) For Non-Key Employees participating only in this Plan, the top heavy minimum
allocation is the minimum allocation described in Section 3.04(B) determined by
substituting _____% (not less than 4%) for "3%", except: (Choose (1) or (2))
(1) No exceptions.
(2) Plan Years in which the top heavy ratio exceeds 90%.
(e) For Non-Key Employees also participating in the defined benefit plan, the
top heavy minimum is: (Choose (1) or (2))
(1) 5% of Compensation (as determined under Section 3.04(B)
of the Plan) irrespective of the contribution rate of any
Key Employee, except: (Choose (i) or (ii))
(i) No exceptions.
(ii) Substituting "7 1/2%" for "5%" if the top heavy ratio
does not exceed 90%.
(2) 0%. [Note: The employer may not select this Option (2)
unless the defined benefit plan satisfies the top heavy
minimum benefit requirements of Code 416 for these Non-Key
Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan:
___________________________.
<PAGE>
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code 416, the
Employer must provide the appropriate provisions in an addendum to this Adoption
Agreement.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
(Choose (a) or (b))
(a) ____________ [State age, but may not exceed age 65].
(b) The later of the date the Participant attains _______ years of age or the
__________________ anniversary of the first day of the Plan Year in which the
Participant commenced participation in the Plan. [The age selected may not
exceed age 65 and the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section 5.02
of the Plan: (Choose (a) or choose one or both of (b) and (c))
(a) Does not apply.
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE. The Employer elects the following vesting schedule:
(Choose (a) or (b); (C) and (d) are available only in addition to (b))
(a) Immediate vesting, 100% Nonforfeitable at all times. [Note: The
Employer must elect Option (a) if the eligibility conditions under Adoption
Agreement Section 2.01(b) require 2 years of service or more than 12 months of
employment.]
(b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Year of Nonforfeitable Year of Nonforfeitable
Service Percentage Service Percentage
Less than 1 ________ Less than 1 ________
1 ________ 1 ________
2 ________ 2 ________
3 ________ 3 ________
<PAGE>
4 ________ 4 ________
5 ________ 5 ________
6 or more 100% 6 ________
7 or more ________
(c) Minimum vesting. A Participant's Nonforfeitable Accrued Benefit will never
be less than the lesser of $__________ or his entire Accrued Benefit, even if
the application of the graduated vesting schedule under Option (b) would result
in a smaller Nonforfeitable Accrued Benefit.
[Note: Under Option (b), the Employer must complete a Top Heavy Schedule which
satisfies Code ss.416. The Employer, at its option, may complete a Non Top Heavy
Schedule. The Non Top Heavy Schedule must satisfy Code ss.411(a)(2). Also see
Section 7.05 of the Plan.]
(d) The Top Heavy Schedule under Option (b) applies: (Choose (1)
or (2))
(1) Only in a Plan Year for which the Plan is top heavy.
(2) In the Plan Year for which the Plan first is top heavy
and then is all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top
Heavy Schedule.]
Life Insurance Investments. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (Choose (e) or
(f))
(e) Subject to the vesting election under Options (a), or (b).
(f) 100% Nonforfeitable at all times, irrespective of the vesting election under
Option (b).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C)
of the Plan: (Choose (a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0% vested
Participants.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each
<PAGE>
successive 12 consecutive month period measured from each anniversary of that
Employment Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (Choose (c) or (d))
(c) 1,000 Hours of Service.
(d) ___________ Hours of Service. [Note: The Hours of Service requirement
may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically excludes the
following Years of Service: (Choose (a) or at least one of (b) through (e))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age
of _______________. [Note: The age selected may not exceed age 18.]
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(d) Any Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This exception applies only if the
Participant is 0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Bread in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not include any Years of
Service no required to be taken into account under this exception by reason of
any prior Break in Service.
(e) Any Year of Service earned prior to the effective date of ERISA if the Plan
would have disregarded that Year of Service on account of an Employee's
Separation from Service under a Plan provision in effect and adopted before
January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.411(d)(6) Protected Benefits. The elections under this Article VI may
not eliminate Code ss.411(d)(6) protected benefits. To the extent the elections
would eliminate a Code ss.411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the Effective Date of this Adoption Agreement.
<PAGE>
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
_______________________________________________________________________________.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c),
(d) or (e))
(a) ______________ of the _____________ Plan Year beginning after the
Participant's Separation from Service.
(b) _________________ following the Participant's Separation from Service.
(c) _________________ of the Plan Year after the Participant incurs
___________________ Break(s) in Service (as defined in Article V).
(d) _________________ following the Participant's attainment of Normal
Retirement Age, but not earlier than _________ days following his Separation
from Service.
(e) (Specify) _________________________________________________.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections
under Section 6.03.
Disability. The distribution date, subject to Section 6.01(A)(3), is: (Choose
(f), (g) or (h))
(f) _________________ after the Participant terminates employment because of
disability.
(g) The same as if the Participant had terminated employment without disability.
(h) (Specify) ________________________________________________.
Hardship. (Choose (i) or (j))
(i) The Plan does not permit a hardship distribution to a Participant who has
separated from Service.
(j) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy. State in:
(Choose (1) or (2))
(1) Section 6.01(A)(4) of the Plan.
<PAGE>
(2) The addendum to this Adoption Agreement, numbered Section 6.01, in
lieu of the policy stated in Section 6.01(A)(4) of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (k), (l) or (m))
(k) Treats the default as a distributable event. The Trustee, at the time of the
default, will reduce the Participant's Nonforfeitable Accrued Benefit by the
lesser of the amount in default (plus accrued interest) or the Plan's security
interest in that Nonforfeitable Accrued Benefit.
(l) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit
by the lesser of the amount in default (plus accrued interest) of the Plan's
security interest in that Nonforfeitable Accrued Benefit.
(m) (Specify) ________________________________________________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will apply
Section 6.02 of the Plan with the following modifications: (Choose (a) or at
least one of (b) (c), (d) and (e))
(a) No modifications.
(b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available: ____________________________.
(c) An installment distribution: (Choose (1) or at least one of (2) or (3))
(1) Is not available under the Plan.
(2) May not exceed the lesser of _________________ years of the maximum
period permitted under Section 6.02.
(3) (Specify) ____________________________________________.
(d) The Plan permits the following annuity options: _______________________
Any Participant who elects a life annuity option is subject to the requirements
of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section 6.04(E). [Note:
The Employer may specify additional annuity options in an addendum to this
Adoption Agreement, numbered 6.02(d).]
(e) If the Plan invests in qualifying Employer securities, as described in
Section 10.03(F), a Participant eligible to elect distribution under Section
6.03 may elect to receive that distribution in Employer securities only in
accordance with the provision of the addendum to this Adoption Agreement,
numbered 6.02(e).
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose at least
one of (a) through (c))
(a) As of any distribution date, but no earlier than __________ of
the _________________________________ Plan Year beginning after the
Participant's Separation from Service.
(b) As of the following date(s): (Choose at least one of Options (1) through
(6))
(1) Any distribution date after the close of the Plan Year in which the
Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from Service.
(3) Any distribution date in the ________________________ Plan Year(s)
beginning after his Separation from Service.
(4) Any distribution date in the Plan Year after the Participant incurs
________ Break(s) in Service (as defined in Article V).
(5) Any distribution date following attainment of age ___________ and
completion of at least ____________ Years of Service (as defined in
Article V).
(6) (Specify) ___________________________________________.
(c) (Specify) ________________________________________________.
Participant Elections Prior to Separation from Service. Subject to the
restrictions of Article VI, the following distribution options apply under the
Employer's Plan prior to a Participant's Separation from Service. (Choose (d) or
at least one of (e) through (h))
(d) No distribution options prior to Separation from Service.
(e) Attainment of Specified Age. Until he retires, the Participant
has a continuing election to receive all or any portion of his Nonforfeitable
Accrued Benefit after he attains: (Choose (1) or (2))
(1) Normal Retirement Age.
<PAGE>
(2) _______________ years of age and is at least _________%
vested in his Accrued Benefit. [Note: If the percentage is
less than 100%, see the special vesting formula in Section
5.03.]
(f) After a Participant has participated in the Plan for a period of not less
than _______ years and he is 100% vested in his Accrued Benefit, until he
retires, the Participant has a continuing election to receive all or any portion
of his Accrued Benefit. [Note: The number in the blank space may not be less
than 5.]
(g) Hardship. A Participant may elect a hardship distribution prior to his
Separation from Service in accordance with the hardship distribution policy:
(Choose (1) or (2))
(1) Under Section 6.01(A)(4) of the Plan. In no event may a
Participant receive a hardship distribution under this
Option (g) before he is at least _________________$ vested
in his Accrued Benefit. [Note: If the percentage in the
blank is less than 100%, see the special vesting formula in
Section 5.03.]
(2) Provided in the addendum to this Adoption Agreement, numbered
Section 6.03.
(h) (Specify) _____________________________________________.
[Note: The Employer may use an addendum, numbered 6.03, to provide additional
language authorized by Options (b)(6), (c), (g)(2) or (h) of this Adoption
Agreement Section 6.03.]
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The annuity
distribution requirements of Section 6.04: (Choose (a) or (b))
(a) Apply only to a Participant described in Section 6.04(E) of the
Plan (relating to the profit sharing exception to the joint and survivor
requirements).
(b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT
TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account) occurs more than 90 days after the most
recent valuation date, the distribution will include interest at: (Choose (a),
(b) or (c))
(a) __________% per annum. [Note: The percentage may equal 0%.]
<PAGE>
(b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
(c) (Specify) ________________________________________________.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (Choose (a) or (b))
(a) May not exceed 10% of Plan assets.
(b) May not exceed ______________% of Plan assets. [Note: the
percentage may not exceed 100%.]
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee must
value the Trust Fund on the following valuation date(s): (Choose (a) or (b))
(a) No other mandatory valuation dates.
(b) (Specify) ________________________________________________.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
(a) Compensation definition. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning after
_____________________________. [Note: May not be effective later than the first
day of the first Plan Year beginning after the Employer executes this Adoption
Agreement to restate the Plan for the Tax Reform Act of 1986, if applicable.]
(b) Eligibility conditions. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning after
_______________________.
(c) Suspension of Years of Service. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after _____________________.
<PAGE>
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
_____________________.
(e) Accrual requirements. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after ______________.
(f) Employment condition. The employment condition of Section 3.06 is
effective for Plan Years beginning after ______________.
(g) Elimination of Net Profits. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after ________________. [Note: The date specified may not be earlier
than December 31, 1985.]
(h) Vesting Schedule. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after
_______________.
(i) (Specify) ________________________________________________.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the delay
of a Plan provision beyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this ___________ day of
________________, 19________.
Name and EIN of Employer: _____________________________________
Signed: _______________________________________________________
Name(s) of Trustee: ___________________________________________
_______________________________________________________________
Signed: _______________________________________________________
_______________________________________________________________
Name of Custodian: ____________________________________________
<PAGE>
Signed: _______________________________________________________
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03 of
the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA
reporting purposes (Form 5500 Series) is: ____________________.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of any amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address and
telephone number: INVESCO Trust Company, 7800 E. Union Ave., Denver, Colorado,
(303 779-0731).
Reliance on Opinion Letter. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District office.
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by, the Signatory Employer to the Execution Page of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is ___________________.
2. The undersigned Employer's adoption of this Plan constitutes:
(a) The adoption of a new plan by the Participating Employer.
<PAGE>
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as _________________________,
and having an original effective date of __________________________.
Dated this ___________ day of ______________________, 19______.
Name of Participating Employer: _______________________________
Signed: _______________________________________________________
Participating Employer's EIN: _________________________________
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: ___________________________________
Accepted: _____________________________________________________
[Date]
Signed: _______________________________________________________
Name(s) of Trustee: ___________________________________________
Accepted: _____________________________________________________
[Date]
Signed: _______________________________________________________
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important Master
Plan information.]
NS PSP AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee, INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will charge an annual trust fee. Note: See Trustee Comments on page 17
for further explaination of Non-discretionary Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Profit Sharing Plan.
<PAGE>
1.07 Employee
If you want the plan to cover all types of employees, select option (a). If you
want to exclude from the plan any group(s) of employees, select any combination
of (b) or (g).
Leased Employees
You may exclude leased employees from participation (option h). However, the
plan must satisfy the coverage rules of Code Section 410(b) and 401(a)(26),
consult your legal or financial counsel.
Related Employers
You may exclude related employers from participating in the plan (option j).
However, the plan must satisfy the coverage rules of Code Section 410(b) and
401(a)(26), consult your legal or financial counsel.
1.12 Compensation
Treatment of elective contributions - Choose option (a) if you prefer to "add
back" employee elective contributions to compensation for purposes of allocating
employer contributions, forfeitures and for non-discrimination testing.
Modifications to Compensation - You must choose option (C) or any combination of
(d) through (j). Any exclusion of compensation may result in unallowable
discrimination. Your accountant may want to test for any discriminatory effect
of excluding any type of compensation.
1.17 Plan Year
You must define the "plan year." Usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account). For administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January 1) and the
year.
Restated Plan - Effective date - If you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Original established date
- - Enter the original effective date of your plan from your prior Adoption
Agreement.
<PAGE>
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by an employee to
accrue benefits. Option (b), the equivalency method, is explained in Section
1.27 of the plan. Option (a) is usually chosen.
1.29 Service for Predecessor Employer
Under this option, you may elect to count service for a predecessor employer
when you are not maintaining the plan of the predecessor employer. (Used
primarily in the event of a merger or acquisition.)
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b)(1) is chosen.
2.01 Eligibility
a. An employee must attain this age to become a participant (cannot
exceed age 21).
b. Pick how long (service) an employee must work to become a
participant.
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (c), semi-annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (f) is chosen.
Dual Eligibility - This section allows you to grandfather into the plan current
employees who have not met the eligibility requirements and apply the
eligibility requirements to newly hired employees. Restated plans usually chose
(i)(2).
2.02 Year of Service
Option (b) should only be chosen if you wish to require less than 1000 hours to
be worked by an employee for eligibility, contributions and vesting. Usually
Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary or the plan year. Option (d)
Plan Year is chosen for administrative convenience.
<PAGE>
2.03 Break In Service
This option may impose a complicated re-entry date for employees who have
terminated or whose hours were severely cut back. Option (a) is chosen for
administrative convenience.
2.06 Election Not to Participate
This option allows employees and participants to elect out of participation.
However, these employees are considered when performing all non-discrimination
tests. Option (a) is chosen for administrative convenience.
3.01 Contributions and Forfeitures
Option (a) provides for a discretionary formula. Option (b) allows the employer
to determine the contribution separately for different catagories of
participants. Options (c) and (d) allow the employer to choose a fixed
contribution formula.
Net Profits - An employer may require net profits to make its contribution or
may disregard profits to determine the contribution. If the employer selects
option (g), it must also complete the three blanks.
3.04 Contribution Allocation
Allocation formula. The primary allocation formulas are in Options (a), (b), (c)
and (d). Option (a) is a Nonintegrated formula and allocates the employer
contribution proportionate to total compensation. Options (b), (c) and (d) are
alternatives for integrated plans. Usually option (a)(2) is chosen for non
integrated plans.
The two-tiered formula under Option (b) maximizes the disparity permitted under
the integration rules. Accordingly, the allocation in the first tier results in
an equal allocation percentage based on total compensation and based on excess
compensation. This equal allocation percentage may not exceed the maximum
disparity percentage (5.7%, 5.4%, or 4.3%) described in he second column of the
Maximum Disparity Table. After completion of the first tier allocation, the
second step allocates the remaining contribution proportionate to total
compensation, in the same manner as the nonintegrated formula.
Under the three-tiered formula under Option (c), the plan: (i) first allocates
based on total compensation, but the allocation percentage may not exceed the
maximum disparity percentage determined under the second column of the Maximum
Disparity Table; (ii) then allocates based on excess compensation, but the
allocation percentage may not exceed the maximum disparity percentage determined
under the second column of the Maximum Disparity Table; and (iii) completes the
allocation on the basis of total compensation.
<PAGE>
The four-tier allocation under Option (d) is a hybrid of Options (b) and (c).
The sole purpose of Option (d) is to use the first tier to satisfy the 3% top
heavy minimum, then use a progression of three additional tiers to make maximum
use of the permitted disparity rules. The second tier allocates solely on the
basis of excess compensation, with a maximum allocation under the second tier
equal to 3% of each participant's excess compensation. The third tier is the
same as the first tier under Option (b). The fourth tier is a prorata allocation
based on total compensation.
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures as an extra
discretionary contribution. Option (b) allocates forfeitures to reduce employer
contributions. Option (c) allows you to allocate forfeitures to reduce the
plan's administrative expense.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered during the year), for contributions choose option (a), if not, choose
option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, waive the service requirement for specific contributions and/or
require the participant to be employed on the last day to receive a
contribution.
Suspension of Accrual Requirements
This section allows you to suspend some or all of the accrual requirements found
in Section 3.06(E) of the plan for participants to receive allocations. This
would apply in plan years when a plan may not satisfy coverage and participation
requirements. For administrative convenience choose option (g).
3.15 More than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
3.18 Defined Benefit Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit under option (b), choose which plan's benefit would be reduced if a
participant's total allocations for a year were to exceed the allowable limit.
<PAGE>
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
5.02 Vesting Death/Disability
You may choose to allow 100% vesting to participants that terminate from service
because of death option (b) or disability option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer discretionary
contributions and matching contributions. If you choose option (b), you must at
a minimum complete the top-heavy vesting schedule. Remember, if the eligibility
requirements are more than one year, option (a) must be chosen.
Complete the Top Heavy Schedule based upon the following:
Year of Service
1
2 (not less than 20%)
3 (not less than 40%)
4 (not less than 60%)
5 (not less than 80%)
6 (not less than 100%)
Optional: Complete the Non Top Heavy Schedule based upon the
following:
Years of Service
1
2 3 (not less than 20%) 4 (not less than 40%) 5 (not less than 60%) 6 (not less
than 80%) 7 (not less than 100%)
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant as
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose option (a).
<PAGE>
5.08 Prior Years of Service
By choosing options (b) through (e) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article 6
The Employer must establish a specific distribution policy for the plan. Treas.
Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any third
party to retain discretion over when or in what form to pay the participant's
benefit. Under a restated plan, the elections under Article VI, to the extent
they differ from previous plan provisions regarding optional forms of benefit,
may not eliminate an optional form of benefit with respect to the account
balance accrued as of the date the Employer executes the restated adoption
agreement (or, if later, the effective date of that restated adoption
agreement). An optional form of benefits includes the form of payment (e.g.,
lump sum or installments), the timing of payment (e.g., immediately after
separation form service, following a break in service, after attaining normal
retirement age) and the medium of payment (e.g., right to elect distribution in
Employer securities, right to elect distribution in the form of an annuity
contract).
With this in mind, if you are restating an existing plan, pay close attention to
the distribution features under that document and your administrative practice
of distributions. In all cases, try to mirror or liberalize those distribution
features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
administratively reasonable period of time" from the distribution date. Typical
distribution dates for 401(k) plans are semi-annual dates or quarterly dates.
Nonforfeitable Accrued Benefit Not Exceeding #3500
When a separate participants vested balance does not exceed $3500, the plan
allows the employer to separately establish the timing of these distributions,
separate from the distribution dates. When you complete this section, you need
to balance two concerns: 1) will the timing of the distribution cause the
participant to consider it a "severance benefit" and therefore encourage
separation from service and 2) the administrative concerns of carrying a
non-active account in the plan.
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (f) and (h).
<PAGE>
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in your
plan.
6.02 Method of Payment
You may choose the standard forms of payment if this is a brand new plan and not
a restatement. Elect any one or combination of options (b) through (e). If no
modifications are necessary, elect option (a).
6.03 Participant Elections After Separation From Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3500, may elect to commence distributions. This election
will be tied directly to the "distribution date" definition earlier.
Participant Elections Prior to Separation from Service
The following distribution elections apply to employer discretionary account
regardless of vested account balances, prior to employment separation. If you
prefer not to allow any distribution options from these accounts prior to
separation, select option (d).
6.04 Annuity Distributions
the law requires distributions to certain participants to be in the form of
commercial insurance annuities, unless consented to and waived by both the
participant and his or her spouse. Participants that are subject to this
requirement are identified in section 6.04(E) of the Plan. For administrative
convenience choose option (a). If you are restating a plan that was subject to
the joint and survivor annuity rules, you must select Option (b).
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
<PAGE>
10.03 Investment Powers
Complete this section if you (the employer) wish to allow the plan to invest in
qualifying employer securities, you should consult your legal counsel. The term
"qualifying employer securities" has a specific meaning under ERISA and may not
include all securities.
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally, option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates of any
of the listed items (a) through (j) have an effective date other than your
restated effective date in adoption agreement section 1.18. Since some
provisions in the Tax Reform Act of 1986 were not effective until 1988 or 1989
the few provisions (if any) that have later effective dates must specify when
they are effective.
a. Compensation definition may not be later than the first day of your
1991 plan year.
b. Eligibility conditions may not be later than the first day of your
1989 plan year.
c. Suspension of years of service may not be earlier than the first day of
your 1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day
of your 1989 plan year.
e. Accrual requirements may not be earlier than the first day of your 1989
plan year.
f. Employment condition may not be earlier than the first day of your 1991
plan year.
g. Elimination of Net Profits may not be earlier than December 31, 1985.
h. Vesting schedule may not be later than the first day of your 1989 plan
year.
i. Allocation of Earnings may not be earlier than the first day of the
1990 plan year.
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides two
lines above the signature line to print or type the name of the Employer and the
<PAGE>
Employer's EIN. If the Employer is a sole proprietorship, the individual sole
proprietor should execute as Employer. If the Employer is a corporation or a
partnership, an officer or a partner, as applicable, should execute the adoption
agreement on behalf of the Employer.
Trustee.
If you selected option (a) of Section 1.02, then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as custodian.
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non-discretionary trustee
accepts all directions from the Named Fiduciary. The Named Fiduciary is either
the President of the Corporation, the managing partner of the partnership or the
self-employed individual of a sole-proprietorship. The Named Fiduciary is
responsible for selecting plan investment.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
necessarily correspond to the 3-digit adoption agreement number specified at the
top of the first page of the adoption agreement. Consult your Counsel if unsure
what 3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
participating Employer should execute a separate Participation Agreement. See
Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
is necessary to satisfy the coverage requirements of Code ss.410(b) or the
minimum participation requirement of Code ss.401(a)(26). If the Employer
determines inclusion of the employees of a related group member is necessary to
maintain qualification of the plan, the Employer may take one of two approaches:
<PAGE>
(1) have the related group member execute a Participation Agreement; or (2)
elect in Adoption Agreement Section 1.07 to include the employees of that
related group member. Under approach (1), the participation of the related group
member will result in the automatic inclusion of the employees of that related
group member, without having to specify their inclusion in Adoption Agreement
Section 1.07. In addition, the related group member, under approach (1), has the
authority to contribute tot he plan and, in the event another participating
related group member makes a contribution on behalf of that related group
member's employees, the Participation Agreement will ensure the deductibility of
that contribution (assuming the contribution does not exceed the deduction
limits of Code ss.404). The addendum instructions to the appropriate adoption
agreement explain the effect on the allocation of Employer contributions when
related group members maintain a single nonstandardized plan. Under approach
(2), the plan will retain its qualified status, but contributions the Employer
makes on behalf of a nonparticipating related group member's employees may not
be deductible (even if otherwise within the limitations of Code ss.404),
resulting in an excise tax to the contributing Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the plan).
legal\adop-agr\nspspaa.001
Adoption Agreement #002
Letter Serial No. D346279a
Nonstandardized Money Purchase Pension Plan
Nonstandardized Money Purchase Pension Plan Features - Maximum employer
contributions - Ability to exclude classifications of employees - May enforce
last-day requirement for employer contribution - Allows integrated contribution
formula
Provided by:
The Financial Funds
Managed & Distributed by
INVESCO Funds Group, Inc.
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
Your Adoption Agreement and Basic Plan Document together constitute the rules
and parameters under which your retirement program will operate. Each section of
the Adoption Agreement requires the employer to make a selection. Whenever
possible (balancing complexity and space constraints) we have provided
instructions to the left of key selections. These instructions are intended to
assist you, the employer, in choosing the optional provisions for your
retirement program. They are not intended to substitute or replace competent
advice from your legal counsel or accountant. If further clarification is
necessary, contact your advisors or INVESCO Trust Company. We recommend that you
obtain the advice of your legal or tax advisor before you sign this Adoption
Agreement.
<PAGE>
ADOPTION AGREEMENT #002
NONSTANDARDIZED MONEY PURCHASE PLAN
The undersigned, _______________________________________ ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
the INVESCO Trust company Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is:
(Choose (a) or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the
Plan. [Note: The Employer may not elect Option (b) if a Custodian
executes the Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is
- ---------------------------------------------------------------.
1.07 EMPLOYEE. The following Employees are not eligible to
participate in the Plan: (Choose (a) or at least one of (b)
through (g))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the Plan, the
Employer must be able to provide evidence that retirement benefits were the
subject of good faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in
Code ss.911(d)(2)) from the Employer which constitutes United States source
income (as defined in Code ss.911(d)(2)) from the Employer which constitutes
United States source income (as defined in Code ss.861(a)(3)).
(d) Commission Salesmen.
(e) Any Employee compensated on a salaried basis.
(f) Any Employee compensated on an hourly basis.
(g) (Specify)
Leased Employees. Any Leased Employee treated as an Employee
under Section 1.31 of the Plan, is: (Choose (h) or (i))
<PAGE>
(h) Not eligible to participate in the Plan.
(i) Eligible to participate in the Plan, unless excluded by reason
of an exclusion classification elected under this Adoption Agreement Section
1.07.
Related Employers. If any member of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement to this Adoption
Agreement, such member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification elected under this
Adoption Agreement Section 1.07. In addition: (Choose (j) or (k))
(j) No other related group member's Employees are eligible to participate
in the Plan.
(k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section 1.07:
_______________________________
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b))
(a) "Compensation" includes elective contributions made by the
Employer on the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least
one of (d) through (j))
(c) No modifications other than as elected under Options (a) or (b).
(d) The plan excludes Compensation in excess of $_____________.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
(f) The Plan excludes bonuses.
(g) The Plan excludes overtime.
(h) The Plan excludes Commissions.
(i) The Plan excludes Compensation from a related employer (as defined in
Section 1.30 of the Plan) that has not executed a Participation Agreement in
this Plan unless, pursuant to Adoption Agreement section 1.07, the Employees of
that related employer are eligible to participate in this Plan.
<PAGE>
(j) (Specify) _______________________________________________.
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every _____________.
(b) (Specify) ________________________________________________.
Limitation Year. The Limitation Year is: (Choose (c) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every ______________.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is __________________.
Restated Plan. The restated Effective Date is _________________.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established _____________________.
(Note: See the Effective Date Addendum.)
1.27 HOUR OF SERVICE. The crediting method for Hours of Service
is: (Choose (a) or (b))
(a) The actual method.
(b) The ___________________________ equivalency method, except:
(1) No exceptions.
(2) The actual method applies for purposes of: (Choose at least
one)
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii)Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly
payroll periods" or "monthly."]
<PAGE>
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the
predecessor service the Plan must credit by reason of Section
1.29 of the Plan, the Plan credits Service with the following
predecessor employer(s): _____________________________________
______________________________________________________________.
Service with the designated predecessor employer(s) applies:
(Choose at least one of (a) or (b); (c) is available only in
addition to (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
(c) Except the following Service: ____________________________.
[Note: If the Plan does not credit any predecessor service under this provision,
insert "N/A" in the first blank line. The Employer may attach a schedule to this
Adoption Agreement, in the same format as this Section 1.29, designating
additional predecessor employers and the applicable service crediting
elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan and
also participates in a plan maintained by the leasing organization: (Choose (a)
or (b))
(a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without taking into
account the Leased Employee's allocation, if any, under the leasing
organization's plan.
(b) The Advisory committee will reduce a Leased Employee's
allocation of Employer contributions under this Plan by the Leased Employee's
allocation under the leasing organization's plan, but only to the extent that
allocation is attributable to the Leased Employee's service provided to the
Employer. The leasing organization's plan:
(1) Must be a money purchase plan which would satisfy the
definition under Section 1.31 of a safe harbor plan, irrespective of
whether the safe harbor exception applies.
(2) Must satisfy the features and, if a defined benefit plan,
the method of reduction described in an addendum to this
Adoption Agreement, numbered 1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions:
(Choose (a) or (b) or both)
<PAGE>
(a) Attainment of age ___________________ (specify age, not exceeding 21).
(b) Service requirement. (Choose one of (1) through (4))
(1) One Year of Service.
(2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
(3) ________________ months (not exceeding 24) following the
Employee's Employment Commencement Date.
(4) One Hour of Service.
Plan Entry Date. "Plan Entry Date" means the Effective Date and:
(Choose (c), (d) or (e))
(c) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
(d) The first day of the Plan Year.
(e) (Specify entry dates) ____________________________________.
Time of Participation. An Employee will become a Participant,
unless excluded under Adoption Agreement Section 1.07, on the
Plan Entry Date (if employed on that date): (Choose (f), (g) or
(h))
(f) immediately following
(g) immediately preceding
(h) nearest __________________________________________________
the date the Employee completes the eligibility conditions
described in Options (a) and (b) of this Adoption Agreement
Section 2.01. [Note: The Employer must coordinate the selection
of (f), (g) or (h) with the "Plan Entry Date" selection in (c),
(d) or (e). Unless otherwise excluded under Section 1.07, the
Employee must become a Participant by the earlier of: 91) the
first day of the Plan Year beginning after the date the Employee
completes the age and service requirements of Code ss.410(a); or
(2) 6 months after the date the Employee completes those
requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01
apply to: (Choose (i) or (j))
(i) All Employees of the Employer, except: (Choose (1) or (2))
(1) No exceptions.
(2) Employees who are Participants in the Plan as of the
Effective Date.
<PAGE>
(j) Solely to an Employee employed by the Employer after ________________.
If the Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1), (2) or (3))
(1) On the latest of the Effective Date, his Employment
Commencement Date or the date he attains age ___________ (not to exceed
21).
(2) Under the eligibility conditions in effect under the Plan
prior to the restated Effective Date. [For restated plans only]
(3) (Specify) ____________________________________________.
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) ___________ Hours of Service during an eligibility
computation period to receive credit for a Year of Service.
[Note: The Hours of Service requirement may not exceed 1,000.]
Eligibility computation period. After the initial eligibility
computation period described in Section 2.02 of the Plan, the
Plan measures the eligibility computation period as: (Choose (c)
or (d))
(c) The 12 consecutive month period beginning with each anniversary
of an Employee's Employment Commencement Date.
(d) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule
described in Section 2.03(B) of the plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
(a) Does not permit an eligible Employee or a Participant to
elect not to participate.
(b) Does permit an eligible Employee or a Participant to elect not
to participate in accordance with Section 2.06 and with the following
rules: (Complete (1), (2) (3) and (4))
<PAGE>
(1) An election is effective for Plan Year if filed no later
than ________________.
(2) An election not to participate must be effective for at
least ___________________ Plan Year(s).
(3) Following a re-election to participate, the Employee
or Participant:
(i) May not again elect not to participate for any
subsequent Plan Year.
(ii) May again elect not to participate, but not earlier
than the ___________ Plan Year following the Plan Year in
which the re-election first was effective.
(4) (Specify) ____________________________________________
[Insert "N/A" if no other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT. The amount of the Employer's annual contribution to the Trust will
equal: (Choose (a), (b), (c), (d) or (e); (f) is mandatory if the Employer
elects (b) or (c), or Adoption Agreement Section 3.04(b)(2))
(a) Nonintegrated Contribution Formula. ___________% of each Participant's
Compensation for the Plan Year.
(b) Integrated Contribution Formula. (Complete both percentages) _____% of
each Participant's Compensation for the Plan Year in excess of the Integration
Level. [Note: The second percentage may not exceed the lesser of the first
percentage or the applicable percentage described in the Maximum Disparity
Table.]
(c) Step-rate Integrated Contribution Formula. (Complete both
percentages) ___________% of each Participant's Compensation for the Plan Year
which does not exceed the Integration Level, plus __________________% of each
Participant's Compensation for the Plan Year in excess of the Integration Level.
[Note: The difference between the second percentage and the first percentage may
not exceed the lesser of the first percentage or the applicable percentage
described in the Maximum Disparity Table.]
(d) Flat Contribution Formula. (Choose (1), (2) or (3); (4) is
optional only in addition to (2) or (3))
(1) $_____________, subject to the limitations of Part 2 of
Article III of the Plan.
(2) For each Participant, $_______________ for each
________________________________________________________.
<PAGE>
(3) For each Participant, _________% of Compensation for each
_____________________________________________________.
(4) The contribution on behalf of any Participant: (Choose
(i) or (iii)
(i) May not exceed _____________________________.
(ii) May not be less than _______________________.
(e) Frozen Plan Formula. This Plan is a frozen Plan effective ________________.
The Employer will not contribute to the Plan with respect to any period
following that stated date.
(f) Integration Level. The Integration Level under the Plan is:
(Choose (1) or (2))
(1) __________% (not exceeding 100%) of the taxable wage base, as
determined under Section 230 of the Social Security Act in effect on
the first day of the Plan Year. (Choose any combination of (i) and (ii)
or choose (iii))
(i) Rounded to _____________ (but not exceeding the
taxable wage base).
(ii) But not greater than $_________________.
(iii)Without any further adjustment or limitation.
(2) $______________ [Note: Not exceeding the taxable wage base for the
Plan Year in which this Adoption Agreement first is effective.
Maximum Disparity Table. For purposes of Options (b) and (c) and
Adoption Agreement Section 3.04(b)(2), the applicable percentage
is:
Integration Level (as Applicable
percentage of taxable wage base) Percentage
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% (but not less than
$10,001) and not more than 80% 4.3%
20% (or $10,000, if greater) or less 5.7%
Application of contribution formula. The Employer will determine its
contribution under Options (a), (b), (c) or (d) by taking into account only the
Participants who satisfy the conditions under Section 3.06 for an allocation of
Employer contributions and only the Participant's Compensation taken into
<PAGE>
account under Section 3.06. The Employer contribution on behalf of a Participant
may not exceed the Participant's annual additions limitation described in Part 2
of Article III, even if the contribution formula otherwise would require a
larger contribution. The Employer will reduce its contribution for a Plan Year
if an allocation offset elected by the Employer under Section 3.04 requires
reduction of that contribution.
Coordination with defined benefit plan. If the Employer maintains a defined
benefit plan under which at least one Participant in this Plan participates, the
Employer will determine its contribution under Options (a), (b), (c) or (d) by
reducing the total contribution, if necessary, to equal the maximum deductible
amount under Code ss.404(a)(7). If the Employer must reduce its contribution,
the Employer determines its contribution with respect to each Participant by
adjusting each percentage under Options (a), (b), (c) or (d) by the same ratio
as the reduced total Employer contribution for the Plan Year bears to the total
Employer contribution determined without application of Code ss.404(a)(7). The
Employer may modify this paragraph by attaching an addendum to this Adoption
Agreement, numbered 3.01, setting forth the modified provision.
Related Employers. Unless obligated by the joint and several liability
provisions of the Code or of ERISA, a related group member, as defined in
Section 1.30 of the Plan, may not contribute to this Plan unless it executes a
Participation Agreement, even if its Employees are Participants in the Plan. The
signatory Employer and any Participating Employer(s) will satisfy the annual
contribution under this Section 3.01 as agreed upon by those Employers. A
Participating Employer may attach a schedule to this Adoption Agreement, in the
same format as this Section 3.01 and Section 3.04, designating separate
contribution and allocation formulas. If a Participating Employer attaches a
separate contribution/allocation schedule, the contributions, and attributable
Participant forfeitures, made by that Participating Employer are allocable only
to the Employees of that Participating Employer. If a Participant receives
Compensation from more than one contributing Employer and that Participant is
subject to two or more contribution/allocation formulas, the Advisory Committee
will apply the contribution/allocation formulas, the Advisory Committee will
apply the contribution/allocation formulas by prorating among the separate
formulas the Participant's Compensation and any integration level applicable to
the Participant.
3.04 CONTRIBUTION ALLOCATION
Method of Allocation. (Choose (a) or (b); (c) is optional to (a)
or (b))
(a) Incorporation of Contribution Formula. Subject to any restoration allocation
required under Section 5.04, the Advisory Committee will allocate and credit
<PAGE>
each annual Employer contribution to the account of each Participant who
satisfies the conditions of Section 3.06, in accordance with the contribution
formula adopted by the Employer under Adoption Agreement Section 3.01. [Note:
The Employer must elect this Option (a) if it elects Adoption Agreement Section
3.01(b), (c), (d)(2) or (d)(3). The Employer may not elect this Option (a) with
Adoption Agreement Section 3.01(d)(1).]
(b) Allocation Formula Different From Contribution Formula. (Choose (1) or (2))
[Note: The Employer must elect this Option (b) if it elected Adoption Agreement
Section 3.01(d)(1). The Employer may not elect this Option (b) if it elected
Adoption Agreement Section 3.01(b), (c), (d)(2) or (d)(3).
(1) Nonintegrated Allocation Formula. The Advisory Committee will
allocate the annual Employer contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
(2) Two-Tiered Integrated Allocation Formula - Maximum Disparity.
First, the Advisory Committee will allocate the annual Employer
contributions in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed
the applicable percentage (5.6% or 4.3%) listed under the Maximum
Disparity Table in Adoption Agreement Section 3.01. A Participant's
"Excess Compensation" is his Compensation for the Plan Year in excess
of the Integration Level elected under Adoption Agreement Section
3.01(f).
The Advisory Committee then will allocate any remaining Employer
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
(c) Allocation offset. The Advisory Committee will reduce a Participant's
allocation otherwise made under this Section 3.04 by the Participant's
allocation under the following qualified plan(s) maintained by the Employer:
________________________________________________________________________________
_______________________________________________________________________________.
(1) By treating the term "Employer contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the
qualified plan(s) referenced under this Option (c). If a Participant
under this Plan also participates in that other plan, the Advisory
Committee will treat the amount the Employer contributes for or during
a Plan Year on behalf of a Particular Participant under such other plan
as an amount allocated under this Plan to that Participant's Account
<PAGE>
for that Plan Year. The Advisory Committee will make the computation
of allocation required under the immediately preceding sentence before
making any allocation required by this Section 3.04.
(2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(c).
Top Heavy Minimum Allocation - Method of Compliance. If a
Participant's allocation under this Section 3.04 is less than the top
heavy minimum allocation to which he is entitled under Section
3.04(B): (Choose (d) or (e))
(d) the Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
(e) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains: ______________________. However, the Employer
will make any necessary additional contribution to satisfy the top heavy minimum
allocation for an Employee covered only under this Plan and not under the other
plan(s) designated in this Option (e). See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under
Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture: (Choose (a) or (b); (c) is optional in addition to (a) or (b))
(a) Reduction of Employer contribution. In accordance with Section 3.04, to
reduce the Employer contribution for the Plan Year: (Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the plan Year in which the forfeiture occurs.
(b) Increased allocation. In addition to the Employer contribution for the Plan
Year in which the forfeiture occurs. The Advisory Committee will allocate the
Participant forfeitures for a Plan Year to the Account of each Participant who
satisfies the conditions of Section 3.06: (Choose (1) or (2))
(1) in the same ratio that such Participant's Compensation for the Plan
Year bears to the total Compensation of all Participants for the Plan
Year.
<PAGE>
(2) as an Employer contribution for the Plan Year, in accordance with
Option (b) of Adoption Agreement Section 3.04, as if the Participant
forfeiture were an additional Employer contribution for that Plan
Year.
(c) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year, and then will allocate any remaining
forfeitures in the manner described in Option (a) or in Option (b),
whichever applies.
3.06 ACCRUAL OF BENEFIT.
Compensation Taken Into Account. For the Plan Year in which the
Employee first becomes a Participant, the Advisory Committee will
determine the contribution/allocation under Adoption Agreement
Sections 3.01 and 3.04 by taking into account: (Choose (a) or
(b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation for the portion of the Plan Year in which the
Employee actually is a Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of Employer contributions
and Participant forfeitures, if any, for the Plan Year, a Participant must
satisfy the conditions described in the following elections: (Choose (c), or at
least one of (d) through (f)
(c) Safe harbor rule. If the Participant is employed by the Employer on the last
day of the Plan Year, the Participant must complete at least one Hour of Service
for that Plan Year. If the Participant is not employed by the Employer on the
last day of the Plan Year, the Participant must complete at least 501 Hours of
Service during the Plan Year.
(d) Hours of Service condition. The Participant must complete the following
minimum number of Hours of Service for the Plan Year: (Choose at least one of
(1) through (4))
(1) 1,000 Hours of Service.
(2) (Specify, but the number of Hours of Service may not exceed 1,000)
_____________________________________.
(3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose at least one of
(i) through iii))
(i) Death.
(ii) Disability.
(iii)Attainment of Normal Retirement Age in the current
Plan Year or in a prior Plan Year.
<PAGE>
(4) _________________ Hours of Service (not exceeding 1,000) if the
Participant terminates employment with the Employer during the Plan
Year, subject to any election in Option (3).
(e) Employment condition. The Participant must be employed by the Employer on
the last day of the Plan Year, irrespective of whether he satisfies any Hours of
Service condition under Option (c), unless his employment terminates because of:
(Choose (1) or at least one of (2) through (4))
(1) No exceptions.
(2) Death.
(3) Disability.
(4) Attainment of Normal Retiement Age in the current Plan Year or in a
prior Plan Year.
(f) (Specify other conditions, if applicable):
_____________________________________________________.
Suspension of Accrual Requirements. The suspension of accrual requirements of
Section 3.06(E) of the Plan: (Choose (g), (h) or (i))
(g) Applies to the Employer's Plan.
(h) Does not apply to the Employer's Plan.
(i) Applies in modified form to the Employer's Plan, as described in an addendum
to this Adoption Agreement, numbered Section 3.06(E).
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply, the
Excess Amount attributed to this Plan equals:
(Choose (a), (b) or (c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated
but for the limitations of Code ss.415, times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified defined
contribution plans (determined without regard to the
limitations of Code ss.415).
<PAGE>
(b) The total Excess Amount.
(c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of
the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
(1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under
the defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section 3.18
do not apply to the Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications:
(Choose (c) or at least one of (d) and (e))
(c) No modifications.
(d) For Non-Key Employees participating only in this Plan, the top heavy minimum
allocation is the minimum allocation described in Section 3.04(B) determined by
substituting _________% (not less than 4%) for "3%", except: (Choose (i) or
(ii))
(i) No exceptions.
(ii) Plan Years in which the top heavy ratio exceeds 90%.
(e) For Non-Key Employees also participating in the defined benefit plan, the
top heavy minimum is: (Choose (1) or (2))
(1) 5% of Compensation (as determined under Section 3.04(B)
of the Plan) irrespective of the contribution rate of any
Key Employee, except: (Choose (i) or (ii))
(i) No exceptions.
<PAGE>
(ii) Substituting "7 1/2%" for "5%" if the top heavy ratio
does not exceed 90%.
(2) 0%. [Note: The employer may not select this Option (2)
unless the defined benefit plan satisfies the top heavy
minimum benefit requirements of Code ss.416 for these Non-Key
Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan:
_______________________________________________________________________________.
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
(Choose (a) or (b))
(a) ____________________ [State age, but may not exceed age 65.]
(b) The later of the date the Participant attains __________ years of age or the
_________ anniversary of the first day of the Plan Year in which the Participant
commenced participation in the Plan. [The age selected may not exceed age 65 and
the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section 5.02
of the Plan: (Choose (a) or choose one or both of (b) and (c))
(a) Does not apply.
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE. The Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only in addition to (b))
(a) Immediate vesting. 100% Nonforfeitable at all times. [Note: The Employer
must elect Option (a) if the eligibility conditions conditions under Adoption
Agreement Section 2.01(b) require 2 years of service or more than 12 months of
employment.]
<PAGE>
(b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
Less than 1 _______ Less than 1 _______
1 _______ 1 _______
2 _______ 2 _______
3 _______ 3 _______
4 _______ 4 _______
5 _______ 5 _______
6 or more _______ 6 _______
7 or more _______
(c) Minimum vesting. A Participant's Nonforfeitable Accrued Benefit will never
be less than the lesser of $__________ or his entire Accrued Benefit, even if
the application of the graduated vesting schedule under Option (b) would result
in a small Nonforfeitable Accrued Benefit.
[Note: Under Option (b), the Employer must complete a Top Heavy Schedule which
satisfies Code ss.416. The Employer, at its option, may complete a Non Top Heavy
Schedule. The Non Top Heavy Schedule must satisfy Code ss.411(a)(2). Also see
Section 7.05 of the Plan.]
(d) The Top Heavy Schedule under Option (b) applies: (Choose (1) or (2))
(1) Only in a Plan Year for which the Plan is top heavy.
(2) In the Plan Year for which the Plan first is top heavy
and then in all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top
Heavy Schedule.]
Life Insurance Investments. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (Choose (e) or
(f))
(e) Subject to the vesting election under Options (a) or (b).
(f) 100% Nonforfeitable at all times, irrespective of the vesting election under
Option (b).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C)
of the Plan: (Choose (a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0% vested
Participants.
<PAGE>
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each successive 12
consecutive month period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (Choose (c) or (d))
(c) 1,000 Hours of Service.
(d) __________ Hours of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer
specifically excludes the following Years of Service: (Choose (a)
or at least one of (b) through (e))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age
of _________________. [Note: The age selected may not exceed age
18.]
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(d) Any Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This exception applies only if the
Participant is 0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Bread in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not include any Years of
Service not required to be taken into account under this exception by reason of
any prior Break in Service.
(e) Any Year of Service earned prior to the effective date of ERISA if the Plan
would have disregarded that Year of Service on account of an Employee's
Separation from Service under a Plan provision in effect and adopted before
January 1, 1974.
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.(d)(6) Protected Benefits. The elections under this Article VI may not
eliminate Code ss.411(d)(6) protected benefits. To the extent the elections
would eliminate a Code ss.411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
___________________________________________________________.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c),
(d) or (e))
(a) _________________ of the ______________ Plan Year beginning after the
Participant's Separation from Service.
(b) _________________ following the Participant's Separation from Service.
(c) ___________________ of the Plan Year after the Participant incurs
___________________ Break(s) in Service (as defined in Article V).
(d) ____________________ following the Participant's attainment of Normal
Retirement Age, but not earlier than _____________ days following his Separation
from Service.
(e) (Specify) ______________________________________________.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections
under Section 6.03.
Disability. The distribution date, subject to Section 6.01(A)(3),
is: (Choose (f), (g) or (h))
(f) ______________________________________ after the Participant terminates
employment because of disability.
(g) The same as if the Participant had terminated employment without disability.
(h) (Specify) ______________________________________________.
<PAGE>
Hardship. (Choose (i) or (j)
(i) The Plan does not permit a hardship distribution to a Participant who has
separated from Service.
(j) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy stated in:
(Choose (1) or (2))
(1) Section 6.01(A)(4) of the Plan.
(2) The addendum to this Adoption Agreement, numbered Section 6.01, in
lieu of the policy stated in Section 6.01(A)(4) of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (k), (l) or (m))
(k) Treats the default as a distributable event only if the Participant has
incurred a Separation from Service or has attained Normal Retirement Age. If
either condition applies, the Trustee, at the time of the default or, if later,
at the time either condition first occurs, will reduce the Participant's
nonforfeitable Accrued Benefit by the lesser of the amount in default (plus
accrued interest) or the Plan's security interest in that Nonforfeitable Accrued
Benefit.
(l) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit
by the lesser of the amount in default (plus accrued interest) or the Plan's
security interest in that Nonforfeitable Accrued Benefit.
(m) (Specify) _______________________________________________.
[Note: Option (m) may not treat default as a distributable event
earlier than the Participant's Separation from Service unless the
Participant has attained Normal Retirement Age.]
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will apply
Section 6.02 of the Plan with the following modifications: (Choose (a) or at
least one of (b), (c) and (d))
(a) No modifications.
(b) Except as required under Section 6.01 of the Plan, a lump sum distribution
is not available: _________________________.
(c) An installment distribution: (Choose (1) or at least one of (2) or (3))
(1) Is not available under the Plan.
<PAGE>
(2) May not exceed the lesser of ________________ years or the maximum
period permitted under Section 6.02.
(3) (Specify) ___________________________________________.
(d) The Plan permits the following annuity options: ___________.
[Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(d).]
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose at least
one of (a) through (c))
(a) As of any distribution date, but not earlier than ________________ of the
______________ Plan Year beginning after the Participant's Separation from
Service.
(b) As of the following date(s): (Choose at least one of Options (1) through
(6))
(1) Any distribution date after the close of the Plan Year in which the
Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from Service.
(3) Any distribution date in the _________________ Plan Year(s)
beginning after his Separation from Service.
(4) Any distribution date in the Plan Year after the Participant incurs
__________________ Break(s) in Service
(as defined in Article V).
(5) Any distribution date following attainment of age ________________
and completion of at least _____________ Years of Service (as defined
in Article V).
(6) (Specify) _________________________________________.
(c) (Specify) ______________________________________________.
Participant Elections Prior to Separation from Service. Subject to the
restrictions of Article VI, the following distribution options apply under the
Employer's Plan prior to a Participant's Separation from Service. (Choose (d) or
at least one of (e) and (f)
(d) No distribution options prior to Separation from Service.
<PAGE>
(e) Attainment of Normal Retirement Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable Accrued
Benefit after he attains Normal Retirement Age.
(f) Specify) ____________________________________. [Note: Option (f) may not
permit in service distributions prior to attainment of Normal Retirement Age.]
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICI-
PANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account) occurs more than 90 days after the most
recent valuation date, the distribution will include interest at: (Choose (a),
(b) or (c))
(a) _________________% per annum. [Note: The percentage may equal 0%.)
(b) The 90 day Treasury bill rate in effect at the beginning of the current
valuation period.
(c) (Specify) _________________________________________________.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee must
value the Trust Fund on the following valuation date(s): (Choose (a) or (b))
(a) No other mandatory valuation dates.
(b) (Specify) _____________________________________________.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
(a) Compensation definition. The Compensation definition of Section 1.12 (other
than the $200,000 limitation) is effective for Plan Years beginning after
____________________________. [Note: May not be effective later than the first
day of the first Plan Year beginning after the Employer executes this Adoption
Agreement to restate the Plan for the Tax Reform Act of 1986, if applicable.]
<PAGE>
(b) Eligibility conditions. the eligibility conditions specified in Adoption
Agreement Section 2.01 are effective for Plan Years beginning after
______________________________.
(c) Suspension of Years of Service. The suspension of Years of Service rule
elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning ___________________________.
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
______________________________________.
(e) Reallocation of Forfeitures. The reallocation of forfeitures under Section
3.05 applies to Plan Years beginning after ________________________________.
[Note: The date specified may not be earlier than December 31, 1985.]
(f) Accrual requirements. The accrual requirements of Section 3.06 are effective
for Plan Years beginning after _____________________________.
(g) Employment condition. The employment condition of Section 3.06 is effective
for Plan Years beginning after _____________________________.
(h) Vesting Schedule. The vesting schedule elected under Adoption Agreement
Section 5.03 is effective for Plan Years beginning after
______________________________.
(i) (Specify) ______________________________________________.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the delay
of a Plan provision beyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance on this _______________ day of
______________________, 19_____.
<PAGE>
Name and EIN of Employer: ____________________________________
Signed: ______________________________________________________
Name(s) of Trustee: __________________________________________
______________________________________________________________
Signed: ______________________________________________________
______________________________________________________________
Name of Custodian: ___________________________________________
Signed: ______________________________________________________
[Note: A Trustee is mandatory, but a Custodian is optional. See
Section 10.03 of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA
reporting purposes (Form 5500 Series) is: ____________.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employees of any amendment of this
Master Plan of any abandonment or discontinuance by the Master Plan Sponsor of
its maintenance of this Master Plan. For inquiries regarding the adoption of the
Master Plan, the Master Plan Sponsor's intended meaning of any plan provisions
or the effect of the opinion letter issued to the Master Plan Sponsor, please
contact the Master Plan Sponsor, please contact the Master Plan Sponsor at the
following address and telephone number: INVESCO Trust Company, 7800 E. Union
Ave., Denver, Colorado (303) 799-0731.
Reliance on Opinion Letter. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District Office.
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Adoption
Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: __________________________.
2. The undersigned Employer's adoption of this Plan constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as __________________, and
having an original effective date of
--------------------.
Dated this ________ day of _____________________, 19_________.
Name of Participating Employer: ________________________________
Signed: ________________________________________________________
Participating Employer's EIN:___________________________________
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: ____________________________________
Accepted: ______________________________________________________
[Date]
Signed: ________________________________________________________
Name(s) of Trustee: ____________________________________________
Accepted: ______________________________________________________
[Date]
Signed: ________________________________________________________
[note: Each Participating Employer must execute a separate
Participation Agreement. See the Execution Page of the Adoption
Agreement for important Master Plan information.]
<PAGE>
NS MP AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee. INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will charge an annual trust fee. Note: See Trustee Comments on page 16
for further explaination of Non-discretionary Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Money Purchase Pension Plan.
1.07 Employee
If you want the plan to cover all types of employees, select option (a). If you
want to exclude from the plan any group(s) of employees, select any combination
of (b) through (g). When a retirement plan excludes employees in options (d)
through (g) from participation, the plan is subject to a minimum coverage test
to maintain its "tax qualified" status. Your accounting firm should be notified
to perform the test annually.
Leased Employees
You may exclude leased employees from participation (option h). However, the
plan must satisfy the coverage rules of Code Section 410(b) and 401(a)(25),
consult your legal or financial counsel.
Related Employers
You may exclude related employers from participating in the plan (option j).
However, the plan must satisfy the coverage rules of Code Section 410(b) and
401(a)(26), consult your legal or financial counsel.
1.12 Compensation
Treatment of elective contributions - Choose option (a) if you prefer to "add
back" employee elective 401(k), contributions to compensation for purposes of
allocating employer contributions, forfeitures and for non-discrimination
testing.
Modifications to Compensation
Modifications to Compensation - You must choose option (C) or any combination of
(d) through (j). Any exclusion of compensation may result in unallowable
discrimination, your accountant may want to test for any discriminatory effect
of excluding any type of compensation.
<PAGE>
1.17 Plan Year
You must define the "plan year," usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account), for administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January 1) and the
year.
Restated Plan - Effective date - if you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Original established date
- - Enter the original effective date of your plan from your prior Adoption
Agreement.
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by an employee to
accrue benefits. Option (b), the equivalency method, is explained in Section
1.27 of the plan. Option (a) is usually chosen.
1.29 Service for Predecessor Employer
Under this option, you may elect to count service for a predecessor employer
when you are not maintaining the plan of the predecessor employer. (Used
primarily in the event of a merger or acquisition.)
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b)(1) is chosen.
2.01 Eligibility
a. An employee must attain this age to become a participant (cannot exceed age
21).
b. Pick how long (service) an employee must work to become a
participant.
<PAGE>
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (c), semi- annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (f) is chosen.
Dual Eligibility - This section allows you to include the plan current employees
who have not met the eligibility requirements and apply the eligibility
requirements to newly hired employees.
Restated plans usually chose (i)(2).
2.02 Years of Service
Option (b) should only be chosen if you wish to require less than 1000 hours to
be worked by an employee for eligibility. Usually Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary or the plan year. Option (d)
is chosen for administrative convenience.
2.03 Break In Service
This option may impose a complicated re-entry date for employees who have
termination or whose hours were severely cut back. Option (a) is chosen for
administrative convenience.
2.06 Election Not To Participate
this option allows employees and participants to elect out of participation.
However, these employees are considered when performing all non-discrimination
tests. Option (a) is chosen for administrative convenience.
3.01 Contributions and Forfeitures
Amount - The employer must select a definite contribution formula under a money
purchase pension plan. Options (a) and (d) are nonintegrated formulas, options
(b) and (c) are integrated formulas.
Option (d) allows the employer to choose a fixed amount for the contribution
regardless of compensation (options (d)(1) or (d)(2). Alternatively, the
employer may choose a fixed percentage of compensation, based upon units of
time, (option (d)(3)). The employer may choose optoin (d)(4) only in addition to
options (d)(2) or (d)(3). Option (d)(4) allows the employer to establish both a
maximum and/or a minimum contribution.
Options (b) and (c) are two approaches to allowing permitted disparity in he
contribution formula. Option (b) applies the first percentage to a participant's
total compensation. Option (C) applies the first percentage only to compensation
not exceeding an integration level.
<PAGE>
3.04 Contribution Allocation
There are two approaches for allocating (dividing up) the contribution to
participants. Option (a) mirrors the contribution formula chosen in Section
3.01. Option (a) must be chosen if the employer chose either integrated
contribution formula 3.01(a) or (b) of if the employer chose 3.01(d)(2) or
(d)(3).
Option (b) allows the employer to take a "profit sharing" approach to allocating
the contribution if the employer chose a fixed percentage or amount in Section
3.01. Under option (b) the employer has the choice of pro-rate (nonintegrated)
or a two-tiered integrated formula.
Option (c) is available only in addition to options (a) and (b). Option (c)
reduces a participant's allocation under this plan by an amount accrued under
the employer's other specified plan.
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures to reduce
employer contributions. Option (b) allocates forfeitures to increase employer
allocations.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered during the year), for contributions choose option (a), if not, choose
Option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, waive the service requirement for specific contributions and/or
require the participant to be employed on the last day to receive a
contribution.
Suspension of Accrual Requirements
This section allows you to suspend some or all of the accrual requirements found
in Section 3.06(E) of the plan for participants to receive allocations. This
would apply in plan years when a plan may not satisfy coverage and participation
requirements. For administrative convenience choose option (g).
3.15 More Than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
<PAGE>
3.18 Defined Benefit Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit under option (b), choose which plan's benefit would be reduced if a
participant's total allocations for a year were to exceed the allowable limit.
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
5.02 Vesting: Death/Disability
You may choose to allow 100% vesting to participants that terminate from service
because of death, option (b) or disability, option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer discretionary
contributions and matching contributions. If you choose option (b), you must at
a minimum complete the top-heavy vesting schedule. Remember, if the eligibility
requirements are more than one year, option (a) must be chosen.
Complete the Top Heavy Schedule based upon the following:
Years of Service
1
2 (not less than 20%)
3 (not less than 40%)
4 (not less than 60%)
5 (not less than 80%)
6 (not less than 100%)
Optional: Complete the Non Top Heavy Schedule based upon the
following:
Years of Service or
1 1 0%
2 2 0
3 (not less than 20%) 3 0
4 (not less than 40% 4 0
5 (not less than 60%) 5 100
6 (not less than 80%)
7 (not less than 100%)
<PAGE>
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant has
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose option (a).
5.08 Prior Years of Service - Vesting
By choosing options (b) through (e) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article 6
The employer must establish a specific distribution policy for the plan. Treas.
Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any third
party to retain discretion over when or in what form to pay the participant's
benefit (Option Forms of Benefit). Under a restated plan, the elections under
Article VI, to the extent they differ from previous plan provisions regarding
optional forms of benefit, may not eliminate an optional form of benefit with
respect to the account balance accrued as of the date the Employer executes the
restated adoption agreement (or, if later, the effective date of that restated
adoption agreement). An optional form of benefit includes the form of payment
(e.g., lump sum or installments), the timing of payment (e.g., immediately after
separation from service, following a break in service, after attaining normal
retirement age) and the medium of payment (e.g., right to elect distribution in
Employer securities, right to elect distribution in the form of an annuity
contract).
With this in mind, if you are restating an existing plan, pay close attention to
the distribution features under that document and your administrative practice
of distributions. In all cases, try to mirror or liberalize those distribution
features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
"administratively reasonable period of time" from the distribution date. A
typical distribution date for money purchase plans would be 60 days after the
plan year end.
Nonforfeitable Accrued Benefit Not Exceeding $3500.
<PAGE>
When a separated participants vested balance does not exceed $3500, the plan
allows the employer to separately establish the timing of these distributions,
separate from the distribution dates. When you complete this section, you need
to balance two concerns: 1) will the timing of the distribution cause the
participant to consider it a "severance benefit" and therefore encourage
separation from service and 2) the administrative concerns of carrying a
non-active account in the plan. Usually an employer chooses Option (a) and
writes in "the first distribution date" of the "first" plan year beginning after
the Participant's separation from service.
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (f) and (h). Usually an
employer chooses Option (g).
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in your
plan.
6.02 Method of Payment
Money purchase pension plans require payouts to be in the form of a commercial
annuity unless properly waived. The employer may in options (b) and (c), if this
is a new plan, limit the alternative method of payment. Caution: an employer
cannot eliminate a prior method of payment by restating the plan onto this
document.
6.03 Participant Elections after Separation from Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3500, may elect to commence distributions. This election
will be tied directly to the "distribution date" definition earlier.
Participant Elections Prior to Separation from Service
The following distribution elections apply to employer discretionary account
regardless of vested account balances, prior to employment separation. If you
prefer not to allow any distribution options from these accounts prior to
separation, select option (d).
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
<PAGE>
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally, option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates of any
of the listed items (a) through (j) have an effective date other than your
restated effective date in adoption agreement section 1.18. Since some
provisions in the Tax Reform Act of 1986 were not effective until 1988 or 1989
the few provisions (if any) that have later effective dates must specify when
they are effective.
a. Compensation definition may not be later than the first day of your 1991 plan
year.
b. Eligibility conditions may not be later than the first day of your 1989 plan
year.
c. Suspension of years of service may not be earlier than the first day of your
1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day of your
1989 plan year.
e. Reallocation of forfeitures may not be earlier than December 31, 1985.
f. Accrual requirements may not be earlier than the first day of your 1989 plan
year.
g. Employment condition may not be earlier than the first day of your 1991 plan
year.
h. Vesting schedule may not be later than the first day of your 1989 plan year.
i. Allocation of Earnings may not be earlier than the first day of the 1990 plan
year.
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides two
lines above the signature line to print or type the name of the Employer and the
Employer's EIN. If the Employer is a sole proprietorship, the individual sole
proprietor should execute as Employer. If the Employer is a corporation or a
partnership, an officer or a partner, as applicable, should execute the adoption
agreement on behalf of the Employer.
<PAGE>
Trustee
If you selected option (a) of Section 1.02, then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as custodian.
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust Company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non-discretionary trustee
accepts all directions from the Named Fiduciary. The Named Fiduciary is either
the President of the Corporation, the managing partner of the partnership or the
self-employed individual of a sole-proprietorship. The Named Fiduciary is
responsible for selecting plan investment.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
correspond to the 3- digit adoption agreement number specified at the top of the
first page of the adoption agreement. Consult your Counsel if unsure what
3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
participating Employer should execute a separate Participation Agreement. See
Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
is necessary to satisfy the coverage requirements of Code ss.410(b) or the
minimum participation requirement of Code ss.401(a)(26). If the Employer
determines inclusion of the employees of a related group member is necessary to
maintain qualification of the plan, the Employer may take one of two approaches:
(1) have the related group member execute a Participation Agreement; or (2)
elect in Adoption Agreement Section 1.07 to include the employees of that
<PAGE>
related group member. Under approach (1), the participation of the related group
member will result in the automatic inclusion of the employees of that related
group member, without having to specify their inclusion in Adoption Agreement
Section 1.07. In addition, the related group member, under approach (1), has the
authority to contribute to the plan and, in the event another participating
related group member makes a contribution on behalf of that related group
member's employees, the Participation Agreement will ensure the deductibility of
that contribution (assuming the contribution does not exceed the deduction
limits of Code ss.404). Additional instructions to the appropriate adoption
agreement explain the effect on the allocation of Employer contributions when
related group members maintain a single nonstandardized plan. Please contact us.
Under approach (2), the plan will retain its qualified status, but contributions
the Employer makes on behalf of a nonparticipating related group member's
employees may not be deductible (even if otherwise within the limitations of
Code ss.404), resulting in an excise tax to the contributing Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the Plan).
legal\adop-agr\nsmpaa.002
Adoption Agreement #003
Letter Serial No. D246280a
Standardized Profit Sharing Plan Adoption Agreement
Features of Standardized Profit Sharing Plan
- - Allows for integration of contributions with Social Security
- - Incorporates top-heavy vesting schedule
- - May be paired with INVESCO Money Purchase Pension Plans
Provided by:
The Financial Funds
Managed & Distributed by
INVESCO Funds Group, Inc.
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
Your Adoption Agreement and Basic Plan Document together constitute the rules
and parameters under which your retirement program will operate. Each section of
the Adoption Agreement requires the employer to make a selection. Whenever
possible (balancing complexity and space constraints) we have provided
instructions to the left of key selections. These instructions are intended to
assist you, the employer, in choosing the optional provisions for your
retirement program. They are not intended to substitute or replace competent
advice from your legal counsel or accountant. If further clarification is
necessary, contact your advisors or INVESCO Trust Company. We recommend that you
obtain the advice of your legal or tax advisor before you sign this Adoption
Agreement.
<PAGE>
ADOPTION AGREEMENT #003
STANDARDIZED PROFIT SHARING PLAN
(PAIRED PROFIT SHARING PLAN)
The undersigned, --------------------------------------------- ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
the INVESCO Trust Company Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 trustee. The Trustee executing this Adoption Agreement is: (Choose (a)
or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note:
The Employer may not elect Option (b) if a Custodian executes the Adoption
Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is
- -------------------------------------------------------------.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (Choose (a) or at least one of (b) or (c))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the Plan, the
Employer must be able to provide evidence that retirement benefits were the
subject of good faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in Code
ss.911(d)(2) from the Employer which constitutes United States source income (as
defined in Code ss.861(a)(3)).
Related Employers/Leased Employees. An Employee of any member of the
Employer's related group (as defined in Section 1.30 of the Plan), and any
Leased Employee treated as an Employee under Section 1.31 of the Plan, is
eligible to participate in the Plan, unless excluded by reason of Options (b) or
(c). [Note: A related group member may not contribute to this Plan unless it
executes a Participation Agreement, even if its Employees are Participants in
the Plan.]
<PAGE>
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b))
(a) "Compensation" includes elective contributions made by the Employer on
the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least one of
(d) and (e))
(c) No modifications other than as elected under Options (a) or
(b).
(d) The Plan excludes Compensation in excess of $-----------------.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation means
any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every ---------------.
(b) (Specify) --------------------------------------------------.
Limitation Year. The Limitation Year is: (Choose (c) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every ---------------.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is ------------------.
Restated Plan. The restated Effective Date is ------------------.
This Plan is a substitution and amendment of an existing
retirement plan(s) originally established ----------------------.
(Note: See the Effective Date Addendum.)
1.27 HOUR OF SERVICE. The crediting method for Hours of Service
is: (Choose (a) or (b))
(a) The actual method.
(b) The ------------------------ equivalency method, except:
(1) No exceptions.
(2) The actual method applies for purposes of: (Choose at
least one)
<PAGE>
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii)Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition tot he predecessor
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s):
- -------------------------. Service with the designated predecessor employer(s)
applies: (Choose at least one of (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach a
schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
1.31 LEASED EMPLOYEES.
If a Leased Employee participates in a save harbor money purchase plan (as
described in Section 1.31) maintained by the leasing organization, but the
Employer is not eligible for the safe harbor plan exception: (Choose (a) or (b))
(a) The Advisory Committee will determine the Leased Employee's allocation of
Employer contributions under Article III without taking into account the Leased
Employee's allocation under the safe harbor plan.
(b) The Advisory Committee will reduce the Leased Employee's allocation of
Employer contributions under this Plan by the Leased Employee's allocation under
the safe harbor plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. [Note: The Employer may
not elect Option (b) if a Paired Plan or any other plan of the Employer makes a
similar reduction for the same plan of the leasing organization.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions:
<PAGE>
(Choose (a) or (b) or both)
(a) Attainment of age -------------------- (specify age, not exceeding 21).
(b) Service requirement. (Choose one of (1) through (4))
(1) One Year of Service.
(2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
(3) ------------months (not exceeding 24) following the Employee's
Employment Commencement Date.
(4) One Hour of Service.
Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose
(c), (d) or (e))
(c) Semi-annual Entry Dates. The first day of the Plan year and the first
day of the seventh month of the Plan Year.
(d) The first day of the Plan Year.
(e) (Specify entry dates) -------------------------------.
Time of Participation. An Employee will become a Participant, unless
excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if
employed on that date): (Choose (f), (g) or (h))
(f) immediately following
(g) immediately preceding
(h) nearest the date the Employer completes the eligibility conditions described
in Options (a) and (b) of this Adoption Agreement Section 2.01. [Note: The
Employer must coordinate the selection of (f), (g) or (h) with the "Plan Entry
Date" selection in (c), (d) of (e). Unless otherwise excluded under Section
1.07, the Employee must become a Participant by the earlier of: (1) the first
day of the Plan Year beginning after the date the Employee completes the age and
service requirements of Code ss.410(a); or (2) 6 months after the date the
Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (i) or (j))
(I) All Employees of the Employer, except: (Choose (1) or (2))
(1) No exceptions
<PAGE>
(2) Employees who are Participants in the Plan as of the
Effective Date.
(j) Solely to an Employee employed by the Employer after ----------------------.
If the Employee was employed by the specified date, the Employee will become a
Participant: (Choose (1) or (2))
(1) On the latest of the Effective Date, his Employment Commencement Date
or the date he attains age ------------------- (not to exceed 21).
(2) Under the eligibility conditions in effect under the
Plan prior to the restated Effective Date. [For restated
plans only]
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) ------------------------ Hours of Service during an eligibility computation
period to receive credit for a Year of Service. [Note: The Hours of Service
requirement may not exceed 1,000.
Eligibility computation period. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
(c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
(d) The Plan year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION.
The Break in Service rule described in Section 2.03(B) of the Plan: (Choose
(a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
The amount of the Employer's annual contribution to the Trust will equal:
(Choose (a), (b), (c) or (d))
(a) The amount (or additional amount) the Employer may from time to time deem
advisable.
<PAGE>
(b) -----------------% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the contribution,
[Note: The percentage selected may not exceed 15%.]
(c) ----------------% of Net Profits but not more than $--------------.
(d) This Plan is a frozen Plan effective ---------------. The Employer will not
contribute to the Plan with respect to any period following the stated date.
Net Profits. The Employer: (Choose (e) or (f))
(e) Need not have Net Profits to make its annual contribution under this Plan.
(f) Must have current or accumulated Net Profits exceeding
$----------------- to make the contributions described in Option
- ------------------.
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. If more than one member of a related group
(as defined in Section 1.30) execute this Adoption Agreement, each participating
member separately will determine Net Profits. "Net Profits" includes both
current and accumulated net profits. The term "net Profits" specifically
excludes:
- ---------------------------------------------------------------.
[Note: Enter "N/A" if no exclusions apply.]
3.04 CONTRIBUTION ALLOCATION.
Method of Allocation. Subject to any restoration allocation required under
Section 5.04, the Advisory Committee will allocate and credit each annual
Employer contribution (and Participant forfeitures, if any) to the Account of
each Participant who satisfies the conditions of Section 3.06, in accordance
with the allocation method selected under this Section 3.04. (Choose an
allocation method under (a), (b), (c) or (d); (e) is mandatory if the Employer
elects (b), (c) or (d))
(a) Nonintegrated Allocation Formula. The Advisory Committee will allocate the
annual Employer contributions (and Participant forfeitures) in the same ratio
that each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
<PAGE>
(b) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First,
the Advisory Committee will allocate the annual Employer contributions (and
Participant forfeitures) in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (e).
The Advisory Committee then will allocate any remaining Employer contributions
(and Participant forfeitures) in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(c) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer contributions (and Participant forfeitures) in
the same ratio that each Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Compensation must
not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the
Maximum Disparity Table following Option (e).
As a second tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Excess Compensation, may not
exceed the allocation percentage in the first paragraph.
Finally, the advisory Committee will allocate any remaining annual Employer
contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year.
(d) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer contributions (and Participant forfeitures) in
the same ratio that each Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan Year, but not exceeding
3% of each Participant's Compensation.
As a second tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year, but not exceeding 3% of each
Participant's Excess Compensation.
<PAGE>
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation plus Excess Compensation for the Plan Year bears to
the total Compensation plus Excess Compensation of all Participants for the Plan
year. The allocation under this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed the applicable percentage
(2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option
(e).
The Advisory Committee then will allocate any remaining Employer contributions
(and Participant forfeitures) in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(e) Excess Compensation. For purposes of Option (b), (c) or (d), "Excess
Compensation" means Compensation in excess of the following Integration Level:
(Choose (1) or (2))
(1) -------% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first day
of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii))
(i) Rounded to ------------------------- (but not exceeding
the taxable wage base).
(ii) But not greater than $----------------.
(iii) Without any further adjustment or limitation.
(2) $------------------. [Note: Not exceeding the taxable
wage base for the Plan Year in which this Adoption Agreement
first is effective.]
Maximum Disparity Table. For purposes of Options (b), (c) and
(d), the applicable percentage is:
Integration Level Applicable Percentages Applicable
(as percentage of for Option (b) or Percentages
taxable wage base) Option (c) For Option (d)
- --------------------------------------------------------------------------------
100% 5.7% 2.7%
More than 80% but
less than 100% 5.4% 2.4%
More than 20%
(but not less than
$10,001) and not
more than 80% 4.3% 1.3%
20% (or $10,000, if
greater) or less 5.7% 2.7%
<PAGE>
Top Heavy Minimum Allocation - Eligible Participant. A Participant is
entitled to the top heavy minimum allocation in Section 3.04(B) of the Plan if
he is employed by the Employer on the last day of the Plan Year, unless: (Choose
(f) or (g))
(f) No exceptions.
(g) The Participant is a Key Employee for the Plan Year.
[Note: If the Employer selects this Option (g), it will have to determine
for each Plan Year who are the Key Employees under the Plan.]
Top Heavy Minimum Allocation - Method of Compliance. If a
Participant's allocation under this Section 3.04 is less than the
top heavy minimum allocation to which he is entitled under
Section 3.04(B): (Choose (h) or (i))
(h) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
(i) The Employer will satisfy the top heavy minimum allocation under the Paired
Pension Plan the Employer also maintains under this Master Plan. However, the
Employer will make any necessary additional contribution to satisfy the top
heavy minimum allocation for an Employee covered only under this Plan and not
under the Paired Pension Plan. See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan which is not a Paired Pension Plan
offered under this Master Plan, the Employer may provide in an addendum to this
Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04, without regard to
which contributing related group member employs the Participant. A Participant's
Compensation includes Compensation from all related employers, irrespective of
which related employers are contributing to the Plan.
3.05 FORFEITURE ALLOCATION.
Subject to any restoration allocation required under Sections 5.04 or 9.14,
the Advisory Committee will allocate a Participant forfeiture in accordance with
Section 3.04: (Choose (a) or (b); (c) is optional in addition to (a) or (b))
(a) As an Employer contribution for the Plan Year in which the forfeiture
occurs, as if the Participant forfeiture were an additional Employer
contribution for that Plan Year.
<PAGE>
(b) To reduce the Employer contribution for the Plan Year:
(Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(c) First to reduce the Plan's ordinary and necessary administrative expenses
for the Plan Year and then will allocate any remaining forfeitures in the manner
described in Option (a) or in Option (b), whichever applies.
3.06 ACCRUAL OF BENEFIT.
Compensation Taken Into Account. For the Plan Year in which the
Employee first becomes a Participant, the Advisory Committee will
determine the allocation under Adoption Agreement Section 3.04 by
taking into account: (Choose (a) or (b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation only for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan, except (Choose (1) or (2))
(1) No exceptions.
(2) For purposes of the first 3% of Compensation allocated to all
Participants under Options (a), (c) or (d) of Adoption Agreement Section
3.04, whichever applies, the Advisory Committee will take into account the
Employee's
Compensation for the entire Plan Year.
Accrual Requirements. To receive an allocation of Employer contributions and
Participant forfeitures, if any, for the Plan year, a Participant must satisfy
the accrual requirements of this paragraph. If the Participant is employed by
the Employer on the last day of the Plan Year, the Participant must complete at
least one hour of Service for that Plan Year. If the Participant terminates
employment with the Employer during the Plan year, the Participant must complete
at least ------------- Hours of Service (not exceeding 501) during the Plan
Year, except: (Choose (C) or (d))
(c) No exceptions.
(d) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose at least
one of (1), (2) and (3))
(1) Death.
(2) Disability.
<PAGE>
(3) Attainment of Normal Retirement Age in the current Plan Year or in a
prior Plan Year.
3.15 MORE THAN ONE PLAN LIMITATION.
If the provisions of Section 3.15 apply, the Excess Amount attributed to
this Plan equals: (Choose (a), (b) or (c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415), times
(ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Code ss.415).
(b) The total Excess Amount.
(c) None of the Excess Amount.
[Note: If the Employer adopts Paired Plans available under this Master
Plan, the Employer must coordinate its elections under Section 3.15 of each
Adoption Agreement.]
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of
the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
(1) The Participant's projected annual benefit under the defined benefit
plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under the
defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section
3.18 do not apply to the Employer's Plan.]
Override of 100% Limitation. The Employer elects: (Choose (c) or 9d))
<PAGE>
(c) To apply the 100% limitation described in Section 3.19(1) of the Plan
in all Limitation Years. [Note: This election will avoid having to calculate the
Plan's top heavy ratio for any year.]
(d) Not to apply the 100% limitation for Limitation Years in which the Plan's
top heavy ratio (as determined under Section 1.33 of the Plan) does not exceed
90%, but only if the defined benefit plan satisfies the extra minimum benefit
requirements of Code ss.415(h)(2) (and the applicable Treasury regulations)
after taking into account the Employer's election under Options (e), (f), (g) or
(h) of this Section 3.18. To determine the top heavy ratio, the Advisory
Committee will use the following interest rate and mortality assumptions to
value accrued benefits under a defined benefit plan:
- ---------------------------------------. [Note: This election will require the
Advisory Committee to calculate the Plan's top heavy ratio.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications:
(Choose (e), (f), (g) or (h))
(e) No modifications.
(f) By substituting 4% for 3% in Paragraph 9b) of Section 3.04(B)(1) of the
Plan, but only for any Plan Year in which Option (d) applies to override the
100% limitation.
(g) By increasing the top heavy minimum allocation to 5% for any Plan Year in
which the 100% limitation applies, and to 7 1/2% for any Plan Year in which
Option (d) applies to override the 100% limitation. The increased percentage
under this Option (g) applies irrespective of whether the highest Participant
contribution rate for the Plan Year is less than that increased percentage.
(h) By eliminating the top heavy minimum allocation. [Note: The Employer
may not select this Option (h) if the defined benefit plan does not guarantee
the top heavy minimum benefit under Code ss.416 for every Participant in this
Plan who is a Non-Key Employee.]
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT.
Normal Retirement Age under the Plan is: (Choose (a) or (b))
(a) ---------------------------------- [State age, but may not exceed age
65].
(b) The later of the date the Participant attains -------- years of age or the
- -----------nniversary of the first day of the Plan Year in which the Participant
commenced participation in the Plan. [The age selected may not exceed age 65 and
the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY.
The 100% vesting rule under Section 5.02 of the Plan: (Choose (a) or choose
one or both of (b) and (c))
(a) Does not apply.
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE.
The Employer elects the following vesting schedule: (Choose (a) or (b); (c)
is available only in addition to (b))
(a) Immediate vesting. 100% Nonforfeitable at all times.
[Note: The Employer must elect Option (a) if the eligibility conditions
under Adoption Agreement Section 2.01(b) require 2 years of service or more than
12 months of employment.]
(b) Graduated Vesting Schedules. (Choose (1), (2) or (3))
(1) 6-year graded (2) 3-year cliff (3) Modified Top
Year of Nonforfeitable Year of Nonforfeitable Year of Nonforfeitable
Service Percentage Service Percentage Service Percentage
- --------------------------------------------------------------------------------
Less Less Less
than 2 0% than 3 0% than 1 ------
2 20% 3 or more 100% 1 ------
3 40% 2 ------
4 60% 3 ------
5 80% 4 ------
6 or more 100% 5 ------
6 or more 100%
[Note: Under Option (b)(3), the vesting schedule must satisfy the
top heavy requirements of Code ss.416.]
<PAGE>
(c) Minimum vesting. A Participant's Nonforfeitable Accrued Benefit will never
be less than the lesser of $------------- or his entire Accrued Benefit, even if
the application of the graduated vesting schedule under Option (b) would result
in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT.
The deemed cash-out rule described in Section 4.04(C) of the Plan: (Choose
(a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0%
vested Participants.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each successive 12
consecutive month period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (choose (c) or (d))
(c) 1,000 Hours of Service.
(d) ----------- Hours of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING.
The Employer specifically excludes the following Years of Service: (Choose
(a) or at least one of (b), (c) and (d))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age of
- --------------------. [Note: The age selected may not exceed age 18.]
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(
<PAGE>
d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This exception
applies only if the Participant is 0% vested in his Accrued Benefit derived from
Employer contributions at the time he has a Break in Service. Furthermore, the
aggregate number of Years of Service before a Break in Service do not include
any Years of Service not required to be taken into account under this exception
by reason of any prior Break in Service.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.411(d)(6) Protected Benefits. The elections under this Article VI may
not eliminate Code ss.411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption ate
or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
- --------------------------------------------------------------.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d))
(a) ---------- of the ---------------- Plan Year beginning after the
Participant's Separation from Service.
(b) ------------------ following the Participant's Separation from
Service.
(c) ------------------------ of the Plan Year after the Participant incurs
- ---------------------------- Break(s) in Service (as defined in Article V).
(d) following the Participant's attainment of Normal Retirement Age, but
not earlier than --------------- days following his Separation from Service.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of Section
6.01(A)(3), is: (Choose (e) or (f))
<PAGE>
(e) ------------------ after the Participant terminates employment because of
disability.
(f) The same as if the Participant had terminated employment without
disability.
Hardship. (Choose (g) or (h))
(g) The Plan does not permit a hardship distribution to a Participant who has
separated from Service.
(h) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy stated in
Section 6.01(A)(4) of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i) or (j))
(i) Treats the default as a distributable event. The Trustee, at the time of the
default, will reduce the Participant's Nonforfeitable Accrued Benefit by the
lesser of the amount in default (plus accrued interest) or the Plan's security
interest in that Nonforfeitable Accrued Benefit.
(j) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit
by the lesser of the amount in default (plus accrued interest) or the Plan's
security interest in that Nonforfeitable Accrued Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT.
The Advisory Committee will apply Section 6.02 of the Plan with the
following modifications: (Choose (a) or (b))
(a) No modifications.
(b) The Plan permits the following annuity options:
- ----------------------------------------------------------------.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section
6.04(E). [Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(b).]
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose (a) or
(b))
<PAGE>
(a) As of any distribution date, but not earlier than -------------- of the
- -------- Plan Year beginning after the Participant's Separation from Service.
(b) As of the following date(s): (Choose at least one of Options
(1) and (5))
(1) As of any distribution date after the close of the Plan Year in which
the Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from
Service.
(3) Any distribution date in the -------------- Plan Year(s) beginning
after his Separation from Service.
(4) Any distribution date in the Plan Year after the Participant incurs
------------ Break(s) in Service (as defined in Article V).
(5) Any distribution date following attainment of age --------- and
completion of at least --------- Years of Service (as defined in Article
V).
Participant Elections Prior to Separation from Service. Subject to the
restrictions of Article VI, the following distribution options apply under the
Employer's Plan prior to a Participant's Separation from Service. (Choose (c) or
at least one of (d) through (f))
(c) No distribution options prior to Separation from Service.
(d) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable Accrued
Benefit after he attains: (Choose (1) or (2))
(1) Normal Retirement Age.
(2) ------------------- years of age and is at least ----------%
vested in his Accrued Benefit. [Note: If the percentage is
less than 100%, see the special vesting formula in Section
5.03.]
(e) After a Participant has participated in the Plan for a period of not
less than ------------ years and he is 100% vested in his Accrued Benefit, until
he retires, the Participant has a continuing election to receive all or any
portion of his Accrued Benefit. [Note: The number in the blank space may not be
less than 5.]
(f) Hardship. A Participant may elect a hardship distribution prior to his
Separation from Service in accordance with the hardship distribution policy
under Section 6.01(A)(4) of the Plan. In no event may a Participant receive a
<PAGE>
hardship distribution under this Option (f) before he is at least
- ---------% vested in his Accrued Benefit. [Note: If the percentage in the
blank space is less than 100%, see the special vesting formula in Section 5.03.]
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (Choose
(a) or (b))
(a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
(b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT.
If a distribution (other than a distribution from a segregated Account)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b))
(a) --------------% per annum. [Note: The percentage may equal 0%.]
(b) The 90 day Treasury bill rate in effect at the beginning of the current
valuation period.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST.
In addition to each Accounting Date, the trustee must value the Trust Fund
on the following valuation date(s): (Choose (a) or (b))
(a) No other mandatory valuation dates.
(b) (Specify) -------------------------------------------.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
<PAGE>
(a) Compensation definition. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning after
- ----------. [Note: May not be effective later than the first day of the first
Plan Year beginning after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986, if applicable.]
(b) Eligibility conditions. The eligibility conditions specified in Adoption
Agreement Section 2.01 are effective for Plan Years beginning after
- -------------.
(c) Suspension of Years of Service. The suspension of Years of Service rule
elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after -------------------.
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
- -------------------.
(e) Accrual requirements. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after ----------. [Note: If the effective
date is later than Plan Years beginning after December 31, 1989, the accrual
requirements in the Plan prior to its restatement may not be more restrictive
for post-1989 Plan Years than the requirements permitted under Adoption
Agreement Section 3.06.]
(f) Elimination of Net Profits. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after ---------------------------. [Note: The date specified may
not be earlier than December 31, 1985.]
(g) Vesting Schedule. The vesting schedule elected under Adoption Agreement
Section 5.03 is effective for Plan Years beginning after ---------------------.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the delay
of a Plan provision beyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
<PAGE>
and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) signified its acceptance, on this ---------- day of
- -----------------, 19----.
Name and EIN of Employer: --------------------------------------
Signed: --------------------------------------------------------
Name(s) of Trustee: --------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Signed: ---------------------------------------------------------
- -----------------------------------------------------------------
Name of Custodian: ----------------------------------------------
Signed: ---------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See
Section 10.03 of the Plan.]
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
The Master Plan Sponsor offers the following Paired Pension Plan(s) with this
Paired Profit Sharing Plan, identified by 3-digit adoption agreement number:
- -----------------------------------------------------------------
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of an amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address and
telephone number: 7800 E. Union Ave., Denver, Colorado 80201, (303) 779- 0731.
Reliance on Opinion Letter. If the Employer does not maintain (and has never
maintained) any other plan other than this Plan and a Paired Pension Plan, it
may rely on the Master Plan Sponsor's opinion letter covering this Plan for
purposes of plan qualification. For this purpose, the Employer has not
maintained
<PAGE>
another plan if this Plan, or the Paired Pension Plan, amended and restated that
prior plan and the prior plan was the same type of plan as the restated plan. If
the Employer maintains or has maintained another plan other than a Paired
Pension Plan, including a welfare benefit fund, as defined in Code ss.419(e),
which provides post-retirement medical benefits for key employees (as defined in
Code ss.419A(d)(3)), or an individual medical account (as defined in Code
ss.415(1)(2)), the Employer may not rely on this Plan's qualified status unless
it obtains a determination letter from the applicable IRS Key District office.
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by, --------------------------------------------
- --------------------------------------------------- the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's
participation in the designated Plan is -------------------------------.
2. The undersigned Employer's adoption of this Plan
constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently maintained
by the Employer, identified as ------------------------------------- and having
an original effective date of ---------------------------------------.
Dated this ---------------- day of ------------------, 19------.
Name of Participating Employer: ----------------------------------
Signed: ----------------------------------------------------------
Participating Employer's EIN: -------------------------------------
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: -------------------------------------
Signed: --------------------------------------------------
Accepted:--------------------------------------------------
[Date]
<PAGE>
Name(s) of Trustee: --------------------------------------------
Signed: --------------------------------------------------
Accepted: ------------------------------------------------
[Date]
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important Master
Plan information.]
STN PSP AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee, INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will be the Trustee and will charge an annual trust fee. Note: See
Trustee Comments on page 14 for further explaination of Non-discretionary
Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Profit Sharing Plan.
1.07 Employee
If you want the plan to cover all employees, select option (a). If you want to
exclude from the plan any group(s) of employees, select any combination of (b)
or (c).
Related Employers/Leased Employers
You may not exclude leased employees or related employers from participation
unless they are excluded under options (b) or (c) of Section 1.07.
1.12 Compensation
Treatment of elective contributions
Choose option (a) if you prefer to "add back" employee elective 401(k)
contributions to compensation for purposes of allocating employer contributions,
forfeitures and for non-discrimination testing.
<PAGE>
Modifications to Compensation - You must choose option (c) or any
combination of (d) or (e). Any exclusion of compensation may result in
unallowable discrimination.
1.17 Plan Year
You must define the "plan year," usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account), for administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January
1) and the year.
Restated Plan 0 Effective date - If you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Originally established
date - Enter the original effective date of your plan from your prior Adoption
Agreement.
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by an
employee to accrue benefits. Option (b), the equivalency method, is explained in
Section 1.27 of the plan. Usually Option (a) is chosen.
1.29 Service for Predecessor Employer
Under this option, you may elect to count service for a predecessor employer
when you are not maintaining the plan of the predecessor employer. (Used
primarily in the event of a merger or acquisition.)
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b) is chosen.
2.01 Eligibility
a. An employee must attain this age to become a participant (cannot exceed
age 21).
b. Pick how long (service) an employee must work to become a participant.
<PAGE>
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (c), semi-annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (f) is chosen.
Dual Eligibility - This section allows you to include in the plan current
employees who have not met the eligibility requirements and apply the
eligibility requirements to newly hired employees.
Restated plans usually choose (i)(2).
2.02 Years of Service
Option (b) should only be chosen if you wish to require less than 1000
hours to be worked by an employee for eligibility. Usually Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary (Option (c) or the plan year
(Option (d)). Option (d) is chosen for administrative convenience.
2.03 Break in Service
This option may impose a complicated re-entry date for employees who have
terminated or whose hours were severely cut back. Option (a) is chosen for
administrative convenience.
Article III
3.01 Amount
Option (a) provides for a discreationary formula. Option (b) allows the employer
to determine the contribution separately for different catagoaries of
participants. Options (c) and (d) allow the employer to choose a fixed
contribution formula.
Net Profits - An employer may require net profits to make it's contribution or
may disregard profits to determine the contribution. If the employer selects
Option (f) it must also complete the two blanks.
3.04 Contribution Allocation
Allocation formula. The primary allocation formulas are in Options (a), (b), (c)
and (d). Option (a) is a nonintegrated formula and allocates the employer
contribution proportionate to total compensation. Options (b), (c) and (d) are
alternatives for integrated plans. Usually option (a) is chosen for
non-integrated plans.
<PAGE>
The two-tiered formula under Option (b) maximizes the disparity permitted under
the integration rules. Accordingly, the allocation in the first tier results in
an equal allocation percentage based on total compensation and based on excess
compensation. This equal allocation percentage may not exceed the maximum
disparity percentage (5.7%, 5.4% or 4.3%) described in the second column of the
Maximum Disparity Table. After completion of the first tier allocation, the
second step allocates the remaining contribution proportionate to total
compensation, in the same manner as the nonintegrated formula.
Under the three-tiered formula of Option (c), the plan: (i) first allocates
based on total compensation, but the allocation percentage may not exceed the
maximum disparity percentage determined under the second column of the Maximum
Disparity Table; (ii) then allocates based on excess compensation, but the
allocation percentage may not exceed the maximum disparity percentage determined
under the second column of the Maximum Disparity Table; and (iii) completes the
allocation on the basis of total compensation.
The four-tiered allocation under Option (d) is a hybrid of Options (b) and (c).
The sole purpose of Option (d) is to use the first tier to satisfy the 3% top
heavy minimum, then use a progression of three additional tiers to make maximum
use of the permitted disparity rules. The second tier allocates solely on the
basis of excess compensation, with a maximum allocation under the second tier
equal to 3% of each participant's excess compensation. The third tier is the
same as the first tier under Option (c). The fourth tier is a prorata allocation
based on total compensation.
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures as an extra
discretionary contribution. Option (b) allocates forfeitures to reduce employer
contributions. Option (c) allows you to allocate separately forfeitures after
taking into account the plan's administrative expenses.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered during the year), for contributions choose option (a), if not, choose
option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, no greater than 501 hours. Standardized plans have relaxed
contribution requirements. A participant will receive an employer contribution
and forfeitures if they meet either of the two requirements below.
<PAGE>
Requirement #1
If the Participant was employed on the last day of the plan year and worked for
at least one hour during the plan year, or
Requirement #2
If the Participant terminates employment during the plan year after working at
least 501 hours for the employer.
3.15 More Than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
3.18 Defined Benefit Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit plan. Choose under option (b), which plan's benefit would be reduced if
a participant's total allocations for a year were to exceed the allowable limit.
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
5.02 Vesting Death/Disability
You may choose to allow 100% vesting for participants that terminate from
service because of death option (b) or disability option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer discretionary
contributions and matching contributions. If you choose option (b), you must at
a minimum complete the top-heavy vesting schedule. Remember, if the eligibility
requirements are more than one year, option (a) must be chosen.
Complete the Modified Top Heavy schedule based upon the following:
Years of Service
1
2 (not less than 20%)
3 (not less than 40%)
4 (not less than 60%)
<PAGE>
5 (not less than 80%)
6 (not less than 100%)
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant as
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose option (a).
5.08 Prior Years of Service
By choosing options (b) through (d) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article VI
The Employer must establish a specific distribution policy for the plan. Treas.
Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any third
party to retain discretion over when or in what form to pay the participant's
benefit (Optional Forms of Benefit). Under a restated plan, the elections under
Article VI, to the extent they differ from previous plan provisions regarding
optional forms of benefit, may not eliminate an optional form of benefit with
respect to the account balance accrued as of the date the Employer executes the
restated adoption agreement (or, if later, the effective date of that restated
adoption agreement). An option form of benefit includes the form of payment
(e.g., lump sum or installments), the timing of payment (e.g., immediately after
separation form service, following a break in service, after attaining normal
retirement age) and the medium of payment (e.g. right to elect distribution in
Employer securities, right to elect distribution in the form of an annuity
contract).
With this in mind, if you are restating an existing plan, pay close attention to
the distribution features under that document and your administrative practice
of distributions. In all cases, try to mirror or liberalize those distribution
features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
<PAGE>
"administratively reasonable period of time" from the distribution date. A
typical distribution date for a Profit Sharing plan is 90 days after the plan
year end.
Nonforfeitable Accrued Benefit Not Exceeding $3,500
When a separated participant's vested balance does not exceed $3,500, the plan
allows the employer to separately establish the timing of these distributions,
separate from the distribution dates. When you complete this section, you need
to balance two concerns: 1) will the timing of the distribution cause the
participant to consider it a "severance benefit" an therefore encourage
separation from service and 2) the administrative concerns of carrying a
non-active account in the plan.
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (e) and (f).
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in your
plan.
6.02 Method of Payment
You may choose the standard forms of payment if this is a brand new plan and not
a restatment. If the plan is not subject to the annuity requirements of Section
6.04, usually option (a) is chosen. If you choose to allow annuities, option (b)
special waivers and consent rules apply to all distributions.
6.03 Participant Elections After Separation from Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3,500, may elect to commence distributions. This election
will be tied directly tot he "distribution date" defined earlier.
Participant Elections Prior to Separation from Service
The following distribution elections apply to employer contributions regardless
of vested account balances, prior to employment separation. If you prefer not to
allow any distribution options from these accounts prior to separation, select
option (c).
<PAGE>
6.04 Annuity Distributions
The law requires distributions to certain participants to be in the form of
commercial insurance annuities, unless consented to and waived by both the
participant and his or her spouse. Participants subject to this requirement are
identified in section 6.04(E) of the Plan. For administrative convenience,
choose option (a). If you are restating a plan that was subject to the joint and
survivor annuity rules you must select Option (b).
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates of any
of the listed items (a) through (g) have an effective date other than your
restated effective date in Adoption Agreement Section 1.18. Some provisions in
the Tax Reform Act of 1986 were not effective until 1988 or 1989. The few
provisions, if any, that have later effective dates must specify when they are
effective.
a. Compensation definition may not be later than the first day of your 1991
plan year.
b. Eligibility conditions may not be later than the first day of your 1989
plan year.
c. Suspension of years of service may not be earlier than the first day of
your 1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day of
your 1989 plan year.
e. Accrual requirements may not be earlier than the first day of your 1989
plan year.
f. Elimination of Net Profits may not be earlier than December 31, 1985.
g. Vesting schedule may not be later than the first day of your 1989 plan
year.
<PAGE>
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides one
line above the signature line to print or type the name of the Employer and the
Employer's EIN. If the Employer is a sole proprietorship, he or she should
execute as Employer. If the Employer is a corporation or a partnership, an
officer or a partner, as applicable, should execute the adoption agreement on
behalf of the Employer.
Trustee
If you selected option (a) of Section 1.02 then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as Custodian.
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust Company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non- discretionary trustee
accepts all directions from the Named Fiduciary. The Named Fiduciary is either
the President of the Corporation, the managing partner of the partnership or the
self-employed individual of a sole proprietorship. The Named Fiduciary is
responsible for selecting plan investments.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
correspond to the 3- digit adoption agreement number specified at the top of the
first page of the adoption agreement. Consult your Counsel if you are unsure
what 3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
participating Employer should execute a separate Participation Agreement. See
Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
<PAGE>
is necessary to satisfy the coverage requirements of Code ss.410(b) or the
minimum participation requirement of Code ss.401(a)(26). If the Employer
determines inclusion of the employees of a related group member is necessary to
maintain qualification of the plan, he Employer may take one or two approaches:
(1) have the related group member execute a Participation Agreement; or (2)
elect in Adoption Agreement Section 1.07 to include the employees of that
related group member. Under approach (1), the participation of the related group
member will result in the automatic inclusion of the employees of that related
group member, without having to specify their inclusion in Adoption Agreement
Section 1.07. In addition, the related group member, under approach (1), has the
authority to contribute to the plan and, in the event another participating
related group member makes a contribution on behalf of that related group
member's employees, the Participation Agreement will ensure the deductibility of
that contribution (assuming the contribution does not exceed the deduction
limits of Code ss.404). Additional instructions to the appropriate adoption
agreement explain the effect on the allocation of Employer contributions when
related group members maintain a single nonstandardized plan. Please contact us.
Under approach (2), the plan will retain its qualified status, but contributions
the Employer makes on behalf of a nonparticipating related group member's
employees may not be deductible (even if otherwise within the limitations of
Code ss.404), resulting in an excise tax to the contributing Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the Plan).
legal\adop-agr\stnpspaa.003
Adoption Agreement #004
Letter Serial No. D246281a
Standardized Money Purchase Pension Plan
Standardized Money Purchase Pension Features
- - Allows for integration of contributions with Social Security
- - Allows for top-heavy vesting schedule
- - May be paired with INVESCO Profit Sharing Plans
Provided by:
The Financial Funds
Managed & Distributed by
INVESCO Funds Group, Inc.
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
Your Adoption Agreement and Basic Plan Document together constitute the rules
and parameters under which your retirement progrma will operate. Each section of
the Adoption Agreemetn requires the employer to make a selection. Whenever
possible (balancing complexity and space constraints) we have provided
instructions to the left of key selections. These instructions are intended to
assist you, the employer, in choosing the optional provisions for your
retirement program. They are not intended to substitute or replace completent
advice from your legal counsel or accountant. If further clarification is
necessary, contact your advisors or INVESCO Trust Company. We recommend that you
obtain the advice of your legal or tax advisor before you sign this Adoption
Agreement.
<PAGE>
ADOPTION AGREEMENT #004
STANDARDIZED MONEY PURCHASE PLAN
(PAIRED PENSION PLAN)
The undersigned, -------------------------------------------- ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
the INVESCO Trust Company Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 Trustee.
The Trustee executing this Adoption Agreement is: (Choose (a) or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note:
The Employer may not elect Option (b) if a Custodian executes the Adoption
Agreement.]
1.03 PLAN.
The name of the Plan as adopted by the Employer is
- -------------------------------------------------------------.
1.07 EMPLOYEE.
The following Employees are not eligible to participate in the Plan:
(Choose (a) or at least one of (b) or (c))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the
Plan).
[Note: If the Employer excludes union employees from the Plan, the Employer
must be able to provide evidence that retirement benefits were the subject of
good faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in Code
ss.911(d)(2) from the Employer which constitutes United States source income (as
defined in Code ss.861(a)(3)).
Related Employers/Leased Employees. An Employee of any member of the
Employer's related group (as defined in Section 1.30 of the Plan), and any
Leased Employee treated as an Employee under Section 1.31 of the Plan, is
eligible to participate in the Plan, unless excluded by reason of Options (b) or
(c).
[Note: A related group member may not contribute to this Plan unless it
executes a Participation Agreement, even if its Employees are Participants in
the Plan.]
<PAGE>
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b))
(a) "Compensation" includes elective contributions made by the
Employer on the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least
one of (d) and (e))
(c) No modifications other than as elected under Options (a) or
(b).
(d) The Plan excludes Compensation in excess of $--------------.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation means
any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every --------------.
(b) (Specify) -------------------------------------------------.
Limitation Year. The Limitation Year is: (Choose (c) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every --------------.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is -------------------.
Restated Plan. The restated Effective Date is -------------------. This
Plan is a substitution and amendment of an existing retirement plan(s)
originally established -----------------------. (Note: See the Effective Date
Addendum.)
1.27 HOUR OF SERVICE.
The crediting method for Hours of Service is: (Choose (a) or (b))
(a) The actual method.
(b) The ----------------------- equivalency method, except:
(1) No exceptions.
<PAGE>
(2) The actual method applies for purposes of: (Choose at
least one)
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii) Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER.
In addition to the predecessor service the Plan must credit by reason of
Section 1.29 of the Plan, the Plan credits Service with the following
predecessor employer(s): --------------------------. Service with the designated
predecessor employer(s) applies: (Choose at least one of (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach a
schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
1.31 LEASED EMPLOYEES.
If a Leased Employee participates in a save harbor money purchase plan (as
described in Section 1.31) maintained by the leasing organization, but the
Employer is not eligible for the safe harbor plan exception: (Choose (a) or (b))
(a) The Advisory Committee will determine the Leased Employee's allocation of
Employer contributions under Article III without taking into account the Leased
Employee's allocation under the safe harbor plan.
(b) The Advisory Committee will reduce the Leased Employee's allocation of
Employer contributions under this Plan by the Leased Employee's allocation under
the safe harbor plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. [Note: The Employer may
not elect Option (b) if a Paired Plan or any other plan of the Employer makes a
similar reduction for the same plan of the leasing organization.]
ARTICLE II
EMPLOYEE PARTICIPANTS
<PAGE>
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions:
(Choose (a) or (b) or both)
(a) Attainment of age -------------------- (specify age, not exceeding 21).
(b) Service requirement. (Choose one of (1) through (4))
(1) One Year of Service.
(2) Two Years of Service, without an intervening Break in
Service. See Section 2.03(A) of the Plan.
(3) --------- months (not exceeding 24) following the Employee's
Employment Commencement Date.
(4) One Hour of Service.
Plan Entry Date. "Plan Entry Date" means the Effective Date and:
(Choose (c), (d) or (e))
(c) Semi-annual Entry Dates. The first day of the Plan year and the first
day of the seventh month of the Plan Year.
(d) The first day of the Plan Year.
(e) (Specify entry dates) --------------------------------.
Time of Participation. An Employee will become a Participant, unless
excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if
employed on that date): (Choose (f), (g) or (h))
(f) immediately following
(g) immediately preceding
(h) nearest the date the Employer completes the eligibility conditions described
in Options (a) and (b) of this Adoption Agreement Section 2.01. [Note: The
Employer must coordinate the selection of (f), (g) or (h) with the "Plan Entry
Date" selection in (c), (d) of (e). Unless otherwise excluded under Section
1.07, the Employee must become a Participant by the earlier of: (1) the first
day of the Plan Year beginning after the date the Employee completes the age and
service requirements of Code ss.410(a); or (2) 6 months after the date the
Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (i) or (j))
(i) All Employees of the Employer, except: (Choose (1) or (2))
<PAGE>
(1) No exceptions
(2) Employees who are Participants in the Plan as of the
Effective Date.
(j) Solely to an Employee employed by the Employer after ---------------------.
If the Employee was employed by the specified date, the Employee will become a
Participant: (Choose (1) or (2))
(1) On the latest of the Effective Date, his Employment Commencement Date
or the date he attains age --------------------- (not to exceed 21).
(2) Under the eligibility conditions in effect under the
Plan prior to the restated Effective Date. [For restated
plans only]
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) ------------------------ Hours of Service during an eligibility computation
period to receive credit for a Year of Service. [Note: The Hours of Service
requirement may not exceed 1,000.
Eligibility computation period. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
(c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
(d) The Plan year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION.
The Break in Service rule described in Section 2.03(B) of the Plan: (Choose
(a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
The amount of the Employer's annual contribution to the Trust will equal:
(Choose (a), (b), (c) or (d); (e) is mandatory if the Employer elects (b) or
(c))
<PAGE>
(a) Nonintegrated Contribution Formula. ---------------% of each Participant's
Compensation for the Plan Year.
(b) Integrated Contribution Formula. (Complete both percentages)
- ---------% of each Participant's Compensation for the Plan Year plus
- ---------% of each Participant's Compensation for the Plan Year in excess of
the Integration Level.
[Note: The second percentage may not exceed the lesser of the first
percentage or the applicable percentage described in the Maximum Disparity
Table.]
(c) Step-rate Integrated Contribution Formula. (Complete both percentages)
- --------% of each Participant's Compensation for the Plan Year which does not
exceed the Integration Level, plus ---------% of each Participant's Compensation
for the Plan Year in excess of the Integration Level. [Note: The difference
between the second percentage and the first percentage may not exceed the lesser
of the first percentage or the applicable percentage described in the Maximum
Disparity Table.]
[Note: If the Employer maintains Paired Plans, the Employer may not elect
Option (b) or Option (c) if the Paired Plan uses an integrated formula.]
(d) Frozen Plan Formula. This Plan is a frozen Plan effective
- -----------------------------. The Employer will not contribute to the Plan with
respet to any period following that stated date.
(e) Integration Level. The Integration Level under the Plan is:
(Choose (1) or (2))
(1) ------% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first day
of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii))
(i) Rounded to -------------------- (but not exceeding
the taxable wage base).
(ii) But not greater than $----------------------.
(iii)Without any further adjustment or limitation.
(2) $------------- [Note: Not esceeding the taxable wage
base for the Plan Year in which this Adoption Agreement
first is effective.]
Maximum Disparity Table. For purposes of Options (b) and (c), the
applicable percentage is:
<PAGE>
Inegration Level (as Applicable
percentage of taxable wage base) Percentage
-----------------------------------------------------------
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% (but not less than $10,001)
and not more than 80% 4.3%
20% (or $10,000, if greater) or less 5.7%
Application of contribution formula. The Employer will determine its
contribution under Options (a), (b) or (c) by taking into account only the
Participants who satisfy the conditions under Section 3.06 for an allocation of
Employer contributions and only the Participant's Compensation taken into
account under Section 3.06. The Empoyer contribution on behalf of a Participant
may not exceed the Participant's annual additions limitation described in Part 2
of Article III, even if the contribution formula otherwise would require a
larger contribution.
Coordination with defined benefit plan. If the Employer maintains a defined
benefit plan under which at least one Participant in this Plan participates, the
Employer will determine its contribuion under Options (a), (b) or (c) by
reducign the total contibution, if necessary to equal the maximum deductible
amount under Code ss.404(a)(7). If the Employer must reduce its contribution,
the Employer determines its contibution with respect to each Participant by
adjusting each percentage under Options (a), (b) or (c) by the same ratio as the
reduced total Employer contribution for the Plan Year bears to the total
Employer contribution determined without applciation of Code ss.404(a)(7).
Related Employers. Unless obligated by the joint and several liability
provisions of the code or of ERISA, a related group member, as defined in
Section 1.30 of the Plan, may not contribute tot his Plan unless it executes a
Participation Agreement, even if its Employees are Participants in the Plan. The
signatory Employer and any Participaing Employer(s) will satisfy the annual
contribution under this Section 3.01 as agreed upon by those Employers.
3.04 CONTRIBUTION ALLOCATION.
Method of Allocation. Subject to any restoration allocation required under
Section .04, the Advisory Committee will allocate and credit each annual
Employer contribution to the Account of each Participant who satisfies the
conditions of Section 3.06, in accordance with the contribution formula adopted
by the Employer under Adoption Agreement Section 3.01.
Top Heavy Minimum Allocation - Eligible Participant. A Participant is
entitled to the top heavy minimum allocation in Section 3.04(B) of the Plan if
he is employed by the Employer on the last day of the Plan Year, unless: (Choose
(a) or (b))
(a) No exceptions.
<PAGE>
(b) The Participant is a Key Employee for the Plan Year. [Note: If the
Employer selects this Option (b), it will need to identify the Key Employees
under the Plan.]
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under thsi Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (Choose (c) or (d))
(c) The employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
(d) The Employer will satisfy the top heavy minimum allocation under the Paired
Profit Sharing Plan the Employer also maintains under this Master Plan. However,
the Employer will make any necessary additional contribution to satisfy the top
heavy minimum allocation for an Employee covered only under this Plan and not
under the Paired Profit Sharing Plan. See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan which is not a Paired Profit Sharing Plan
offered under thsi Master Plan, the Employer may provide in an addendum to this
Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
3.05 FORFEITURE ALLOCATION.
Subject to any restoration allocation required under Sections 5.04 or 9.14,
the Advisory Committee will allocate a Participant forfeiture: (Choose (a) or
(b); (c) is optional in addition to (a) or (b))
(a) Reduction of Employer contribution. In accordance with Section 3.04, to
reduce the Employer contribution for the Plan Year: (Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(b) Increased allocation. In addition to the Employer contribution for the Plan
Year in which the forfeiure occurs. The Advisory Committee will allocate the
Participant forfeitures for a Plan Year to the Account of each Participant who
satisfies the conditions of Section 3.06, in the same ratio that such
Participant's Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year.
(c) First to reduce the Plan's ordinary and necessary administrative expenses
for the Plan Year and then will allocate any remaining forfeitures in the manner
described in Option (a) or in Option (b), whichever applies.
<PAGE>
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory committee will detemine the contribution
under Section 3.01, and, if applicable, the allocation under Option (b) of
Section 3.05, by taking into account: (Choose (a) or (b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation only for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan.
Accrual Requirements. To receive an allocation of Employer contributions and
Participant forfeitures, if any, for the Plan year, a Participant must satisfy
the accrual requirements of this paragraph. If the Participant is employed by
the Employer on the last day of the Plan Year, the Participant must complete at
least one hour of Service for that Plan Year. If the Participant terminates
employment with the Employer during the Plan year, the Participant must complete
at least ------------- Hours of Service (not exceeding 501) during the Plan
Year, except: (Choose (c) or (d))
(c) No exceptions.
(d) No Hour of Service requirement if the Participant terminates employment
during the Plan Year on account of: (Choose at least one of (1), (2) and (3))
(1) Death.
(2) Disability.
(3) Attainment of Normal Retirement Age in the current Plan Year or in a
prior Plan Year.
3.15 MORE THAN ONE PLAN LIMITATION.
If the provisions of Section 3.15 apply, the Excess Amount attributed to
this Plan equals: (Choose (a), (b) or (c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415), times
(ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Code ss.415).
(b) The total Excess Amount.
<PAGE>
(c) None of the Excess Amount.
[Note: If the Employer adopts Paired Plans available under this Master
Plan, the Employer must coordinate its elections under Section 3.15 of each
Adoption Agreement.]
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
(1) The Participant's projected annual benefit under the defined benefit
plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under the
defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section
3.18 do not apply to the Employer's Plan.]
Override of 100% Limitation. The Employer elects: (Choose (c) or 9d))
c) To apply the 100% limitation described in Section 3.19(1) of the Plan
in all Limitation Years.
[Note: This election will avoid having to calculate the Plan's top heavy
ratio for any year.]
(d) Not to apply the 100% limitation for Limitation Years in which the
Plan's top heavy ratio (as determined under Section 1.33 of the Plan) does not
exceed 90%, but only if the defined benefit plan satisfies the extra minimum
benefit requirements of Code ss.416(h)(2) (and the applicable Treasury
regulations) after taking into account the Employer's election under Options
(e), (f), (g) or (h) of this Section 3.18. To determine the top heavy ratio, the
Advisory Committee will use the following interest rate and mortality
assumptions to value accrued benefits under a defined benefit plan:
- -------------------------.
[Note: This election will require the Advisory Committee to calculate the
Plan's top heavy ratio.]
<PAGE>
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (Choose (e), (f), (g) or (h))
(e) No modifications.
(f) By substituting 4% for 3% in Paragraph 9b) of Section 3.04(B)(1) of the
Plan, but only for any Plan Year in which Option (d) applies to override the
100% limitation.
(g) By increasing the top heavy minimum allocation to 5% for any Plan Year in
which the 100% limitation applies, and to 7 1/2% for any Plan Year in which
Option (d) applies to override the 100% limitation. The increased percentage
under this Option (g) applies irrespective of whether the highest Participant
contribution rate for the Plan Year is less than that increased percentage.
(h) By eliminating the top heavy minimum allocation.
[Note: The Employer may not select this Option (h) if the defined benefit
plan does not guarantee the top heavy minimum benefit under Code ss.416 for
every Participant in this Plan who is a Non-Key Employee.]
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT.
Normal Retirement Age under the Plan is: (Choose (a) or (b))
(a) ------------------------------- [State age, but may not exceed age
65].
(b) The later of the date the Participant attains ---------(------) years of
age or the --------(---------) anniversary of the first day of the Plan Year in
which the Participant commenced participation in the Plan. [The age selected may
not exceed age 65 and the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY.
The 100% vesting rule under Section 5.02 of the Plan: (Choose (a) or choose
one or both of (b) and (c))
(a) Does not apply.
<PAGE>
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE.
The Employer elects the following vesting schedule: (Choose (a) or (b); (c)
is available only in addition to (b))
(a) Immediate vesting. 100% Nonforfeitable at all times.
[Note: The Employer must elect Option (a) if the eligibility conditions
under Adoption Agreement Section 2.01(b) require 2 years of service or more than
12 months of employment.]
(b) Graduated Vesting Schedules. (Choose (1), (2) or (3))
(1) 6-year graded (2) 3-year cliff (3) Modified Top
Heavy Schedule
Year of Nonforfeitable Year of Nonforfeitable Year of Nonforfeitable
Service Percentage Service Percentage Service Percentage
- --------------------------------------------------------------------------------
Less Less Less
than 2 0% than 3 0% than 1 ------
2 20% 3 or more 100% 1 ------
3 40% 2 ------
4 60% 3 ------
5 80% 4 ------
6 or more 100% 5 ------
6 or more 100%
[Note: Under Option (b)(3), the vesting schedule must satisfy the
top heavy requirements of Code ss.416.]
(c) Minimum vesting. A Participant's Nonforfeitable Accrued Benefit will never
be less than the lesser of $------------- or his entire Accrued Benefit, even if
the application of the graduated vesting schedule under Option (b) would result
in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT.
The deemed cash-out rule described in Section 4.04(C) of the Plan: (Choose
(a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0%
vested Participants.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
<PAGE>
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each successive 12
consecutive month period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (choose (c) or (d))
(c) 1,000 Hours of Service.
(d) ---------------- Hours of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING.
The Employer specifically excludes the following Years of Service: (Choose
(a) or at least one of (b), (c) and (d))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age of
- --------------------.
[Note: The age selected may not exceed age 18.]
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(d) Any Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This exception applies only if the
Participant is 0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Break in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not include any Years of
Service not required to be taken into account under this exception by reason of
any prior Break in Service.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.411(d)(6) Protected Benefits. The election under this Article VI may not
eliminate Code ss.411(d)(6) protected benefits. To the extent the elections
would eliminate a Code ss.(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the Effective Date of this Adoption Agreement.
<PAGE>
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
- --------------------------------------------------------------.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d))
(a) ----------- of the -------------- Plan Year beginning after the
Participant's Separation from Service.
(b) ---------------------- following the Participant's Separation from
Service.
(c) ------------------------- of the Plan Year after the Participant incurs
- -------------------- Break(s) in Service (as defined in Article V).
(d) ------------- following the Participant's attainment of Normal
Retirement Age, but not earlier than -------------- days following his
Separation from Service.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of Section
6.01(A)(3), is: (Choose (e) or (f))
(e) ----------------- after the Participant terminates employment because
of disability.
(f) The same as if the Participant had terminated employment without
disability.
Hardship. (Choose (g) or (h))
(g) The Plan does not permit a hardship distribution to a Participant who has
separated from Service.
(h) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy stated in
Section 6.01(A)(4) of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i) or (j))
<PAGE>
(i) Treats the default as a distributable event only if the
Participant has incurred a Separation from Service or has attained Normal
Retirement Age. If either conditions applies, the Trustee, at the time of
the default or, if later, at the time either conditions first occurs, will
reduce the Participant's Nonforfeitable Accrued Benefit by the lesser of
the amount in default (plus accrued interest) or the Plan's security
interest in that Nonforfeitable Accrued Benefit.
(j) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Setion 6.03
of the Plan, the Trustee will reduce the Participant's Nonforfeitable
Accrued Benefit by the lesser of the amount in default (plus accrued
interest) or the Plan's security interest in that Nonforfeitable Accrued
Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT.
The Advisory Committee will apply Section 6.02 of the Plan with the
following modifications: (Choose (a) or (b))
(a) No modifications.
(b) The Plan permits the following annuity options:
- ----------------------------------------------------------------.
[Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(b).]
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose (a) or
(b))
(a) As of any distribution date, but not earlier than -------- of the --------
Plan Year beginning after the Participant's Separation from Service.
(b) As of the following date(s): (Choose at least one of Options
(1) through (5))
(1) Any distribution date after the close of the Plan Year in which the
Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from
Service.
(3) Any distribution date in the ----------------- Plan Year(s) beginning
after his Separation from Service.
(4) Any distribution date in the Plan Year after the
Participant incurs --------------------- Break(s) in Service (as
defined in Article V).
<PAGE>
(5) Any distribution date following attainment of age ----------- and
completion of at least -------- Years of Service (as defined in Article
V).
Participant Elections Prior to Separation from Service. Subject to the
restrictions of Article VI, the following distribution options apply under the
Employer's Plan prior to a Participant's Separation from Service. (Choose (c) or
(d))
(c) No distribution options prior to Separation from Service.
(d) Attainment of Normal Retirement Age. Until he retires, the Participant
has a continuing election to receive all or any portion of his Nonforfeitable
Accrued Benefit after he attains Normal Retirement Age.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT.
If a distribution (other than a distribution from a segregated Account)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b))
(a) --------------% per annum. [Note: The percentage may equal 0%.]
(b) The 90 day Treasury bill rate in effect at the beginning of the current
valuation period.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST.
In addition to each Accounting Date, the Trustee must value the Trust Fund
on the following valuation date(s): (Choose (a) or (b))
(a) No other mandatory valuation dates.
(b) (Specify) --------------------------------------.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
<PAGE>
(a) Compensation definition. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning after
- -----------------.
[Note: May not be effective later than the first day of the first Plan Year
beginning after the Employer executes this Adoption Agreement to restate the
Plan for the Tax Reform Act of 1986, if applicable.]
(b) Eligibility conditions. The eligibility conditions specified in Adoption
Agreement Section 2.01 are effective for Plan Years beginning after
- -------------------.
(c) Suspension of Years of Service. The suspension of Years of Service rule
elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after --------------------.
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
- ---------------------.
(e) Reallocation of Forfeitures. The reallocation of forfeitures under
Section 3.05 applies to Plan Years beginning after ------------------.
[Note: The date specified may not be earlier than December 31, 1985.]
(f) Accrual requirements.
The accrual requirements of Section 3.06 are effective for Plan Years
beginning after -----------------. [Note: If the effective date is later than
Plan Years beignning after December 31, 1989, the accrual requirements in the
Plan prior to its restatement may not be more restrictive for post- 1989 Plan
Years than the requirements permitted under Adoption Agreement Section 3.06.]
(g) Vesting schedule. The vesting schedule elected under Adoption Agreement
Section 5.03 is effective for Plan Years beginning after --------------------.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated povisions. A special Effective Date may not result in the delay
of a Plan provisionbeyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
<PAGE>
and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee (and
Custodian, if applicable) signified its acceptance, on this --------- day of
- -------------, 19---.
Name and EIN of Employer: ---------------------------------------
Signed: ---------------------------------------------------------
Name(s) of Trustee: ---------------------------------------------
- -----------------------------------------------------------------
Signed: ---------------------------------------------------------
- -----------------------------------------------------------------
Name of Custodian: ----------------------------------------------
Signed: ---------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See
Section 10.03 of the Plan.]
Plan Number: The 3-digit plan number the Employer assigns to this
Plan for ERISA reporting purposes (Form 5500 Series) is:
- ------------------------.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
The Master Plan Sponsor offers the following Paired Pension Plan(s) with this
Paired Profit Sharing Plan, identified by 3-digit adoption agreement number: 003
and 009.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of an amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address and
telephone number: INVESCO Trust Company, 7800 E. Union Ave., Denver, Colorado
80201, (303) 779-0731.
<PAGE>
Reliance on Opinion Letter. If the Employer does not maintain (and has
never maintained) any other plan other than this Plan and a Paired Profit
Sharing Plan, it may rely on the Master Plan Sponsor's opinion letter covering
this Plan for purposes of plan qualification. For this purpose, the Employer has
not maintained another plan if this Plan, or the Paired Profit Sharing Plan,
amended and restated that prior plan and the prior plan was the same type of
plan as the restated plan. If the Employer maintains or has maintained another
plan other than a Paired Profit Sharing Plan, including a welfare benefit fund,
as defined in Code ss.419(e), which provides post-retirement medical benefits
for key employees (as defined in Code ss.419A(d)(3)), or an individual medical
account (as defined in Code ss.415(1)(2)), the Employer may not rely on this
Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by, ----------------------------------, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is ---------------------------.
2. The undersigned Employer's adoption of this Plan constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as ------------------------------------
and having an original effective date of --------------------------------------.
Dated this ----------------- day of --------------, 19----.
Name of Participating Employer: ------------------------------------
Signed: ------------------------------------------------------------
Participating Employer's EIN: --------------------------------------
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: ----------------------------------------
<PAGE>
Accepted: -------------------------------------------------
[Date]
Signed: ---------------------------------------------------
Name(s) of Trustee: ---------------------------------------
Accepted: -------------------------------------------------
[Date]
Signed: ---------------------------------------------------
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important Master
Plan information.]
STD MP AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee, INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will be the Trustee and will charge an annual trust fee. Note: See
Trustee Comments on page 14 for further explaination of Non-discretionary
Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Money Purchase Pension
Plan.
1.07 Employee
If you want the plan to cover all types of employees, select option (a). If you
want to exclude from the plan any group(s) of employees, select any combination
of (b) or (c).
Leased Employees
You may not exclude leased employees from participation unless they are excluded
under options (b) or (c) of Section 1.07.
Related Employers
You may not exclude related employers from participating in the plan unless they
are excluded under options (b) or (c) of Section 1.07.
<PAGE>
1.12 Compensation
Treatment of elective contributions - Choose option (a) if you prefer to "add
back" employee elective 401(k) contributions to compensation for purposes of
allocating employer contributions, and forfeitures.
Modification to Compensation
Modifications to Compensation - You must choose option (c) or any combination of
(d) or (e). Any exclusion of compensation may result in unallowable
discrimination.
1.17 Plan Year
You must define the "plan year," usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account), for administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January 1) and
the year.
Restated Plan - Effective date - If you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Originally established
date - Enter the original effective date of your plan from your prior Adoption
Agreement.
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by an employee to
accrue benefits. Option (b), the equivalency method, is explained in Section
1.27 of the plan. Option (a) is usually chosen.
1.29 Service for Predecessor Employer
Under this option, you may elect to count service for a predecessor employer
when you are not maintaining the plan of the predecessor employer. (Used
primarily in the event of a merger or acquisition.)
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b) is chosen.
<PAGE>
2.01 Eligibility
a. An employee must attain this age to become a participant (cannot exceed
age 21).
b. Pick how long (service) an employee must work to become a participant.
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (c), semi-annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (f) is chosen.
Dual Eligibility - This section allows you to include in the plan current
employees who have not met the eligibility requirements and apply the
eligibility requirements to newly hired employees.
Restated plans usually chose (i)(2).
2.02 Years of Service
Option (b) should only be chosen if you wish to require less than 1000
hours to be worked by an employee for eligibility. Usually Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary or the plan year. Option (d)
is chosen for administrative convenience.
2.03 Break in Service
This option may impose a complicated re-entry date for employees who have
terminated or whose hours were severely cut back. Option (a) is chosen for
administrative convenience.
3.01 Employer Contributions and Forfeitures
Amount - The employer must select a definite contribution formula under a money
purchase pension plan. Option (a) is a nonintegrated formula, options (b) and
(c) are integrated formulas.
Option (a) allows the employer to choose a fixed amount for the contribution
regardless of compensation.
Options (b) and (c) are two approaches to allowing permitted disparity in the
contribution formula. Option (b) applies the first percentage to a participant's
total compensation.
<PAGE>
3.04 Contribution Allocation
Contribution will be allocated (split up to participants) in the manner elected
to computate the contribution selected under Section 3.01.
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures as a reduction
in contributions. Option (b) allocates forfeitures as an additional employer
contribution.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered the plan during the year), for contributions choose option (a), if not,
choose option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, no greater than 501 hours. Standardized plans have relaxed
contribution requirements. A participant will receive an employer contribution
and forfeitures if they meet either of the two requirements below.
Requirement #1
If the Participant was employed on the last day of the plan year and worked for
at least one hour during the plan year, or
Requirement #2
If the Participant terminates employment during the plan year after working at
least 501 hours for the employer.
3.15 More Than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
3.18 Defined Benefit Plan Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit under option (b), choose which plan's benefit would be reduced if a
participant's total allocations for a year were to exceed the allowable limit.
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
<PAGE>
5.02 Vesting Death/Disability
You may choose to allow 100% vesting for participants that terminate from
service because of death, option (b) or disability, option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer contributions. If
you choose option (b), you must at a minimum complete the top-heavy vesting
schedule. Remember, if the eligibility requirements are more than one year,
option (a) must be chosen.
Complete the Modified Top Heavy Schedule based upon the following:
Nonforfeitable Percentage
Years of Service
1
2 (not less than 20%)
3 (not less than 40%)
4 (not less than 60%)
5 (not less than 80%)
6 (not less than 100%)
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant as
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose Option (a).
5.08 Prior Years of Service
By choosing options (b) through (d) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article 6
The Employer must establish a specific distribution policy for the plan.
Treas. Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any
third party to retain discretion over when or in what form to pay the
participant's benefit (Optional Forms of Benefit). Under a restated plan, the
elections under Article VI, to the extent they differ from previous plan
<PAGE>
provisions regarding optional forms of benefit, may not eliminate an
optional form of benefit with respect to the account balance accrued as of the
date the Employer executes the restated adoption agreement (or, if later, the
effective date of that restated adoption agreement). An option form of benefit
includes the form of payment (e.g., lump sum or installments), the timing of
payment (e.g., immediately after separation form service, following a break in
service, after attaining normal retirement age) and the medium of payment (e.g.
right to elect distribution in Employer securities, right to elect distribution
in the form of an annuity contract).
With this in mind, if you are restating an existing plan, pay close attention to
the distribution features under that document and your administrative practice
of distributions. In all cases, try to mirror or liberalize those distribution
features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
administratively reasonable period of time from the distribution date. Typical
distribution dates are annual dates such as March 1.
Nonforfeitable Accrued Benefit Not Exceeding $3,500
When a separated participant's vested balance does not exceed $3,500, the plan
allows the employer to separately establish the timing of these distributions,
separate from the distribution dates. When you complete this section, you need
to balance two concerns: 1) will the timing of the distribution cause the
participant to consider it a "severance benefit" and therefore encourage
separation from service and 2) the administrative concerns of carrying a
non-active account in the plan.
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (e) and (f).
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in your
plan.
<PAGE>
6.02 Method of Payment
Money purchase pension plans require payouts to be in the form of a
commercial annuity unless properly waived. The employer may in options (b) and
(c), (if this is a new plan), limit the alternative method of payment. Caution:
an employer cannot eliminate a prior method of payment by restating the plan
onto this document.
6.03 Participant Elections After Separation form Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3,500, may elect to commence distributions. This election
will be tied directly to the "distribution date" defined earlier.
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally, option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates of any
of the listed items (a) through (g) have an effective date other than your
restated effective date in adoption agreement section 1.18. Some provisions in
the Tax Reform Act of 1986 were not effective until 1988 or 1989 the few
provisions (if any) that have later effective dates must specify when they are
effective.
a. Compensation definition may not be later than the first day of your 1991
plan year.
b. Eligibility conditions may not be later than the first day of your 1989
plan year.
c. Suspension of years of service may not be earlier than the first day of
your 1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day of
your 1989 plan year.
e. Reallocation of Forfeitures may not be earlier than December 31, 1989.
f. Accrual requirements may not be earlier than the first day of your 1989
plan year.
<PAGE>
g. Vesting schedule may not be later than the first day of your 1989 plan
year.
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides two
lines above the signature line to print or type the name of the Employer and the
Employer's EIN. If the Employer is a sole proprietorship, the individual sole
proprietor should execute as Employer. If the Employer is a corporation or a
partnership, an officer or a partner, as applicable, should execute the adoption
agreement on behalf of the Employer.
Trustee
If you selected option (a) of Section 1.02, then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as Custodian.
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust Company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non- discretionary trustee
accepts all directions from the Named Fiduciary. The Named Fiduciary is either
the President of the Corporation, the managing partner of the partnership or the
self-employed individual of a sole proprietorship. The Named Fiduciary is
responsible for selecting plan investments.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
correspond to the 3- digit adoption agreement number specified at the top of the
first page of the adoption agreement. Consult your Counsel if you are unsure
what 3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
<PAGE>
participating Employer should execute a separate Participation Agreement.
See Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
is necessary to satisfy the coverage requirements of Code ss.410(b) or the
minimum participation requirement of Code ss.401(a)(26). If the Employer
determines inclusion of the employees of a related group member is necessary to
maintain qualification of the plan, the Employer may take one or two approaches:
(1) have the related group member execute a Participation Agreement; or (2)
elect in Adoption Agreement Section 1.07 to include the employees of that
related group member. Under approach (1), the participation of the related group
member will result in the automatic inclusion of the employees of that related
group member, without having to specify their inclusion in Adoption Agreement
Section 1.07. In addition, the related group member, under approach (1), has the
authority to contribute to the plan and, in the event another participating
related group member makes a contribution on behalf of that related group
member's employees, the Participation Agreement will ensure the deductibility of
that contribution (assuming the contribution does not exceed the deduction
limits of Code ss.404). Additional instructions to the appropriate adoption
agreement explain the effect on the allocation of Employer contributions when
related group members maintain a single nonstandardized plan. Please contact us.
Under approach (2), the plan will retain its qualified status, but contributions
the Employer makes on behalf of a nonparticipating related group member's
employees may not be deductible (even if otherwise within the limitations of
Code ss.404), resulting in an excise tax to the contributing Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the Plan).
legal\adop-agr\stdmpaa.004
Adoption Agreement #005
D346282a
Nonstandardized 401(k) Plan Adoption Agreement
Nonstandardized 401(k) Plan Considerations
For: Businesses that want the ability of employee pre-tax
contributions.
Compensation: The employer may exclude certain types of
compensation.
Eligibility for Contributions: May require employees to work up
to 1,000 hours and be employed on the last day.
Investment Direction: May allow the employee to direct where
funds are invested.
Eligibility: The employer may exclude certain classifications or
groups of employees.
Provided by:
The Financial Funds
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
Your Adoption Agreement and Basic Plan Document together constitute the rules
and parameters under which your retirement program will operate. Each section of
the Adoption Agreement requires the employer to make a selection. Whenever
possible (balancing complexity and space constraints) we have provided
instructions to the left of key selections. These instructions are intended to
assist you, the employer, in choosing the optional provisions for your
retirement program. They are not intended to substitute or replace competent
advice from your legal counsel or accountant. If further clarification is
necessary, contact your advisors or INVESCO Trust Company. We recommend that you
obtain the advice of your legal or tax advisor before you sign this Adoption
Agreement.
<PAGE>
ADOPTION AGREEMENT #005
NONSTANDARDIZED CODE 401(k)
PROFIT SHARING PLAN
The undersigned, -------------------------------------------- ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
the INVESCO Trust Company Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose (a)
or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note:
The Employer may not elect Option (b) if a Custodian executes the Adoption
Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is
- -------------------------------------------------------------.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (Choose (a) or at least one of (b) through (G))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the Plan, the
Employer must be able to provide evidence that retirement benefits were the
subject of good faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in
Code ss.911(d)(2) from the Employer which constitutes United States source
income (as defined in Code ss.861(a)(3)).
(d) Commission Salesmen.
(e) Any Employee compensated on a salaried basis.
(f) Any Employee compensated on an hourly basis.
(g) (Specify) -------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Leased Employees. Any Leased Employee treated as an Employee
under Section 1.31 of the Plan, is: (Choose (h) or (i))
(h) Not eligible to participate in the Plan.
(i) Eligible to participate in the Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section 1.07.
Related Employers. If any member of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement to this Adoption
Agreement, such member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification elected uner this
Adoption Agreement Section 1.07. In addition: (Choose (j) or (k))
(j) No other related group member's Employees are eligible to participate
in the Plan.
(k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section 1.07:
- ---------------------------------------
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b))
(a) "Compensation" includes elective contributions made by the Employer on
the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least one of
(d) through (j))
(c) No modifications other than as elected under Options (a) or
(b).
(d) The Plan excludes Compensation in excess of $---------------.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation means
any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
(f) The Plan excludes bonuses.
(g) The Plan excludes overtime.
(h) The Plan excludes Commissions.
<PAGE>
(i) Compensation will not include Compensation from a related employer (as
defined in Section 1.30 of the Plan) that has not executed a Participation
Agreement in this Plan unless, pursuant to Adoption Agreement Section 1.07, the
Employees of that related employer are eligible to participate in this Plan.
(j) (Specify) ----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
Special definition for matching contributions. "Compensation" for purposes
of any matching contribution formula under Article III means: (Choose (k) or (l)
only if applicable)
(k) Compensation as defined in this Adoption Agreement Section
1.12.
(l) (Specify) ----------------------------------------------------------------
- --------------------------------------------------------------------------------
Special definition for salary reduction contributions. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (Choose (m) or at least one of (n) or (o), if applicable)
(m) No exceptions.
(n) If the Employee makes elective contributions to another plan maintained by
the Employer, the Advisory Committee will determine the amount of the Employee's
salary reduction contribution for the withholding period: (Choose (1) or (2))
(1) After the reduction for such period of elective
contributions to the other plan(s).
(2) Prior to the reduction for such period of elective
contributions to the other plan(s).
(o) (Specify) ----------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every ---------------.
(b) (Specify) ----------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Limitation Year. The Limitation Year is: (Choose (c) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every ---------------.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is -----------------.
Restated Plan. The restated Effective Date is -----------------.
This Plan is a substitution and amendment of an existing
retirement plan(s) originally established ---------------------.
(Note: See the Effective Date Addendum.)
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is: (Choose
(a) or (b))
(a) The actual method.
(b) The ---------------------------- equivalency method, except:
(1) No exceptions.
(2) The actual method applies for purposes of: (Choose at
least one)
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii)Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s):---------------------
- --------------------------------------------------------------------------------
Service with the designated predecessor employer(s) applies: (Choose at least
one of (a) or (b); (c) is available only in addition to (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
(c) Except the following Service: --------------------------/
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach a
schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
<PAGE>
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan
and also participates in a plan maintained by the leasing organization: (Choose
(a) or (b))
(a) The Advisory Committee will determine the Leased Employee's allocation of
Employer contributions under Article III without taking into account the Leased
Employee's allocation, if any, under the leasing organization's plan.
(b) The Advisory Committee will reduce the Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified nonelective
contributions) under this Plan by the Leased Employee's allocation under the
leasing organization's plan, but only to the extent that allocation is
attributable to the Leased Employee's service provided to the Employer. The
leasing organizationn's plan:
(1) Must be a money purchase plan which would satisfy the definition under
Section 1.31 of a safe harbor plan, irrespective of whether the safe
harbor exception applies.
(2) Must satisfy the features and, if a defined benefit plan, the method
of reduction described in an addendum to this Adoption Agreement, numbered
1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee
must satisfy the following eligibility conditions: (Choose (a) or (b) or both;
(c) is optional as an additional election)
(a) Attainment of age ------------------ (specify age, not exceeding 21).
(b) Service requirement. (Choose one of (1) through (3))
(1) One Year of Service.
(2) ---------- months (not exceeding 12) following the Employee's
Employment Commencement Date.
(3) One Hour of Service.
(c) Special requirements for non-401(k) portion of plan. (Make elections
under (1) and under (2))
<PAGE>
(1) The requirements of this Option (c) apply to
participation in: (Choose at least one of (i) through (iii))
(i) The allocation of Employer nonelective contributions and
Participant forfeitures.
(ii) The allocation of Employer matching contributions (including
forfeitures allocated as matching contributions).
(iii)The allocation of Employer qualified nonelective
contributions.
(2) For participation in the allocations described in (1),
the eligibility conditions are: (Choose at least one of (i)
through (iv))
(i) --------- (one or two) Year(s) of Service, without an
intervening Break in Service (as described in Section 2.03(A) of the
Plan) if the requirement is two Years of Service.
(ii) --------- months (not exceeding 24) following the Employee's
Employment Commencement Date.
(iii)One Hour of Service.
(iv) Attainment of age ----------------- (Specify age, not
exceeding 21).
Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose
(d), (e) or (f))
(d) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
(e) The first day of the Plan Year.
(f) (Specify entry dates) ----------------------------/
Time of Participation. An Employee will become a Participant (and, if
applicable, will participate int he allocations described in Option (c)(1)),
unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date): (Choose (g), (h) or (I))
(g) immediately following
(h) immediately preceding
(i) nearest --------------------------------------------- the date the
Employer completes the eligibility conditions described in Options (a) and (b)
(or in Option (c)(2) if applicable) of this Adoption Agreement Section 2.01.
<PAGE>
[Note: The Employer must coordinate the selection of (g), (h) or (i) with
the "Plan Entry Date" selection in (d), (e) or (f). Unless otherwise excluded
under Section 1.07, the Employee must become a Participant by the earlier of:
(1) the first day of the Plan Year beginning after the date the Employee
completes the age and service requirements of Code ss.410(a); or (2) 6 months
after the date the Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01
apply to: (Choose (j) or (k))
(j) All Employees of the Employer, except: (Choose (1) or (2))
(1) No exceptions
(2) Employees who are Participants in the Plan as of the
Effective Date.
(k) Solely to an Employee employed by the Employer after ----------------.
If the Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1), (2) or (3))
(1) On the latest of the Effective Date, his Employment Commencement Date
or the date he attains age ----------------- (not to exceed 21).
(2) Under the eligibility conditions in effect under the Plan prior to the
restated Effective Date. If the restated Plan required more than one Year
of Service to participate, the eligibility conditions under this Option
(2) for participation in the Code 401(k) arrangement under this Plan is
one Year of Service for Plan Years beginning after December 31, 1988. [For
restated plans only]
(3) (Specify)
----------------------------------------------------------
----------------------------------------------------------/
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) -------------- Hours of Service during an eligibility computation
period to receive credit for a Year of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
Eligibility computation period. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
<PAGE>
(c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
(d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
in Section 2.03(B) of the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
(a) Does not permit an eligible Employee or a Participant to elect not to
participate.
(b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
(Complete (1), (2), (3) and (4))
(1) An election is effective for Plan Year if filed no later than
---------------------.
(2) An election not to participate must be effective for at least
------------- Plan Year(s).
(3) Following a re-election to participate, the Employee or
Participant:
(i) May not again elect not to participate for any
subsequent Plan Year.
(ii) May again elect not to participate, but not earlier than the
--------------------- Plan Year following the Plan Year in which
the re-election first was effective.
(4) (Specify) --------------------------------------------------------
[Insert "N/A" if no other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's contribution. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01.
<PAGE>
(Choose any combination of (a), (b), (c) and (d), or choose (e))
(a) Deferral contributions (Code 401(k) arrangement). (Choose
(1) or (2) or both)
(1) Salary reduction arrangement. The Employer must contribute the amount
by which the Participants have reduced their Compensation for the Plan
Year, pursuant to their salary reduction agreements on file with the
Advisory Committee. A reference in the Plan to salary reduction
contributions is a reference to these amounts.
(2) Cash or deferred arrangement. The Employer will contribute on behalf
of each Participant the portion of the Participant's proportionate share
of the cash or deferred contribution which he has not elected to receive
in cash. See Section 14.02 of the Plan. The Employer's cash or deferred
contribution is the amount the Employer may from time to time deem
advisable which the Employer designates as a cash or deferred contribution
prior to making that contribution to the Trust.
(b) Matching contributions. The Employer will make matching contributions in
accordance with the formula(s) elected in Part II of this Adoption Agreement
Section 3.01.
(c) Designated qualified nonelective contributions. The Employer, in its sole
discretion, may contribute an amount which it designates as a qualified
nonelective contribution.
(d) Nonelective contributions. (Choose any combination of (1)
through (4))
(1) Discretionary contribution. The amount (or additional
amount) the Employer may from time to time deem advisable.
(2) The amount (or additional amount) the Employer may from
time to time deem advisable, separately determined for each
of the following classifications of Participants: (Choose
(i) of (ii))
(i) Nonhighly Compensated Employees and Highly
Compensated Employees.
(ii) (Specify classifications) ------------------------------------
------------------------------------------------------.
Under this Option (2), the Advisory Committee will allocate the
amount contributed for each Participant classification in accordance
with Part II of Adoption Agreement Section 3.04, as if the
Participants in that classification were the only Participants in
the Plan.
<PAGE>
(3) ----------------% of the Compensation of all Participants under
the Plan, determined for the Employer's taxable year for
which it makes the contribution. [Note: The percentage
selected may not exceed 15%.]
(4) -----------% of Net Profits but not more than $--------------.
(e) Frozen Plan. This Plan is a frozen Plan effective
- ----------------------. The Employer will not contribute to the Plan with
respect to any period following the stated date.
Net Profits. The Employer: (Choose (f) or (g))
(f) Need not have Net Profits to make its annual contribution under this Plan.
(g) Must have current or accumulated Net Profits exceeding $------------ to
make the following contributions: (Choose at least one)
(1) Cash or deferred contributions described in Option
(a)(2).
(2) Matching contributions described in Option (b), except:
-----------------------------------------------------------.
(3) Qualified nonelective contributions described in Option
(c).
(4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "net Profits" specifically
excludes:
- ---------------------------------------------------------------.
[Note: Enter "N/A" if no exclusions apply.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits uner Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
<PAGE>
Agreement, each participating member will determine net Profits separately
but will not apply this reduction unless, after combining the separately
determined Net Profits, the aggregate Net Profits are insufficient to satisfy
the matching contribution liability. "Net Profits" includes both current and
accumulated Net Profits.
Part II. [Options (h) through (j)] Matching contribution formula. [Note: If
the Employer elected Option (b), complete Options (h), (i) and (j).]
(h) Amount of matching contributions. For each Plan Year, the Employer's
matching contribution is: (Choose any combination of (1), (2), (3), (4) and (5))
(1) An amount equal to -----------% of each Participant's eligible
contributions for the Plan Year.
(2) An amount equal to -----------% of each Participant's first tier of
eligible contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible contributions
for the Plan Year: --------------------------------------.
(3) Discretionary formula.
(i) An amount (or additional amount) equal to a matching percentage
the Employer from time to time may deem advisable of the
Participant's eligible contributions for the Plan Year.
(ii) An amount (or additional amount) equal to a matching percentage
the Employer from time to time may deem advisable of each tier of
the Participant's eligible contributions for the Plan Year.
(4) An amount equal to the following percentage of each Participant's
eligible contributions for the Plan Year, based on the Participant's Years
of Service:
Number of Years of Service Matching Percentage
----------- ------------
----------- ------------
----------- ------------
----------- ------------
The Advisory Committee will apply this formula by determining
Years of Service as follows: -------------------------------------------------.
(5) A Participant's matching contribuitons may not: (Choose
(i) or (ii))
(i) Exceed -------------------------------------------.
(ii) Be less than -------------------------------------.
<PAGE>
Related Employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the related employers may elect different
matching contribution formulas by attaching to the Adoption Agreement a
separately completd copy of this Part II. [Note: Separate matching contribution
formulas create separate current benefit structures that must satisfy the
minimum participation test of Code 401(a)(26).]
(i) Definition of eligible contributions. Subject to he requirements of
Option (j), the term "eligible contributions" means: (Choose any combination of
(1) through (3))
(1) Salary reduction contributions.
(2) Cash or deferred contributions (including any part of the
Participant's proportionate share of the cash or deferred contribution
which the Employer defers without the Participant's election).
(3) Participant mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
(j) Amount of eligible contributions taken into account. When determining a
Participant's eligible contributions taken into account under the matching
contributions formula(s), the following rules apply: (Choose any combination of
(1) through (4))
(1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
(2) The Advisory Committee will disregard eligible contributions
exceeding
(3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not exceeding:
-----------------------------.
The subsequent tiers of eligible contributions are:
- ---------------------------.
(4) (Specify)------------------------------------.
Part III. [Options (k) and (l). Special rules for Code ss.401(k)
Arrangement. (Choose (k) or (l), or both, as applicable)
(k) Salary Reduction Agreements. The following rules and
restrictions apply to an Employee's salary reduction agreement:
(Make a selection under (1), (2), (3) and (4))
(1) Limitation on amount. The Employee's salary reduction
contributions: (Choose (i) or at least one of (ii or (iii))
<PAGE>
(i) No maximum limitation other than as provided in
the Plan.
(ii) May not exceed ------------% of Compensation for the Plan Year,
subject to the annual additions limitation described in Part 2 of
Article III and the 402(g) limitation described in Section 14.07 of
the Plan.
(iii)Based on percentages of Compensation must equal at
least --------------------.
(2) An Employee may revoke, on a prospective basis, a
salary reduction agreement: (Choose (i), (ii), (iii) or
(iv))
(i) Once during any Plan Year but not later than
--------------------- of the Plan Year.
(ii) As of any Plan Entry Date.
(iii)As of the first day of any month.
(iv) (Specify, but must be at least once per Plan Year
-------------------------.
(3) an Employee who revokes his salary reduction agreemetn
may file a new salary reduction agreemetn with an effective
date: (Choose (i), (ii), (iii) or (iv))
(i) No earlier than the first day of the next Plan
Year.
(ii) As of any subsequent Plan Entry Date.
(iii)As of the first day of any month subsequent to the
month in which he revoked an Agreement.
(iv) (Specify, but must be at least once per Plan Year following the
Plan Year of revocation) ----------------------.
(4) A Participant may increase or may decrease, on a
prospective basis, his salary reduction percentage or dollar
amount: (Choose (i), (ii), (iii) or (iv))
(i) As of the beginning of each payroll period.
(ii) As of the first day of each month.
(iii)As of any Plan Entry Date.
(iv) (Specify, but must permit an increase or a
decrease at least once per Plan Year
-----------------------------------.
<PAGE>
(l) Cash or deferred contributions. For each Plan Year for which the Employer
makes a designated cash or deferred contribution, a Participant may elect to
receive directly in cash not more than the following portion (or, if less, the
402(g) limitation described in Section 14.07 of the Plan) of his proportionate
share of that cash or deferred contribution: (Choose (1) or (2))
(1) All or any portion.
(2) ----------------%.
3.04 CONTRIBUTION ALLOCATION. the Advisory Committee will allocate deferral
contributions, matching contributions, qualified nonelective contributions and
nonelective contributions in accordance with Section 14.06 and the elections
under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose
whichever elections are applicable to the Employer's Plan)
(a) Matching Contribuitons Account. The Advisory Committee will allocate
matching contributions to a Participant's: (Choose (1) or (20; (3) is available
only in addition to (1))
(1) Regular Matching Contribution Account.
(2) Qualified Matching Contributions Account.
(3) Except, matching contributions under Option(s) ---------------------
of Adoption Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
(b) Special Allocation Dates for Salary Reduction Contributions. The
advisory Committee will allocate salary reduction contributions as of the
Accounting Date and as of the following additional allocation dates:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(c) Special Allocation Dates for Matching Contributions. The Advisory
Committee will allocate matching contributions as of the Accounting Date and as
of the following additional allocation dates:
- ----------------------------------------------------------.
(d) Designated Qualified Nonelective Contributions - Definition of
Participant. For purposes of allocating the designated qualified nonelective
contribution, "Participant" means: (Choose (1), (2) or (3))
(1) All Participants.
(2) Participants who are Nonhighly Compensated Employees
for the Plan Year.
<PAGE>
(3) (Specify) ----------------------------------------------------------
--------------------------------------------------------------------------
Part II. Method of Allocation - Nonelective Contribution. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Optoin (g)(2) or Option (h), for the first 3% of
Compensation allocated to all Participants, "Compensation" does not include an
exclusions elected under Adoptoin Agreement Section 1.12 (other than the
exclusion of elective contributions), and the Advisory Committee must take into
account the Participant's Compensation for the entire Plan Year. (Choose an
allocation method under (e), (f), (g) or (h); (I) is mandatory if the Employer
elects (f), (g) or (h); (j) is optional in addition to any other election.)
(e) Nonintegrated Allocation Formula. (Choose (1) or (2))
(1) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
(2) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year. For purposes of this Option (2), "Participant" means, in
addition to a Participant who satisfies the requirements of Section 3.06
for the Plan Year, any other Participant entitled to a top heavy minimum
allocation under Section 3.04(b), but such Participant's allocation will
not exceed 3% of his Compensation for the Plan Year.
(f) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the
Advisory Committee will allocate the annual Employer nonelective contributions
in the same ratio that each Participant's Compensation plus Excess Compensation
of all Participants for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
<PAGE>
(c) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation may not exceed the
applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity
Table following Option (I). Solely for purposes of the allocation in this first
paragraph, "Participant" means, in addition to a Participant who satisfies the
requirements of Section 3.06 for the Plan Year: (Choose (1) or (2))
(1) No other Participant.
(2) any other Participant entitled to a top heavy minimum allocation under
Section 3.04(B), but such Participant's allocation under this Option (g) will
not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year. The allocation under this paragraph, as a
percentage of each Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
(h) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year, but not exceeding 3% of each
Participant's Compensation. Solely for purposes of this first tier allocation, a
"Participant" means, in addition to any Participant who satisfies the
requirements of Section 3.06 for the Plan Year, any other Participant entitled
to a top heavy minimum allocation under Sectoin 3.04(B) of the Plan.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year, but not exceeding 3% of each Participant's
Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total Compensation plus
<PAGE>
Excess Compensation of all Participants for the Plan year. The allocation
under this paragraph, as a percentage of each Participant's Compensation plus
Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or
1.3%) listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
(i) Excess Compensation. For purposes of Option (f), (g) or (h), "Excess
Compensation" means Compensation in excess of the following Integration Level:
(Choose (1) or (2))
(1) --------% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first day
of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii))
(i) Rounded to ----------------------- (but not exceeding
the taxable wage base).
(ii) But not greater than $--------------------.
(iii)Without any further adjustment or limitation.
(2) $------------------. [Note: Not exceeding the taxable
wage base for the Plan Year in which this Adoption Agreement
first is effective.]
Maximum Disparity Table. For purposes of Options (f), (g) and
(h), the applicable percentage is:
Integration Level Applicable Percentages Applicable
(as percentage of for Option (f) or Percentages
taxable wage base) Option (g) For Option (h)
- --------------------------------------------------------------------------------
100% 5.7% 2.7%
More than 80% but
less than 100% 5.4% 2.4%
More than 20%
(but not less than
$10,001) and not
more than 80% 4.3% 1.3%
20% (or $10,000, if
greater) or less 5.7% 2.7%
<PAGE>
(j) Allocation offset. The Advisory Committee will reduce a Participant's
allocation otherwise made under Part II of this Section 3.04 by the
Participant's allocation under the following qualified plan(s) maintained by the
Employer: ----------------. The Advisory Committee will determine this
allocation reduction:
(Choose (1) or (2))
(1) By treating the term "nonelective contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the
qualified plan(s) referenced under this Option (j). If a Participant under
this Plan also participates in that other plan, the Advisory Committee
will treat the amount the Employer contributes for or during a Plan Year
on behalf of a particular Participant under such other plan as an amount
allocated under this Plan to that Participant's Account for that Plan
Year. The Advisory Committee will make the computation of allocation
required under the immediately preceding sentence before making any
allocation of nonelecive contributions under this Section 3.04.
(2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(j).
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (Choose (k) or (l))
(k) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
(l) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains: ---------------------. However, the Employer
will make any necessary additional contribution to satisfy the top heavy minimum
allocation for an Employee covered only under this Plan and not under the other
plan(s) designated in this Option (l). See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
nonelective contributions (and forfeitures treated as nonelective contributions)
to each Participant in the Plan, in accordance with the elections in this
Adoption Agreement Section 3.04: (Choose (m) or (n))
<PAGE>
(m) Without regard to which contributing related group member employes the
Participant.
(n) Only to the Participants directly employed by the contributing Employer. If
a Participant receives Compensation from more than one contributing Employer,
the Advisory Committee will determine the allocations under this Adoption
Agreement Section 3.04 by prorating among the participating Employers the
Participant's Compensation and, if applicable, the Participant's Integration
Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b))
(a) As an Employer nonelective contribution for the Plan Year in which the
forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
(b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(c) To the extent attributable to matching contributions:
(Choose (1), (2) or (3))
(1) In the manner elected under Options (a) or (b).
(2) First to reduce Employer matching contributions for the
Plan Year: (Choose (i) or (ii))
(i) in which the forfeiture occurs,
(ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
(3) As a discretionary matching contribution for the Plan Year in which
the forfeiture occurs, in lieu of the manner elected under Options (a) or
(b).
(d) First to reduce the Plan's ordinary and necessary administrative expenses
for the Plan Year and then will allocate any remaining forfeitures in the manner
described in Option (a), (b) or (c), whichever applies. If the Employer elects
Option (c), the forfeitures used to reduce Plan expenses: (Choose (1) or (2))
(1) relate proportionately to forfeitures described in
Option (c) and to forfeitures described in Options (a) or (b).
<PAGE>
(2) relate first to forfeitures described in Option
--------------.
Allocation of forfeited excess aggregate contributions. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (Choose (e), (f) or (g))
(e) To reduce Employer matching contributions for the Plan Year:
(Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(f) As Employer discretionary matching contributions for the Plan Year in which
forfeited, except the Advisory Committee will not allocate these forfeitures to
the Highly Compensated Employees who incurred the forfeitures.
(g) In accordance with Options (a) through (d), whichever applies, except the
Advisory Committee will not allocate these forfeitures under Option (a) or under
Option (c)(3) to the Highly Compensated Emplyees who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any cash or deferred contribution, designated qualified nonelective contribution
or nonelective contribution by taking into account: (Choose (a) or (b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation only for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of cash or deferred
contributions, matching contributions, designated qualified nonelective
contributions, nonelective contributions and Participant forfeitures, if any,
for the Plan Year, a Participant must satisfy the conditions described in the
folloiwng elections: (Choose (c) or at least one of (d) through (f))
(c) Safe harbor rule. If the Participant is employed by the Employer on the
last day of the Plan Year, the Participant must complete at least one Hour of
Service for that Plan Year. If the Participant is not employed by the Employer
on the last day of the Plan Year, the Participant must complete at least 501
Hours of Service during the Plan Year.
<PAGE>
(d) Hours of Service condition. The Participant must complete the following
minimum number of Hours of Service during the Plan Year: (Choose at least one of
(1) through (5))
(1) 1,000 Hours of Service.
(2) (Specify, but the number of Hours of Service may not
exceed 1,000) --------------------------------------------.
(3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of:
(Choose (i), (ii) or (iii))
(i) Death.
(ii) Disability.
(iii)Attainment of Normal Retirement Age in the current Plan Year or
in a prior Plan Year.
(4) ------------ Hours of Service (not exceeding 1,000) if the Participant
terminates employment with the Employer during the Plan Year, subjet to
any election in Option (3).
(5) No Hour of Service requirement for an allocation of the
following contributions: -------------------------------------------------
--------------------------------------------------------------------------
(e) Employment conditions. The Participant must be employed by the Employer on
the last day of the Plan Year, irrespective of whether he satisfies any Hours of
Service condition under Option (d), with the following exceptions: (Choose (1)
or at least one of (2) through (5))
(1) No exceptions.
(2) Termination of employment because of death.
(3) Termination of employment because of disability.
(4) Termination of employment following attainment of
Normal Retirement Age.
(5) No employment conditions for the following
contributions: ---------------------------------.
(f) (Specify other conditions, if applicable): -------------------------------
- --------------------------------------------------------------------------------
Suspension of Accrual Requirements. The suspension of accrual requirements
of Section 3.06(E) of the Plan: (g), (h) or (I))
<PAGE>
(g) Applies to the Employer's Plan.
(h) Does not apply to the Employer's Plan.
(i) Applies in modified form to the Employer's Plan, as described in an addendum
to this Adoption Agreement, numbered Section 3.06(E).
Special accrual requirements for matching contributions. If the Plan allocates
matching contributions on two or more allocation dates for a Plan Year, the
Advisory Committee, unless otherwise specified in Option (1), will apply any
Hours of Service condition by dividing the required Hours of Service on a
prorata basis to the allocation periods included in that Plan Year. Furthermore,
a Participant who satisfies the conditions described in this Adoption Agreement
Section 3.06 will receive an allocation of matching contributions (and
forfeitures treated as matching contributions) only if the Participant satisfies
the following additional condition(s): (Choose (j) or at least one of (k) or
(l))
(j) No additional conditions.
(k) The Participant is not a Highly Compensated Employee for the Plan Year.
This Option (k) applies to: (Choose (1) or (2))
(1) All matching contributions.
(2) Matching contributions described in Option(s) --------- of Adoption
Agreement Section 3.01.
(l) (Specify) ----------------------------------------------------------------
- -------------------------------------------------------------------------------.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals: (Choose (a), (b) or
(c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415), times
(ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Code ss.415).
(b) The total Excess Amount.
(c) None of the Excess Amount.
<PAGE>
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of
the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
(1) The Participant's projected annual benefit under the defined benefit
plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under the
defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section
3.18 do not apply to the Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications:
(Choose (c), or at least one of (d) or (e))
(c) No modifications.
(d) For Non-Key Employees participating only in this Plan, the top heavy minimum
allocation is the minimum allocation described in Section 3.04(B) determined by
substituting ---------% (not less than 4%) for "3%", except: (Choose (i or (ii))
(i No exceptions.
(ii) Plan Years in which the top heavy ratio exceeds 90%.
(e) For Non-Key Employees also participating in the defined benefit plan,
the top heavy minimum is: (Choose (1) or (2))
(1) 5% of Compensation (as determined under Section 3.04(B)
of the Plan) irrespective of the contribution rate of any
Key Employee, except: (Choose (i) or (ii))
(i) No exceptions.
(ii) Substituting "7 1/2%" for "5%" if the top heavy ratio
does not exceed 90%.
<PAGE>
(2) 0%. [Note: The employer may not select this Option (2)
unless the defined benefit plan satisfies the top heavy
minimum benefit requirements of Code ss.416 for these Non-Key
Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and mortality
assumptions to value accured benefits under a defined benefit plan:-------------
- -------------------------------------------------------------------------------.
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or (b);
(c) is available only with (b))
(a) Does not permit Participant nondeductible contributions.
(b) Permits Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
(c) The following portion of the Participant's nondeductible contributions
for the Plan Year are mandatory contributions under Option (i)(3) of Adoption
Agreement Section 3.01: (Choose (1) or (2))
(1) The amount which is not less than: -------------------.
(2) The amount which is not greater than: ----------------.
Allocation dates: The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates:
(Choose (d) or (e))
(d) No other allocation dates.
(e) (Specify) ----------------------------------------------------------------
- -------------------------------------------------------------------------------.
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (e), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
<PAGE>
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION.
Subject to the restrictions of Article VI, the following distribution options
apply to a Participant's Mandatory Contributions Account, if any, prior to his
Separation from Service: (Choose (a) or at least one of (b) through (d))
(a) No distribution optoins prior to Separation from Service.
(b) The same distribution options applicable to the Deferral Contributions
Account prior to the Participant's Separation from Service, as elected in
Adoption Agreement Section 6.03.
(c) Until he retires, the Participant has a continuing election
to receive all or any portion of his Mandatory Contributions
Account if: (Choose (1) or at least one of (2) through (4))
(1) No conditions.
(2) The mandatory contributions have accumulated for at least
--------------- Plan Years since the Plan Year for which contributed.
(3) The Participant suspends making nondeductible
contributions for a period of months.
(4) (Specify)-----------------------------------------------------------
-------------------------------------------------------------------------.
(d) (Specify) ----------------------------------------------------------------
-------------------------------------------------------------------------.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (Choose
(a) or (b))
(a) ----------------------- [State age, but may not exceed age
65].
(b) The later of the date the Participant attains --------- years of age or the
- --------- anniversary of the first day of the Plan Year in which the Participant
commenced participation in the Plan. [The age selected may not exceed age 65 and
the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c))
(a) Does not apply.
<PAGE>
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Qualified Matching Contributions
Account/Qualified Nonelective Contributions Account/Mandatory Contributions
Account. A Participant has a 100% Nonforfeitable interest at all times in his
Deferral Contributions account, his Qualified Matching Contributions Account,
his Qualified Nonelective Contributions Account and in his Mandatory
Contributions Account.
Regular Matching Contributions Account/Employer contributions Account. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only as additional options)
(a) Immediate vesting. 100% Nonforfeitable at all times. [Note: The
Employer must election Option (a) if the eligibility conditions under Adoption
Agreement Section 2.01(c) require 2 year of service or more than 12 months of
employment.]
(b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percengage Service Percentage
- --------------------------------------------------------------------------------
Less than 1 ----- Less than 1 -----
1 ----- 1 -----
2 ----- 2 -----
3 ----- 3 -----
4 ----- 4 -----
5 ----- 5 -----
6 or more 100% 6 -----
7 or more -----
(c) Special vesting election for Regular Matching Contributions Account. In
lieu of the election under Options (a) or (b), the Employer elects the following
vesting schedule for a Participant's Regular Matching Contributions Account:
(Choose (1) or (2))
(1) 100% Nonforfeitable at all times.
(2) In accordance with the vesting schedule described in
the addendum to this Adoption Agreement, numbered 5.03(c).
[Note: If the Employer elects this Option (c)(2), the
addendum must designate the applicable vesting schedule(s)
using the same format as used in Option (b).]
<PAGE>
[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy
Schedule which satisfies Code ss.411(a)(2). Also see Section 7.05 of the Plan.]
(d) The Top Heavy Schedule under Option (b) (and, if applicable,
under Option (c)(2)) applies: (Choose (1) or (2))
(1) Only in a Plan Year for which the Plan is top heavy.
(2) In the Plan Year for which the Plan first is top heavy
and then in all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top
Heavy Schedule.]
Minimum Vesting. (Choose (e) or (f))
(e) The Plan does not apply a minimum vesting rule.
(f) A Participant's Nonforfeitable Accrued Benefit will never be less than the
lesser of $--------------- or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c) would
result in a smaller Nonforfeitable Accrued Benefit.
Life Insurance Investments. The Participant's Accrued Benefit attributable
to insurance contracts purchased on his behalf under Article XI is: (Choose (g)
or (h))
(g) Subject to the vesting election under Options (a), (b), or
(c).
(h) 100% Nonforfeitable at all times, irrespective of the vesting election
under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C)
of the Plan: (Choose (a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a Deferral
Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
<PAGE>
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each successive 12
consecutive month period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (choose (c) or (d))
(c) 1,000 Hours of Service.
(d) ------- Hours of Service. [Note: The Hours of Service
requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
excludes the following Years of Service: (Choose (a) or at least one of (b)
through (e))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age of
- ------------------. [Note: The age selected may not exceed age 18.]
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(d) Any Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This exception applies only if the
Participant is 0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Break in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not include any Years of
Service not required to be taken into account under this exception by reason of
any prior Break in Service.
(e) Any Year of Service earned prior to the effective date of ERISA if the Plan
would have disregarded that Year of Service on account of an Employee's
Separation from Service under a Plan provision in effect and adopted before
January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.411(d)(6) Protected Benefits. The elections under this Article VI may
not eliminate Code ss.411(d)(6) protected benefit. To the extent the elections
would eliminate a Code ss.411(d)(6) protected benefit, see Section 13.02 of the
<PAGE>
Plan. Furthermore, if the elections liberalize the optional forms of
benefit under the Plan, the more liberal options apply on the later of the
adoption date or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
- --------------------------------------------------------------.
[Note: The Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d)or (e))
(a) ----------- of the -------------- Plan Year beginning after the
Participant's Separation from Service.
(b) ------------------------ following the Participant's Separation from
Service.
(c) --------------------------------- of the Plan Year after the
Participant incurs ---------------------- Break(s) in Service (as defined in
Article V).
(d) -------------- following the Participant's attainment of Normal Retirement
Age, but not earlier than --------------- days following his Separation from
Service.
(e) (Specify) ----------------------------------------------------------------
- -------------------------------------------------------------------------------.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of Section
6.01(A)(3), is: (Choose (f), (g) or (h))
(e) -------------------- after the Participant terminates employment because of
disability.
(f) The same as if the Participant had terminated employment without
disability.
(h) (Specify)----------------------------------------------------------------
- -------------------------------------------------------------------------------.
Hardship. (Choose (i) or (j))
<PAGE>
(i) The Plan does not permit a hardship distribution to a Participant who
has separated from Service.
(h) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy stated in
(Choose (1), (2) or (3))
(1) Section 6.01(A)(4) of the Plan.
(2) Section 14.11 of the Plan.
(3) The addendum to this Adoption Agreement, numbered
Section 6.01.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (k), (l) or (m))
(k) Treats the default as a distributable event. the Trustee, at the time of the
default, will reduce the Participant's Nonforfeitable Accrued Benefit by the
lesser of the amount in default (plus accrued interest) or the Plan's security
interest in that Nonforfeitable Accrued Benefit. To the extent the loan is
attributable to the Participant's Deferral Contributions Account, Qualified
Matching Contributions Account or Qualified Nonelective Contributions Account,
the Trustee will not reduce the Participant's Nonforfeitable Accrued Benefit
unless the participant has separated from Service or unless the Participant has
attained age 59 1/2.
(l) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit
by the lesser of the amount in default (plus accrued interest) or the Plan's
security interest in that Nonforfeitable Accrued Benefit.
(m) (Specify) ----------------------------------------------------------------
- -------------------------------------------------------------------------------.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (Choose (a) or
at least one of (b), (c), (d) and (e))
(a) No modifications.
(b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available: -------------------------------------------------
- -------------------------------------------------------------------------------.
(c) An installment distribution: (Choose (1) or at least one of
(2) or (3))
<PAGE>
(1) Is not available under the Plan.
(2) May not exceed the lesser of ------------- years of the maximum
period permitted under Section 6.02.
(3) (Specify) ---------------------------------------------------------
-------------------------------------------------------------------------.
(d) The Plan permits the following annuity options: -------------------------
- ----------------------------------------------------------------.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section
6.04(E). [Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(d).]
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose at least
one of (a) through (c))
(a) As of any distribution date, but not earlier than ---------of the ---------
Plan Year beginning after the Participant's Separation from Service.
(b) As of the following date(s): (Choose at least one of Options (1)
through (6))
(1) Any distribution date after the close of the Plan Year in which the
Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from
Service.
(3) Any distribution date in the --------------- Plan Year(s) beginning
after his Separation from Service.
(4) Any distribution date in the Plan Year after the Participant incurs
------------ Break(s) in Service (as defined in Article V).
(5) Any distribution date following attainment of age ---------- and
completion of at least -------- Years of Service (as defined in Article
V).
(6) (Specify) ----------------------------------------------------------
-------------------------------------------------------------------------.
(c) (Specify) ----------------------------------------------------------------
-------------------------------------------------------------------------.
<PAGE>
The distribution events described in the election(s) made under Options (a), (b)
or (c) apply equally to all Accounts maintained for the Participant unless
otherwise specified in Option (c).
Participant Elections Prior to Separation from Service - Regular Matching
Contributions Account and Employer Contributions Account. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (d) or at least one of (e)
through (h))
(d) No distribution options prior to Separation from Service.
(e) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable interest
in these Accounts after he attains: (Choose (1) or (2))
(1) Normal Retirement Age.
(2) ----------- years of age and is at least -----------%
vested in these Accounts. [Note: If the percentage is less
than 100%, see the special vesting formula in Section 5.03.]
(f) After a Participant has participated in the Plan for a period of not
less than ---------- years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any portion
of his Accounts. [Note: The number in the blank space may not be less than 5.]
(g) Hardship. A Participant may elect a hardship distribution prior to his
Separation from Service in accordance with the hardship distribution policy:
Choose (1), () or (3); (4) is available only as an additional option)
(1) Under Section 6.01(A)(4) of the Plan.
(2) Under Section 14.11 of the Plan.
(3) Provided in the addendum to this Adoption Agreement,
numbered Setion 6.03.
(4) In no event may a Participant receive a hardship
distribution before he is at least ---------% vested in
these Accounts. [Note: If the percentage in the blank is
less than 100%, see the special vesting formula in Section
5.03.]
(h) (Specify) ---------------------------------------------------------------
- -------------------------------------------------------------------------------.
[Note: The Employer may use an addendum, numbered 6.03, to provide
additional language authorized by Options (b)(6), (g)(3) or (h) of this Adoption
Agreement Section 6.03.]
<PAGE>
Participant Elections Prior to Separation from Service - Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (Choose (i) or at least one of (j)
through (l))
(i) No distribution options prior to Separation from Service.
(j) Until he retires, the Participant has a continuing election to receive all
or any portion of these Accounts after he attains:
(Choose (1) or (2))
(1) The later of Normal Retirement Age or age 59 1/2.
(2) Age --------------------- (at least 59 1/2).
(k) Hardship. A participant, prior to his separation from service, may elect a
hardship distribution from his Deferral Contributions Account in accordance with
the hardship distribution policy under Section 14.11 of the Plan.
(l) (Specify) ---------------------------------------------------.
[Note: Option (m) may not permit in service distributions prior to age 59
1/2, (other than hardship) and may not modify the hardship policy described in
Section 14.11.]
Sale of trade of business/subsidiary. If the employer sells substantially all of
the assets (within the meaning of Code 409(d)(2) used in a trade or business or
sells a subsidiary (within the meaning of Code 409(d)(3)), a Participant who
continues employment with he acquiring corporation is eligible for distribution
from his Deferral Contributions Account, Qualified Matching Contributions
Account and Qualified Nonelective Contributions Account: (Choose (m) or (n))
(m) Only as described in this Adoption Agreement Section 6.03 for distributions
prior to Separation from Service.
(n) As if he has a Separation from Service. After March 31, 1988, a distribution
authorized solely by reason of this Option (n) must constitute a lump sum
distribution, determined in a manner consistent with Code (k)(10) and the
applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
annuity distribution requirements of Section 6.04: (Choose (a) or (b))
<PAGE>
(a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
(b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than
a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b) (c))
(a) ---------------% per annum. [Note: The percentage may equal 0%.]
(b) The 90 day Treasury bill rate in effect at the beginning of the current
valuation period.
(c) (Specify) ----------------------------------------------------------------
- -------------------------------------------------------------------------------.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
Section 14.12, to determine the allocation of net income, gain or loss:
(complete only those items, if any, which are applicable to the Employer's Plan)
(a) For salary reduction contributions, the Advisory Committee will:
(Choose (1), (2), (3), (4) or (5))
(1) Apply Section 9.11 without modification.
(2) Use the segregated account approach described in
Section 14.12.
(3) Use the weighted average method described in Section 14.12, based on a
-------------------------- weighting period.
(4) Treat as part of the relevant Account at the beginning
of the valuation period -----% of the salary reduction
contributions: (Choose (i) or (ii))
(i) made during that valuation period.
(ii) made by the following specified time: ----------
----------------------------------------------------.
(5) Apply the allocation method described in the addendum to this Adoption
Agreement numbered 9.11(a).
<PAGE>
(b) For matching contributions, the Advisory Committee will:
(Choose (1), (2), (3) or (4))
(1) Apply Section 9.11 without modification.
(2) Use the weighted average method described in Section 14.12, based on a
-------------------- weighting period.
(3) Treat as part of the relevant Account at the beginning of the
valuation period ---------% of the Matching contributions allocated during
the valuation period.
(4) Apply the allocation method described in the addendum to this Adoption
Agreement numbered 9.11(b).
(c) For Participant nondeductible contributions, the Advisory Committee
will: (Choose (1), (2), (3), (4) or (5))
(1) Apply Section 9.11 without modification.
(2) Use the segregated account approach described in
Section 14.12.
(3) Use the weighted average method described in Section 14.12, based on a
-------------------- weighting period.
(4) Treat as part of the relevant Account at the beginning
of the valuation period -------------% of the Participant
nondeductible contributions: (Choose (i) or (ii))
(i) made during that valuation period.
(ii) made by the following specified time: ---------------.
(5) Apply the allocation method described in the addendum to this Adoption
Agreement numbered 9.11(c).
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03(F) of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (Choose (a) or (b))
(a) May not exceed 10% of Plan assets.
(b) May not exceed --------------% of Plan assets.
[Note: The percentage may not exceed 100%.]
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee
must value the Trust Fund on the following valuation date(s): (Choose (a) or
(b))
<PAGE>
(a) No other mandatory valuation dates.
(b) (Specify) --------------------------------------------------------------
- -------------------------------------------------------------------------------.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
(a) Compensation definition. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning after
- -----------. [Note: May not be effective later than the first day of the first
Plan Year beginning after the Employer executes this Adoption Agreement to
restate the Plan for the Tax Reform Act of 1986, if applicable.]
(b) Eligibility conditions. the eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning after
- -----------------.
(c) Suspension of Years of Service. The suspension of Years of Service rule
elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after ------------------.
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
- ------------------.
(e) Accrual requirements. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after ----------------.
(f) Employment condition. The employment condition of Section 3.06 is
effective for Plan Years beginning after --------------.
(g) Elimination of Net Profits. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after ------------------------------. [Note: The date specified may
not be earlier than December 31, 1985.]
(h) Vesting Schedule. The vesting schedule elected under Adoption Agreement
Section 5.03 is effective for Plan Years beginning after ----------------------.
(i) Allocation of Earnings. The special allocation provisions elected under
Adoption Agreement Section 9.11 are effective for Plan Years beginning after
- -------------------------------.
<PAGE>
(j) (Specify)-----------------------------------------------------------------
- -------------------------------------------------------------------------------.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the delay
of a Plan provision beyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this ----------- day of
- ----------------, 19---.
Name and EIN of Employer: --------------------------------------------
Signed: --------------------------------------------------------------
Name(s) of Trustee: --------------------------------------------------
Signed: -------------------------------------------------------------
- ----------------------------------------------------------------------
Name of Custodian: ---------------------------------------------------
Signed: --------------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See Section
10.03 of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this
Plan for ERISA reporting purposes (Form 5500 Series) is:
- ------------------------------------------------.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
<PAGE>
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of an amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan Sponsor
at the following address and telephone number: INVESCO Trust Company, 7800 E.
Union Ave., Suite 900, Denver, Colorado (303) 779-0731.
Reliance on Opinion Letter. The Employer may not rely on the Master Plan
Sponsor's opinion letter covreing this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District office.
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by, -----------------------------------, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's
participation in the designated Plan is ------------------------------.
2. The undersigned Employer's adoption of this Plan
constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently maintained
by the Employer, identified as ------------------------------------ and having
an original effective date of --------------------------------------.
Dated this -------------- day of ---------------------, 19-----.
Name of Participating Employer: -------------------------------------
Signed: -------------------------------------------------------------
Participating Employer's EIN: ---------------------------------------
<PAGE>
Acceptance by the Signatory Employer to the Execution Page of the
Adoption Agreement and by the Trustee.
Name of Signatory Employer: -------------------------------------
Accepted: -------------------------------------------------------
[Date]
Signed: ---------------------------------------------------------
Name(s) of Trustee: ---------------------------------------------
Accepted: -------------------------------------------------------
[Date]
Signed: ---------------------------------------------------------
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important Master
Plan information.]
STN PSP AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee, INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will be the Trustee and will charge an annual trust fee. Note: See
Trustee Comments on page 26 for further explaination of Non-discretionary
Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Employees 401(k) Plan.
1.07 Employee
If you want the plan to cover all employees, select option (a). If you want to
exclude from the plan any group(s) of employees, select any combination of (b)
through (g). When a retirement plan excludes employees in options (d) through
(g) from participation, the plan is subjet to a minimum coverage test to
maintain its "tax qualified" status. Your accounting firm should be notified to
perform the test annually.
Leased Employers
You may exclude leased employees from participation (option h). However, the
plan must satisfy the coverage rules of Code Section 401(b) and 401(a)(26),
consult your legal or financial counsel.
<PAGE>
Related Employers
You may exclude related employers from participating in the plan (option j).
However, the plan must satisfy the coverage rules of Code Section 410(b) and
401(a)(26), consult your legal or financial counsel.
1.12 Compensation
Treatment of elective contributions - Choose option (a) if you prefer to "add
back" employee elective 401(k) contributions to compensation for purposes of
allocating employer contributions, forfeitures and for non-discrimination
testing.
Modifications to Compensation
Modifications to Compensation - You must choose option (c) or any combination of
(d) through (j). Any exclusion of compensation may result in unallowable
discrimination, your accountant may want to test for any discriminatory effect
of excluding any type of compensation.
1.17 Plan Year
You must define the "plan year," usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account), for administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January
1) and the year.
Restated Plan - Effective date - If you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Originally established
date - Enter the original effective date of your plan from your prior Adoption
Agreement.
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by an employee to
accrue benefits. Option (b), the equivalency method, is explained in Section
1.27 of the plan. Option (a) is usually chosen.
1.29 Service for Predecessor Employer
<PAGE>
Under this option, you may elect to count service for a predecessor
employer when you are not maintaining the plan of the predecessor employer.
(Used primarily in the event of a merger or acquisition.)
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b)(1) is chosen.
2.01 Eligibility
a. An employee must attain this age to become a participant (cannot exceed
age 21).
b. Pick how long (service) an employee must work to become a participant.
c. You may choose to have more restrictive eligibility requirements apply to the
employer contributions under the plan. Choose the employer contribution affected
and the conditions which apply to those contributions. Choosing separate
eligibility conditions may cause your plan to be discriminatory, consult your
counsel.
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (d), semi-annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (g) is chosen.
Dual Eligibility - This section allows you to grandfather into the plan current
employees who have not met the eligibility requirements and apply the
eligibility requirements to newly hired employees. Restated plans usually choose
(j)(1).
2.02 Years of Service
Option (b) should only be chosen if you wish to require less than 1000
hours to be worked by an employee for eligibility. Usually Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary or the plan year. Option (d)
is chosen for administrative convenience.
2.03 Break in Service
This option may impose a complicated re-entry date for employees who have
terminated or whose hours were severely cut back. Option
<PAGE>
(a) is chosen for administrative convenience.
2.06
This option allows employees and participants to elect out of participation.
However, these employees are considered when performing all non-discrimination
tests. Option (a) is chosen for administrative convenience.
3.01 Contributions allowed
Section 3.01 of this Adoption Agreement consists of three parts. Part I defines
the types of contributions you authorize under the plan. Part II explains the
matching contribution formula, if any. Part III allows you to put limits on the
employee 401(k) contributions. You must complete Part I, but only complete Parts
II and III, if necessary.
Option (a) permits the election of either a salary reduction arrangement (Option
(a)(1), or a cash or deferred arrangement Option (a)(2). The Employer also may
elect both arrangements.
Option (b) authorizes matching contributions. If the Employer elects Option (b),
it must complete Part II to establish the matching contribution formula.
Option (c) authorizes the Employer to make qualified nonelective contributions
(QNCs"). The Employer will designate to the Trustee the amount of its
contributions consisting of QNCs.
The amount of QNCs is solely within the Employer's discretion. Any contribution
designated as QNCs is includible in the ADP test (see Section 14.08 of the Plan)
or in the ACP test (see Section 14.09 of the Plan). The advisory committee may
divide the QNCs between these two tests in any fashion it deems appropriate, but
may not use the same contributions in both tests. As a general rule, the
Employer will make a level of QNCs necessary to satisfy the applicable tests,
unless the Employer wishes to have excess contributions or excess aggregate
contributions distributed to the appropriate highly compensated employees, in
accordance with Sections 14.08 and 14.09.
Option (d) authorizes the Employer to make nonelective contributions in the same
manner it would under a regular profit sharing plan. The choices under Option
(d) are the same as the contribution formula options under the profit sharing
adoption agreements.
Part II Matching Contribution Formula
If the Employer elects Option (b), it must complete Part II, making a selection
under each option provided under Part II.
<PAGE>
The Plan permits matching contributions for salary reduction contributions,
cash or deferred contributions or participant mandatory contributions.
Therefore, the formulas offered under Option (h) refer to "eligible
contributions." The Employer will define eligible contributions under Options
(i) and (j).
Option (h) provides the formulas for determining the matching contribution. The
primary purpose of Option (h) is to establish the level of the matching
contribution (a fixed percentage or discretionary with the Employer) and to
permit the Employer to define a maximum or a minimum matching contribution. The
formula alone will not be sufficient to determine the Employer's actual matching
contribution on a participant's behalf. The characterization of eligible
contributions under Option (i) and any limitations on the amount of eligible
contributions taken into account, as provided under Option (j), are necessary
factors in computing the Employer's matching contribution.
Option (i) designates the character of the matching contributions. If the
Employer elects (i)(3), it also must elect Adoption Agreement Section 4.01(c).
If eligible contribuitons include salary reduction contributions or cash or
deferred contributions, the matching contribution formulas will not apply to
amounts characterized as excess deferrals under Section 14.07 of the Plan.
Option (j) establishes any limitations on the amount of eligible contributions
taken into account under Option (h).
Part III Salary Reduction Agreements
Under Option (k), the Employer must make selections from (1), 92), (3) and (4).
Under (1), Option (ii) prescribes a maximum deferral percentage, Option (iii)
prescribes a minimum deferral percentage and Option (i) prescribes no special
maximum limitation. The Employer may select both Options (ii) and (iii), or both
Options (i) and (iii), but Options (i) and (ii) are mutually exclusive. The
Employer may wish to consider a maximum percentage deferral under Option (ii) to
minimize the potential for Code 415 violations.
Under paragraphs (2) and (3), the Employer elects which restrictions apply to
the participant's right to revoke his/her salary reduction agreement. Under
paragraph (4), the Employer elects which restrictions apply to the participant's
right to increase or decrease his/her salary reduction percentage. The Employer
should consider the effect its elections have on plan administration.
3.04 Contribution Allocation
Part I - Matching Contributions. Select which account you want the matching
contributions to be allocated to. The Regular Matching Account is subject to a
vesting schedule. The Qualified Matching Account is always 100% vested and
contributions may be used to satisfy the deferral non-discrimination test.
<PAGE>
Qualified Non-elective Contributions. Choose which participants would
receive an extra contribution to help satisfy the non-discrimination test for
deferrals (QNEC). For administrative convenience opton (2) is chosen.
Part II - Method of Allocation. Choose the option for allocating the
discretionary employer contribution between all plan participants. You have
choices of non-integrated (pro-rata) or one of four integrated formulas.
Allocation formula. The primary allocation formulas are in Options (e), (f), (g)
and (h). Option (e) is a nonintegrated formula and allocates the employer
contribution proportionate to total compensation. Options (f), (g) and (h) are
alternatives for integrated plans. Usually option (e)(2) is chosen for non-
integrated plans.
The two-tiered formula under Option (f) maximizes the disparity permitted under
the integration rules. Accordingly, the allocation in the first tier results in
an equal allocation percentage based on total compensation and based on excess
compensation. This equal allocation percentage may not exceed the maximum
disparity percentage (5.7%, 5.4% or 4.3%) described in the second column of the
Maximum Disparity Table. After completion of the first tier allocation, the
second step allocates the remaining contribution proportionate to total
compensation, in the same manner as the nonintegrated formula.
Under the three-tiered formula under Option (g), the plan: (i) first allocates
based on total compensation, but the allocation percentage may not exceed the
maximum disparity percentage determined under the second column of the Maximum
Disparity Table; (ii) then allocates based on excess compensation, but the
allocation percentage may not exceed the maximum disparity percentage determined
under the second column of the Maximum Disparity Table; and (iii) completes the
allocation on the basis of total compensation.
The four-tiered allocation under Option (h) is a hybrid of Options (g) and (f).
The sole purpose of Option (h) is to use the first tier to satisfy the 3% top
heavy minimum, then use a progression of three additional tiers to make maximum
use of the permitted disparity rules. The second tier allocates solely on the
basis of excess compensation, with a maximum allocation under the second tier
equal to 3% of each participant's excess compensation. The third tier is the
same as the first tier under Option (g). The fourth tier is a prorata allocation
based on total compensation.
<PAGE>
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures as an extra
discretionary contribution. Option (b) allocates forfeitures to reduce employer
contributions. Options (c) and (d) allow you to allocate separately forfeitures
from matching contributions. Select from options (e), (f) and (g) to determine
how to allocate forfeitures from high paid employee's matching account when the
matching non-discrimination test is not satisfied.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered during the year), for contributions choose option (a), if not, choose
option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, waive the service requirement for specific contributions and/or
require the participant to be employed on the last day to receive a
contribution.
Suspension of Accrual Requirements - This section allows you to suspend some or
all of the accrual requirements found in Section 3.06(E) of the plan for
participants to receive allocations. This would apply in plan years when a plan
may not satisfy coverage and participation requirements. For administrative
convenience choose option (g).
3.15 More Than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
3.18 Defined Benefit Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit plan under option (b), choose which plan's benefit would be reduced if a
participant's total allocations for a year were to exceed the allowable limit.
4.01 Participant Nondeductible Contributions
This section allows participants to contribute after-tax employee contributions.
These contributions are subject to a special nondiscrimination test. By checking
option (a) these contributions are not allowed.
4.05 Withdrawal Restriction
This section only applies if you checked option (c) of section
<PAGE>
4.01. It states whether or not there are restrictions on participants receiving
their after-tax contributions prior to separation from service.
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
5.02 Vesting Death/Disability
You may choose to allow 100% vesting for participants that terminate from
service because of death option (b) or disability option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer discretionary
contributions and matching contributions. If you choose option (b), you must at
a minimum complete the top-heavy vesting schedule. Remember, if the eligibility
requirements are more than one year, option (a) must be chosen.
Complete the Top Heavy Schedule based upon the following:
Years of Service
1
2 (not less than 20%)
3 (not less than 40%)
4 (not less than 60%)
5 (not less than 80%)
6 (not less than 100%)
Optional: Complete the Non Top Heavy Schedule based upon the
following:
Years of Service
1
2
3 (not less than 20%)
4 (not less than 40%
5 (not less than 60%)
6 (not less than 80%)
7 (not less than 100%)
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant as
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
<PAGE>
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose option (a).
5.08 Prior Years of Service
By choosing options (b) through (e) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article 6
The Employer must establish a specific distribution policy for the plan. Treas.
Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any third
party to retain discretion over when or in what form to pay the participant's
benefit (Optional Forms of Benefit). Under a restated plan, the elections under
Article VI, to the extent they differ from previous plan provisions regarding
optional forms of benefit, may not eliminate an optional form of benefit with
respect to the account balance accrued as of the date the Employer executes the
restated adoption agreement (or, if later, the effective date of that restated
adoption agreement). An optional form of benefit includes the form of payment
(e.g., lump sum or installments), the timing of payment (e.g., immediately after
separation form service, following a break in service, after attaining normal
retirement age) and the medium of payment (e.g. right to elect distribution in
Employer securities, right to elect distribution in the form of an annuity
contract).
With this in mind, if you are restating an existing plan, pay close attention to
the distribution features under that document and your administrative practice
of distributions. In all cases, try to mirror or liberalize those distribution
features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
"administratively reasonable period of time" from the distribution date. Typical
distribution dates for 401(k)plans are semi-annual dates or quarterly dates.
Nonforfeitable Accrued Benefit Not Exceeding $3,500
When a separated participants vested balance does not exceed $3,500, the
plan allows the employer to separately establish the timing of these
distributions, separate from the distribution dates. When you complete this
section, you need to balance two concerns: 1) will the timing of the
distribution cause the participant to consider it a "severance benefit" and
therefore encourage separation from service, and 2) the administrative concerns
of carrying a non-active account in the plan.
<PAGE>
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (f) and (h).
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in you
plan.
6.02 Method of Payment
You may choose the standard forms of payment if this is a brand new plan and not
a restatment. Elect any one or combineation of options (b) through (e). If no
modifications are necessary, elect option (a).
6.03 Participant Elections After Separation from Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3,500, may elect to commence distributions. This election
will be tied directly to the "distribution date" defined earlier.
Participant Elections Prior to Separation from Service - Employer
Contributions
The following distribution elections apply to all participant's matching and
employer discretionary accounts regardless of vested account balances, prior to
employment separation. If you prefer not to allow any distribution options from
these accounts prior to separation, select option (d).
Participant Elections Prior Separation from Service
Deferrals, QMAC's and QNEC's - The following distribution elections apply to all
participant's deferral, qualified matching, and qualified non-elective
contributions accounts, prior to employment separation. If you prefer not to
allow any distribution options from these accounts prior to employment
separation, select option (I).
<PAGE>
6.04 Annuity Distributions
The law requires distributions to certain participants to be in the form of
commercial insurance annuities, unless consented to and waived by both the
participant and his or her spouse. Participants subject to this requirement are
identified in section 6.04(E) of the Plan. For administrative convenience,
choose option (a). If you are restating a plan that was subject to the joint and
survivor annuity rules you must select Option (b).
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
9.11 Allocation of Net Income/Loss
The following elections will state how current year contributions will share, if
at all, in net income, gains or losses of the trust. You must election option
(a) if your plan allows employee deferrals, option (b) if your plan includes a
matching contribution, or option (c) if the plan allows employee after tax
contributions. Only make the elections applicable to your plan.
Option (1) would not include contributions made since the last valuation date in
any earnings or loss calculation. The other choices are based upon a segregated
account approach or a weighted average approach, both are described in section
14.12 of the plan.
Usually option (3) daily weighting is chosen if INVESCO is your recordkeeper,
for 9.11(a)(b) and (c).
10.03 Investment Powers
Complete this section if you (the employer) wish to allow the plan to invest in
qualifying employer securities, you should consult your legal counsel. The term
"qualifying employer securities: has a specific meaning under ERISA and may not
include all securities.
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally Option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates
of any of the listed items (a) through (j) have an effective date other than
your restated effective date in adoption agreement Section 1.18. Some some
provisions in the Tax Reform Act of 1986 were not effective until 1988 or 1989.
The few provisions (if any) that have later effective dates must specify when
they are effective.
<PAGE>
a. Compensation definition may not be later than the first day of your 1991
plan year.
b. Eligibility conditions may not be later than the first day of your 1989
plan year.
c. Suspension of years of service may not be earlier than the first day of
your 1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day of
your 1989 plan year.
e. Accrual requirements may not be earlier than the first day of your 1989
plan year.
f. Employment condition may not be earlier than the first day of your 1991
plan year.
g. Elimination of Net Profits may not be earlier than December 31, 1985.
h. Vesting schedule may not be later than the first day of your 1989 plan
year.
i. Allocation of Earnings may not be earlier than the first day of the 1990
plan year.
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides two
lines above the signature line to print or type the name of the Employer and the
Employer's EIN. If the Employer is a sole proprietorship, the individual sole
proprietor should execute as Employer. If the Employer is a corporation or a
partnership, an officer or a partner, as applicable, should execute the adoption
agreement on behalf of the Employer.
Trustee
If you selected option (a) of Section 1.02 then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as Custodian.
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust Company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non- discretionary trustee
<PAGE>
accepts all directions from the Named Fiduciary. The Named Fiduciary is
either the President of the Corporation, the managing partner of the partnership
or the self-employed individual of a sole proprietorship. The Named Fiduciary is
responsible for selecting plan investments.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
correspond to the 3- digit adoption agreement number specified at the top of the
first page of the adoption agreement. Consult your Counsel if unsure what
3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
participating Employer should execute a separate Participation Agreement. See
Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
is necessary to satisfy the coverage requirements of Code ss.410(b) or the
minimum participation requirement of Code ss.401(a)(26). If the Employer
determines inclusion of the employees of a related group member is necessary to
maintain qualification of the plan, the Employer may take one of two approaches:
(1) have the related group member execute a Participation Agreement; or (2)
elect in Adoption Agreement Section 1.07 to include the employees of that
related group member. Under approach (1), the participation of the related group
member will result in the automatic inclusion of the employees of that related
group member, without having to specify their inclusion in Adoption Agreement
Section 1.07. In addition, the related group member, under approach (1), has the
authority to contribute to the plan and, in the event another participating
related group member makes a contribution on behalf of that related group
member's employees, the Participation Agreement will ensure the deductibility of
that contribution (assuming the contribution does not exceed the deduction
limits of Code ss.404). Additional instructions to the appropriate adoption
<PAGE>
agreement explain the effect on the allocation of Employer contributions
when related group members maintain a single nonstandardized plan. Please
contact us. Under approach (2), the plan will retain its qualified status, but
contributions the Employer makes on behalf of a nonparticipating related group
member's employees may not be deductible (even if otherwise within the
limitations of Code ss.404), resulting in an excise tax to the contributing
Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the Plan).
legal\adop-agr\ns401kaa.005
ADOPTION AGREEMENT #006
STANDARDIZED CODE ss.401(k) PLAN
(PAIRED PROFIT SHARING PLAN)
The undersigned, -------------------------------------------- ("Employer"), by
executing this Adoption Agreement, elects to become a participating Employer in
the INVESCO Trust Company Defined Contribution Master Plan (basic plan document
#01) by adopting the accompanying Plan and Trust in full as if the Employer were
a signatory to that Agreement. The employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is:
(Choose (a) or (b))
(a) A discretionary Trustee, See Section 10.03[A] of the Plan.
(b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note: The
Employer may not elect Option (b) if a Custodian executes the Adoption
Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is
- -------------------------------------------------------------.
1.07 EMPLOYEE. The following Employees are not eligible to participate in the
Plan:
(Choose (a) or at least one of (b) or (c))
(a) No exclusions.
(b) Collective bargaining employees (as defined in Section 1.07 of the Plan).
[Note: If the Employer excludes union employees from the Plan, the Employer must
be able to provide evidence that retirement benefits were the subject of good
faith bargaining.]
(c) Nonresident aliens who do not receive any earned income (as defined in Code
ss.911(d)(2) from the Employer which constitutes United States source income (as
defined in Code ss.861(a)(3)).
Related Employers/Leased Employees. An Employee of any member of the Employer's
related group (as defined in Section 1.30 of the Plan), and any Leased Employee
treated as an Employee under Section 1.31 of the Plan, is eligible to
participate in the Plan, unless excluded by reason of Options (b) or (c).
[Note: A related group member may not contribute to this Plan unless it
executes a Participation Agreement, even if its Employees are Participants
in the Plan.]
<PAGE>
1.12 COMPENSATION
Treatment of elective contributions. (Choose (a) or (b))
(a) "Compensation" includes elective contributions made by the Employer on
the Employee's behalf.
(b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least one of
(d) and (e))
(c) No modifications other than as elected under Options (a) or (b).
(d) The Plan excludes Compensation in excess of $---------------.
(e) In lieu of the definition in Section 1.12 of the Plan, Compensation means
any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
Special definition for salary reduction contributions. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (Choose (f) or any combination of (g) and (h), if applicable)
(f) No exceptions.
(g) The dollar limitation described in Option (d) does not apply.
(h) If the Employee makes elective contributions to another plan maintained by
the Employer, the Advisory Committee will determine the amount of the Employee's
salary reduction contribution for the withholding period: (Choose (1) or (2))
(1) After the reduction for such period of elective
contributions to the other plan(s).
(2) Prior to the reduction for such period of elective
contributions to the other plan(s).
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
(a) The 12 consecutive month period ending every --------------.
(b) (Specify) -------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
Limitation Year. The Limitation Year is: (Choose (c) or (d))
(c) The Plan Year.
(d) The 12 consecutive month period ending every ---------------.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is ---------------.
Restated Plan. The restated Effective Date is ---------------.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established -------------------.
(Note: See the Effective Date Addendum.)
1.27 HOUR OF SERVICE. The crediting method for Hours of Service
is: (Choose (a) or (b))
(a) The actual method.
(b) The ------------------------- equivalency method, except:
(1) No exceptions.
(2) The actual method applies for purposes of: (Choose at
least one)
(i) Participation under Article II.
(ii) Vesting under Article V.
(iii)Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor service
the Plan must credit by reason of Section 1.29 of the Plan, the Plan credits
Service with the following predecessor employer(s): ---------------------------.
Service with the designated predecessor employer(s) applies:
(Choose at least one of (a) or (b))
(a) For purposes of participation under Article II.
(b) For purposes of vesting under Article V.
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach a
schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
<PAGE>
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in a safe
harbor money purchase plan (as described in Section 1.31) maintained by the
leasing organization, but the Employer is not eligible for the safe harbor plan
exception: (Choose (a) or (b))
(a) The Advisory Committee will determine the Leased Employee's allocation of
Employer contributions under Article III without taking into account the Leased
Employee's allocation, under the safe harbor plan.
(b) The Advisory Committee will reduce the Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified nonelective
contributions) under this Plan by the Leased Employee's allocation under the
safe harbor plan, but only to the extent that allocation is attributable to the
Leased Employee's service provided to the Employer. [Note: The Employer may not
elect Option (b) if a Paired Plan or any other plan of the Employer makes a
similar reduction for the same plan of the leasing organization.]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions:
(Choose (a) or (b) or both)
(a) Attainment of age -------------------- (specify age, not
exceeding 21).
(b) Service requirement. (Choose one of (1), (2) or (3))
(1) One Year of Service.
(2) ----------------- months (not exceeding 12) following the
Employee's Employment Commencement Date.
(3) One Hour of Service.
Plan Entry Date. "Plan Entry Date" means the Effective Date and:
(Choose (c), (d) or (e))
(c) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
(d) The first day of the Plan Year.
(e) (Specify entry dates) ----------------------------------.
Time of Participation. An Employee will become a Participant, unless
exclued under Adoption Agreement Section 1.07, on the Plan
<PAGE>
Entry Date (if employed on that date): (Choose (f), (g) or (h))
(f) immediately following
(g) immediately preceding
(h) nearest the date the Employer completes the eligibility conditions described
in Options (a) and (b) of this Adoption Agreement Section 2.01. [Note: The
Employer must coordinate the selection of (f), (g) or (h) with the "Plan Entry
Date" selection in (c), (d) or (e). Unless otherwise excluded under Section
1.07, the Employee must become a Participant by the earlier of: (1) the first
day of the Plan Year beginning after the date the Employee completes the age and
service requirements of Code ss.410(a); or (2) 6 months after the date the
Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01
apply to: (Choose (i) or (j))
(i) All Employees of the Employer, except: (Choose (1) or (2))
(1) No exceptions
(2) Employees who are Participants in the Plan as of the
Effective Date.
(j) Solely to an Employee employed by the Employer after ----------------------.
If the Employee was employed by the Employer on or before the specified date,
the Employee will become a Participant: (Choose (1) or (2))
(1) On the latest of the Effective Date, his Employment Commencement Date
or the date he attains age --------------------- (not to exceed 21).
(2) Under the eligibility conditions in effect under the Plan prior to the
restated Effective Date. If the restated Plan required more than one Year
of Service to participate, the eligibility conditions under this Option
(2) for participation in the Code ss.401(k) arrangement under this Plan is
one Year of Service for Plan Years beginning after December 31, 1988. [For
restated plans only]
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
(a) 1,000 Hours of Service
(b) ---------------------- Hours of Service during an eligibility
computation period to receive credit for a Year of Service. [Note: The Hours of
Service requirement may not exceed 1,000.]
<PAGE>
Eligibility computation period. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
(c) The 12 consecutive month period beginning with each anniversary of an
Employee's Employment Commencement Date.
(d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
in Section 2.03(B) of the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan.
(b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's contribution. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e))
(a) Deferral contributions (Code ss.401(k) arrangement). The Employer must
contribute the amount by which the Participants have reduced their Compensation
for the Plan Year, pursuant to their salary reduction agreements on file with
the Advisory Committee. A reference in the Plan to salary reduction
contributions is a reference to these amounts.
(b) Matching contributions. The Employer will make matching contributions in
accordance with the formula(s) elected in Part II of this Adoption Agreement
Section 3.01.
(c) Designated qualified nonelective contributions. The Employer, in its sole
discretion, may contribute an amount which it designates as a qualified
nonelective contribution.
(d) Nonelective contributions.
(1) Discretionary contribution. The amount (or additional amount) the
Employer may from time to time deem advisable.
<PAGE>
(2) ----------% of the Compensation of all Participants under the
Plan, determined for the Employer's taxable year for
which it makes the contribution. [Note: The percentage
selected may not exceed 15%.]
(3) --------% of Net Profits but not more than $----------.
(e) Frozen Plan. This Plan is a frozen Plan effective------------------------.
The Employer will not contribute to the Plan with respect to any period
following the stated date.
Net Profits. The Employer: (Choose (f) or (g))
(f) Need not have Net Profits to make its annual contribution under this Plan.
(g) Must have current or accumulated Net Profits exceeding $----------- to
make the following contributions: (Choose at least one of (1), (2) and (3))
(1) Matching contributions described in Option (b), except:
-----------------------------------------------------------.
(2) Qualified nonelective contributions described in Option
(c).
(3) Nonelective contributions described in Option --------.
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes:
- -------------------------------------------------------------------------------.
[Note: Enter "N/A" if no exclusions apply.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits uner Option (g), it will reduce the
matching contribution under a fixed formula on a pro rata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
Part II. [Options (h) and (i)] Matching contribution formula.
<PAGE>
[Note: If the Employer elected Option (b), complete Options (h)
and (i).]
(h) Amount of matching contributions. Subject to Option (i), for each Plan
Year, the Employer's matching contribution is: (Choose any combination of (1),
(2), (3) and (4))
(1) An amount equal to ----------% of each Participant's Salary
Recuction contributions for the Plan Year.
(2) An amount equal to ----------% of each Participant's first tier of
Salary Reduction contributions for the Plan Year, plus the following
matching percentage(s) for the following subsequent tiers of Salary
Reduction contributions for the Plan Year:
-------------------------------------------------.
(3) Discretionary formula.
(i) An amount (or additional amount) equal to a matching percentage
the Employer from time to time may deem advisable of the
Participant's salary reduction contributions for the Plan Year.
(ii) An amount (or additional amount) equal to a matching percentage
the Employer from time to time may deem advisable of each tier of
the Participant's Salary Reduction contributions for the Plan Year.
[Note: Under Options (2) and (3)(ii), the matching percentage for any
subsequent tier of salary reduction contributions may not exceed the matching
percentage for any prior tier.]
(4) A Participant's matching contributions may not:
(i) Exceed ---------------------------------------.
(ii) Be less than ---------------------------------.
(i) Amount of salary reduction contributions taken into account. When
determining a Participant's salry reduction contributions taken into account
under the matching contributions formula(s), the following rules apply: (Choose
any combination of (1) through (3))
(1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
(2) The Advisory Committee will disregard eligible contributions exceeding
------------------------------------.
(3) The Advisory Committee will treat as the first tier of Salary
Recuction contributions, an amount not exceeding:----------------------.
The subsequent tiers of eligible contributions are: -------------------.
<PAGE>
Part III. [Option (j). Special rules for Code ss.401(k) Arrangement.
(Choose (j), if applicable)
(j) Salary Reduction Agreements. The following rules and restrictions apply
to an Employee's salary reduction agreement: (Make a selection under (1), (2),
(3) and (4))
(1) Limitation on amount. The Employee's salary reduction
contributions: (Choose (i) or at least one of (ii) or (iii))
(i) No maximum limitation other than as provided in
the Plan.
(ii) May not exceed -----------% of Compensation for the Plan Year,
subject to the annual additions limitation described in Part 2 of
Article III and the 402(g) limitation described in Section 14.07 of
the Plan.
(iii)Based on percentages of Compensation must equal at
least -----------------.
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (Choose (i), (ii), (iii) or (iv))
(i) Once during any Plan Year but not later than
--------------- of the Plan Year.
(ii) As of any Plan Entry Date.
(iii)As of the first day of any month.
(iv) (Specify, but must be at least once per Plan Year
-------------------------.
(3) An Employee who revokes his salary reduction agreement may file a
new salary reduction agreement with an effective date: (Choose (i),
(ii), (iii) or (iv))
(i) No earlier than the first day of the next Plan
Year.
(ii) As of any subsequent Plan Entry Date.
(iii)As of the first day of any month subsequent to the
month in which he revoked an Agreement.
(iv) (Specify, but must be at least once per Plan Year following the
Plan Year of revocation) ---------------------.
<PAGE>
(4) A Participant may increase or may decrease, on a prospective basis,
his salary reduction percentage or dollar amount:
(Choose (i), (ii), (iii) or (iv))
(i) As of the beginning of each payroll period.
(ii) As of the first day of each month.
(iii)As of any Plan Entry Date.
(iv) (Specify, but must permit an increase or a
decrease at least once per Plan Year
-----------------------------------.
3.04 CONTRIBUTION ALLOCATION. the Advisory Committee will allocate deferral
contributions, matching contributions, qualified nonelective contributions and
nonelective contributions in accordance with Section 14.06 of the Plan and the
elections under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose
whichever elections are applicable to the Employer's Plan)
(a) Matching Contribuitons Account. The Advisory Committee will allocate
matching contributions to a Participant's: (Choose (1) or (2); (3) is available
only in addition to (1))
(1) Regular Matching Contribution Account.
(2) Qualified Matching Contributions Account.
(3) Except, matching contributions under Option(s) --------------------
of Adoption Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
(b) Special Allocation Dates for Salary Reduction Contributions. The
Advisory Committee will allocate salary reduction contributions as of the
Accounting Date and as of the following additional allocation dates:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(c) Special Allocation Dates for Matching Contributions. The Advisory
Committee will allocate matching contributions as of the Accounting Date and as
of the following additional allocation dates:
- ---------------------------------------------------------.
(d) Designated Qualified Nonelective Contributions - Definition of
Participant. For purposes of allocating the designated qualified nonelective
contribution, "Participant" means: (Choose (1) or (2))
(1) All Participants.
(2) Participants who are Nonhighly Compensated Employees.
<PAGE>
Part II. Method of Allocation - Nonelective Contribution. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Part II. (Choose an
allocation method under (e), (f), (g) or (h); (i) is mandatory if the Employer
elects (f), (g) or (h))
(e) Nonintegrated Allocation Formula. The Advisory Committee will allocate the
annual nonelective contributions in the same ratio that each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(f) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the
Advisory Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation plus Excess Compensation for the
Plan Year bears to the total Compensation plus Excess Compensation of all
Participants for the Plan Year. The allocation under this paragraph, as a
percentage of each Participant's Compensation plus Excess Compensation, must not
exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum
Disparity Table following Option (i). The Advisory Committee then will allocate
any remaining nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year.
(g) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee
will allocate the annual Employer nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation may not exceed the
applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity
Table following Option (I).
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year. The allocation under this paragraph, as a
percentage of each Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
<PAGE>
(h) Fourth Tier Integrated Allocation Formula. First, the Advisory
Committee will allocate the annual nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year, but not exceeding 3% of each
Participant's Compensation.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year, but not exceeding 3% of each Participant's
Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
contributions in the same ratio that each Participant's Compensation plus Excess
Compensation for the Plan Year bears to the total Compensation plus Excess
Compensation of all Participants for the Plan Year. The allocation under this
paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%)
listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
(i) Excess Compensation. For purposes of Option (f), (g) or (h), "Excess
Compensation" means Compensation in excess of the following Integration Level:
(Choose (1) or (2))
(1) -------% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first day
of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii))
(i) Rounded to --------------------- (but not exceeding
the taxable wage base).
(ii) But not greater than $-------------.
(iii)Without any further adjustment or limitation.
(2) $---------------------. [Note: Not exceeding the taxable
wage base for the Plan Year in which this Adoption Agreement
first is effective.]
Maximum Disparity Table. For purposes of Options (f), (g) and
(h), the applicable percentage is:
Integration Level Applicable Percentages Applicable
(as percentage of for Option (f) or Percentages
taxable wage base) Option (g) For Option (h)
<PAGE>
- --------------------------------------------------------------------------------
100% 5.7% 2.7%
More than 80% but
less than 100% 5.4% 2.4%
More than 20%
(but not less than
$10,001) and not
more than 80% 4.3% 1.3%
20% (or $10,000, if
greater) or less 5.7% 2.7%
Top Heavy Minimum Allocation - Application of Requirement. The Plan applies
the top heavy minimum allocation requirements of Section 3.04(B)(1): (Choose (j)
or (k))
(j) In all Plan years. A Participant is entitled to the top heavy minimum
allocation if he is employed by the Employer on the last day of the Plan Year,
unless: (Choose (1) or (2))
(1) No exceptions.
(2) The Participant is a Key Employee for the Plan Year.
[Note: If the Employer selects this Option (2), it will have
to determine for each Plan Year who are the Key Employees
under the Plan.]
(k) Only in Plan Years for which the Plan is top heavy. A Participant is
entitled to the top heavy minimum allocation if he is employed by the Employer
on the last day of the Plan Year, unless he is a Key Employee. [Note: Option (k)
will require the Advisory Committee to determine whether the Plan is top heavy
for a Plan Year.]
Top Heavy Minimum Allocation - Method of Compliance. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (Choose (l) or (m))
(l) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
(m) The Employer will satisfy the top heavy minimum allocation under the Paired
Pension Plan the Employer also maintains under this Master Plan. However, the
Employer will make any necessary additional contribution to satisfy the top
heavy minimum allocation for an Employee covered only under this Plan and not
under the Paired Pension Plan. See Section 3.04(B)(7)(b) of the Plan.
<PAGE>
If the Employer maintains another plan which is not a Paired Pension Plan
offered under this Master Plan, the Employer may provide in an addendum to this
Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04, without regard to
which contributing relating group member employs the Participant. A
Participant's Compensation includes Compensatin from all related employers,
irrespective of which related employers are contributing to the Plan. The
signatory Employer and any Participating Employer(s) will satisfy any fixed
matching contribution formula under Adoption Agreement Section 3.01 as agreed by
those Employers.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b))
(a) As an Employer nonelective contribution for the Plan Year in which the
forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
(b) To reduce the Employer matching contributions and
nonelective contributions for the Plan Year: (Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(c) To the extent attributable to matching contributions:
(Choose (1), (2) or (3))
(1) In the manner elected under Options (a) or (b).
(2) First to reduce Employer matching contributions for the
Plan Year: (Choose (i) or (ii))
(i) in which the forfeiture occurs,
(ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
(3) As a discretionary matching contribution for the Plan Year in which
the forfeiture occurs, in lieu of the manner elected under Options (a) or
(b).
<PAGE>
(d) First to reduce the Plan's ordinary and necessary administrative expenses
for the Plan Year and then will allocate any remaining forfeitures in the manner
described in Options (a), (b) or (c), whichever applies. If the Employer elects
Option (c), the forfeitures used to reduce Plan expenses: (Choose (1) or (2))
(1) relate proportionately to forfeitures described in Option (c) and to
forfeitures described in Options (a) or (b).
(2) relate first to forfeitures described in Option
--------------.
Allocation of forfeited excess aggregate contributions. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (Choose (e), (f) or (g))
(e) To reduce Employer matching contributions for the Plan Year:
(Choose (1) or (2))
(1) in which the forfeiture occurs.
(2) immediately following the Plan Year in which the
forfeiture occurs.
(f) As Employer discretionary matching contributions for the Plan Year in which
forfeited, except the Advisory Committee will not allocate these forfeitures to
the Highly Compensated Employees who incurred the forfeitures.
(g) In accordance with Options (a) through (d), whichever applies, except the
Advisory Committee will not allocate these forfeitures under Option (a) or under
Option (c)(3) to the Highly Compensated Emplyees who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any designated qualified nonelective contribution or nonelective contribution by
taking into account:
(Choose (a) or (b))
(a) The Employee's Compensation for the entire Plan Year.
(b) The Employee's Compensation for the portion of the Plan Year in which
the Employee actually is a Participant in the Plan, except: (Choose (2) or (2))
(1) No exceptions.
<PAGE>
(2) For purposes of the first 3% of Compensation allocated
under Option (e), (g) or (h) of Adoption Agreement Section
3.04, whichever applies, the Advisory Committee will take into account the
Employee's Compensation for the entire Plan Year.
Accrual Requirements. To receive an allocation of designated qualified
nonelective contributions, nonelective contributiosn and Participant forfeitures
treated as nonelective contributions for the Plan Year, a Participant must
satisfy the accrual requirements of this paragraph. If the Participant is
employed by the Employer on the last day of the Plan Year, the Participant must
complete at least one Hour of Service for that Plan Year. If the Participant
terminates employment with the Employer during the Plan Year, the Participant
must complete at least --------- Hours of Service (not exceeding 501) during the
Plan Year, except: )Choose (c) or (d))
(c) No exceptions.
(d) No Hour of Service requirement if the Participant terminates employment
during the Plan Year on account of: (Choose at least one of (1), (2) and (3))
(1) Death.
(2) Disability.
(3) Attainment of Normal Retirement Age in the current Plan Year or in a
prior Plan Year.
Special accrual requirements for matching contributions. To receive an
allocation of matching contributions (for forfeitures applied to reduce matching
contributions) a Participant must satisfy the following condition(s): (Choose
(e) or any combination of (f), (g) and (h))
(e) No conditions other than making salary reduction contributions.
(f) The accrual requirements prescribed for an allocation of nonelective
contributions.
(g) The Participant does not revoke his salary reduction agreement effective
during the Plan Year.
(h) The Participant is not a Highly Compensated Employee for the Plan Year.
This Option (h) applies to: (Choose (1) or (2))
(1) All matching contributions.
(2) Matching contributions described in Option(s) ------------- of
Adoption Agreement Section 3.01.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals:
<PAGE>
(Choose (a), (b) or (c))
(a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415), times
(ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Code ss.415).
(b) The total Excess Amount.
(c) None of the Excess Amount.
[Note: If the Employer adopts Paired Plans available under this
Master Plan, the Employer must coordinate its elections under
Section 3.15 of each Adoption Agreement.]
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of
the Plan: (Choose (a) or (b))
(a) Does not apply to the Employer's Plan because the Employer does not maintain
and never has maintained a defined benefit plan covering any Participant in this
Plan.
(b) Applies to the Employer's Plan. To the extent necessary to satisfy the
limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2))
(1) The Participant's projected annual benefit under the defined benefit
plan under which the Participant participates.
(2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and
then, if necessary, the Participant's projected annual benefit under the
defined benefit plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section
3.18 do not apply to the Employer's Plan.]
Override of 100% Limitation. The Employers elects: (Choose (c) or (d))
(c) To apply the 100% limitation described in Section 3.19(1) fo the Plan
in all Limitation Years. [Note: This election will avoid having to calculate the
Plan's top heavy ratio for any year, unless the Employer has elected Adoption
Agreement Section 3.04(k).]
<PAGE>
(d) Not to apply the 100% limitation for Limitation years in which the Plan's
top heavy ratio (as determined under Section 1.33 of the Plan) does not exceed
90%, but only if the defined benefit plan satisfies the extra minimum benefit
requirements of Code ss.416(h)(2) (and the applicable Treasury regulations)
after taking into account the Employer's election under Options (e), (f), (g) or
(h) of this Section 3.18. To determine the top heavy ratio, the Advisory
Committee will use the following interest rate and mortality assumptions to
value accrued benefits under a defined benefit plan. [Note: This election will
require the Advisory Committee to calculate the Plan's top heavy ratio.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications:
(Choose (e), (f), (g) or (h))
(e) No modifications.
(f) By substituting 4% for 3% in Paragraph (b) of Section 3.04(B)(1) or of
Section 3.04(B)(2) of the Plan, whichever applies, but only for any Plan Year in
which Option (d) applies to override the 100% limitation.
(g) By increasing the top heavy minimum allocation to 5% for any Plan Year in
which the 100% limitation applies, and to 7 1/2% for any Plan Year in which
Option (d) applies to override the 100% limitation. The increased percentage
under this Option (g) applies irrespective of whether the highest contribution
rate for the Plan Year is less than that increased percentage.
(h) By eliminating the top heavy minimum allocation. [Note: The Employer
may not select this Option (h) if the defined benefit plan does not guarantee
the top heavy minimum benefit under Code ss.416 for every Participant in this
Plan who is a Non-Key Employee.]
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or (b)
(a) Does not permit Participant nondeductible contributions.
(b) Permits Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
<PAGE>
Allocation dates: The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates:
(Choose (c) or (d))
(c) No other allocation dates.
(d) (Specify) ----------------------------------------------------------------
- ----------------------------------------------------------------.
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (d), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
(Choose (a) or (b))
(a) --------------------------- [State age, but may not exceed age
65].
(b) The later of the date the Participant attains --------(-------) years of age
or the ---------(--------) anniversary of the first day of the Plan Year in
which the Participant commenced participation in the Plan. [The age selected may
not exceed age 65 and the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c))
(a) Does not apply.
(b) Applies to death.
(c) Applies to disability.
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Qualified Matching Contributions
Account/Qualified Nonelective Contributions Account. A Participant has a 100%
Nonforfeitable interest at all times in his Deferral Contributions account, his
Qualified Matching Contributions Account and in his Qualified Nonelective
Contributions Account.
<PAGE>
Regular Matching Contributions Account/Employer Contributions Account. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only as additional options)
(a) Immediate vesting. 100% Nonforfeitable at all times.
(b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percengage Service Percentage
- --------------------------------------------------------------------------------
Less than 1 ----- Less than 1 -----
1 ----- 1 -----
2 ----- 2 -----
3 ----- 3 -----
4 ----- 4 -----
5 ----- 5 -----
6 or more 100% 6 -----
7 or more 100%
(c) Special vesting election for Regular Matching Contributions Account. In
lieu of the election under Options (a) or (b), the Employer elects the following
vesting schedule for a Participant's Regular Matching Contributions Account:
(Choose (1) or (2))
(1) 100% Nonforfeitable at all times.
(2) In accordance with the vesting schedule described in
the addendum to this Adoption Agreement, numbered 5.03(c).
[Note: If the Employer elects this Option (c)(2), the
addendum must designate the applicable vesting schedule(s)
using the same format as used in Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy
Schedule which satisfies Code ss.416. The Employer, at its option, may complete
a Non Top Heavy Schedule only if the Employer elected Adoption Agreement Section
3.04(k). The Non Top Heavy Schedule must satisfy Code 411(a)(2). Also see
Section 7.05 of the Plan.]
(d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2)) applies: (Choose (1) or (2))
(1) Only in a Plan Year for which the Plan is top heavy.
(2) In the Plan Year for which the Plan first is top heavy
and then in all subsequent Plan Years. [Note: The Employer
may not elect Option (d) unless it has completed a Non Top
Heavy Schedule.]
<PAGE>
Minimum Vesting. (Choose (e) or (f))
(e) The Plan does not apply a minimum vesting rule.
(f) A Participant's Nonforfeitable Accrued Benefit will never be less than the
lesser of $-------------- or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c) would
result in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION OF
FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C)
of the Plan: (Choose (a) or (b))
(a) Does not apply.
(b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a Deferral
Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods:
(Choose (a) or (b))
(a) Plan Years.
(b) Employment Years. An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each successive 12
consecutive month period measured from each anniversary of that Employment
Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (choose (c) or (d))
(c) 1,000 Hours of Service.
(d) -------------- Hours of Service. [Note: The Hours of Service requirement
may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
excludes the following Years of Service: (Choose (a) or at least one of (b), (c)
and (d))
(a) None other than as specified in Section 5.08(a) of the Plan.
(b) Any Year of Service before the Participant attained the age of
- --------------------. [Note: The age selected may not exceed age 18.]
<PAGE>
(c) Any Year of Service during the period the Employer did not maintain this
Plan or a predecessor plan.
(d) Any Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This exception applies only if the
Participant is 0% vested in his Accrued Benefit derived from Employer
contributions at the time he has a Break in Service. Furthermore, the aggregate
number of Years of Service before a Break in Service do not include any Years of
Service not required to be taken into account under this exception by reason of
any prior Break in Service.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code ss.411(d)(6) Protected Benefits. The elections under this Article VI may
not eliminate Code ss.411(d)(6) protected benefit. To the extent the elections
would eliminate a Code ss.411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
- --------------------------------------------------------------.
[Note: The [Employer must specify the appropriate date(s). The specified
distribution dates primarily establish annuity starting dates and the notice and
consent periods prescribed by the Plan. The Plan allows the Trustee an
administratively practicable period of time to make the actual distribution
relating to a particular distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d))
(a) ---------- of the -------------- Plan Year beginning after the
Participant's Separation from Service.
(b) --------------------- following the Participant's Separation from Service.
(c) --------------------- of the Plan Year after the Participant incurs
- ------------------------- Break(s) in Service (as defined in Article V).
<PAGE>
(d) ----------------- following the Participant's attainment of Normal
Retirement Age, but not earlier than --------------- days following his
Separation from Service.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under
Section 6.03.
Disability. The distribution date, subject to the limitations of Section
6.01(A)(3), is: (Choose (e) or (f))
(e) ----------------- after the Participant terminates employment because
of disability.
(f) The same as if the Participant had terminated employment without
disability.
Hardship. (Choose (g) or (h))
(g) The Plan does not permit a hardship distribution to a Participant who has
separated from Service.
(h) The Plan permits a hardship distribution to a Participant who has separated
from Service in accordance with the hardship distribution policy stated in
(Choose (1) or (2))
(1) Section 6.01(A)(4) of the Plan.
(2) Section 14.11 of the Plan.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i), (j))
(i) Treats the default as a distributable event. the Trustee, at the time of the
default, will reduce the Participant's Nonforfeitable Accrued Benefit by the
lesser of the amount in default (plus accrued interest) or the Plan's security
interest in that Nonforfeitable Accrued Benefit. To the extent the loan is
attributable to the Participant's Deferral Contributions Account, Qualified
Matching Contributions Account or Qualified Nonelective Contributions Account,
the Trustee will not reduce the Participant's Nonforfeitable Accrued Benefit
unless the Participant has separated from Service or unless the Participant has
attained age 59 1/2.
(j) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit
by the lesser of the amount in default (plus accrued interest) or the Plan's
security interest in that Nonforfeitable Accrued Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (Choose (a) or
(b))
<PAGE>
(a) No modifications.
(b) The Plan permits the following annuity options: -------------------------
- ------------------------------------------------------------------.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section
6.04(E). [Note: The Employer may specify additional annuity options in an
addendum to this Adoption Agreement, numbered 6.02(b).]
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose (a) or
(b))
(a) As of any distribution date, but not earlier than -------- of the Plan Year
beginning after the Participant's Separation from Service.
(b) As of the following date(s): (Choose at least one of Options
(1) through (5))
(1) As of any distribution date after the close of the Plan Year in which
the Participant attains Normal Retirement Age.
(2) Any distribution date following his Separation from
Service.
(3) Any distribution date in the -------------- Plan Year(s) beginning
after his Separation from Service.
(4) Any distribution date in the Plan Year after the Participant incurs
---------------- Break(s) in Service (as defined in Article V).
(5) Any distribution date following attainment of age -------- and
completion of at least --------- Years of Service (as defined in Article
V).
The distribution events described in the election(s) made under Options (a) or
(b) apply equally to all Accounts maintained for the Participant.
Participant Elections Prior to Separation from Service - Regular Matching
Contributions Account and Employer Contributions Account. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (c) or at least one of (d)
through (f))
(c) No distribution options prior to Separation from Service.
<PAGE>
(d) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable interest
in these Accounts after he attains: (Choose (1) or (2))
(1) Normal Retirement Age.
(2) ----------- years of age and is at least --------------%
vested in these Accounts. [Note: If the percentage is less
than 100%, see the special vesting formula in Section 5.03.]
(e) After a Participant has participated in the Plan for a period of not
less than --------- years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any portion
of the Accounts. [Note: The number in the blank space may not be less than 5.]
(f) Hardship. A Participant may elect a hardship distribution prior to his
Separation from Service in accordance with the hardship distribution policy:
Choose (1), or (2); (3) is available only as in addition to (1) or (2))
(1) Under Section 6.01(A)(4) of the Plan.
(2) Under Section 14.11 of the Plan.
(3) In no event may a Participant receive a hardship
distribution before he is at least -----------% vested in
these Accounts. [Note: If the percentage in the blank is
less than 100%, see the special vesting formula in Section
5.03.]
Participant Elections Prior to Separation from Service - Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (Choose (g) or at least one of (h)
or (i))
(g) No distribution options prior to Separation from Service.
(h) Until he retires, the Participant has a continuing election to receive all
or any portion of these Accounts after he attains:
(Choose (1) or (2))
(1) The later of Normal Retirement Age or age 59 1/2.
(2) Age --------------- (at least 59 1/2).
(i) Hardship. A participant, prior to his separation from service, may
elect a hardship distribution in accordance with the hardship distribution
policy under Section 14.11 of the Plan.
<PAGE>
Sale of trade of business/subsidiary. If the employer sells substantially all of
the assets (within the meaning of Code ss.409(d)(2) used in a trade or business
or sells a subsidiary (within the meaning of Code ss.409(d)(3)), a Participant
who continues employment with he acquiring corporation is eligible for
distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account: (Choose
(j) or (k))
(j) Only as described in this Adoption Agreement Section 6.03 for distributions
prior to Separation from Service.
(k) As if he has a Separation from Service. After March 31, 1988, a distribution
authorized solely by reason of this Option (k) must constitute a lump sum
distribution, determined in a manner consistent with Code ss.(k)(10) and the
applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
annuity distribution requirements of Section 6.04: (Choose (a) or (b))
(a) Apply only to a Participant described in Section 6.04(E) of the Plan
(relating to the profit sharing exception to the joint and survivor
requirements).
(b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account and other than a corrective distribution
described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more than
90 days after the most recent valuation date, the distribution will include
interest at: (Choose (a) or (b))
(a) -----------------% per annum. [Note: The percentage may equal 0%.]
(b) The 90 day Treasury bill rate in effect at the beginning of the current
valuation period.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
Section 14.12, to determine the allocation of net income, gain or loss:
(complete only those items, if any, which are applicable to the Employer's Plan)
(a) For salary reduction contributions, the Advisory Committee will:
(Choose (1), (2), (3) or (4))
<PAGE>
(1) Apply Section 9.11 without modification.
(2) Use the segregated account approach described in
Section 14.12.
(3) Use the weighted average method described in Section 14.12, based on a
------------------------ weighting period.
(4) Treat as part of the relevant Account at the beginning
of the valuation period -----% of the salary reduction
contributions: (Choose (i) or (ii))
(i) made during that valuation period.
(ii) made by the following specified time: --------.
(b) For matching contributions, the Advisory Committee will:
(Choose (1), (2) or (3))
(1) Apply Section 9.11 without modification.
(2) Use the weighted average method described in Section 14.12, based on a
----------------- weighting period.
(3) Treat as part of the relevant Account at the beginning of the
valuation period --------% of the Matching contributions allocated during
the valuation period.
(c) For Participant nondeductible contributions, the Advisory
Committee will: (Choose (1), (2), (3) or (4))
(1) Apply Section 9.11 without modification.
(2) Use the segregated account approach described in
Section 14.12.
(3) Use the weighted average method described in Section 14.12, based on a
--------------------- weighting period.
(4) Treat as part of the relevant Account at the beginning
of the valuation period ----------% of the Participant
nondeductible contributions: (Choose (i) or (ii))
(i) made during that valuation period.
(ii) made by the following specified time: ---------.
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee
must value the Trust Fund on the following valuation date(s): (Choose (a) or
(b))
<PAGE>
(a) No other mandatory valuation dates.
(b) (Specify) ---------------------------------------------------------------
- --------------------------------------------------------------.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
(a) Compensation definition. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning after
- -------------------------------. [Note: May not be effective later than the
first day of the first Plan Year beginning after the Employer executes this
Adoption Agreement to restate the Plan for the Tax Reform Act of 1986, if
applicable.]
(b) Eligibility conditions. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning after
- -------------------------.
(c) Suspension of Years of Service. The suspension of Years of Service rule
elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after --------------------.
(d) Contribution/allocation formula. The contribution formula elected under
Adoption Agreement Section 3.01 and the method of allocation elected under
Adoption Agreement Section 3.04 is effective for Plan Years beginning after
- ----------------------.
(e) Accrual requirements. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after ---------. [Note: If the effective
date is later than Plan Years beginning after December 31, 1989, the accrual
requirements in the Plan prior to its restatement may not be more restrictive
for post- 1989 Plan Years than the requirements permitted under Adoption
Agreement Section 3.06.]
(f) Elimination of Net Profits. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after ------------------------------. [Note: The date specified may
not be earlier than December 31, 1985.]
(g) Vesting Schedule. The vesting schedule elected under Adoption Agreement
Section 5.03 is effective for Plan Years beginning after ---------------------.
<PAGE>
(h) Allocation of Earnings. The special allocation provisions elected under
Adoption Agreement Section 9.11 are effective for Plan Years beginning after
- ------------------------------.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the delay
of a Plan provision beyond the permissible Effective Date under any applicable
law requirements.
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this -------- day of
- ---------------, 19---.
Name and EIN of Employer: ----------------------------------------------------
- -----------------------------------------------------------------.
Signed: -------------------------------------------------
Name(s) of Trustee: ---------------------------------------------
- -----------------------------------------------------------------
Signed: ---------------------------------------------------------
- -----------------------------------------------------------------
Name of Custodian: ----------------------------------------------
Signed: ---------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See Section
10.03 of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this
Plan for ERISA reporting purposes (Form 5500 Series) is:
- ------------------------------------------------.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
<PAGE>
correspond to the plan number the Employer designated in the prior
paragraph. The Master Plan Sponsor offers the following Paired Pension Plan(s)
with this Paired Profit Sharing Plan, identified by 3-digit adoption agreement
number: 004 and 010.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of an amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan Sponsor
at the following address and telephone number: INVESCO Trust Company, 7800 E.
Union Ave., Denver, Colorado (303) 779-0731.
Reliance on Opinion Letter. If the Employer does not maintain (and has never
maintained) any other plan other than this Plan and a Paired Pensnion Plan, it
may rely on the Master Plan Sponsor's opinion letter covering this Plan for
purposes of plan qualification. For this purpose, the Employer has not
maintained another plan if this Plan, or the Paired Pension Plan, amended and
restated that prior plan and the prior plan was the same type of plan as the
restated plan. If the Employer maintains or has maintained another plan other
than a Paired Pension Plan, including a welfare benefit fund, as defined in Code
ss.491(e), which provides post-retirement medical benefits for key employees (as
defined in Code ss.419A(d)(3)), or an individual medical account (as defined in
Code ss.415(l)(2)), the Employer may not rely on this Plan's qualified status
unless it obtains a determination letter from the applicable IRS Key District
office.
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by ------------------------------------, the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is --------------------------.
2. The undersigned Employer's adoption of this Plan
constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as ------------------------------ and
having an original effective date of ------------------------------------------.
<PAGE>
Dated this --------------- day of --------------------, 19-----
Name of Participating Employer: -------------------------------
Signed: -----------------------------------------------
Participating Employer's EIN: ---------------------------------
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: -------------------------------------
Accepted: ------------------------------------------
[Date]
Signed: --------------------------------------------
Name(s) of Trustee: --------------------------------
Accepted: ------------------------------------------
[Date]
Signed: --------------------------------------------
[Note: Each Participating Employer must execute a separate
Participation Agreement. See the Execution Page of the Adoption
Agreement for important Master Plan information.]
Std 401(k) AA Instructions
Complete the first blank in the paragraph by writing in the business' name in
its entirety.
1.02 Trustee
Option (a) should be chosen when the employer will be the trustee, INVESCO Trust
Company would then act as Custodian. If option (b) is chosen, INVESCO Trust
Company will charge an annual trust fee. Note: See Trustee Comments on page 20
for further explaination of Non-discretionary Trustee.
1.03 Plan
Enter the plan name. Example: ABC Inc. Employees 401(k) Plan.
1.07 Employee
If you want the plan to cover all employees, select option (a). If you want
to exclude from the plan any group(s) of employees, select any combination of
(b) or (c).
<PAGE>
Leased Employers/Related Employers
You may not exclude leased employees or related employers from participation
unless they are excluded under options (b) or (c) of Section 1.07.
1.12 Compensation
Treatment of elective contributions - Choose option (a) if you prefer to "add
back" employee elective contributions to compensation for purposes of allocating
employer contributions, forfeitures and for non-discrimination testing.
Modifications to Compensation
Modifications to Compensation - You must choose option (c) or any combination of
(d) or (e).
1.17 Plan Year
You must define the "plan year," usually it will follow the business tax year.
Limitation Year - You must define the "limitation year" (12 month period for
testing allocations to each employee's account), for administrative convenience
it should match the plan year.
1.18 Effective Date
New Plan - Enter the first day of your plan year (usually January
1) and the year.
Restated Plan - Effective date - If you are amending for the Tax Reform Act of
1986 enter: January 1, 1987. If you are amending for another reason, enter the
first day of your tax year, example: January 1, 1990. Originally established
date - Enter the original effective date of your plan from your prior Adoption
Agreement.
1.27 Hours of Service
Choose which method you wish to use for counting hours worked by
an employee to accrue benefits. Option (b), the equivalency
method, is explained in Section 1.27 of the plan. Usually Option
(a) is chosen.
1.29 Service for Predecessor Employer
Under this option, you may elect to count service for a predecessor employer
when you are not maintaining the plan of the predecessor employer. (Used
primarily in the event of a merger or acquisition.)
<PAGE>
1.31 Leased Employees
The law requires you to state how your plan would treat a leased employee who
could become a participant, even if you don't intend to ever lease employees.
Choose option (a) covering the employee without regard to the leasing company's
plan or option (b) the reduction method. Usually Option (b) is chosen.
2.01 Eligibility
a. An employee must attain this age to become a participant
(cannot exceed age 21).
b. Pick how long (service) an employee must work to become a
participant.
Plan Entry - Choose when employees enter the plan for purposes of contributions
and benefit accrual. Normally, option (c), semi-annual entry dates, is chosen.
Time of Participation - Choose which plan entry date (before or after) an
employee who meets the eligibility requirements will enter the plan. Normally,
option (f) is chosen.
Dual Eligibility - This section allows you to include into the plan current
employees who have not met the eligibility requirements and apply the
eligibility requirements to newly hired employees. Restated plans usually choose
(i)(2).
2.02 Years of Service
Option (b) should only be chosen if you wish to require less than
1000 hours to be worked by an employee for eligibility. Usually
Option (a) is chosen.
Eligibility Computation Period - Choose whether to measure subsequent
eligibility periods on the employee's anniversary or the plan year. Option (d)
is chosen for administrative convenience.
2.03 Break-in Service
This option may impose a complicated re-entry date for employees who have
terminated or whose hours were severely cut back. Option (a) is chosen for
administrative convenience.
3.01 Contributions allowed
PART I - Employer Contributions
Section 3.01 of this Adoption Agreement consists of three parts. Part I
defines the types of contributions you authorize under the plan. Part II
explains the matching contribution formula, if any. Part III allows you to put
limits on the employee 401(k) contributions. You must complete Part I, but only
complete Parts II and III, if necessary.
<PAGE>
Option (a) authorizes salary reduction contributions.
Option (b) authorizes matching contributions. If the Employer elects Option (b),
it must complete Part II to establish the matching contribution formula.
Option (c) authorizes the Employer to make qualified nonelective contributions
(QNECs"). The Employer will designate to the Trustee the amount of its
contributions consisting of QNECs.
The amount of QNECs is solely within the Employer's discretion. Any contribution
designated as QNECs is includible in the ADP test (see Section 14.08 of the
Plan) or in the ACP test (see Section 14.09 of the Plan). The advisory committee
may divide the QNECs between these two tests in any fashion it deems
appropriate, but may not use the same contributions in both tests. As a general
rule, the Employer will make a level of QNECs necessary to satisfy the
applicable tests, unless the Employer wishes to have excess contributions or
excess aggregate contributions distributed to the appropriate highly compensated
employees, in accordance with Sections 14.08 and 14.09.
Option (d) authorizes the Employer to make nonelective contributions in the same
manner it would under a regular profit sharing plan. the choices under Option
(d) are the same as the contribution formula options under the profit sharing
adoption agreements.
Part II Matching Contribution Formula
If the Employer elects Option (b), it must complete Part II, making a selection
under each option provided under Part II.
The Plan permits matching contributions for salary reduction contributions. The
formulas offered under Option (h) refer to "salary reduction contributions." The
Employer will define salary reduction contributions under Option (i).
Option (h) provides the formulas for determining the matching contribution. The
primary purpose of Option (h) is to establish the level of the matching
contribution (a fixed percentage or discretionary with the Employer). The
formula alone will not be sufficient to determine the Employer's actual matching
contribution on a participant's behalf. Any limitations on the amount of salary
reduction contributions taken into account, as provided under Option (i), are
necessary factors in computing the Employer's matching contribution.
Option (i) establishes any limitation on the amount of eligible contributions
taken into account under Option (h).
<PAGE>
Part III Salary Reduction Agreements
Under Option (j), the Employer must make selections from (1), (2), (3) and (4).
Under (1), Option (ii) prescribes a maximum deferral percentage, Option (iii)
prescribes a minimum deferral percentage and Option (i) prescribes no special
maximum limitation. The Employer may select both Options (ii) and (iii), or both
Options (i) and (iii), but Options (i) and (ii) are mutually exclusive. The
Employer may wish to consider a maximum percentage deferral under Option (ii) to
minimize the potential for Code 415 violations.
Under paragraphs (2) and (3), the Employer elects which restrictions apply to
the participant's right to revoke his/her salary reduction agreement. Under
paragraph (4), the Employer elects which restrictions apply to the participant's
right to increase or decrease his/her salary reduction percentage. The Employer
should consider the effect its elections have on plan administration.
3.04 Contribution Allocation
Part I - Matching Contributions. Select which account you want the matching
contributions to be allocated to, the Regular Matching Account is subject to a
vesting schedule. The Qualified Matching Account is always 100% vested and
contributions may be used to satisfy the deferral non-discrimination test.
Qualified Non-elective Contributions.
Choose which participants would receive an extra contribution to help satisfy
the non-discrimination test for deferrals (QNEC). For administrative convenience
opton (2) is chosen.
Part II - Method of Allocation. Choose the option for allocating the
discretionary employer contribution between all plan participants. You have
choices of non-integrated (pro-rata) or one of four integrated formulas.
Allocation formula. The primary allocation formulas are in Options (e), (f), (g)
and (h). Option (e) is a nonintegrated formula and allocates the employer
contribution proportionate to total compensation. Options (f), (g) and (h) are
alternatives for integrated plans. Usually option (e) is chosen for
proportionate allocation plans.
The two-tiered formula under Option (f) maximizes the disparity permitted
under the integration rules. Accordingly, the allocation in the first tier
results in an equal allocation percentage based on total compensation and based
on excess compensation. This equal allocation percentage may not exceed the
maximum disparity percentage (5.7%, 5.4% or 4.3%) described in the second column
of the Maximum Disparity Table. After completion of the first tier allocation,
the second step allocates the remaining contribution proportionate to total
compensation, in the same manner as the nonintegrated formula.
<PAGE>
Under the three-tiered formula under Option (g), the plan: (i) first allocates
based on total compensation, but the allocation percentage may not exceed the
maximum disparity percentage determined under the second column of the Maximum
Disparity Table; (ii) then allocates based on excess compensation, but the
allocation percentage may not exceed the maximum disparity percentage determined
under the second column of the Maximum Disparity Table; and (iii) completes the
allocation on the basis of total compensation.
The four-tiered allocation under Option (h) is a hybrid of Options (g) and (f).
The sole purpose of Option (h) is to use the first tier to satisfy the 3% top
heavy minimum, then use a progression of three additional tiers to make maximum
use of the permitted disparity rules. The second tier allocates solely on the
basis of excess compensation, with a maximum allocation under the second tier
equal to 3% of each participant's excess compensation. The third tier is the
same as the first tier under Option (g). The fourth tier is a prorata allocation
based on total compensation.
3.05 Forfeiture Allocation
Choose the method of allocating (dividing up) forfeitures of terminated
non-vested participant balances. Option (a) allocates forfeitures as an extra
discretionary contribution. Option (b) allocates forfeitures to reduce employer
contributions. Options (c) and (d) allow you to allocate separately forfeitures
from matching contributions. Select from options (e), (f) and (g) to determine
how to allocate forfeitures from highly compensated employee's matching account
when the matching non-discrimination test is not satisfied.
3.06 Compensation Taken Into Account
If you wish to count a participant's full year's compensation (even if he or she
entered during the year), for contributions choose option (a), if not, choose
option (b).
Accrual Requirements - Specify the service requirements a participant must
satisfy to receive an allocation. You may specify an hours of service
requirement, no greater than 501 hours. Standardized plans have relaxed
contribution requirements. A participant will receive a contribution of QNECs,
forfeitures or profit sharing contributions if they meet either of the two
requirements below:
Requirement #1
If the Participant was employed on the last day of the plan year the participant
must have worked at least one hour for the employer.
<PAGE>
Requirement #2
If the Participant terminates employment during the year and the participant
terminated after earning at leats 501 hours of work with the employer that plan
year.
3.15 More Than One Plan
This section only applies if you (the employer) maintain another defined
contribution plan (e.g.: profit sharing, money purchase, 401(k) or target
benefit) that covers at least one participant in this plan.
3.18 Defined Benefit Limitation
Check option (a) if you have never maintained a defined benefit plan for any
participants in this plan. If you have or are currently maintaining a defined
benefit under option (b), choose which plan's benefit would be reduced if a
participant's total allocations for a year were to exceed the allowable limit.
4.01 Participant Nondeductible Contributions
This section allows participants to contribute after-tax employee contributions.
These contributions are subject to a special nondiscrimination test. By checking
option (a) these contributions are not allowed.
5.01 Normal Retirement Age
Choose what age you (the employer) want the participants to be 100% vested in
their benefits, if still employed (normal retirement age).
5.02 Vesting Death/Disability
You may choose to allow 100% vesting for participants that terminate from
service because of death option (b) or disability option (c).
5.03 Vesting Schedule
Choose what vesting schedule(s) you want to apply to employer discretionary
contributions and matching contributions. If you choose option (b), you must at
a minimum complete the top-heavy vesting schedule.
Complete the Top Heavy Schedule based upon the following:
Years of Service
1
2 (not less than 20%)
3 (not less than 40%)
<PAGE>
4 (not less than 60%)
5 (not less than 80%)
6 (not less than 100%)
Optional: Complete the Non Top Heavy Schedule based upon the
following:
Years of Service or
1 1 - 0%
2 2 - 0%
3 (not less than 20%) 3 - 0%
4 (not less than 40% 4 - 0%
5 (not less than 60%) 5 - 100%
6 (not less than 80%) 6 - 100%
7 (not less than 100%)
5.04 Cash-Out Rule
If option (b) is chosen, the plan treats a 0% vested terminated participant as
having received a distribution, allowing for forfeitures to be reallocated to
active participants.
5.06 Years of Service
Choose what measuring period the plan should use to determine years of service
for vesting, employee's anniversary year or plan year. For ease of
administration choose option (a).
5.08 Prior Years of Service
By choosing options (b) through (d) you (the employer) may exclude some prior
years of service for purposes of vesting.
Article 6
The Employer must establish a specific distribution policy for the plan. Treas.
Reg. 1.411(d)-4 prohibits the Employer, the advisory committee or any third
party to retain discretion over when or in what form to pay the participant's
benefit. Under a restated plan, the elections under Article VI, to the extent
they differ from previous plan provisions regarding optional forms of benefit,
may not eliminate an optional form of benefit with respect to the account
balance accrued as of the date the Employer executes the restated adoption
agreement (or, if later, the effective date of that restated adoption
agreement). An optional form of benefit includes the form of payment (e.g., lump
sum or installments), the timing of payment (e.g., immediately after separation
form service, following a break in service, after attaining normal retirement
age) and the medium of payment (e.g. right to elect distribution in Employer
securities, right to elect distribution in the form of an annuity contract).
<PAGE>
With this in mind, if you are restating an existing plan, pay close
attention to the distribution features under that document and your
administrative practice of distributions. In all cases, try to mirror or
liberalize those distribution features when restating onto this document.
6.01 Distribution Date
A distribution date establishes a predetermined "target" date in a plan year
when the plan will offer distributions. The actual distribution may occur later
than a distribution date as long as the actual distribution is within an
"administratively reasonable period of time" from the distribution date. Typical
distribution dates for 401(k)plans are semi-annual dates or quarterly dates.
Nonforfeitable Accrued Benefit Not Exceeding $3,500
When a separated participants vested balance does not exceed $3,500, the plan
allows the employer to separately establish the timing of these distributions,
separate from the distribution dates. When you complete this section, you need
to balance two concerns: 1) will the timing of the distribution cause the
participant to consider it a "severance benefit" and therefore encourage
separation from service and 2) the administrative concerns of carrying a
non-active account in the plan.
Disability - The plan allows you (the employer) to establish a different target
payout date for disability distributions in options (e) and (f).
Hardship - This option states whether or not the plan would allow a separated
participant to receive a hardship distribution, prior to receiving a total
distribution of his/her vested account balance.
Default on a Loan - This election does not create a loan policy. You (the
employer) must elect the timing of the plan's foreclosure if a participant's
loan were to be defaulted upon even if you do not intend to offer loans in you
plan.
6.02 Method of Payment
You may choose the standard forms of payment if this is a brand new plan and not
a restatment. If the plan is not subject to the annuity requirements of Section
6.04, usually option (a) is chosen. If you choose to allow annuities, special
waivers and consent rules apply to all distributions.
6.03 Participant Elections After Separation from Service
You must choose when an employee who has separated from service, with a vested
benefit greater than $3,500, may elect to commence distributions. This election
will be tied directly to the "distribution date" definition earlier.
<PAGE>
Participant Elections Prior to Separation from Service
The following distribution elections apply to all participant's matching and
employer discretionary account regardless of vested account balances, prior to
employment separation. If you prefer not to allow any distribution options from
these accounts prior to separation, select option (c).
Deferrals, QMAC's and QNEC's - The following distribution elections apply to all
participant's deferral qualified matching, and qualified non-elective
contributions accounts, prior to employment separation. If you prefer not to
allow any distribution options from these accounts prior to employment
separation, select option (g).
6.04 Annuity Distributions
The law requires distributions to certain participants to be in the form of
commercial insurance annuities, unless consented to and waived by both the
participant and his or her spouse. Participants subject to this requirement are
identified in section 6.04(E) of the Plan. For administrative convenience,
choose option (a). If you are restating a plan that was subject to the joint and
survivor annuity rules you must select Option (b).
9.10 Value of Benefit
This option allows the employer to add interest to a participant's balance, if a
distribution occurs more than 90 days after the most recent plan valuation. You
do not have to provide an interest addition under this section and may complete
option (a) with 0%.
9.11 Allocation of Net Income/Loss
The following elections will state how current year contributions will share, if
at all, in net income, gains or losses of the trust. You must election option
(a) if your plan allows employee deferrals, option (b) if your plan includes a
matching contribution, or option (c) if the plan allows employee after tax
contributions. Only make the elections applicable to your plan.
Option (1) would not include contributions made since the last valuation date in
any earnings or loss calculation. The other choices are based upon a segregated
account approach or a weighted average approach, both are described in section
14.12 of the plan.
Usually daily weighting is chosen if INVESCO Trust Company is your recordkeeper,
for 9.11(a)(3), (b)(2) and (c)(3).
<PAGE>
10.14 Valuation of Trust
You may use this option to specify mandatory valuation dates, in addition to the
accounting date. Normally Option (a) is chosen.
Instructions for Effective Date Addendum
You must complete the effective date addendum only if the effective dates of any
of the listed items (a) through (j) have an effective date other than your
restated effective date in adoption agreement Section 1.18. Since some
provisions in the Tax Reform Act of 1986 were not effective until 1988 or 1989
The few provisions (if any) that have later effective dates must specify when
they are effective.
a. Compensation definition may not be later than the first day of your 1991
plan year.
b. Eligibility conditions may not be later than the first day of your 1989
plan year.
c. Suspension of years of service may not be earlier than the first day of
your 1990 plan year.
d. Contribution/allocation formula may not be earlier than the first day of
your 1989 plan year.
e. Accrual requirements may not be earlier than the first day of your 1989
plan year.
f. Elimination of Net Profits may not be earlier than December 31, 1985.
g. Vesting schedule may not be later than the first day of your 1989 plan
year.
h. Allocation of Earnings may not be earlier than the first day of the 1990
plan year.
Execution Page
The Employer must complete the date on which it executes the adoption agreement
and must execute the signature for the Employer. The execution page provides two
lines above the signature line to print or type the name of the Employer and the
Employer's EIN. If the Employer is a sole proprietorship, the individual sole
proprietor should execute as Employer. If the Employer is a corporation or a
partnership, an officer or a partner, as applicable, should execute the adoption
agreement on behalf of the Employer.
Trustee
If you selected option (a) of Section 1.02, then the employer will be the
Trustee. An individual must sign as trustee for the employer. INVESCO Trust
Company will then act as Custodian.
<PAGE>
If you choose to have INVESCO Trust Company act as "Trustee" then option (b) of
Section 1.02 must be chosen. INVESCO does charge an annual fee for this service.
INVESCO Trust Company will only serve as a non-discretionary trustee, this means
that there is a person who is the "Named Fiduciary." The Named Fiduciary gives
direction to a non-discretionary trustee, and the non- discretionary trustee
accepts all directions from the Named Fiduciary. The Named Fiduciary is either
the President of the Corporation, the managing partner of the partnership or the
self-employed individual of a sole-proprietorship. The Named Fiduciary is
responsible for selecting plan investments.
The execution page also includes a signature line for the Custodian, if any.
Leave the Custodian lines blank if INVESCO Trust Company will act as custodian.
Plan number. This paragraph designates the number the Employer assigns to the
plan for reporting (Form 5500) purposes. If this is the first plan the Employer
ever maintained, the number must be 001. The Employer's plan number does not
correspond to the 3- digit adoption agreement number specified at the top of the
first page of the adoption agreement. Consult your Counsel if unsure what
3-digit plan number to use.
Instructions for the Participation Agreement
This adoption agreement includes a Participation Agreement under which a related
group member of the signatory Employer to the execution page may participate in
the same plan with that Employer. Each related group member wishing to become a
participating Employer should execute a separate Participation Agreement. See
Section 1.30 of the Plan for the definition of related Employers.
Thus, it is possible to exclude the employees of related group members not
participating in the plan. If an Employer is a member of a related group, it
should consider whether the inclusion of other related group members' employees
is necessary to satisfy the coverage requirements of Code 410(b) or the minimum
participation requirement of Code 401(a)(26). If the Employer determines
inclusion of the employees of a related group member is necessary to maintain
qualification of the plan, the Employer may take one of two approaches: (1) have
the related group member execute a Participation Agreement; or (2) elect in
Adoption Agreement Section 1.07 to include the employees of that related group
member. Under approach (1), the participation of the related group member will
result in the automatic inclusion of the employees of that related group member,
without having to specify their inclusion in Adoption Agreement Section 1.07. In
addition, the related group member, under approach (1), has the authority to
contribute to the plan and, in the event another participating related group
member makes a contribution on behalf of that related group member's employees,
the Participation Agreement will ensure the deductibility of that contribution
(assuming the contribution does not exceed the deduction limits of Code 404).
<PAGE>
The addendum instructions to the appropriate adoption agreement explain the
effect on the allocation of Employer contributions when related group members
maintain a single non-standardized plan. Under approach (2), the plan will
retain its qualified status, but contributions the Employer makes on behalf of a
nonparticipating related group member's employees may not be deductible (even if
otherwise within the limitations of Code 404), resulting in an excise tax to the
contributing Employer.
Unrelated Employers. The Master Plan does not allow the participation in a
single plan of unrelated Employers (i.e., Employers that do not satisfy the
related group definition in Section 1.30 of the Plan).
legal\adop-agr\st401kaa.006
Adoption Agreement #009
D246284a
Standardized Simplified Profit Sharing Plan
Paired Profit Sharing Plan
Basic Profit Sharing Plan Considerations
For: Corporate or self-employed employers who want the
flexibility of optional contributions.
Maximum Annual Contribution: 15% of compensation up to $30,000.
Eligibility: All employees age 21 or older who have worked for
the employer for 2 years.
Contribution: Optional.
Establishment Deadline: December 31, or the end of the employer's
fiscal year.
Contribution Deadline: April 15, or date for filing tax return.
Benefits: Contribution is tax-deductible; earnings are tax-
deferred.
Financial Programs
Investment Professionals Since 1932
Provided by:
Financial Programs, Inc.
And the Financial Group
of No-Load Mutual Funds
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
[Your Adoption Agreement and Plan document constitute the rules and parameters
under which your retirement program will operate.] These instructions are
intended to assist you, the employer, in choosing the option provisions for your
retirement plan. They are not intended to substitute or replace competent legal
advice from your attorney or accountant. If further clarification is necessary,
contact your counsel or INVESCO Trust Company.
The Standardized Simplified Profit Sharing Plan is designed to make
administration of your retirement plan as simple as possible. If you feel your
situation requires a more complex retirement plan offering additional options,
please call our toll-free number, 800/525-8085, and ask for "Retirement
Services."
Employer's Name -------------------------------------------------------------
Employer ID# ----------------------------------------------------------------
Address ---------------------------------------------------------------------
City, State -------------------------------- Zip -----------------
Telephone Number (----------)------------------------------
One Person Plan: ---- Yes ---- No
Date of Birth ---------------------------------------------
Contribution Frequency ------------------------------------
Instructions for Standardized Simplified Profit Sharing Plan
This Adoption Agreement is an important part of your retirement plan. Please
carefully read the instructions for each option. You may need to refer to the
Plan Document for definitions in the text.
Completes the first blank by putting in the business' name, or, if
self-employed, the owner's name.
1.03 Enter the plan name. Examples, ABC Profit Sharing Plan or John Smith Profit
Sharing Plan.
1.17 Enter the last day of your tax year (usually December 31).
1.18 New Plan - Enter the first day of your tax year, (usually January 1) and
the year.
Restated Plan - effective date - If you are amending for the Tax Reform
Act of 1986, enter: January 1, 1987. If you are amending for another
reason, enter the first day of your tax year, example: January 1, 1990.
<PAGE>
Original established date - Enter the original effective date of your plan
from your prior adoption agreement.
2.01 Eligibility
Restated Plan - Complete the eligibility requirements you originally
choose on your prior Adoption Agreement.
New Plan - Choose an age and/or service requirement applicable to the
owner and all employees.
6.01 Distribution Date
Select a "target date" for payouts from the plan due to separation from service,
death, disability or attainment of age 59 1/2. Usually this date is after the
plan has been valued (e.g.: March 1).
10.0 Provide your Federal tax identification number. Date and sign the Adoption
Agreement. Type the name(s) of trustees, (usually the owner and/or managers) and
sign the document as trustee.
Plan Number
If this is the first retirement plan for your business, enter 001; if the
second, enter 002.
Return your completed Adoption Agreement to INVESCO Trust Company for review and
processing. It will be examined for completeness. We will then sign as
custodian, and return the original document.
INVESCO TRUST COMPANY USE ONLY: Account Number ---------------------
<PAGE>
Adoption Agreement #009
Standardized Simplified Profit Sharing Plan
(Paired Profit Sharing Plan)
The undersigned,
- --------------------------------------------------------------------------------
("Employer"), by executing this Adoption Agreement, elects to become a
participating Employer in the INVESCO Trust Company Defined Contribution Master
Plan (basic plan document #01) by adopting the accompanying Plan and Trust in
full as if the Employer were a signatory to that Agreement. The Employer makes
the following elections granted under the provisions of the Plan.
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is:
(Choose (a) or (b))
(a) A discretionary Trustee.
(b) A nondiscretionary Trustee. See Section 10.03.
1.03 PLAN. The name of the Plan as adopted by the Employer is
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
1.07 EMPLOYEE. The term "Employee" specifically includes all employees of the
Employer.
1.12 COMPENSATION. "Compensation" includes elective contributions and does not
exclude any items other than as specified in Section 1.12 of the Plan.
1.17 PLAN YEAR. Plan Year means the 12 consecutive month period
ending every---------------------------------------------------------.
The Limitation Year is the Plan Year.
1.18 EFFECTIVE DATE. New Plan. The "Effective Date" of the Plan
is ---------------------. Restated Plan. The restated Effective
Date is ---------------------------------------. This Plan is a
substitution and amendment of an existing retirement plan(s)
originally established ---------------------------------------.
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is the monthly
equivalency method.
1.31 LEASED EMPLOYEES. The Advisory Committee will determine the Leased
Employee's allocation of Employer contributions under Article III without taking
into account the Leased Employee's allocation, if any, under the leasing
organization's plan.
2.01 ELIGIBILITY. To become a Participant in the Plan, an Employee must satisfy
the following eligibility conditions:
(Choose (a) or (b))
(a) Age ------ (not exceeding 21).
<PAGE>
(b) ------ (0, 1 or 2) Year(s) of Service without, in the case of 2 Years,
an intervening break in Service.
Plan Entry Date/Time of Participation. "Plan Entry Date" means the effective
date and the first day of the Plan Year. An Employee will become a Participant
on the Plan Entry Date (if employed on that date) nearest the date the Employee
completes the above eligibility conditions.
Dual Eligibility. The above eligibility conditions apply to:
(Choose (c) or (d))
(c) all Employees of the Employer without exception.
(d) Employees who are not Participants in the Plan as of the Effective Date.
2.02 YEAR OF SERVICE - PARTICIPATION. An Employee must complete 1,000 Hours of
Service during an eligibility computation period to receive credit for a Year of
Service. After the initial eligibility computation period described in Section
2.02 of the Plan, the Plan measures the eligibility computation period as the 12
consecutive month period beginning with each anniversary of an Employee's
Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described in
Section 2.03(B) of the Plan applies to the Employer's Plan.
3.01 AMOUNT. The amount of the Employer's annual contribution to the Trust will
equal the amount the Employer may from time to time deem advisable, irrespective
of whether the Employer has Net Profits. If the Employer is a member of a
related group (as defined in Section 1.30), it may not execute this Adoption
Agreement.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) in the same ratio that each
Participant's Compensation for the Plan Year bears to the total Compensation of
all Participants for the Plan Year.
Top Heavy Minimum Allocation. The plan will satisfy the top heavy minimum
allocation requirement of Section 3.04(B) as follows: (1) if the Employer does
not maintain a Paired Pension Plan, the Employer will make any necessary
additional contribution to the Participant's Account, as described in Section
3.04(B)(7)(a) of the Plan; and (2) if the Employer maintains a Paired Pension
Plan, that Paired Pension Plan will guarantee the top heavy minimum allocation
and this Plan does not guarantee that minimum.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under
Section 9.14, the Advisory Committee will allocate a Participant forfeiture, as
an Employer contribution for the Plan Year in which the forfeiture occurs, as if
the Participant forfeiture were an additional Employer contribution for that
Plan Year.
<PAGE>
3.06 ACCRUAL OF BENEFIT. For any Plan Year, the Advisory Committee will
determine the allocation under Section 3.04 by taking into account a
Participant's Compensation for the entire Plan Year. To receive an allocation of
Employer contributions (and Participant forfeitures), the Participant: (a) if he
is employed by the Employer on the last day after the Plan Year, must complete
at least one Hour of Service for that Plan Year, and (b) if he is not employed
by the Employer on the last day of the Plan Year, the Participant must complete
at least 501 Hours of Service during the Plan year, except there is no Hour of
Service requirement if the Participant terminates employment during the Plan
year on account of death, disability or attainment of Normal Retirement Age.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply, the
Excess Amount attributed to this Plan equals the produce of: (i) the total
Excess Amount allocated as of such date (including any amount which the Advisory
Committee would have allocated but for the limitations of Code Section 415);
times (ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan, divided by (2) the total amount allocated as of such date
under all qualified defined contribution plans (determined without regard to the
limitations of Code Section 415).
3.18 DEFINED BENEFIT PLAN LIMITATION. The limitation under Section 3.18 of the
Plan does not apply to the Employer's Plan if the Employer does not maintain and
never has maintained a defined benefit plan covering any Participant in this
Plan. If the limitation under Section 3.18 does apply, the Employer will reduce
the Participant's projected annual benefit under the defined benefit plan under
which the Participant participates and will apply the 100% limitation described
in Section 3.19(1), unless the Employer provides an alternative compliance
method in an addendum to this Section 3.18.
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is age 59 1/2.
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule of Section 5.02
applies to death and to disability.
5.03 VESTING SCHEDULE. Subject to Section 9.14 of the Plan, a Participant's
Accrued Benefit is 100% Nonforfeitable at all times. The deemed cash-out rule
does not apply.
5.06 YEARS OF SERVICE - VESTING. An Employee receives credit for a Year of
Service for vesting purposes if he completes at least 1,000 Hours of Service
during a Plan Year.
<PAGE>
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically includes
all Years of Service.
[Note: If Section 6.01 or Section 6.03 liberalizes the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the Effective Date of this Adoption Agreement.]
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. A distribution date under the Plan
means
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If a Participant's Nonforfeitable Accrued Benefit does not exceed $3,500, or if
the Participant separates from Service because of disability, the distribution
date, subject to the limitations of Section 6.01(A), is the first distribution
date following the Participant's Separation from Service. The Plan does not
permit a hardship distribution. If a Participant or Beneficiary defaults on a
loan made pursuant to a loan policy adopted by the Advisory Committee pursuant
to Section 9.04, the Plan treats the default as a distributable event. The
Trustee, at the time of the default, will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus
accrued interest) of the Plan's security interest in that Nonforfeitable Accrued
Benefits.
6.03 BENEFIT PAYMENT ELECTIONS. A Participant who is eligible to make
distribution elections under Section 6.03 of the Plan may elect to commence
distribution of his Nonforfeitable Accrued Benefit as of any distribution date
following his Separation from Service. Furthermore, subject to the restrictions
of Article VI, until he retires, the Participant has a continuing election to
receive all or any portion of his Nonforfeitable Accrued Benefit after he
attains Normal Retirement Age.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The annuity
distribution requirements of Section 6.04 apply only to a Participant described
in Section 6.04(E) of the Plan (relating to the profit sharing plan exception).
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account) occurs more than 90 days after the most
recent valuation date, the distribution will include interest at 0% per annum.
10.0 The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
<PAGE>
officers has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this ----- day of---------------,
19-----.
Name and EIN of Employer: ---------------------------------------------------
Signed: ---------------------------------------------------------------------
Name(s) of Trustee: ---------------------------------------------------------
Signed: ---------------------------------------------------------------------
Signed: ---------------------------------------------------------------------
Name of Custodian: INVESCO Trust Company
Signed:----------------------------------------------------------------------
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03
of the Plan.]
Plan Number. The plan's 3-digit number assigned for ERISA reporting purposes
(Form 5500 Series) is: ------------------------------.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
The Master Plan Sponsor offers the following Paired Pension Plan(s) with this
Paired Profit Sharing Plan, identified by 3-digit adoption agreement number: 004
and 010.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the
basic plan document will notify all adopting employers of any amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address and
telephone number: INVESCO Trust Company, 7800 East Union Ave., Suite 800,
Denver, Colorado 80237, (303) 779-0731.
Reliance on Opinion Letter. If the Employer does not maintain (and has never
maintained) any other plan other than this Plan and a Paired Pension Plan, it
may rely on the Master Plan Sponsor's opinion letter covering this Plan for
purposes of plan qualification. For this purpose, the Employer has not
maintained another plan if this Plan, or the Paired Pension Plan , amended and
restated that prior plan and the prior plan was the same type of plan as the
<PAGE>
restated plan. If the Employer maintains or has maintained another plan
other than a Paired Pension Plan, including a welfare benefit fund, as defined
in Code Section 419(e), which provides post-retirement medical benefits for key
employees (as defined in Code Section 419A(d)(3)), or an individual medical
account (as defined in Code Section 415(1)(2)), the Employer may not rely on
this Plan's qualified status unless it obtains a determination letter from the
applicable IRS Key District office.
adop-agr\sspsp.009
THE FINANCIAL FUNDS
Defined Contribution
Master Plan
and Trust Agreement
Basic Plan Document #01
Provided by:
The Financial Funds
Managed & Distributed by
INVESCO Funds Group, Inc.
Custodian:
INVESCO Trust Company
A Subsidiary of INVESCO MIM PLC
<PAGE>
INVESCO TRUST COMPANY
DEFINED CONTRIBUTION
MASTER PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT #01
INVESCO Trust Company, Denver, Colorado, in its capacity as Master Plan
Sponsor, establishes this Master Plan intended to conform to and qualify under
ss.401 and ss.501 of the Internal Revenue Code of 1986, as amended. An Employer
establishes a Plan and Trust under this Master Plan by executing an Adoption
Agreement. If the Employer adopts this Plan as a restated Plan in substitution
for, and in amendment of, an existing plan, the provisions of this Plan, as a
restated Plan, apply solely to an Employee whose employment with the Employer
terminates on or after the restated Effective Date of the Employer's Plan. If an
Employee's employment with the Employer terminates prior to the restated
Effective Date, that Employee is entitled to benefits under the Plan as the Plan
existed on the date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by
executing an Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute the
Employer's Adoption Agreement, or any successor in office who in writing accepts
the position of Trustee. The Employer must designate in its Adoption Agreement
whether the Trustee will administer the Trust as a discretionary Trustee or as a
nondiscretionary Trustee. If a person acts as a discretionary Trustee, the
Employer also may appoint a Custodian. See Article X. If the Master Plan Sponsor
is a bank, savings and loan, credit union or similar financial institution, a
person other than the Master Plan Sponsor (or its affiliate) may not serve as
Trustee or as Custodian of the Employer's Plan without the written consent of
the Master Plan Sponsor.
1.03 "Plan" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement under
which the Employer has elected to participate in this Master Plan. The Employer
must designate the name of the Plan in its Adoption Agreement. An Employer may
execute more than one Adoption Agreement offered under this Master Plan, each of
which will constitute a separate Plan and Trust established or continued by that
Employer. The Plan and the Trust created by each adopting Employer is a separate
Plan and a separate Trust, independent from the plan and the trust of any other
employer adopting this Master Plan. All section references within the Plan are
Plan section references unless the context clearly indicates otherwise.
<PAGE>
1.04 "Adoption Agreement" means the document executed by each Employer
adopting this Master Plan. The terms of this Master Plan as modified by the
terms of an adopting Employer's Adoption Agreement constitute a separate Plan
and Trust to be construed as a single Agreement. Each elective provision of the
Adoption Agreement corresponds by section reference to the section of the Plan
which grants the election. Each Adoption Agreement offered under this Master
Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in
the preamble to that Adoption Agreement. The provisions of this Master Plan
apply equally to Nonstandardized Plans and to Standardized Plans unless
otherwise specified.
1.05 "Plan Administrator" is the Employer unless the Employer
designates another person to hold the position of Plan Administrator. In
addition to his other duties, the Plan Administrator has full responsibility for
compliance with the reporting and disclosure rules under ERISA as respects this
Agreement.
1.06 "Advisory Committee" means the Employer's Advisory Committee as
from time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed
Individual) of the Employer. The Employer must specify in its Adoption
Agreement any Employee, or class of Employees, not eligible to participate in
the Plan. If the Employer elects to exclude collective bargaining employees, the
exclusion applies to any employee of the Employer included in a unit of
employees covered by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and one or more
employers unless the collective bargaining agreement requires the employee to be
included within the Plan. The term "employee representatives" does not include
any organization more than half the members of which are owners, officers, or
executives of the Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed
Individual" means an individual who has Earned Income (or who would have
had Earned Income but for the fact that the trade or business did not have net
earnings) for the taxable year from the trade or business for which the Plan is
established. "Owner-Employee" means a Self-Employed Individual who is the sole
proprietor in the case of a sole proprietorship. If the Employer is a
partnership, "Owner-Employee" means a Self-Employed Individual who 3 is a
partner and owns more than 10% of either the capital or profits interest of the
partnership.
1.09 "Highly Compensated Employee" means an Employee who, during the
Plan Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the
constructive ownership rules of Code ss.318, and applying the principles
of Code ss.318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of the
top-paid 20% group of employees (based on Compensation for the relevant
year); or
<PAGE>
(d) has Compensation in excess of 50% of the dollar amount prescribed
in Code ss.415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding
12-month period and does not satisfy clause (a) in either period, the Employee
is a Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (d) will not exceed the greater of 3 or 10% of the total
number (after application of the Code ss.414(q) exclusions) of Employees, but no
more than 50 officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Advisory Committee will treat the highest
paid officer as satisfying clause (d) for that year.
For purposes of this Section 1.09, "Compensation" means Compensation as
defined in Section 1.12, except any exclusions from Compensation elected in the
Employer's Adoption Agreement Section 1.12 do not apply, and Compensation must
include "elective contributions" (as defined in Section 1.12). The Advisory
Committee must make the determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the top paid 20%
group, the top 100 paid Employees, the number of officers includible in clause
(d) and the relevant Compensation, consistent with Code ss.414(q) and
regulations issued under that Code section. The Employer may make a calendar
year election to determine the Highly Compensated Employees for the Plan Year,
as prescribed by Treasury regulations. A calendar year election must apply to
all plans and arrangements of the Employer. For purposes of applying any
nondiscrimination test required under the Plan or under the Code, in a manner
consistent with applicable Treasury regulations, the Advisory Committee will
treat a Highly Compensated Employee and all family members (a spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant) as a
single Highly Compensated Employee, but only if the Highly Compensated Employee
is a more than 5% owner or is one of the 10 Highly Compensated Employees with
the greatest Compensation for the Plan Year. This aggregation rule applies to a
family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes an former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.09 or received Compensation in excess of $50,000
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.11 "Beneficiary" is a person designated by a Participant who is or
may become entitled to a benefit under the Plan. A Beneficiary who becomes
entitled to a benefit under the Plan remains a Beneficiary under the Plan until
the Trustee has fully distributed his benefit to him. A Beneficiary's right to
(and the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.12 "Compensation" means, except a provided in the Employer's
Adoption Agreement, the Participant's Earned Income, wages, salaries, fees
for professional service and other amounts received for personal services
actually rendered in the course of employment with the Employer maintaining the
plan (including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). The Employer must elect in its Adoption Agreement
whether to include elective contributions in the definition of Compensation.
"Elective contributions" are amounts excludible from the Employee's gross income
under Code ss.125,402(a)(8), 402(h) or 403(b), and contributed by the Employer,
<PAGE>
at the Employee's election, to a Code ss.401(k) arrangement, a Simplified
Employee Pension, cafeteria plan or tax-sheltered annuity. The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if
includible in the definition of Compensation under Section 1.12 of the
Employer's Adoption Agreement) to a plan of deferred compensation to the
extent the contributions are not included in the gross income of the
Employee for the taxable year in which contributed, on behalf of an
Employee to a Simplified Employee Pension Plan to the extent such
contributions are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of whether
such amounts are includible in the gross income of the Employee when
distributed.
(b) Amounts realized from the exercise of a non-qualified stock
option, or when estricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk
of forfeiture
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a stock option described in Part II, Subchapter D,
Chapter 1 of the Code.
(d) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the extent that the
premiums are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code 403(b) (whether or not the contributions are excludible
from the gross income of the Employee), other than "elective
contributions," if elected in the Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into account
only Compensation actually paid for the relevant period. A Compensation payment
includes Compensation by the Employer through another person under the common
paymaster provisions in Code ss.3121 and 3306.
(A) Limitations on Compensation.
(1) Compensatio dollar limitation. For any Plan Year beginning after
December 31, 1988, the Advisory Committee must take into account only the first
$200,000 (or beginning January 1, 1990, such larger amount as the Commissioner
of Internal Revenue may prescribe) of any Participant's Compensation. For any
Plan Year beginning prior to January 1, 1989, this $200,000 limitation (but
<PAGE>
not the family aggregation requirement described in the next paragraph) applies
only if the Plan is top heavy for such Plan Year or operates as a deemed top
heavy plan for such Plan Year.
(2) Application of compensation limitation to certain family members.
The $200,000 Compensation limitation applies to the combined Compensation
of the Employee and of any family member aggregated with the Employee under
Section 1.09 who is either (I) the Employee's spouse; or (ii) the Employee's
lineal descendant under the age of 19. If, for a Plan Year, the combined
Compensation of the Employee and such family members who are Participants
entitled to an allocation for that Plan Year exceeds the $200,000 (or adjusted)
limitation. "Compensation" for each such Participant, for purposes of the
contribution and allocation provisions of Article III, means his Adjusted
Compensation. Adjusted Compensation is the amount which bears the same ratio to
the $200,000 (or adjusted) limitation as the affected Participant's Compensation
(without regard to the $200,000 Compensation limitation) bears to the combined
Compensation of all the affected Participants in the family unit. If the Plan
uses permitted disparity, the Advisory Committee must determine the integration
level of each affected family member Participant prior to the proration of the
$200,000 Compensation limitation, but the combined integration level of the
affected Participants may not exceed $200,000 (or the adjusted limitation). The
combined Excess Compensation of the affected Participants in the family unit may
not exceed $200,000 (or the adjusted limitation) minus the affected
Participants' combined integration level (as determined under the preceding
sentence). If the combined Excess Compensation exceeds this limitation, the
Advisory Committee will prorate the Excess Compensation limitation among the
affected Participants in the family unit in proportion to each such individual's
Adjusted Compensation minus his integration level. If the Employer's Plan is a
Nonstandardized Plan, the Employer may elect to use a different method in
determining the Adjusted Compensation of the affected Participants by specifying
that method in an addendum to the Adoption Agreement, numbered Section 1.12.
(B) Nondiscrimination. For purposes of determining whether the plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.12, except: (1) the Employer may elect
to include or to exclude elective contributions, irrespective of the Employer's
election in its Adoption Agreement regarding elective contributions; and (2) the
Employer will not give effect to any elections made in the "modifications to
Compensation definition" section of Adoption Agreement Section 1.12. The
Employer's election described in clause (1) must be consistent and uniform with
respect to all Employees and all plans of the Employer for any particular Plan
Year. If the Employer's Plan is a Nonstandardized Plan, the Employer,
<PAGE>
irrespective of clause (2), may elect to exclude from this
nondiscrimination definition of Compensation any items of Compensation
excludible under Code ss.414(s) and the applicable Treasury regulations,
provided such adjusted definition conforms to the nondiscrimination requirements
of those regulations.
1.13 "Earned Income" means net earnings from self-employment in the
trade or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material income
producing factor. The Advisory Committee will determine net earnings without
regard to items excluded from gross income and the deductions allocable to those
items. The Advisory Committee will determine net earnings after the deduction
allowed to the Self-Employed Individual for all contributions made by the
Employer to a qualified plan and, for Plan Years beginning after December 31,
1989, the deduction allowed to the Self-Employed under Code ss.164(f) for
self-employment taxes.
1.14 "Account" means the separate account(s) which the Advisory
Committee or the Trustee maintains for a participant under the Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.16 "Nonforfeitable" means a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to be
Participant's Accrued Benefit.
1.17 "Plan Year" means the fiscal year of the Plan, the consecutive
month period specified in the Employer's Adoption Agreement. The Employer's
Adoption Agreement also must specify the "Limitation Year" applicable to the
limitations on allocations described in Article III. If the Employer maintains
Paired Plans, each Plan must have the same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the
Employer's Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01 of
the Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Plan Year.
Unless otherwise specified in the Plan, the Advisory Committee will make
all Plan allocations for a particular Plan Year as of the Accounting Date of
that Plan Year.
1.21 "Trust" means the separate Trust created under the Employer's
Plan.
<PAGE>
1.22 "Trust Fund" means all property of every kind held or acquired
by the Employer's Plan, other than incidental benefit insurance contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms
provides that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any purpose
to any person other than the insurance company. If the Plan distributes an
annuity contract, the contract must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the
employ of the Employer, including any period the Employee is on an unpaid leave
of absence authorized by the Employer under a uniform, nondiscriminatory policy
applicable to all Employees. "Separation from Service" means the Employee no
longer has an employment relationship with the Employer maintaining this Plan.
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties.
The Advisory Committee credits Hours of Service under this paragraph (a)
to the Employee for the computation period in which the Employee performs
the duties, irrespective of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee has
received an award. The Advisory Committee credits Hours of Service under
this paragraph (b) to the Employee for the computation period(s) to which
the award or the agreement pertains rather than for the computation period
in which the award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is
terminated), for reasons other than for the performance of duties during a
computation period, such as leave of absence, vacation, holiday, sick
leave, illness, incapacity (including disability), layoff, jury duty
<PAGE>
or military duty. The Advisory Committee will credit no more than 501
Hours of Service under this paragraph (c) to an Employee on account of any
single continuous period during which the Employee does not perform any
duties (whether or not such period occurs during a single computation
period). The Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b) and (c) of
Labor Reg. ss.530.200b-2, which the Plan, by this reference, specifically
incorporates in full within this paragraph (c). The Advisory Committee
will not credit an Hour of Service under more than one of the above
paragraphs. A computation period for purposes of this Section 1.27 is the
Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory
Committee is measuring an Employee's Hours of Service. The Advisory
Committee will resolve any ambiguity with respect to the crediting of an
Hour of Service in favor of the Employee.
(A) Method of crediting Hours of Service. The Employer must elect
in its Adoption Agreement the method the Advisory Committee will use in
crediting an Employee with Hours of Service. For purposes of the Plan, "actual"
method means the determination of Hours of Service from records of hours worked
and hours for which the employer makes payment or for which payment is due from
the Employer. If the employer elects to apply an "equivalency" method for each
equivalency period for which the Advisory Committee would credit the Employee
with at least one Hour of Service, the Advisory Committee will credit the
Employee with: (I) 10 Hours of Service for a daily equivalency; (ii) 45 Hours of
Service for a weekly equivalency; (iii) 95 Hours of Service for a semimonthly
payroll period equivalency; and (iv) 190 Hours of Service for a monthly
equivalency.
(B) Maternity/paternity leave. Solely for purposes of determining
whether the Employee incurs a Break in Service under any provision of this
Plan, the Advisory Committee must credit Hours of Service during an Employee's
unpaid absence period due to maternity or paternity leave. The Advisory
Committee considers an Employee on maternity or paternity leave if the
Employee's absence is due to he Employee's pregnancy, the birth of the
Employee's child, the placement with the Employee of an adopted child, or the
care of the Employee's child immediately following the child's birth or
placement. The Advisory Committee credits Hours of Service under this paragraph
on the basis of the number of Hours of Service the employee would receive if he
were paid during the absence period or, if the Advisory Committee cannot
determine the number of Hours of Service the Employee would receive, on the
basis of 9 hours per day during the absence period. The Advisory Committee will
credit only the number (not exceeding 501) of Hours of Service necessary to
<PAGE>
prevent an Employee's Break in Service. The Advisory Committee credits all
Hours of Service described in this paragraph to the computation period in which
the absence period begins or, if the Employee does not need these Hours of
Service to prevent a Break in Service in the computation period in which his
absence period begins, the Advisory Committee credits these Hours of Service to
the immediately following computation period.
1.28 "Disability" means the Participant, because of a physical or
mental disability, will be unable to perform the duties of his customary
position of employment (or is unable to engage in any substantial gainful
activity) for an indefinite period which the Advisory Committee considers will
be of long continued duration. A Participant also is disabled if he incurs the
permanent loss or loss of use of a member or function of the body, or is
permanently disfigures, and incurs a Separation from Service. The Plan considers
a Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.28 in a nondiscriminatory, consistent and uniform manner. If the Employer's
Plan is a Nonstandardized Plan, the Employer may provide an alternative
definition of disability in an addendum to its Adoption Agreement, numbered
Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the
plan of a predecessor employer, the Plan treats service of the employee
with the predecessor employer as service with the Employer. If the Employer does
not maintain the plan of a predecessor employer, the Plan does not credit
service with the predecessor employer, unless the Employer identifies the
predecessor in its Adoption Agreement and specifies the purposes for which the
Plan will credit service with that predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
corporations (as defined in Code ss.414(b)), trades or businesses (whether or
not incorporated) which are under common control (as defined in Code ss.414(c))
or an affiliated service group (as defined in Code ss.414(m) or in Code
ss.414(o)). If the Employer is a member of a related group, the term "Employer"
includes the related group members for purposes of crediting Hours of Service,
determining Years of Service and Breaks in Service under Articles II and V,
applying the Participation Test and the Coverage Test under Section 3.06(E),
applying the limitations on allocations in Part 2 of Article III, applying the
top heavy rules and the minimum allocation requirements of Article III, the
definitions of Employee, Highly Compensated Employee, Compensation and Leased
Employee, and for any other purpose required by the applicable Code section or
by a Plan provision. However, an Employer may contribute to the Plan only by
<PAGE>
being a signatory to the Execution Page of the Adoption Agreement or to a
Participation Agreement to the Employer's Adoption Agreement. If one or more of
the Employer's related group members become Participating Employers by executing
a Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members for all purposes of
the Plan, and "Plan Administrator" means the Employer that is the signatory to
the Execution Page of the Adoption Agreement.
If the Employer's Plan is a Standardized Plan, all Employees of the
Employer or of any member of the Employer's related group, are eligible to
participate in the Plan, irrespective of whether the related group member
directly employing the Employee is a Participating Employer. If the Employer's
Plan is a Nonstandardized Plan, the Employer must specify in Section 1.07 of its
Adoption Agreement, whether the Employees of related group members that are not
Participating Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation received from a related
employer that has not executed a Participation Agreement and whose Employees are
not eligible to participate in the Plan.
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an
Employee of the Employer. A Leased Employee is an individual (who otherwise
is not an Employee of the Employer) who, pursuant to a leasing agreement between
the Employer (or for the Employer and any persons related to the Employer within
the meaning of Code ss.144(a)(3)) on a substantially full time basis for at
least one year and who performs services historically performed by employees in
the Employer's business field. If a Leased Employee is treated as an Employee by
reason of this Section 1.31 of the Plan, "Compensation" includes Compensation
from the leasing organization which is attributable to services performed for
the Employer.
(A) Safe harbor plan exception. The Plan does not treat a Leased
Employee as an Employee if the leasing organization covers the employee is
a safe harbor plan and, prior to application of this safe harbor plan exception,
20% or less of the Employer's Employees (other than Highly Compensated
Employees) are Leased Employees. A safe harbor plan is a money purchase pension
plan providing immediate participation, full and immediate vesting, and a
nonintegrated contribution formula equal to at least 10% of the employee's
compensation without regard to employment by the leasing organization on a
specified date. The safe harbor plan must determine the 10% contribution on the
basis of compensation as defined in Code ss.415(c)(3) plus elective
contributions (as defined in Section 1.12).
<PAGE>
(B) Other requirements. The Advisory Committee must apply this
Section 1.31 in a manner consistent with Code ss.414(n) and 414(o) and the
regulations issued under those Code sections. The Employer must specify in the
Adoption Agreement the manner in which the Plan will determine the allocation of
Employer contributions and Participant forfeitures on behalf of a Participant if
the Participant is a Leased Employee covered by a plan maintained by the leasing
organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special
provisions and restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-
Employee or for a group of Owner-Employees who controls the trade or
business with respect to which this Plan is established and the
Owner-Employee or Owner-Employees also control as Owner-Employees one or
more other trades or businesses, plans must exist or be established with
respect to all the controlled trades or businesses so that when the plans
are combined they form a single plan which atisfies the requirements of
Code ss.401(a) and Code ss.401(d) with respect to the employees of the
controlled trades or businesses.
(b) The Plan excludes an Owner-employee or group of Owner-Employees
if the Owner-Employee or group of Owner-Employees controls any other trade
or business, unless the employees of the other controlled trade or
business participate in a plan which satisfies the requirements of Code
ss.401(a) and Code ss.401(d). The other qualified plan must provide
contributions and benefits which are not less favorable than the
contributions and benefits provided for the Owner-Employee or group of
Owner-Employees under this Plan, or if an Owner-Employee is covered under
another qualified plan as an Owner-Employee, then the plan established
with respect to the trade or business he does control must provide
contributions or benefits as favorable as those provided under the most
favorable plan of the trade or business he does not control. If the
exclusion of this paragraph (b) applies and the Employer's Plan is a
Standardized Plan, the Employer may not participate or continue to
participate in this Master Plan and the Employer's Plan becomes an
individually-designed plan for purposes of qualification reliance.
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an
Owner-Employee or group of Owner-Employees controls a trade or business if
the Owner-Employee or Owner-Employees together (1) own the entire interest
in an unincorporated trade or business, or (2) in the case of a
partnership, own more than 50% of either the capital interest or the
profits interest in the partnership.
<PAGE>
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan
Year if the top heavy ratio as of the Determination Date exceeds 60%. The top
heavy ratio is a fraction, the numerator of which is the sum of the present
value of Accrued Benefits of all Key Employees as of the Determination Date and
the denominator of which is a similar sum determined for all Employees. The
Advisory Committee must include in the top heavy ratio, as part of the present
value of Accrued Benefits, any contribution not made as of the Determination
Date but includible under Code ss.416 and the applicable Treasury regulations,
and distributions made within the Determination Period. The Advisory Committee
must calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including the extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code ss.416 and the regulations under that
Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.33, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans. Code ss.416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his accrued benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code ss.411(b)(1)(C). If the Employer maintains a
defined benefit plan, the Employer must specify in Adoption Agreement Section
3.18 the actuarial assumptions (interest and mortality only) the Advisory
Committee will use to calculate the present value of benefits from a defined
benefit plan. If an aggregated plan does not have a valuation date coinciding
<PAGE>
with the Determination Date, the Advisory Committee must value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date, except as Code
ss.416 and applicable Treasury regulations require for the first and second plan
year of a defined benefit plan. The Advisory Committee will calculate the top
heavy ratio with reference to the Determination Dates that fall within the same
calendar year.
(A) Standardized Plan. If the Employer's Plan is a Standardized
Plan, the Plan operates as a deemed top heavy plan in all Plan Years,
except, if the Standardized Plan includes a Code ss.401(k) arrangement, the
Employer may elect to apply the top heavy requirements only in Plan Years for
which the Plan actually is top heavy. Under a deemed top heavy plan, the
Advisory Committee need not determine whether the Plan actually is top heavy.
However, if the Employer, in Adoption Agreement Section 3.18, elects to override
the 100% limitation, the Advisory Committee will need to determine whether a
deemed top heavy Plan's top heavy ratio for a Plan Year exceeds 90%.
(B) Definitions. For purposes of applying the provisions of this
Section 1.33:
(1) "Key Employee" means, as of any Determination Date, any
Employee or former Employee (or Beneficiary of such Employee) who, for any
Plan Year in the Determination Period: (I) has Compensation in excess of
50% of the dollar amount prescribed in Code ss.415(b)(1)(A) (relating
to defined benefit plans) and is an officer of the Employer; (ii) has
Compensation in excess of the dollar amount prescribed in Code
ss.415(c)(1)(A) (relating to defined contribution plans) and is one of
the Employees owning the ten largest interests in the Employer; (iii)
is a more than 5% owner of the Employer; or (iv) is a more than 1%
owner of the employer and has Compensation of more than $150,000. The
constructive ownership rules of Code ss.318 (or the principles of that
section in the case of an unincorporated Employer,) will apply to
determine ownership in the Employer. The number of officers taken into
account under clause (I) will not exceed the greater of 3 or 10% of
the total number (after application of the Code ss.414(q) exclusions)
of Employees, but no more than 50 officers. The Advisory Committee
will make the determination of who is a Key Employee in accordance
with Code ss.416(I)(1) and the regulations under that Code section.
(2) "Non-Key Employee" is an employee who does not meet the
definition of Key Employee.
(3) "Compensation" means Compensation as determined under Section
1.09 for purposes of identifying Highly Compensated Employees.
<PAGE>
(4) "Required Aggregation Group" means: (I) each qualified plan of
the Employer in which at least one Key Employee participates at any time
during the Determination Period; and (ii) any other qualified plan of the
employer which enables a plan described in clause (I) to meet the
requirements of Code ss.401(a)(4) or of Code ss.410.
(5) "Permissive Aggregation Group" is the Required Aggregation Group
plus any other qualified plans maintained by the employer, but only if
such group would satisfy in the aggregate the requirements of Code ss.401
(a)(4) and of Code ss.410. The Advisory Committee will determine the
Permissive Aggregation Group.
(6) "Employer" means the Employer that adopts this Plan and any
related employers described in Section 1.30.
(7) "Determination Date" for any Plan Year is the Accounting Date of
the preceding Plan Year or, in the case of the first Plan Year of the
Plan, the Accounting Date of that Plan Year. The "Determination Period"
is the 5 year period ending on the Determination Date.
1.34 "Paired Plans" means the Employer has adopted two Standardized
Plan Adoption Agreements offered with this Master Plan, one Adoption
Agreement being a Paired Profit Sharing Plan and one Adoption Agreement being a
Paired Pension Plan. A Paired Profit Sharing Plan may include a Code ss.401(k)
arrangement. A Paired Pension Plan must be a money purchase pension plan or a
target benefit pension plan. Paired Plans must be the subject of a favorable
opinion letter issued by the National Office of the Internal Revenue Service.
This Master Plan does not pair any of its Standardized Plan Adoption Agreements
with Standardized Plan Adoption Agreements under a defined benefit master plan.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan in
accordance with the participation option selected by the Employer in its
Adoption Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues as a
Participant in the Plan, irrespective of whether he satisfies the participation
conditions in the restated Plan, unless otherwise provided in the Employer's
Adoption Agreement.
<PAGE>
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Adoption Agreement Section 2.01, the Plan takes
into account all of his Years of Service with the Employer, except as provided
in Section 2.03. "Year of Service" means an eligibility computation period
during which the Employee completes not less than the number of Hours of Service
specified in the Employer's Adoption Agreement. The initial eligibility
computation period is the first 12 consecutive month period measured from the
Employment Commencement Date. The Plan measures succeeding eligibility
computation periods in accordance with the option selected by the Employee in
its Adoption Agreement. If the Employer elects to measure subsequent periods on
a Plan Year basis, an Employee who receives credit for the required number of
Hours of Service during the initial eligibility computation period and during
the first applicable Plan Year will receive credit for two Years of Service
under Article II. "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service for the Employer. If the Employer
elects a service condition under Adoption Agreement Section 2.01 based on
months, the Plan does not apply any Hour of Service requirement after the
completion of the first Hour of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break in
Service" if during any consecutive month period he does not complete more than
500 Hours of Service with the Employer. The "12 consecutive month period" under
this Section 2.03 is the same 12 consecutive month period for which the Plan
measures "Years of Service" under Section 2.02.
(A) 2-year Eligibility. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section 2.01, the
Plan treats an Employee who incurs a one year Break in Service and who has never
become a Participant as a new Employee on the date he first performs an Hour of
Service for the Employer after the Break in Service.
(B) Suspension of Years of Service. The Employer must elect in its
Adoption Agreement whether a Participant will incur a suspension of Years of
Service after incurring a one year Break in Service. If this rule applies under
the Employer's Plan, the Plan disregards a Participant's Years of Service (as
defined in Section 2.02) earned prior to a Break in Service until the
Participant completes another Year of Service and the Plan suspends the
Participant's participation in the Plan. If the Participant completes a Year of
Service following his Break in Service, the Plan restores that Participant's
pre-Break Years of Service (and the Participant resumes active participation in
the Plan) retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial computation
period under this Section 2.03(B) is the 12 consecutive month period measured
from the date the Participant first receives credit for an Hour of Service
following the one year Break in Service period. The Plan measures any subsequent
periods, if necessary, in a manner consistent with the computation period
<PAGE>
selection in Adoption Agreement Section 2.02. This Section 2.03(B) does not
affect a Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will not
result in the restoration of any Year of Service disregarded under the Break in
Service rule of Section 2.03(A).
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
with the Employer terminates will re-enter the Plan as a Participant on the
date of his re-employment, subject to the Break in Service rule, if applicable,
under Section 2.03(B). An Employee who satisfies the Plan's eligibility
conditions but who terminates employment with the Employer prior to becoming a
Participant will become a Participant on the later of the Plan Entry Date on
which he would have entered the Plan had he not terminated employment or the
date of his re-employment, subject to the Break in Service rule, if applicable,
under Section 2.03(B). Any Employee who terminates employment prior to
satisfying the Plan's eligibility conditions becomes a Participant in accordance
with Adoption Agreement Section 2.01.
2.05 CHANGE IN EMPLOYEE STATUS. If a Participant has not ncurred a
Separation from Service but ceases to be eligible to participate in the Plan, by
reason of employment within an employment classification excluded by the
Employer under Adoption Agreement Section 1.07, the Advisory Committee must
treat the Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a Participant's sharing in the allocation of Employer
contributions and Participant forfeitures, if applicable, by disregarding his
Compensation paid by the Employer for services rendered in his capacity as an
Excluded Employee. However, during such period of exclusion, the Participant,
without regard to employment classification, continues to receive credit for
vesting under Article V for each included Year of Service and the Participant's
Account continues to share fully in Trust Fund allocations under Section 9.11.
If an Excluded Employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment classification, he
will participate in the Plan immediately if he has satisfied the eligibility
conditions of Section 2.01 and would have been a Participant had he not been an
Excluded Employee during his period of Service. Furthermore, the Plan takes into
account all of the Participant's included Years of Service with the Employer as
an Excluded Employee for purposes of vesting credit under Article V.
<PAGE>
2.06 ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a
Standardized Plan, the Plan does not permit an otherwise eligible Employee
nor any Participant to elect not to participate in the Plan. If the Employer's
Plan is a Nonstandardized Plan, the Employer must specify in its Adoption
Agreement whether an Employee eligible to participate, or any present
Participant, may elect not to participate in the Plan. For an election to be
effective for a particular Plan Year, the Employee or Participant must file the
election in writing with the Plan Administrator not later than the time
specified in the Employer's Adoption Agreement. The employer may not make a
contribution under the Plan for the Employee or for the Participant for the Plan
Year for which the election is effective, nor for any succeeding Plan Year,
unless the Employee or Participant re-elects to participate in the Plan. After
an Employee's or Participant's election not to participate has been effective
for at least the minimum period prescribed by the Employer's Adoption Agreement,
the Employee or Participant may re-elect to participate in the Plan for any Plan
Year and subsequent Plan Years. An Employee or Participant may re-elect to
participate in the Plan by filing his election in writing with the Plan
Administrator not later than the time specified in the Employer's Adoption
Agreement. An Employee or Participant who re-elects to participate may again
elect not to participate only as permitted in the Employer's Adoption Agreement.
If an Employee is a Self- Employed Individual, the Employee's election (except
as permitted by Treasury regulations without creating a Code ss.401(k)
arrangement with respect to that Self-Employed Individual) must be effective no
later than the date the Employee first would become a Participant in the Plan
and the election is irrevocable. The Plan Administrator must furnish an Employee
or a Participant any form required for purposes of an election under this
Section 2.06. An election timely filed is effective for the entire Plan Year.
A Participant who elects not to participate may not receive a distribution
of his Accrued Benefit attributable either to Employer or to Participant
contributions except as provided under Article IV or under Article VI. However,
for each Plan year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in Trust Fund
allocations under Article IX. Furthermore, the Employee or the Participant
receives vesting credit under Article V for each included Year of Service during
the period the election not to participate is effective.
ARTICLE III
EMPLOYER CONTRIBUTIONS
AND FORFEITURES
Part 1. Amount of Employer Contributions and Plan Allocations:
Sections 3.01 through 3.06.
3.01 AMOUNT. For each Plan Year, the Employer contributes to the trust
the amount determined by application of the contribution option selected by
the Employer in its Adoption Agreement. The Employer may not make a contribution
to the Trust for any Plan Year to the extent the contribution would exceed the
Participants' Maximum Permissible Amounts.
<PAGE>
The Employee contributes to this Plan on the condition its contribution is
not due to a mistake of fact and the Revenue Service will not disallow the
deduction for its contribution. The Trustee, upon written request from the
employer, must return to the Employer the amount of the Employer's contribution
made by the Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code ss.404. The Trustee will not
return any portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact;
or
(b) The disallowance of the contribution as a deduction,
and then, only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Plan within the time prescribed
by the Code or applicable Treasury regulations. Subject to the consent of the
Trustee, the Employer may make its contribution in property rather than in cash,
provided the contribution of property is not a prohibited transaction under the
Code of under ERISA.
3.04 CONTRIBUTION ALLOCATION.
(A) Method of Allocation. The Employer must specify in its Adoption
Agreement the manner of allocating each annual Employer contribution to this
Trust.
(B) Top Heavy Minimum Allocation. The Plan must comply with the
provisions of this Section 3.04(B), subject to the elections in the
Employer's Adoption Agreement.
<PAGE>
(1) Top Heavy Minimum Allocation Under Standardized Plan. Subject
to the Employer's election under Section 3.04(B)(3), the top heavy minimum
allocation requirement applies to a Standardized Plan for each Plan Year,
irrespective of whether the Plan is top heavy.
(a) Each Participant employed by the Employer on the last day of the
Plan Year will receive a top heavy minimum allocation for that Plan Year.
The Employer may elect in Section 3.04 of its Adoption Agreement to apply
this paragraph (a) only to a Participant who is a Non-Key Employee.
(b) Subject to any overriding elections in section 3.18 of the
Employer's Adoption Agreement, the top heavy minimum allocation is the
lesser of 3% of the Participant's Compensation for the Plan Year or the
highest contribution rate for the Plan Year made on behalf of any
Participant for the Plan Year. However, if the Employee participates in
Paired Plans, the top heavy minimum allocation is 3% of his Compensation.
If, under Adoption Agreement Section 3.04, the Employer elects to apply
paragraph (a) only to a Participant who is a Non-Key Employee, the
Advisory Committee will determine the "highest contribution rate"
described in the first sentence of this paragraph (b) by reference only to
the contribution rates of Participants who are Key Employees for the
Plan Year.
(2) Top Heavy Minimum Allocation Under Nonstandardized Plan. The top
heavy minimum allocation requirement applies to a Nonstandardized Plan only
in Plan Years for which the Plan is top heavy. Except as provided in the
Employer's Adoption Agreement, if the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by the
Employer on the last day of the Plan Year will receive a top heavy minimum
allocation for that Plan Year, irrespective of whether he satisfies the
Hours of Service condition under Section 3.06 of the Employer's Adoption
Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the
Non-Key Employee's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Key Employee.
However, if a defined benefit plan maintained by the Employer which
benefits a Key Employee depends on this Plan to satisfy the
antidiscrimination rules of Code ss.401(a)(4) or the coverage rules of
<PAGE>
Code ss.410 (or another plan benefiting the Key Employee so depends on such
defined benefit plan), the top heavy minimum allocation is 3% of the
Non-Key Employee's Compensation regardless of the contribution rate for the
Key Employees.
(3) Special Election for Standardized Code ss.401(k) Plan. If the
Employer's Plan is a Standardized Code ss.401(k) Plan, the Employer may elect in
Adoption Agreement Section 3.04 to apply the top heavy minimum allocation
requirements of Section 3.04(B)(1) only for Plan Years in which the Plan
actually is a top heavy plan.
(4) Special Definitions. For purposes of this Section 3.04(B), the
term "Participant" includes any Employee otherwise eligible to participate
in the Plan but who is not a Participant because of his Compensation level or
because of his failure to make elective deferrals under a Code ss.401(k)
arrangement or because of his failure to make mandatory contributions. For
purposes of sub- paragraph (1)(b) or (2)(b), "Compensation" means Compensation
as defined in Section 1.12, except Compensation does not include elective
contributions, irrespective of whether the Employer has elected to include these
amount sin Section 1.12 of its Adoption Agreement, any exclusion selected in
Section 1.12 of the Adoption Agreement (other than the exclusion of elective
contributions) does not apply and any modification to the definition of
Compensation in Section 3.06 does not apply.
(5) Determining Contribution Rates. For purposes of this Section
3.04(B), a Participant's contribution rate is the sum of all Employer
contributions (not including Employer contributions to Social security) and
forfeitures allocated to the Participant's Account for the Plan Year divided by
his Compensation for the entire Plan Year. However, for purposes of satisfying a
Participant's top heavy minimum allocation in Plan Years beginning after
December 31, 1998, the Participant's contribution rate does not include an
elective contributions under a Code ss.401(k) arrangement nor any Employer
matching contributions allocated on the basis of those elective contributions or
on the basis of employee contributions, except a Nonstandardized Plan may
include in the contribution rate any matching contributions not necessary to
satisfy the nondiscrimination requirements of Code ss.401(k) or of Code
ss.401(m).
If the Employee is a Participant in Paired Plans, the Advisory Committee
will consider the Paired Plans as a single Plan to determine a Participant's
contribution rate and to determine whether the Plans satisfy this top heavy
minimum allocation requirement. To determine a Participant's contribution rate
under a Nonstandardized Plan, the Advisory Committee must treat all qualified
top heavy defined contribution plans maintained by the Employer (or by any
related Employers described in Section 1.30) as a single plan.
<PAGE>
(b) No Allocations. If, for a Plan Year, there are no allocations of
Employer contributions or forfeitures for any Participant (for purposes of
Section 3.04(B)(1)(b)) or for any Key Employee (for purposes of Section
3.04(B)(2)(b)), the Plan does not require any top heavy minimum allocation for
the Plan Year, unless a top heavy minimum allocation applies because of the
maintenance by the Employer of more than one plan.
(7) Election of Method. The Employer must specify in its Adoption
Agreement the manner in which the Plan will satisfy the top heavy minimum
allocation requirement.
(a) If the Employer elects to make any necessary additional
contribution to this Plan, the Advisory Committee first will allocate the
Employer contributions (and Participant forfeitures, if any) for the Plan
Year in accordance with the provisions of Adoption Agreement Section 3.04.
The Employer then will contribute an additional amount for the Account of
any Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this Plan
and any other plan aggregated under paragraph (5), is less than the top
heavy minimum allocation. The additional amount is the amount necessary to
increase the Participant's contribution rate to the top heavy minimum
allocation. The Advisory Committee will allocate the additional
contribution to the Account of the Participant on whose behalf the
Employer makes the contribution.
(b) If the Employer elects to guarantee the top heavy minimum
allocation under another plan, this Plan does not provide the top heavy
minimum allocation and the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) under the plan solely
in accordance with the allocation method selected under Adoption Agreement
Section 3.04.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued
Benefit forfeited under the Plan is a Participant forfeiture. The Advisory
Committee will allocate Participant forfeitures in the manner specified by the
Employer in its Adoption Agreement. The Advisory Committee will continue to hold
the undistributed, non-vested portion of a terminated Participant's Accrued
Benefit in his Account solely for his benefit until a forfeiture occurs at the
time specified in Section 5.09 or if applicable, until the time specified in
Section 9.14. Except as provided under Section 5.04, a Participant will not
share in the allocation of a forfeiture of any portion of his Accrued Benefit.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the
accrualof benefit (Employer contributions and Participant forfeitures) on the
basis of the Plan Year in accordance with the Employer's elections in its
Adoption Agreement.
<PAGE>
(A) Compensation Taken Into Account. The Employer must specify
in its Adoption Agreement the Compensation the Advisory Committee is to
take into account in allocating an Employer contribution to a Participant's
Account for the Plan Year in which the Employee first becomes a Participant. For
all other Plan Years, the Advisory Committee will take into account only the
Compensation determined for the portion of the Plan Year in which the Employee
actually is a Participant. The Advisory Committee must take into account the
Employee's entire Compensation for the Plan Year to determine whether the Plan
satisfies the top heavy minimum allocation requirement of Section 3.04(B). The
Employer, in an addendum to its Adoption Agreement numbered 3.06(A), may elect
to measure Compensation for the Plan Year for allocation purposes on the basis
of a specified period other than the Plan Year.
(B) Hours of Service Requirement. Subject to the applicable
minimum allocation requirement of Section 3.04, the Advisory Committee will
not allocate any portion of an Employer contribution for a Plan Year to any
Participant's Account if the Participant does not complete the applicable
minimum Hours of Service requirement specified in the Employer's Adoption
Agreement.
(C) Employment Requirement. If the Employer's Plan is a Standardized
Plan, a Participant who, during a particular Plan Year, completes the
accrual requirements of Adoption Agreement Section 3.06 will share in the
allocation of Employer contributions for that Plan Year without regard to
whether he is employed by the Employer on the Accounting Date of that Plan Year.
If the Employer's Plan is a Nonstandardized Plan, the Employer must specify in
its Adoption Agreement whether the Participant will accrue a benefit if he is
not employed by the Employer on the Accounting Date of the Plan Year. If the
Employer's Plan is a money purchase plan or a target benefit plan, whether
nonstandardized or Standardized, the Plan conditions benefit accrual on
employment with the Employer on the 1st day of the Plan Year for the Plan Year
in which the Employer terminates the Plan.
(D) Other Requirements. If the Employer's Adoption Agreement
includes options for other requirements affecting the Participant's accrual
of benefits under the Plan, the Advisory Committee will apply this Section 3.06
in accordance with the Employer's Adoption Agreement selections.
(E) Suspension of Accrual Requirements Under Nonstandardized Plan.
If the Employer's Plan is a Nonstandardized Plan, the Employer may elect in
its Adoption Agreement to suspend the accrual requirements elected under
Adoption Agreement Section 3.06 if, for any Plan Year beginning after December
31, 1989, the Plan fails to satisfy the Participation Test or the Coverage Test.
<PAGE>
A Plan satisfies the Participation Test if, on each day of the Plan Year, the
number of Employees who benefit under the Plan is at least equal to the lesser
of 50 or 40% of the total number of Includible Employees as of such day. A Plan
satisfies the Coverage Test if, on the last day of each quarter of the Plan
Year, the number of Nonhighly Compensated Employees who benefit under the Plan
si at least equal to 70% of the total number of Includible Nonhighly Compensated
Employees as of such day. "Includible" Employees are all Employees other than:
(1) those Employees excluded from participating in the Plan for the entire Plan
Year by reason of the collective bargaining unit exclusion or the nonresident
alien exclusion under Adoption Agreement Section 1.07 or by reason of the
participation requirements of Sections 2.01 and 2.03; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to complete at
least 401 Hours of Service for the Plan Year. A "Nonhighly Compensated Employee"
is an Employee who is not a Highly Compensated Employee and who is not a family
member aggregated with a Highly Compensated Employee pursuant to Section 1.09 of
the Plan.
For purposes of the Participation Test and the Coverage Test, an Employee
is benefiting under the Plan on a particular date if, under Adoption Agreement
Section 3.04, he is entitled to an allocation for the Plan Year. Under the
Participation Test, when determining whether an Employee is entitled to an
allocation under Adoption Agreement Section 3.04, the Advisory Committee will
disregard any allocation required solely by reason of the top heavy minimum
allocation, unless the top heavy minimum allocation is the only allocation made
under the Plan for the Plan Year.
If this Section 3.06(E) applies for a Plan Year, the Advisory Committee
will suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend in descending order the accrual requirements for each Includible
Employee who incurred an earlier Separation from Service date, until the Plan
satisfies both the Participation Test and the Coverage Test for the plan Year.
If two or more Includible Employees have a Separation from Service on the same
day, the Advisory Committee will suspend the accrual requirements for all such
Includible Employees irrespective of whether the Plan can satisfy the
Participation Test and the Coverage Test by accruing benefits for fewer than all
such Includible Employees. If the Plan suspends the accrual requirements for an
Includible Employee, that Employee will share in the allocation of Employer
contributions and Participant forfeitures, if any, without regard to the number
of Hours of Service he has earned for the Plan Year and without regard to
whether he is employed by the Employer on the last day of the Plan Year. If the
<PAGE>
Employer's Plan includes Employer matching contributions subject to Code
ss.401(m), this suspension of accrual requirements applies separately to the
Code ss.401(m) portion of the Plan, and the Advisory Committee will treat an
Employee as benefiting under that portion of the Plan if he is an Eligible
Employee for purposes of the Code ss.401(m) nondiscrimination test. The Employer
may modify the operation of this Section 3.06(E)k by electing appropriate
modifications in Section 3.06 of its Adoption Agreement.
Part 2. Limitations On Allocations: sections 3.07 through 3.19
[Note: Sections 3.07 through 3.10 apply only to Participants in this Plan
who do not participate, and who have never participated, in another qualified
plan or in a welfare benefit fund (as defined in Code ss.419(3)) maintained by
the Employer.]
3.07 The amount of Annual Additions which the Advisory Committee
may allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the Employer
otherwise would contribute to the Participant's Account would cause the Annual
Additions for the Limitation Year to exceed the Maximum Permissible Amount, the
Employer will reduce the amount of its contribution so the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount. If an allocation
of Employer contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual
Compensation for a Limitation Year, the Advisory Committee may determine
the Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee must make
this determination on a reasonable and uniform basis for all Participants
similarly situated. The Advisory Committee must reduce any Employer
contributions (including any allocation of forfeitures) based on estimated
annual Compensation by any Excess Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of
the Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the Participant's
actual Compensation for such Limitation Year.
<PAGE>
3.10 If, pursuant to Section 3.09, or because of the allocation
of forfeitures, there is an Excess Amount with respect to a Participant for
a Limitation Year, the Advisory Committee will dispose of such Excess Amount as
follows:
(a) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the return would
reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount
still exists, and the Plan covers the Participant at the end of the
Limitation Year, then the Advisory Committee will use the Excess Amount(s)
to reduce future Employer contributions (including any allocation of
forfeitures) under the plan for the next Limitation Year and for each
succeeding Limitation Year, as is necessary, for the Participant. If the
Employer's Plan is a profit sharing plan, the Participant may elect to
limit his Compensation for allocation purposes to the extent necessary to
reduce his allocation for the Limitation Year to the Maximum Permissible
Amount and eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount
still exists, and the Plan does not cover the Participant at the end of
the Limitation Year, then the Advisory Committee will hold the Excess
Amount unallocated in a suspense account. The Advisory Committee will
apply the suspense account to reduce Employer Contributions (including
allocation of forfeitures) for all remaining Participants in the next
Limitation Year, and in each succeeding Limitation Year if necessary.
Neither the Employer nor any Employee may contribute to the Plan for any
Limitation Year in which the Plan is unable to allocate fully a suspense
account maintained pursuant to this paragraph (c).
(d) The Advisory Committee will not distribute any Excess
Amount(s) to Participants or to former Participants.
[Note: Sections 3.11 through 3.16 apply only to Participants who, in
addition to this Plan, participate in one or more plans (including Paired
Plans), all of which are qualified Master or Prototype defined contribution
plans or welfare benefit funds (as defined in Code ss.419(e)) maintained by the
Employer during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Accounts for the same Limitation Year
under this Plan and such other defined contribution plan. If the amount the
<PAGE>
Employer otherwise would contribute to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, the Employer will reduce the amount of its contribution so the
Annual Additions under all such plans for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.10) to the Participant's
Account, the Advisory Committee will reallocate the Excess Amount to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the Advisory Committee may determine
the amounts referred to in 3.11 above on the basis of the Participant's
estimated annual Compensation for such Limitation year. The Advisory Committee
will make this determination on a reasonable and uniform basis for all
Participants similarly situated. The Advisory Committee must reduce any Employer
contribution (including allocation of forfeitures) based on estimated annual
Compensation by any Excess Amounts carried over from prior years.
3.13 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts referred to
in 3.11 on the basis of the Participant's actual Compensation for such
Limitation Year.
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess amount will consist of the Amounts
last allocated. The Advisory Committee will determine the Amounts last allocated
by treating the Annual Additions attributable to a welfare benefit fund as
allocated first, irrespective of the actual allocation date under the welfare
benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess
amount attributed to this Plan, if the Advisory Committee allocates an
Excess Amount to a Participant on an allocation date of this Plan which
coincides with an allocation date of another plan.
3.16 The Advisory Committee will dispose of an Excess Amounts
attributed to this Plan as provided in Section 3.10.
<PAGE>
[Note: Section 3.17 applies only to Participants who, in addition to this
Plan, participate in one or more qualified plans which are qualified defined
contribution plans other than a Master or Prototype plan maintained by the
Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions
which the Advisory Committee may allocate under this Plan on behalf of any
Participant are limited in accordance with the provisions of Section 3.11
through 3.16, as though the other plan were a Master or Prototype plan, unless
the Employer provides other limitations in an addendum to the Adoption
Agreement, numbered Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. If the Employer maintains a
defined benefit plan, or has ever maintained a defined benefit plan which
the Employer has terminated, then the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any Participant for any
Limitation Year must not exceed 1.0. The Employer must provide in Adoption
Agreement Section 3.18 the manner in which the plan will satisfy this
limitation. The Employer also must provide in its Adoption Agreement Section
3.18 the manner in which the plan will satisfy the top heavy requirements of
Code ss.416 after taking into account the existence (or prior maintenance) of
the defined benefit plan.
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the
following terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year, of (I) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury regulations, Annual Additions
include excess contributions described in Code ss.401(k), excess
contributions described in Code ss.401(m) and excess deferrals described
in Code ss.402(g), irrespective of whether the plan distributes or
forfeits such excess amounts. Annual Additions also include Excess Amounts
reapplied to reduce Employer contributions under Section 3.10. Amounts
allocated after March 31, 1984, to an individual medical account (as
defined in Code 415(l)(2)) included as part of a defined benefit plan
maintained by the Employer are Annual Additions. Furthermore, Annual
Additions include contributions paid or accrued after December 31, 1985,
for taxable years ending after December 31, 1985, attributable to
post-retirement medical benefits allocated to the separate account of a
key employee (as defined in Code ss.419(d)(3)) under a welfare benefit fun
(as defined in Code ss.419(e)) maintained by the Employer.
<PAGE>
(b) "Compensation" - For purposes of applying the limitations of Part
2 of this Article III, "Compensation" means Compensation as defined in
Section 1.12, except Compensation does not include elective
contributions, irrespective of whether the Employer has elected to
include these amounts as Compensation under Section 1.12 of its
Adoption Agreement, and any exclusion selected in Section 1.12 of the
Adoption Agreement (other than the exclusion of elective
contributions) does not apply.
(c) "Employer" - the Employer that adopts this Plan and any related
employers described in Section 1.30. Solely for purposes of applying the
limitations of Part 2 of this Article III, the advisory Committee will
determine related employers described in Section 1.30 by modifying Code
ss.414(b) and (c) in accordance with Code ss.415(h).
(d) "Excess Amount" - The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(e) "Limitation Year" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the Employer must
use the same Limitation Year. If the Employer amends the Limitation Year
to a different 12 consecutive month period, the new Limitation Year must
begin on a date within the Limitation Year for which the Employer
makes the amendment, creating a short Limitation year.
(f) "Master or Prototype Plan" - A plan the form of which is the
subject of a favorable notification letter or a favorable opinion letter
from the Internal Revenue Service.
(g) "Maximum Permissible Amount" - The lesser of (I) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code
ss.415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for the
Limitation Year. If there is a short Limitation Year because of a change
in Limitation Year, the Advisory Committee will multiply the $30,000 (or
adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(h) "Defined contribution plan" - A retirement plan which provides
for an individual account for each participant and for benefits based
solely on the amount contributed to the participant's account, and
any income, expenses, gains and losses, and any forfeitures of
accounts of other participants which the plan may allocate to such
participant's account. The Advisory Committee must treat all defined
<PAGE>
contribution plans (whether or not terminated) maintained by the Employer
as a single plan. Solely for purposes of the limitations of Part 2 of
this Article III, the Advisory Committee will treat employee contributions
made to a defined benefit plan maintained by the Employer as a separate
defined contribution plan. The Advisory Committee also will treat as a
defined contribution plan an individual medical account (as defined in
Code ss.415(l)(2)) included as part of a defined benefit plan maintained
by the Employer and, for taxable years ending after December 31, 1985, a
welfare benefit fund under Code ss.419(e) maintained by the Employer
to the extent there are post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code
ss.419A(d)(3)).
(I) "Defined benefit plan" - A retirement plan which does not
provide for individual accounts for Employer contributions. The Advisory
Committee must treat all defined benefit plans (whether or not
terminated) maintained by the Employer as a single plan.
[Note: The definitions in paragraphs (j), (k) and (l) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under the defined
benefit plan(s)
--------------------------------------------------------------------------
The lesser of (I) 125% (subject to the "100% limitation" in
paragraph (l)) of the
dollar limitation in effect under Code ss.415(b)(l)(A) for the
Limitation Year,
or (ii) 140% of the Participant's average Compensation for his
high three (3) consecutive Years of Service
To determine the denominator of this fraction, the Advisory Committee will
make any adjustment required under Code ss.415(b) and will determine a
Year of Service, unless otherwise provided in an addendum to Adoption
Agreement Section 3.18, as a Plan Year in which the Employee completed at
least 1,000 Hours of Service. The "projected annual benefit" is the annual
retirement benefit (adjusted to an actuarially equivalent straight life
annuity if the plan expresses such benefit in a form other than a straight
life annuity or qualified joint and survivor annuity) of the Participant
under the terms of the defined benefit plan on the assumptions he
continues employment until his normal retirement age (or current age, if
later) as stated in the defined benefit plan, his compensation continues
at the same rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other relevant factors
used to determine benefits under the defined benefit plan remain constant
as of the current Limitation Year for all future Limitation Years.
<PAGE>
Current Accrued Benefit. If the Participant accrued benefits in one or
more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the dollar limitation used in the denominator of
this fraction will not be less than the Participant's Current Accrued
Benefit. A Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the Participant had
accrued as of the end of the 1986 Limitation year (the last Limitation
Year beginning before January 1, 1987), determined without regard to any
change in the terms or conditions of the Plan made after May 5, 1986, and
without regard to any cost of living adjustment occurring after May 5,
1986. This Current Accrued Benefit rule applies only if the defined
benefit plans individually and in the aggregate satisfied the requirements
of Code ss.415 as in effect at the end of the 1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year, of the
Annual Additions to the Participant's Account under the
defined contribution plan(s)
--------------------------------------------------------------------------
The sum of the lesser of the following amounts
determined for the Limitation Year and for each prior
Year of Service with the Employer: (I) 125% (subject to
the "100% limitation" in paragraph (l) of the dollar
limitation in effect under Code ss.415(c)(l)(A) for
the Limitation year (determined without regard to
the special dollar limitations for employee stock ownership
plans), or (ii) 35% of the Participant's Compensation
for the Limitation Year.
For purposes of determining the defined contribution plan
fraction, the Advisory Committee will not recompute Annual Additions in
Limitation Years beginning prior to January 1, 1987, to treat all Employee
contributions as Annual Additions. If the Plan satisfied Code ss.415 for
Limitation Years beginning prior to January 1, 1987, the Advisory
Committee will redetermine the defined contribution plan fraction and the
defined benefit plan fraction as of the end of the 1986 Limitation Year,
in accordance with this Section 3.19. If the sum of the redetermined
fractions exceeds 1.0, the Advisory Committee will subtract permanently
from the numerator of the defined contribution plan fraction an amount
equal to the produce of (l) the excess of the sum of the fractions over
1.0, times (2) the denominator of the defined contribution plan fraction.
In making the adjustment, the Advisory Committee must disregard any
accrued benefit under the defined benefit plan which is in excess of the
Current Accrued Benefit. This Plan continues any transitional rules
<PAGE>
applicable to the determination of the defined contribution plan fraction
under the Employer's Plan as of the end of the 1986 Limitation Year.
(l) "100% limitation."If the 100% limitation applies, the Advisory
Committee must determine the denominator of the defined benefit plan
fraction and the denominator of the defined contribution plan fraction by
substituting 100% for 125%. If the Employer's Plan is a Standardized Plan,
the 100% limitation applies in all Limitation Years, subject to any
override provisions under Section 3.18 of the Employer's Adoption
Agreement. If the Employer overrides the 100% limitation under a
Standardized Plan, the Employer must specify in its Adoption Agreement the
manner in which the Plan satisfies the extra minimum benefit requirement
of Code ss.416(h) and the 100% limitation must continue to apply if the
Plan's top heavy ratio exceeds 90%. If the Employer's Plan is a
Nonstandardized Plan, the 100% limitation applies only if: (I) the Plan's
top heavy ratio exceeds 90%; or (ii) the plan's top heavy ratio is greater
than 60%, and the Employer does not elect in its Adoption Agreement
Section 3.18 to provide extra minimum benefits which satisfy Code
ss.416(h)(2).
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not
permit Participant nondeductible contributions unless the Employer
maintains its Plan under a Code ss.401(k) Adoption Agreement. If the Employer
does not maintain its Plan under a Code ss.401(k) Adoption Agreement and, prior
to the adoption of this Master Plan, the Plan accepted Participant nondeductible
contributions for a Plan Year beginning after December 31, 1986, those
contributions must satisfy the requirements of Code ss.401(m). This Section 4.01
does not prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan Year in
which the Employer adopts this Master Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS, A qualified Plan may not
accept Participant deductible contributions after April 15, 1987. If the
Employer's Plan includes Participant deductible contributions ("DECs") made
prior to April 16, 1987, the Advisory Committee must maintain a separate
accounting for the Participant's Accrued Benefit attributable to DECs, including
DECs as part of the Participant's accrued Benefit for all purposes of the Plan,
except for purposes of determining the top heavy ratio under Section 1.33. The
Advisory Committee may not use DECs to purchase life insurance on the
Participant's behalf.
<PAGE>
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
Employer's written consent and after filing with the Trustee the form prescribed
by the Advisory Committee, may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting a
rollover contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified plan. A
rollover contribution is not an Annual Addition under Part 2 of Article III.
The Trustee will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the Trustee (or the
Named Fiduciary, in the case of a nondiscretionary Trustee designation), in its
sole discretion, agrees to invest the rollover contribution as part of the Trust
Fund. The Trustee will not have any investment responsibility with respect to a
Participant's segregated rollover Account. The Participant, however, from time
to time, may direct the Trustee in writing as to the investment of his
segregated rollover Account in property, or property interest, of any kind,
real, personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from investments
made at the direction of the Participant. As of the Accounting Date (or other
valuation date) for each Plan Year, the Advisory Committee will allocate and
credit the net income (or net loss) from a Participant's segregated rollover
Account and the increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Trustee is not liable
nor responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action taken
pursuant to and in accordance with the direction of the Participant. In all
other respects, the Trustee will hold, administer and distribute a rollover
contribution in the same manner as any Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same extent and
in the same manner as a Participant If an Employee makes a rollover contribution
to the Trust prior to satisfying the plan's eligibility conditions, the Advisory
Committee and Trustee must treat the Employee as a Participant for all purposes
of the plan except the Employee is not a participant for purposes of sharing in
Employer contributions or Participant forfeitures under the Plan until he
actually becomes a Participant in the Plan. If the Employee has a Separation
<PAGE>
from Service prior to becoming a Participant, the Trustee will distribute his
rollover contribution Account to him as if it were an Employer contribution
Account.
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's
Accrued Benefit is, at all times, 100% Nonforfeitable to the extent the
value of his Accrued Benefit is derived from his Participant contributions
described in this Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A
Participant, by giving prior written notice to the Trustee, may withdraw
all or any part of the value of his Accrued Benefit derived from his Participant
contributions described in this Article IV. A distribution of Participant
contributions must comply with the joint and survivor requirements described in
Article VI, if those requirements apply to the Participant. A Participant my not
exercise his right to withdraw the value of his Accrued Benefit derived from his
Participant contributions more than once during any Plan Year. The Trustee, in
accordance with the direction of the advisory Committee, will distribute a
Participant's unwithdrawn Accrued Benefit attributable to his Participant
contributions in accordance with the provisions of Article VI applicable to the
distribution of the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory
Committee must maintain a separate Account(s) in the name of each
Participant to reflect the Participant's Accrued Benefit under the Plan derived
from his Participant contributions. A Participant's Accrued Benefit derived from
his Participant contributions as of any applicable date is the balance of his
separate Participant contribution Account(s).
ARTICLE V
TERMINATION OF SERVICE -
PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal Retirement
Age in its Adoption Agreement. A Participant's Accrued Benefit derived from
Employer contribution is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its
Adoption Agreement to provide a Participant's Accrued Benefit derived from
Employer contributions will be 100% Nonforfeitable if the Participant's
Separation from Service is a result of his death or his disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02,
for each Year of Service, a Participant's Nonforfeitable percentage of his
Accrued Benefit derived from Employer contributions equals the percentage in the
vesting schedule completed by the Employer in its Adoption Agreement.
<PAGE>
(A) Election of Special Vesting Formula. If the Trustee makes a
distribution (other than a cash-out distribution described in Section 5.04) to a
partially-vested Participant, and the Participant has not incurred a Forfeiture
Break in Service at the relevant time, the Advisory Committee will establish a
separate Account for the Participant's Accrued Benefit. At any relevant time
following the distribution, the Advisory Committee will determine the
Participant's Nonforfeitable Accrued Benefit derived from Employer contributions
in accordance with the following formula:
P(AB+(RxD))-(RxD).
To apply this formula, "P" is the Participant's current vesting percentage
at the relevant time, "AB" is the Participant's Employer- derived Accrued
Benefit at the relevant time, "R" is the ratio of "AB" to the Participant's
Employer-derived Accrued Benefit immediately following the earlier distribution
and "D" is the amount of the earlier distribution. If, under a restated Plan,
the Plan has made distribution to a partially-vested Participant prior to its
restated Effective date and is unable to apply the cash-out provisions of
Section 5.04 to that prior distribution, this special vesting formula also
applies to that Participant's remaining Account. The Employer, in an addendum to
its Adoption Agreement, numbered Section 5.03, may elect to modify this formula
to read as follows: P(AB+D)-D.
5.04 CASH-0UT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANT/
RESTORATION OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a
partially-vested Participant receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Section 5.08), the cash-out
distribution will result in an immediate forfeiture of the nonvested portion of
the Participant's Accrued Benefit derived from Employer contributions. See
Section 5.09. A partially-vested Participant is a Participant whose
Nonforfeitable Percentage determined under Section 5.03 is less than 100%. A
cash-out distribution is a distribution of the entire present value of the
Participant's Nonforfeitable Accrued Benefit.
(A) Restoration and Conditions upon Restoration. A partially-
vested Participant who is re-employed by the Employer after receiving a
cash-out distribution of the Nonforfeitable percentage of his Accrued Benefit
may repay the Trustee the amount of the cash-out distribution attributable to
Employer contributions, unless the Participant no longer has a right to
restoration by reason of the conditions of this Section 5.04(A). If a
partially-vested Participant makes the cash-out distribution repayment, the
Advisory Committee, subject to the conditions of this Section 5.04(A), must
restore his Accrued Benefit attributable to Employer contributions to the same
dollar amount as the dollar amount of his Accrued Benefit on the accounting
Date, or other valuation date, immediately preceding the date of the cash-our
<PAGE>
distribution, unadjusted for any gains or losses occurring subsequent to
that Accounting Date, or other valuation date. Restoration of the Participant's
Accrued Benefit includes restoration of all Code ss.411(d)(6) protected benefits
with respect to that restored Accrued Benefit, in accordance with applicable
Treasury regulations. The Advisory Committee will not restore a reemployed
Participant's Accrued Benefit under this paragraph if:
(1) 5 years have elapsed since the Participant's first re- employment
date with the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as
defined in Section 5.08). This condition also applies if the
Participant makes repayment within the Plan Year in which he incurs the
Forfeiture Break in Service and that Forfeiture Break in Service would
result in a complete forfeiture of the amount the Advisory Committee
otherwise would restore.
(B) Time and Method of Restoration. If neither of the two conditions
preventing restoration of the Participant's Accrued Benefit applies, the
Advisory Committee will restore the Participant's Accrued Benefit as of the Plan
Year Accounting Date coincident with or immediately following the repayment. To
restore the Participant's Accrued Benefit, the advisory Committee, to the extent
necessary, will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the
Advisory Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain
for the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent
made under a discretionary formula.
In an addendum to its Adoption Agreement numbered 5.04(B), the Employer
may eliminate as a means of restoration any of the amounts described in clauses
(1), (2) and (3) or may change the order or priority of these amounts. To the
extent the amounts described in clauses (1), (2) and (3) are insufficient to
enable the Advisory Committee to make the required restoration, the Employer
must contribute, without regard to any requirement or condition of Section 3.01,
the additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants.
<PAGE>
The Advisory Committee will not take into account any allocation under this
Section 5.04 in applying the limitation on allocations under Part 2 of Article
III.
(C) 0% Vested Participant. The Employer must specify in its
Adoption Agreement whether the deemed cash-out rule applies to a 0% vested
Participant. A 0% vested Participant is a Participant whose Accrued Benefit
derived from Employer contributions is entirely forfeitable at the time of his
Separation from Service. If the Participant's Account is not entitled to an
allocation of Employer contributions for the Plan Year in which he has a
Separation from Service, the Advisory Committee will apply the deemed cash-out
rule as if the 0% vested Participant received a cash-out distribution on the
date of the Participant's Separation from Service. If the Participant's Account
is entitled to an allocation of Employer contributions or Participant
forfeitures for the Plan Year in which he has a Separation from Service, the
Advisory Committee will apply the deemed cash-out rule as if the 0% vested
Participant received a cash-out distribution on the first day of the first Plan
Year beginning after his Separation from Service. For purposes of applying the
restoration provisions of this Section 5.04, the Advisory Committee will treat
the 0% vested Participant as repaying his cash-out "distribution" on the first
date of his re-employment with the Employer. If the deemed cash-out rule does
not apply to the Employer's Plan a 0% vested Participant will not incur a
forfeiture until he incurs a Forfeiture Break in Service.
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory
Committee restores the Participant's Accrued Benefit, as described in
Section 5.04, the Trustee will invest the cash-out amount the Participant has
repaid in a segregated Account maintained solely for that Participant. The
Trustee must invest the amount in the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. Until commingled
with the balance of the Trust Fund on the date the Advisory Committee restores
the Participant's Accrued Benefit, the Participant's segregated Account remains
a part of the Trust, but it alone shares in any income it earns and it alone
bears any expense or loss it incurs. Unless the repayment qualifies as a
rollover contribution, the Advisory Committee will direct the Trustee to repay
to the Participant as soon as is administratively practicable the full amount of
the Participant's segregated Account if the Advisory Committee determines either
of the conditions of Section 5.04(A) prevents restoration as of the applicable
Accounting Date, notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under
Section 5.03, Year of Service means any 12-consecutive month period
designated in the Employer's Adoption Agreement during which an Employee
completes not less than the number of Hours of Service (not exceeding 1,000)
specified in the Employer's Adoption Agreement. A Year of Service includes any
Year of Service earned prior to the Effective Date of the Plan, except as
provided in Section 5.08.
<PAGE>
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any vesting computation period
he does not complete more than 500 Hours of Service. If, pursuant to Section
5.06, the Plan does not require more than 500 Hours of Service to receive credit
for a Year of Service, a Participant incurs a Break in Service in a vesting
computation period in which he fails to complete a Year of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except:
(a) For the sole purpose of determining a Participant's Non-
forfeitable percentage of his Accrued Benefit derived from Employer
contributions which accrued for his benefit prior to a Forfeiture Break
in Service, the Plan disregards any Year of Service after the
Participant first incurs a Forfeiture Break in Service. the Participant
incurs a Forfeiture Break in Service when he incurs 5 consecutive Breaks
in Service.
(b) The Plan disregards any Year of Service excluded under
the Employer's Adoption Agreement.
The Plan does not apply the Break in Service rule under Code
ss.411(a)(6)(B). Therefore, an Employee need not complete a Year of Service
after a Break in Service before the Plan takes into account the Employee's
otherwise includible Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his
Accrued Benefit derived from Employer contributions occurs under the Plan
on the earlier of:
(a) The last day of the vesting computation period in which the
Participant first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's
Accrued Benefit forfeiture, if any, under this Section 5.09 solely by reference
to the vesting schedule of Section 5.03. A Participant does not forfeit any
portion of his Accrued Benefit for any other reason or cause except as expressly
provided by this Section 5.09 or as provided under Section 9.14.
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME AND METHOD OF PAYMENT OF BENEFITS Unless, pursuant to
Section 6.03, the Participant or the Beneficiary elects in writing to a
different time or method of payment, the Advisory Committee will direct the
Trustee to commence distribution of a Participant's Nonforfeitable Accrued
Benefit in accordance with this Section 6.01. A Participant must consent, in
writing, to any distribution required under this Section 6.01 if the present
value of the Participant's Nonforfeitable Accrued Benefit, at the time of the
distribution to the Participant, exceeds $3,500 and the Participant has not
attained the later of Normal Retirement Age or age 62. Furthermore, the
Participant's spouse also must consent, in writing, to any distribution, for
which Section 6.04 requires the spouse's consent. For all purposes of this
Article VI, the term "annuity starting date" means the first day of the first
period for which the Plan pays an amount as an annuity or in any other form. A
distribution date under this Article VI, unless otherwise specified within the
Plan, is the date or dates the Employer specifies in the Adoption Agreement, or
as soon as administratively practicable following that distribution date. For
purposes of the consent requirements under this Article VI, if the present value
of the Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that present
value as exceeding $3,500 for purposes of all subsequent Plan distributions to
the Participant.
(A) Separation from Service For a Reason Other Than Death.
(1) Participant's Nonforfeitable Accrued Benefit Not Exceeding
$3,500. If the Participant's Separation from Service is for nay reason
other than death, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit in a lump sum, on the
distribution date the Employer specifies in the Adoption Agreement, but in no
event later than the 60th day following the close of the Plan Year in which the
Participant attains Normal Retirement Age. If the Participant has attained
Normal Retirement Age at the time of his Separation from Service, the
distribution under this paragraph will occur no later than the 60th day
following the close of the Plan Year in which the Participant's Separation from
Service occurs.
(2) Participant's Nonforfeitable Accrued Benefit Exceeds $3,500.
If the Participant's Separation from Service is for any reason other than
death, the Advisory Committee will direct the Trustee to commence distribution
of the Participant's Nonforfeitable Accrued Benefit in a form and at the time
<PAGE>
elected by the Participant, pursuant to Section 6.03. In the absence of an
election by the Participant, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in a lump sum (or,
if applicable, the normal annuity form of distribution required under Section
6.04), on the 60th day following the close of the Plan Year in which the latest
of the following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's Separation
from Service.
(3) Disability. If the Participant's Separation from Service is
because of his disability, the Advisory Committee will direct the Trustee
to pay the Participant's Nonforfeitable Accrued Benefit in lump sum, on the
distribution date the Employer specifies in the Adoption Agreement, subject to
the notice and consent requirements of this Article VI and subject to the
applicable mandatory commencement dates described in Paragraphs (1) and (2).
(4) Hardship. Prior to the time at which the Participant may
receive distribution under Paragraphs (1), (2) or (3), the Participant may
request a distribution from his Nonforfeitable Accrued Benefit in an amount
necessary to satisfy a hardship, if the Employer elects in the Adoption
Agreement to permit hardship distributions. Unless the Employer elects otherwise
in the Adoption Agreement, a hardship distribution must be on account of any of
the following: (a) medical expenses; (b) the purchase (excluding mortgage
payments) of the Participant's principal residence; (c) post-secondary education
tuition, for the next semester or quarter, for the Participant or for the
Participant's spouse, children or dependents; (d) to prevent the eviction of the
Participant from his principal residence or the foreclosure on the mortgage of
the Participant's principal residence; (e) funeral expenses of the Participant's
family member; or (f) the Participant's disability. A partially-vested
Participant may not receive a hardship distribution described in this Paragraph
(A)(4) prior to incurring a Forfeiture Break in Service, unless the hardship
distribution is a cash-out distribution (as defined in Article V). The Advisory
Committee will direct the Trustee to make the hardship distribution as soon as
administratively practicable after the Participant makes a valid request for the
hardship distribution.
(B) Required Beginning Date. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by Plan provision or
by Participant election (or nonelection), is later than the Participant's
Required Beginning Date, the Advisory Committee instead must direct the Trustee
to make distribution on the Participant's Required Beginning Date, subject to
the transitional election, if applicable, under Section 6.03(D). A Participant's
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant attains age 70 1/2. However, if the Participant, prior
<PAGE>
to incurring a Separation from Service, attained age 70 1/2 by January 1,
1988, and, for the five Plan Year period ending in the calendar year in which he
attained age 70 1/2 and for all subsequent years, the Participant was not a more
than 5% owner, the Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from Service or, if
earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5% owner. Furthermore, if a Participant who was
not a more than 5% owner attained age 70 1/2 during 1988 and did not incur a
Separation from Service prior to January 1, 1989, his Required Beginning Date is
April 1, 1990. A mandatory distribution at the Participant's Required Beginning
Date will be in lump sum (or, if applicable, the normal annuity form of
distribution required under Section 6.04) unless the Participant, pursuant to
the provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) Death of the Participant. The Advisory Committee will direct the
Trustee, in accordance with this Section 6.01(C), to distribute to the
Participant's Beneficiary the Participant's Non- forfeitable Accrued Benefit
remaining in the Trust at the time of the Participant's death. Subject tot he
requirements of Section 6.04, the Advisory Committee will determine the death
benefit by reducing the Participant's Nonforfeitable Accrued Benefit by any
security interest the Plan has against that Nonforfeitable Accrued Benefit by
reason of an outstanding Participant loan.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does Not
Exceed $3,500. The Advisory Committee, subject to the requirements of
Section 6.04, must direct the Trustee to distribute the deceased Participant's
Nonforfeitable Accrued Benefit in a single sum, as soon as administratively
practicable following the Participant's death or, if later, the date on which
the Advisory Committee receives notification of or otherwise confirms the
Participant's death.
(2) Deceased Participant's nonforfeitable Accrued Benefit Exceeds
$3,500. The Advisory Committee will direct the Trustee to distribute the
deceased Participant's Nonforfeitable Accrued Benefit at the time and in the
form elected by the Participant or, if applicable by the Beneficiary, as
permitted under this Article VI. In the absence of an election, subject to the
requirements of Section 6.04, the Advisory Committee will direct the Trustee to
distribute the Participant's undistributed Nonforfeitable Accrued Benefit in a
lump sum on the first distribution date following the close of the Plan Year in
which the Participant's death occurs or, if later, the first distribution date
following the date the Advisory Committee receives notification of or otherwise
confirms the Participant's death.
<PAGE>
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form
(other than a joint and survivor annuity) this Article VI would permit for a
Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary. The Employer may elect in its Adoption
Agreement to modify the methods of payment available under this Section 6.02.
The distribution options permitted under this Section 6.02 are available
only if the present value of the Participant Nonforfeitable Accrued Benefit, at
the time of the distribution to the Participant, exceeds $3,500. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated Account
in Federally insured interest bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated
Account remains a part of the Trust, but it alone shares in any income it earns,
and it alone bears any expense or loss it incurs. A Participant or Beneficiary
may elect to receive an installment distribution in the form of a
Nontransferable Annuity Contract. Under an installment distribution, the
Participant or beneficiary, at any time, may elect to accelerate the payment of
all, or any portion, of the Participant's unpaid Nonforfeitable Accrued Benefit,
subject to the requirements of Section 6.04.
(A) Minimum Distribution Requirements for Participants. The
Advisory Committee may not direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit, nor may the Participant elect to
have the Trustee distribute his Nonforfeitable Accrued Benefit, under a method
of payment which, as of the Required Beginning Date, does not satisfy the
minimum distribution requirements under Code ss.401(a)(9) and the applicable
Treasury regulations. The minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the Participant's life
expectancy or, if applicable, the joint and last survivor expectancy of the
Participant and his designated Beneficiary (as determined under Article VIII,
subject to the requirements of the Code ss.(a)(9) regulations). The Advisory
<PAGE>
Committee will increase the Participant's Nonforfeitable Accrued Benefit,
as determined on the relevant valuation date, for contributions or forfeitures
allocated after the valuation date and by December 31 of the valuation calendar
year, and will decrease the valuation by distributions made after the valuation
date and by December 31 of the valuation calendar year. For purposes of this
valuation, the Advisory Committee will treat any portion of the minimum
distribution for the first distribution calendar year made after the close of
that year as a distribution occurring in that first distribution calendar year.
In computing a minimum distribution, the Advisory Committee must use the unisex
life expectancy multiples under Treas. Reg. ss.1.72-0. The Advisory Committee,
only upon the Participant's written request, will compute the minimum
distribution for a calendar year subsequent to the first calendar year for which
the Plan requires a minimum distribution by redetermining the applicable life
expectancy. However, the Advisory Committee may not redetermine the joint life
and last survivor expectancy of the Participant and a nonspouse designated
Beneficiary in a manner which takes into account any adjustment to a life
expectancy other than the Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
treasury regulations issued under Code ss.401(a)(9) for distributions made on or
after the Participant's Required Beginning Date and before the Participant's
death. To satisfy the MDIB requirement, the Advisory Committee will compute the
minimum distribution required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy factor, if the MDIB
divisor is a lesser number. Following the Participant's death, the Advisory
Committee will compute the minimum distribution required by this Section 6.02(A)
solely on the basis of the applicable life expectancy factor and will disregard
the MDIB factor. For Plan Years beginning prior to January 1, 1989, the Plan
satisfies the incidental benefits requirement if the distributions to the
Participant satisfied the MDIB requirement or if the present value of the
retirement benefits payable solely to the Participant is greater than 50% of the
present value of the total benefits payable to the Participant and his
Beneficiaries. The Advisory Committee must determine whether benefits to the
Beneficiary are incidental as of the date the Trustee is to commence payment of
the retirement benefits to the Participant, or as of any date the Trustee
redetermines the payment period to the Participant.
<PAGE>
The minimum distribution for the first distribution calendar year is due by
the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date occurs, is due to by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.01(A) if the
contract complies with the requirements of Code ss.401(a)(9) and the applicable
Treasury regulations.
(B) Minimum Distribution Requirements for Beneficiaries. The
method of distribution to the Participant's Beneficiary must satisfy Code
ss.401(a)(9) and the applicable Treasury regulations. If the Participant's death
occurs after his Required Beginning Date of, if earlier, the date the
Participant commences an irrevocable annuity pursuant to Section 6.04, the
method of payment to the Beneficiary must provide for completion of payment over
a period which does not exceed the payment period which had commenced for the
Participant. If the Participant's death occurs prior to his Required Beginning
Date, and the Participant had not commenced an irrevocable annuity pursuant to
Section 6.04, the method of payment to the Beneficiary, subject to Section 6.04,
must provide for completion of payment to the Beneficiary over a period not
exceeding: (I) 5 years after the date of the Participant's death; or (ii) if the
Beneficiary is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of the Participant's
Nonforfeitable Accrued Benefit over a period described in clause (ii) unless the
Trustee will commence payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which the Participant's
death occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. ss.1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, will recalculate the life
expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the Trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the beneficiary's written request, the
Advisory Committee must direct the Trustee to accelerate payment of all, or
any portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practical following the effective date of that request.
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not
later than 30 days, before the Participant's annuity starting date, the
advisory Committee must provide a benefit notice to a Participant who is
eligible to make an election under this Section 6.03. The benefit notice must
explain the optional forms of benefit in the Plan, including the material
features and relative values of those options, and the Participant's right to
defer distribution until he attains the later of Normal Retirement Age or age
62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02 and of Section 6.04. The Participant or Beneficiary must make an election
under this Section 6.03 by filing his election with the advisory Committee at
any time before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) Participant Elections After Separation from Service. If the present
value of a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may
elect to have the Trustee commence distribution as of any distribution date
permitted under the Employer's Adoption Agreement Section 6.03. The Participant
may reconsider an election at any time prior to the annuity starting date and
elect to commence distribution as of any other distribution date permitted under
the Employer's Adoption Agreement Section 6.03. If the Participant is
partially-vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer. Following his attainment of
Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the elections under
Adoption Agreement Section 6.03.
(B) Participant Elections Prior to Separation from Service. The Employer
must specify in its Adoption Agreement the distribution election rights, if any,
a Participant has prior to his Separation from Service. A Participant must make
an election under this Section 6.03(B) on a form prescribed by the Advisory
Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
<PAGE>
or dollar amount he wishes the Trustee to distribute to him. The
Participant's election relates solely to the percentage or dollar amount
specified in his election form and his right to elect to receive an amount, if
any, for a particular Plan Year greater than the dollar amount or percentage
specified in his election form terminates on the Accounting Date. The Trustee
must make a distribution to a Participant in accordance with his election under
this Section 6.03(B) within the 90 day period (or as soon as administratively
practicable) after the Participant files his written election with the Trustee.
The Trustee will distribute the balance of the Participant's Accrued Benefit not
distributed pursuant to his election(s) in accordance with the other
distribution provisions of this Plan.
(C) Death Benefit Elections. If the present value of the
deceased Participant's Nonforfeiture Accrued Benefit exceeds $3,500, the
Participant's Beneficiary may elect to have the Trustee distribute the
Participant's Nonforfeitable Accrued Benefit in a form and within a period
permitted under Section 6.02. The Beneficiary's election is subject to any
restrictions designated in writing by the Participant and not revoked as of his
date of death.
(D) Transitional Elections. Notwithstanding the provisions of
Sections 6.01 and 6.02, if the Participant (or Beneficiary) signed a
written distribution designation prior to January 1, 1984, the Advisory
Committee must distribute the Participant's Nonforfeitable Accrued Benefit in
accordance with that designation, subject however, to the survivor requirements,
if applicable, of Sections 6.04, 6.05 and 6.06. This Section 6.03(D) does not
apply to a pre-1984 distribution designation, and the Advisory Committee will
not comply with that designation, if any of the following applies: (1) the
method of distribution would have disqualified the Plan under Code ss.401(a)(9)
as in effect on December 31, 1983; (2) the Participant did not have an Accrued
Benefit as of December 31, 1983; (3) the distribution designation does not
specify the timing and form of the distribution and the death Beneficiaries (in
order of priority); (4) the substitution of a Beneficiary modifies the payment
period of the distribution; or, (5) the Participant (or Beneficiary) modifies or
revokes the distribution designation. In the event of a revocation, the Plan
must distribute, no later than December 31 of the calendar year following the
year of revocation, the amount which the Participant would have received under
Section 6.02(A) if the distribution designation had not been in effect or, if
the Beneficiary revokes the distribution designation, the amount which the
Beneficiary would have received under Section 6.02(B) if the distribution
designation had not been in effect. The Advisory Committee will apply this
Section 6.03(D) to rollovers and transfers in accordance with Part J of the Code
ss.401(a)(9) Treasury regulations.
<PAGE>
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
(a) Joint and Survivor Annuity. The Advisory Committee must direct
the Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified joint and survivor
annuity, unless the Participant makes a valid waiver election (described in
Section 6.05) within the 90 day period ending on the annuity starting date. If,
as of the annuity starting date, the Participant is married, a qualified joint
and survivor annuity is an immediate annuity which is purchasable with the
Participant's Nonforfeitable Accrued Benefit and which provides a life annuity
for the Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity payable
during the life of the Participant. If, as of the annuity starting date, the
Participant is not married, a qualified joint and survivor annuity is an
immediate life annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the annuity starting
date, the Advisory Committee, without Participant or spousal consent, must
direct the Trustee to pay the Participant's Nonforfeitable Accrued Benefit in a
lump sum, in lieu of a qualified joint and survivor annuity, in accordance with
Section 6.01, if the Participant's Nonforfeitable Accrued Benefit is not grater
than $3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August 22, 1984.
(B) Preretirement Survivor Annuity. If a married Participant dies
prior to his annuity starting date, the Advisory Committee will direct the
Trustee to distribute a portion of the Participant's Nonforfeitable Accrued
Benefit to the Participant's surviving spouse in the form of a preretirement
survivor annuity, unless the Participant has a valid waiver election (as
described in Section 6.06) in effect, or unless the Participant and his spouse
were not married throughout the one year period ending on the date of his death.
A preretirement survivor annuity is an annuity which is purchasable with 50% of
the Participant's Nonforfeitable Accrued Benefit (determined as of the date of
the Participant's death) and which is payable for the life of the Participant's
surviving spouse. The value of the preretirement survivor annuity is
attributable to Employer contributions and to Employee contributions in the same
proportion as the Participant's Nonforfeitable Accrued Benefit is attributable
to those contributions. The portion of the Participant's Nonforfeitable Accrued
Benefit not payable under this paragraph is payable to the Participant's
Beneficiary, in accordance with the other provisions of this Article VI. If the
present value of the preretirement survivor annuity does not exceed $3,500, the
Advisory Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving spouse,
in lieu of a preretirement survivor annuity. This Section 6.04(B) applies only
<PAGE>
to a Participant who dies after August 22, 1984, and either (I) completes
at least one Hour of Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as defined in Section
5.06) and completed at least one Hour of Service with the Employer in a Plan
Year beginning after December 31, 1975.
(C) Surviving Spouse Elections. If the present value of the
preretirement survivor annuity exceeds $3,500, the Participant's surviving
spouse may elect to have the Trustee commence payment of the preretirement
survivor annuity at any time following the date of the Participant's death, but
not later than the mandatory distribution periods described in Section 6.02, and
may elect any of the forms of payment described in Section 6.02, in lieu of the
preretirement survivor annuity. In the absence of an election by the surviving
spouse, the Advisory Committee must direct the Trustee to distribute the
preretirement survivor annuity on the first distribution date following the
close of the Plan Year in which the latest of the following events occurs: (I)
the Participant's death; (ii) the date the Advisory Committee receives
notification of or otherwise confirms the Participant's death; (iii) the date
the Participant would have attained Normal Retirement Age; or (iv) the date the
Participant would have attained age 62.
(D) Special Rules. If the Participant has in effect a valid
waiver election regarding the qualified joint and survivor annuity or the
preretirement survivor annuity, the Advisory Committee must direct the Trustee
to distribute the Participant's Nonforfeitable Accrued Benefit in accordance
with Sections 6.01, 6.02 and 6.03. The Advisory Committee will reduce the
Participant's Nonforfeitable Accrued Benefit by any security interest (pursuant
to any offset rights authorized by Section 10.03[E]) held by the Plan by reason
of a Participant loan to determine the value of the Participant's Nonforfeitable
Accrued Benefit distributable in the form of a qualified joint and survivor
annuity or preretirement survivor annuity, provided any post-August 18, 1985,
loan satisfied the spousal consent requirement described in Section 10.03[E] of
the Plan. For purposes of applying this Article VI, the Advisory Committee
treats a former spouse as the Participant's spouse or surviving spouse to the
extent provided under a qualified domestic relations order described in Section
6.07. The provisions of this Section 6.04, and of Sections 6.05 and 6.06, apply
separately to the portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
(E) Profit Sharing Plan Election. If this Plan is a profit sharing
plan, the Employer must elect the extent to which the preceding provisions
of Section 6.04 apply. If the Employer elects to apply this Section 6.04 only to
<PAGE>
a Participant described in this Section 6.04(E), the preceding provisions of
this Section 6.04 apply only to the following Participants: (1) a Participant as
respects whom the Plan is a direct or indirect transferee from a plan subject to
the Code ss.417 requirements and the Plan received the transfer after December
31, 1984, unless the transfer is an elective transfer described in Section
13.06; (2) a Participant who elects a life annuity distribution (if Section 6.02
or Section 13.02 of the plan requires the Plan to provide a life annuity
distribution option); and (3) a Participant whose benefits under a defined
benefit plan maintained by the Employer are offset by benefits provided under
this Plan. If the Employer elects to apply this Section 6.04 to all
Participants, the preceding provisions of this Section 6.04 apply to all
Participants described in the first two paragraphs of this Section 6.04, without
regard to the limitations of this Section 6.04(E). Sections 6.05 and 6.06 only
apply to Participants to whom the preceding provisions of this Section 6.04
apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not
earlier than 90 days, but not later than 30 days, before the Participant's
annuity starting date, the Advisory Committee must provide the Participant a
written explanation of the terms and conditions of the qualified joint and
survivor annuity, the Participant's right to make, and the effect of, an
election to waive the joint and survivor form of benefit, the rights of the
Participant's spouse regarding the waiver election and the Participant's right
to make, and the effect of, a revocation of a waiver election. The Plan does not
limit the number of times the Participant may revoke a waiver of the qualified
joint and survivor annuity or make a new waiver during the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has received the
written explanation described in this Section 6.05, has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of the
election, and a notary public or the Plan Administrator (or his representative)
witnesses the spouse's consent, (b)the spouse consents to the alternate form of
payment designated by the Participant or to any change in that designated form
of payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
<PAGE>
consent to a specific designation but, in writing, waives that right. The
consent requirements of this Section 6.05 apply to a former spouse of the
Participant, to the extent required under a qualified domestic relations order
described in Section 6.07.
The Advisory Committee will accept as valid a waiver election which does
not satisfy the spousal consent requirements if the Advisory Committee
establishes the Participant does not have a spouse, the Advisory Committee is
not able to locate the Participant's spouse, the Participant is legally
separated or has been abandoned (within the meaning of State law) and the
Participant has a court order to that effect, or other circumstances exist under
which the Secretary of the Treasury will excuse the consent requirement. If the
Participant's spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The
Advisory Committee must provide a written explanation of the preretirement
survivor annuity to each married Participant, within the following period which
ends last: (1) the period beginning on the first day of the Plan Year in which
the Participant attains age 32 and ending on the last day of the Plan Year in
which the Participant attains age 34; (2) a reasonable period after an Employee
becomes a Participant; (3) a reasonable period after the joint and survivor
rules become applicable to the Participant; or (4) a reasonable period after a
fully subsidized preretirement survivor annuity no longer satisfies the
requirements for a fully subsidized benefit. A reasonable period described in
clauses (2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from Service
before attaining age 35, clauses (1), (2), (3) and (4) do not apply and the
Advisory Committee must provide the written explanation within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation must describe, in a manner consistent with Treasury
regulations, the terms and conditions of the preretirement survivor annuity
required under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the preretirement survivor annuity or make a
new waiver during the election period.
A Participant's waiver election of the preretirement survivor annuity is
not valid unless (a) the Participant makes the waiver election no earlier than
the first day of the Plan Year in which he attains age 35 and (b) the
Participant's spouse (to whom the preretirement survivor annuity is payable)
satisfies the consent requirements described in Section 6.05, except the spouse
need not consent to the form of benefit payable to the designated Beneficiary.
The spouse's consent to the waiver of the preretirement survivor annuity is
irrevocable, unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the Participant
<PAGE>
separates from Service prior to the first day of the Plan Year in which he
attains age 35, the Advisory Committee will accept a waiver election as respects
the Participant's Accrued Benefit attributable to his Service prior to his
Separation from Service. Furthermore, if a Participant who has not separated
from Service makes a valid waiver election, except for the timing requirement of
clause (a), the Advisory Committee will accept that election as valid, but only
until the first day of the Plan Year in which the Participant attains age 35. A
waiver election described in this paragraph is not valid unless made after the
Participant has received the written explanation described in this Section 6.06.
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing
contained in this Plan prevents the Trustee, in accordance with the
direction of the Advisory Committee, from complying with the provisions of a
qualified domestic relations order (as defined in Code ss.414(0)). This Plan
specifically permits distribution to an alternate payee under a qualified
domestic relations order at any time, irrespective of whether the Participant
has attained his earliest retirement age (as defined under Code ss.414(p)) under
the Plan. A distribution to an alternate payee prior to the Participant's
attainment of earliest retirement age is available only if: (1) the order
specifies distribution at that time or permits an agreement between the Plan and
the alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,5000, and the
order requires, the alternate payee consents to any distribution occurring prior
to the Participant's attainment of earliest retirement age. The Employer, in an
addendum to its Adoption Agreement numbered 6.07, may elect to limit
distribution to an alternate payee only when the Participant has attained his
earliest retirement age under the Plan. Nothing in this Section 6.07 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
The Advisory Committee must establish reasonable procedures to determine
the qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
<PAGE>
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during he period the Advisory Committee is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Advisory
Committee determines the order is a qualified domestic relations order within 18
months of the date amounts first are payable following receipt of the order, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply
current information to the Advisory Committee a to the name, date of birth,
date of employment, annual compensation, leaves of absence, Years of Service and
date of termination of employment of each Employee who is, or who will be
eligible to become, a Participant under the Plan, together with any other
information which the Advisory Committee considers necessary. The Employer's
records as to the current information the Employer furnishes to the Advisory
Committee are conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or
responsibility to any of its Employees, Participants or Beneficiaries for
any act of, or failure to act, on the part of its Advisory Committee (unless the
Employer is the Advisory Committee), the Trustee, the Custodian, if any, or the
Plan Administrator (unless the Employer is the Plan Administrator).
<PAGE>
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and
saves harmless the Plan Administrator and the members of the Advisory
Committee, and each of them, from and against any and all loss resulting from
liability to which the Plan Administrator and the Advisory Committee, or the
members of the Advisory Committee, may be subjected by reason of any act or
conduct (except willful misconduct or gross negligence) in their official
capacities in the administration of this Trust or Plan or both, including all
expenses reasonably incurred in their defense, in case the Employer fails to
provide such defense. The indemnification provisions of this Section 7.03 do not
relieve the Plan Administrator or any Advisory committee member from any
liability he may have under ERISA for breach of a fiduciary duty. Furthermore,
the Plan Administrator and the Advisory Committee members and the Employer may
execute a letter agreement further delineating the indemnification agreement of
this Section 7.03, provided the letter agreement must be consistent with and
does not violate ERISA. The indemnification provisions of this Section 7.03
extend to the Trustee (or to a Custodian, if any) solely to the extent provided
by a letter agreement executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right
to direct the Trustee with respect to the investment and re- investment of
assets comprising the Trust Fund only if the Trustee consents in writing to
permit such direction. If the Trustee consents to Employer direction of
investment, the Trustee and the Employer must execute a letter agreement as a
part of this Plan containing such conditions, limitations and other provisions
they deem appropriate before the Trustee will follow any Employer direction as
respects the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the
right to amend the vesting schedule at any time, the Advisory Committee
will not apply the amended vesting schedule to reduce the Nonforfeitable
percentage of any Participant's Accrued Benefit derived from Employer
contributions (determined as of the later of the date the Employer adopts the
amendment, or the date the amendment becomes effective) to a percentage less
than the Nonforfeitable percentage computed under the plan without regard to the
amendment. An amended vesting schedule will apply to a Participant only if the
Participant receives credit for at least one Hour of Service after the new
schedule becomes effective.
If the Employer makes a permissible amendment to the vesting schedule,
each Participant having at least 3 Years of Service with the Employer may elect
to have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning prior to January
1, 1989, the election described in the preceding sentence applies only to
Participants having at least 5 Years of Service with the Employer. The
<PAGE>
Participant must file his election with the Advisory Committee within 60
days of the latest of (a) the Employer's adoption of the amendment; (b) the
effective date of the amendment; or (c) his receipt of a copy of the amendment.
The Advisory Committee, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule provided
under the Plan prior to the amendment and notice of the time within which the
Participant must make an election to remain under the prior vesting schedule.
The election described in this Section 7.05 does not apply to a Participant if
the amended vesting schedule provides for vesting at least as rapid at all times
as the vesting schedule in effect prior to the amendment. For purposes of this
Section 7.05, an amendment to the vesting schedule includes any Plan amendment
which directly or indirectly affects the computation of the Nonforfeitable
percentage of an Employee's rights to his Employer derived Accrued Benefit.
Furthermore, the Advisory Committee must treat any shift in the vesting
schedule, due to a change in the Plan's top heavy status, as an amendment to the
vesting schedule for purposes of this Section 7.05.
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to
time designate, in writing, any person or persons, contingently or
successively, to whom the Trustee will pay his Nonforfeitable Accrued Benefit
(including any life insurance proceeds payable to the Participant's Account) in
the event of his death and the Participant may designate the form and method of
payment. The Advisory Committee will prescribe the form for the written
designation of Beneficiary and, upon the Participant's filing the form with the
Advisory Committee, the form effectively revokes all designations filed prior to
that date by the same Participant.
(A) Coordination with survivor requirements. If the joint and
survivor requirements of Article VI apply to the Participant, this Section
8.01 does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of spousal
consent (as required by Article VI) to the Participant's Beneficiary
designation: (1) any waiver of the joint and survivor annuity or of the
preretirement survivor annuity is not valid; and (2) if the Participant dies
prior to his annuity starting date, the Participant's Beneficiary designation
will apply only to the portion of the death benefit which is not payable as a
preretirement survivor annuity. Regarding clause (2), if the Participant's
surviving spouse is a primary Beneficiary under the Participant's Beneficiary
designation, the Trustee will satisfy the spouse's interest in the Participant's
death benefit first from the portion which is payable as a preretirement
survivor annuity.
<PAGE>
(B) Profit sharing plan exception. If the Plan is a profit sharing
plan, the Beneficiary designation of a married Exempt Participant is not
valid unless the Participant's spouse consents (in a manner described in Section
6.05) to the Beneficiary designation. An "Exempt Participant" is a Participant
who is not subject to the joint and survivor requirements of Article VI. The
spousal consent requirement in this paragraph does not apply if the Exempt
Participant and his spouse are not married throughout the one year period ending
on the date of the Participant's death, or if the Participant's spouse is the
Participant's sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a
Participant fails to name a Beneficiary in accordance with Section 8.01, or
if the Beneficiary named by a Participant predeceases him, then the Trustee will
pay the Participant's Nonforfeitable Accrued Benefit in accordance with Section
6.02 in the following order of priority, unless the Employer specifies a
different order to priority in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including
adopted children, in equal shares;
(c) The Participant's surviving parents, in equal shares;
or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise or unless the Employer provides otherwise in its Adoption Agreement.
If the Plan is a profit sharing plan, an the Plan includes Exempt Participants,
the Employer may not specify a different order of priority in the Adoption
Agreement unless the Participant's surviving spouse will be first in the
different order of priority. The Advisory Committee will direct the Trustee as
to the method and to whom the trustee will make payment under this Section 8.02.
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary
of a deceased Participant must furnish to the Advisory Committee such
evidence, data or information as the Advisory Committee considers necessary or
desirable for the purpose of administering the Plan. The provisions of this Plan
are effective for the benefit of each Participant upon the condition precedent
that each Participant will furnish promptly full, true and complete evidence,
data and information when requested by the Advisory Committee, provided the
Advisory Committee advises each Participant of the effect of his failure to
comply with its request.
<PAGE>
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary
of a deceased Participant must file with the Advisory Committee from time
to time, in writing, his post office address and any change of post office
address. Any communication, statement or notice addressed to a Participant, or
Beneficiary, at his last post office address filed with the Advisory Committee,
or as shown on the records of the Employer, binds the Participant, or
Beneficiary, for all purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code ss.414(p) relating to
qualified domestic relations orders, neither a Participant nor a Beneficiary may
anticipate, assign or alienate (either at law or in equity) any benefit provided
under the Plan, and the Trustee will not recognize any such anticipation,
assignment or alienation. Furthermore, a benefit under the Plan is not subject
to attachment, garnishment, levy, execution or other legal or equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the
time prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction
may authorize any appropriate equitable relief to redress violations of
ERISA or to enforce any provisions of ERISA or the terms of the Plan. A
fiduciary may receive reimbursement of expenses properly and actually incurred
in the performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any
Beneficiary may examine copies of the Plan description, latest annual
report, any bargaining agreement, this Plan and Trust, contract or any other
instrument under which the Plan was established or is operated. The Plan
Administrator will maintain all of the items listed in this Section 8.08 in his
office, or in such other place or places as he may designate from time to time
in order to comply with the regulations issued under ERISA, for examination
during reasonable business hours. Upon the written request of a Participant or
Beneficiary the Plan Administrator must furnish him with a copy of any item
listed in this Section 8.08. The Plan Administrator may make a reasonable charge
to the requesting person for the copy so furnished.
<PAGE>
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant
or a Beneficiary ("Claimant") may file with the Advisory Committee a
written claim for benefits, if the Participant or Beneficiary determines the
distribution procedures of the Plan have not provided him his proper
Nonforfeitable Accrued Benefit. The Advisory Committee must render a decision on
the claim within 60 days of the Claimant's written claim for benefits. The Plan
Administrator must provide adequate notice in writing to the Claimant whose
claim for benefits under the Plan the advisory Committee has denied. The Plan
Administrator's notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provision on which the
Advisory Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the
material or information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within 75 days
after receipt of the Plan Administrator's notice of denial of benefits,
The Plan Administrator's notice must further advise the Claimant that his
failure to appeal the action to the Advisory Committee in writing within
the 75-day period will render the Advisory Committee's determination
final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the
name of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
<PAGE>
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the
right to direct the Trustee with respect to the investment or re-investment
of the assets comprising the Participant's individual Account only if the
Trustee consents in writing to permit such direction. If the Trustee consents to
Participant direction of investment, the Trustee will accept direction from each
Participant on a written election form (or other written agreement), as a part
of this Plan, containing such conditions, limitations and other provisions the
parties deem appropriate. The Trustee or, with the Trustee's consent, the
Advisory Committee, may establish written procedures, incorporated specifically
as part of this Plan, relating to Participant direction of investment under this
Section 8.10. The Trustee will maintain a segregated investment Account to the
extent a Participant's Account is subject to Participant self- direction. The
Trustee is not liable for any loss, nor is the Trustee liable for any breach,
resulting from a Participant's direction of the investment of any part of his
directed Account.
The Advisory Committee, to the extent provided in a written loan policy
adopted under Section 9.04, will treat a loan made to a Participant as a
Participant direction of investment under this Section 8.10. To the extent of
the loan outstanding at any time, the borrowing Participant's Account alone
shares in any interest paid on the loan, and it alone bears any expense or loss
it incurs in connection with the loan. The Trustee may retain any principal or
interest paid on the borrowing Participant's loan in an interest bearing
segregated Account on behalf of the borrowing Participant until the Trustee (or
the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account under
the Plan.
If the Trustee consents to Participant direction of investment of his
Account, the Plan treats any post-December 31, 1981, investment by a
Participant's directed Account in collectibles (as defined by Code ss.408(m)) as
a deemed distribution to the Participant for Federal income tax purposes.
ARTICLE IX
ADVISORY COMMITTEE -
DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint
an Advisory Committee to administer the Plan, the members of which may or
may not be Participants in the Plan, or which may be the Plan Administrator
acting alone. In the absence of an Advisory Committee appointment, the Plan
Administrator assumes the powers, duties and responsibilities of the Advisory
Committee. The members of the Advisory Committee will serve without compensation
for services as such, but the Employer will pay all expenses of the Advisory
Committee, except to the extent the Trust properly pays for such expenses,
pursuant to Article X.
<PAGE>
9.02 TERM. Each member of the Advisory Committee serves until the
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following
powers and duties:
(a) To select a Secretary, who need not be a member of the
Advisory Committee;
(b) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Accrued Benefit
and the Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the
proper and efficient administration of the Plan provided the rules are not
inconsistent with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the
rules and regulations it adopts, including interpretation of
the Plan documents and documents related to the Plan's
operation;
(e) To direct the trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as
defined in ERISA ss.3(38)), each of whom will have full power and
authority to manage, acquire or dispose (or direct the Trustee with
respect to acquisition or disposition) of any Plan asset under its
control;
(j) To establish, in its sole discretion, a nondiscriminatory
policy (see Section 9.04(A)) which the Trustee must observe in making
loans if any, to Participants and Beneficiaries; and
<PAGE>
(k) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in
accordance with the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
(A) Loan policy. If the Advisory Committee adopts a loan policy,
pursuant to paragraph (j), the loan policy must be a written document and
must include: (1) the identity of the person or positions authorized to
administer the participant loan program; (2) a procedure for applying for the
loan; (3) the criteria for approving or denying a loan; (4) the limitations, if
any, on the types and amounts of loans available; (5) the procedure for
determining a reasonable rate of interest; (6) the types of collateral which may
secure the loan; and (7) the events constituting default and the steps the Plan
will take to preserve plan assets in the event of default. This Section 9.04
specifically incorporates a written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less
often than annually, all pertinent Employee information and Plan data in order
to establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members
appointed and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize
any one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may
decide or determine any matter concerning the distribution, nature or
method of settlement of his own benefits under the Plan, except in exercising an
election available to that member in his capacity as a Participant, unless the
Plan Administrator is acting alone in the capacity of the Advisory Committee.
<PAGE>
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or
direct the Trustee to maintain, a separate Account, or multiple Accounts,
in the name of each Participant to reflect the Participant's Accrued Benefit
under the Plan. If a Participant reenters the Plan subsequent to his having a
Forfeiture Break in Service, the Advisory Committee, or the Trustee, must
maintain a separate Account for the Participant's pre-Forfeiture Break in Serve
Accrued Benefit and a separate Account for his post- Forfeiture Break in Service
Accrued Benefit, unless the Participant's entire Accrued Benefit under the Plan
is 100% Nonforfeitable.
The Advisory Committee will make its allocations, or request the Trustee
to make its allocations, to the Accounts of the Participants in accordance with
the provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee must maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account (exclusive of the cash value of incidental benefit insurance
contracts) bears to the total net credit balance in the accounts (exclusive of
the cash value of the incidental benefit insurance contracts) of all
Participants plus the cash surrender value of any incidental benefit insurance
contracts held by the Trustee on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date immediately
preceding the date of the distribution. Any distribution (other than a
distribution from a segregated Account) made to a Participant (or to his
Beneficiary) more than 90 days after the most recent valuation date may include
interest on the amount of the distribution as an expense of the Trust Fund. The
interest, if any, accrues from such valuation date to the date of the
distribution at the rate established in the Employer's Adoption Agreement.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A
"valuation date" under this Plan is each Accounting Date and each interim
valuation date determined under Section 10.14. As of each valuation date the
Advisory Committee must adjust Accounts to reflect net income, gain or loss
since the last valuation date. The valuation period is the period beginning the
day after the lat valuation date and ending on the current valuation date.
<PAGE>
(A) Trust Fund Accounts. The allocation provisions of this
paragraph apply to all Participant Accounts other than segregated
investment Accounts. The Advisory Committee first will adjust the Participant
Accounts, as those Accounts stood at the beginning of the current valuation
period, by reducing the Accounts for any forfeitures arising under Section 5.09
or under Section 9.14, for amounts charged during the valuation period to the
Accounts in accordance with Section 9.13 (relating to distributions) and Section
11.01 (relating to insurance premiums), and for the cash value of incidental
benefit insurance contracts. The Advisory Committee then, subject to the
restoration allocation requirements of Section 5.04 or of Section 9.14, will
allocate the net income, gain or loss pro rate to the adjusted Participant
Accounts. The allocable net income, gain or loss is the net income (or net
loss), including the increase or decrease in the fair market value of assets,
since the last valuation date.
(B) Segregated investment Accounts. A segregated investment
Account receives all income it earns and bears all expense or loss it
incurs. The Advisory Committee will adopt uniform and nondiscriminatory
procedures for determining income or loss of a segregated investment Account in
a manner which reasonably reflects investment directions relating to pooled
investments and investment directions occurring during a valuation period. As of
the valuation date, the Advisory Committee must reduce a segregated Account for
any forfeiture arising under Section 5.09 after the Advisory Committee has made
all other allocations, changes or adjustments to the account for the Plan Year.
(C) Additional rules. An Excess Amount or suspense account
described in Part 2 of the Article III does not share in the allocation of
net income, gain or loss described in this Section 9.11. If the Employer
maintains its Plan under a Code ss.401(k) Adoption Agreement, the Employer may
specify in its Adoption Agreement alternate valuation provisions authorized by
that Adoption Agreement. This Section 9.11 applies solely to the allocation of
net income, gain or loss of the Trust. The Advisory Committee will allocate the
Employer contributions and Participant forfeitures, if any, in accordance with
Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the
Accounting Date of each Plan Year, but within the time prescribed by ERISA
and the regulations under ERISA, the Plan Administrator will deliver to each
Participant (and to each Beneficiary) a statement reflecting the condition of
his Accrued Benefit in the Trust as of that date and such other information
ERISA requires be furnished the Participant or Beneficiary. No Participant,
except a member of the Advisory Committee, has the right to inspect the records
reflecting the Account of any other Participant.
<PAGE>
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a
Participant's Account for all distributions made from that Account to the
Participant, to his Beneficiary or to an alternate payee. The Advisory Committee
also will charge a Participant's Account for any administrative expenses
incurred by the Plan directly related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either
the Trustee or the Advisory Committee to search for, or to ascertain the
whereabouts of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
or record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A forfeiture under this
paragraph will occur at the end of the notice period or, if later, the earliest
date applicable Treasury regulations would permit the forfeiture. Pending
forfeiture, the Advisory Committee, following the expiration of the notice
period, may direct the Trustee to segregate the Nonforfeitable Accrued Benefit
in a segregated Account and to invest that segregated Account in Federally
insured interest bearing savings accounts or time deposits (or in a combination
of both), or in other fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section 9.14
makes a claim, at any time, for his forfeited Accrued Benefit, the advisory
Committee must restore the Participant's or Beneficiary's forfeited Accrued
Benefit to the same dollar amount as the dollar amount of the Accrued Benefit
forfeited, unadjusted for any gains or losses occurring subsequent to the date
of the forfeiture. The Advisory Committee will make the restoration during the
Plan Year in which the Participant or Beneficiary makes the claim, first from
the amount, if any, of Participant forfeitures the advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of Participant
forfeitures the Advisory Committee otherwise would allocate for the Plan Year,
then from the amount, if any, of the Trust Fund net income or gain fro the Plan
Year and then from the amount, or additional amount, the Employer contributes to
enable the Advisory Committee to make the required restoration. The Advisory
Committee must direct the Trustee to distribute the Participant's or
<PAGE>
Beneficiary's restored Accrued Benefit to him not later than 60 days after
the close of the Plan Year in which the Advisory Committee restores the
forfeited Accrued Benefit. The forfeiture provisions of this Section 9.14 apply
solely to the Participant's or to the Beneficiary's Accrued Benefit derived from
Employer contributions.
ARTICLE X
TRUSTEE AND CUSTODIAN,
POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under he Plan
and agrees to perform the obligations imposed. The Trustee must provide
bond for the faithful performance of its duties under the Trust to the extent
required by ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The trustee is accountable to the
Employer for the funds contributed to it by the Employer, but does not have
any duty to see that the contributions received comply with the provisions of
the Plan. The Trustee is not obliged to collect any contributions from the
Employer, nor is obliged to see that funds deposited with it are deposited
according to the provisions of the Plan.
10.03 INVESTMENT POWERS.
(A) Discretionary Trustee Designation. If the Employer, in
Adoption Agreement Section 1.02, designates the Trustee to administer the
Trust as a discretionary Trustee, then the Trustee has full discretion and
authority with regard to the investment of the Trust Fund, except with respect
to a Plan assets under the control or direction of a properly appointed
Investment Manager or with respect to a Plan asset properly subject to Employer,
Participant or Advisory Committee direction of investment. The Trustee must
coordinate its investment policy with Plan financial needs as communicated to it
by the Advisory Committee. The Trustee is authorized and empowered, but not by
way of limitation, with the following powers, rights and duties:
(a) To invest any part or all of the trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, put and call
options traded on a national exchange, United States retirement plan
bonds, corporate bonds, debentures, convertible debentures, commercial
paper, U.S. Treasury bills, U.S. Treasury notes and other direct or
indirect obligations of the United States Government or its agencies,
improved or unimproved real estate situated in the United States,
limited partnerships, insurance contracts of any type, mortgages,
notes or other property of any kind, real or personal, to buy or sell
options on common stock on a nationally recognized exchange with or
without holding the underlying common stock, to buy and sell
commodities, commodity options and contracts for the future
delivery of commodities, and to make any other investments the Trustee
<PAGE>
deems appropriate, as a prudent man would do under like circumstances
with due regard for the purposes of this Plan. Any investment made or
retained by the Trustee in good faith is proper but must be of a kind
constituting a diversification considered by law suitable for trust
investments.
(b) To retain in cash so much of the Trust Fund as it may deem
advisable to satisfy liquidity needs of the Plan and to deposit any cash
held in the trust Fund in a bank account at reasonable interest.
(c) To invest, if the Trustee is a bank or similar financial
institution supervised by the United States or by a State, in any type
of deposit of the Trustee (or of a bank related to the Trustee within
the meaning of Code ss.414(b)) at a reasonable rate of interest or in
a common trust fund, as described in Code ss.584, or in a collective
investment fund, the provisions of which govern the investment of such
assets and which the Plan incorporates by this reference, which the
Trustee (or its affiliate, as defined in Code ss.1504) maintains
exclusively for the collective investment of money contributed by the
bank (or the affiliate) in its capacity as trustee and which conforms to
the rules of the Comptroller of the Currency.
(d) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for
any term even though commencing in the future or extending beyond the
term of the trust, and otherwise deal with all property, real or
personal, in such manner, for such considerations and on such terms
and conditions as the Trustee decides.
(e) To credit and distribute the Trust as directed by the
Advisory Committee. The Trustee is not obliged to inquire as to whether
any payee or distributee is entitled to any payment or whether the
distribution is proper or within the terms of the Plan, or as to the
manner of making any payment or distribution. The Trustee is accountable
only to the Advisory Committee for any payment or distribution made by it
in good faith on the order or direction of the Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands
in its discretion.
(h) To have with respect to the Trust all of the rights of an
individual owner, including the power to give proxies, to participate
in any voting trusts, mergers, consolidations or liquidations, and to
exercise or sell stock subscriptions or conversion rights.
<PAGE>
(i) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize interest
in oil, gas and other minerals; and to enter into operating agreements
and to execute division and transfer orders.
(j) To hold any securities or other property in the name of the
Trustee or its nominee, with depositories or agent depositories or in
another form as it may deem best, with or without disclosing the trust
relationship.
(k) To perform any and all other acts in its judgment
necessary or appropriate for the proper and advantageous management,
investment and distribution of the Trust.
(l) To retain any funds or property subject to any dispute
without liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until final adjudication
is made by a court of competent jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the
Advisory Committee an annual statement of account showing the
condition of the Trust Fund and all investments, receipts,
disbursements and other transactions effected by the Trustee during
the Plan Year covered by the statement and also stating the assets of the
Trust held at the end of the Plan Year, which accounts are conclusive
on all persons, including the Employer, the Plan Administrator and the
Advisory Committee, except as to any act or transaction concerning
which the Employer, the Plan Administrator or the Advisory Committee
files with the Trustee written exceptions or objections within 90 days
after the receipt of the accounts or for which ERISA authorizes a longer
period within which to object.
(o) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the
Trustee is not obliged or required to do so unless indemnified to its
satisfaction.
(B) Nondiscretionary Trustee Designation/Appointment of Custodian.
If the Employer, in its Adoption Agreement Section 1.02, designates the
Trustee to administer the Trust as a nondiscretionary Trustee, then the Trustee
will not have any discretion or authority with regard to the investment of the
<PAGE>
Trust Fund, but must act solely as a directed trustee of the funds
contributed to it. A nondiscretionary Trustee, as directed trustee of the funds
held by it under the Employer's Plan, is authorized and empowered, by way of
limitation, with the following powers, rights and duties, each of which the
nondiscretionary Trustee exercises solely as directed trustee in accordance with
the written direction of the Named Fiduciary (except to the extent a Plan asset
is subject to the control and management of a properly appointed Investment
Manager or subject to Advisory Committee or Participant direction of
investment):
(a) To invest any part or all of the trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, put and call
options traded on a national exchange, United States retirement plan
bonds, corporate bonds, debentures, convertible debentures, commercial
paper, U.S. Treasury bills, U.S. Treasury notes and other direct or
indirect obligations of the United States Government or its agencies,
improved or unimproved real estate situated in the United States,
limited partnerships, insurance contracts of any type, mortgages,
notes or other property of any kind, real or personal, to buy or sell
options on common stock on a nationally recognized options exchange with
or without holding the underlying common stock, to buy and sell
commodities, commodity options and contracts for the future delivery of
commodities, and to make any other investments the Named Fiduciary deems
appropriate.
(b) To retain in cash so much of the Trust Fund as the Named
Fiduciary may direct in writing to satisfy liquidity needs of the Plan
and to deposit any cash held in the trust Fund in a bank account at
reasonable interest, including, specific authority to invest in any
type of deposit of the trustee (or of a bank related to the Trustee
within the meaning of Code ss.414(b)) at a reasonable rate of interest.
(c) To sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for
any term even though commencing in the future or extending beyond the
term of the Trust, and otherwise deal with all property, real or
personal, in such manner, for such considerations and on such terms
and conditions as the Named Fiduciary directs in writing.
(d) To credit and distribute the Trust as directed by the
Advisory Committee. The Trustee is not obliged to inquire as to whether
any payee or distributee is entitled to any payment or whether the
distribution is proper or within the terms of the Plan, or as to the
manner of making any payment of distribution. The Trustee is accountable
only to the Advisory Committee for any payment or distribution made by it
in good faith on the order or direction of the Advisory Committee.
<PAGE>
(e) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(f) To have with respect to the Trust all of the rights of an
individual owner, including the power to give proxies, to participate
in any voting trusts, mergers, consolidations or liquidations, and to
exercise or sell stock subscriptions or conversion rights, provided
the exercise of any such powers is in accordance with and at the
written direction of the Named Fiduciary.
(g) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize interests
in oil, gas and other minerals; and to enter into operating agreements
and to execute division and transfer orders, provided the exercise of
any such powers is in accordance with and at the written direction of
the Named Fiduciary.
(h) To hold any securities or other property in the name of
the nondiscretionary Trustee or its nominee, with depositories or
agent depositories or in another form as the Name Fiduciary may deem
best, with or without disclosing the custodial relationship.
(i) To retain any funds or property subject to any dispute
without liability for the payment of interest, and to decline to make
payment or delivery of the funds or property until a court of competent
jurisdiction makes final adjudication.
(j) To file all tax returns required of the trustee.
(k) To furnish to the Named Fiduciary, the Employer, the Plan
Administrator and the Advisory Committee an annual statement of account
showing the condition of the Trust Fund and all investments, receipts,
disbursements and other transactions effected by he nondiscretionary
Trustee during the Plan Year covered by the statement and also stating the
assets of the Trust held at the end of the Plan Year, which accounts are
conclusive on all persons, including the Named Fiduciary, the Employer,
the Plan Administrator and the Advisory Committee, except as to any act or
transaction concerning which the Named Fiduciary, the Employer, the Plan
Administrator or the Advisory Committee files with the nondiscretionary
Trustee written exceptions or objections within 90 days after the receipt
of the accounts or for which ERISA authorizes a longer period within which
to object.
(l) To begin, maintain or defend any litigation necessary in
connection with the administration of the Plan, except that the Trustee is
not obliged or required to do so unless indemnified to its satisfaction.
<PAGE>
Appointment of Custodian. The Employer may appoint a Custodian under the
Plan, the acceptance by the Custodian indicated on the execution page of the
Employer's Adoption Agreement. If the employer appoints a Custodian, the
Employer's Plan must have a discretionary Trustee, as described in Section
10.03(A). A Custodian has the same powers, rights and duties as a
nondiscretionary Trustee, as described in this Section 10.03(B). The Custodian
accepts the terms of the Plan and Trust by executing the Employer's Adoption
Agreement. Any reference in the Plan to a Trustee also is a reference to a
Custodian where the context of the Plan dictates. A limitation of the Trustee's
liability by Plan provision also acts as a limitation of the Custodian's
liability. Any action taken by the Custodian at the discretionary Trustee's
direction satisfies any provision in the Plan referring to the Trustee's taking
that action.
Modification of Powers/Limited Responsibility. The Employer and the
Custodian or nondiscretionary Trustee, by letter agreement, may limit the powers
of the custodian or nondiscretionary Trustee to any combination of powers listed
within this Section 10.03(B). If there is a Custodian or a nondiscretionary
Trustee under the Employer's Plan, then the Employer, in adopting this Plan
acknowledges the Custodian or nondiscretionary Trustee has no discretion with
respect to the investment or re-investment of the Trust Fund and that the
Custodian or nondiscretionary Trustee is acting solely as custodian or as
directed trustee with respect to the assets comprising the Trust Fund.
(C) Limitation of Powers of Certain Custodians. If a Custodian is
a bank which, under its governing state law, does not possess trust powers,
then paragraphs (a), (c), (e), (f), (g) of Section 10.03(B), Section 10.16 and
Article XI do not apply to that bank and that bank only has the power and
authority to exercise the remaining powers, rights and duties under Section
10.03(B).
(D) Named Fiduciary/Limitation of Liability of Nondiscretionary
Trustee or Custodian. Under a nondiscretionary Trustee designation, the
Named Fiduciary under the Employer's Plan has the sole responsibility for the
management and control of the Employer's Trust Fund, except with respect to a
Plan asset under the control or direction of a properly appointed Investment
Manager or with respect to a Plan asset properly subject to Participant or
Advisory Committee direction of investment. If the Employer appoints a
Custodian, the Named Fiduciary is the discretionary Trustee. Under a
nondiscretionary Trustee designation, unless the Employer designates in writing
another person or persons to serve as Named Fiduciary, the Named Fiduciary under
the Plan is the president of a corporate Employer, the managing partner of a
<PAGE>
partnership Employer or the sole proprietor, as appropriate. The Named
Fiduciary will exercise its management and control of the Trust Fund through its
written direction to the nondiscretionary Trustee or to the Custodian, whichever
applies to the Employer's Plan.
The nondiscretionary Trustee or Custodian has no duty to review or to make
recommendations regarding investments made at the written direction of the Named
Fiduciary. The nondiscretionary Trustee or Custodian must retain any investment
obtained at the written direction of the Named Fiduciary to dispose of such
investment. The nondiscretionary Trustee or Custodian is not liable in any
manner or for any reason for making, retaining or disposing of any investment
pursuant to any written direction described in this paragraph. Furthermore, the
Employer agrees to indemnify and to hold the nondiscretionary Trustee or
Custodian harmless from any damages, costs or expenses, including reasonable
counsel fees, which the nondiscretionary Trustee or Custodian may incur as a
result of any claim asserted against the nondiscretionary Trustee, the custodian
or the Trust arising out of the nondiscretionary Trustee's or Custodian's
compliance with any written direction described in this paragraph.
(E) Participant Loans. This Section 10.03(E) specifically authorizes the
Trustee to make loans on a nondiscriminatory basis to a Participant or to a
Beneficiary in accordance with the loan policy established by the Advisory
Committee, provided: (1) the loan policy satisfies the requirements of Section
9.04; (2) loans are available to all Participants and Beneficiaries on a
reasonably equivalent basis and are not available in a greater amount for Highly
Compensated Employees than for other Employees; (3) any loan is adequately
secured and bears a reasonable rate of interest; (4) the loan provides for
repayment within a specified time; (5) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; and (7) the loan otherwise conforms to the exemption provided
by Code ss.4975(d)(1). If the joint and survivor requirements of Article VI
apply to the Participant, the Participant may not pledge any portion of his
Accrued Benefit as security for a loan made after August 18, 1985, unless,
within the 90 day period ending on the date the pledge becomes effective, the
Participant's spouse, if any, consents (in a manner described in Section 6.05
other than the requirement relating to the consent of a subsequent spouse) to
the security or, by separate consent, to an increase in the amount of security.
If the employer is an unincorporated trade or business, a Participant who is an
Owner- Employee may not receive a loan from the Plan, unless he has obtained a
prohibited transaction exemption from the Department of Labor. If the Employer
is an "S Corporation," a Participant who is a shareholder-employee (an employee
or an officer) who, at any time during the Employer's taxable year, owns more
<PAGE>
than 5%, either directly or by attribution under Code ss.318(a)(1), of the
Employer's outstanding stock may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of Labor. If the
Employer is not an unincorporated trade or business nor an "S Corporation," this
Section 10.03(E) does not impose any restrictions on the class of Participants
eligible for a loan from the Plan.
(F) Investment in qualifying Employer securities and qualifying
Employer real property. The investment options in this Section 10.03(F)
include the ability to invest in qualifying Employer securities or qualifying
Employer real property, as defined in and as limited by ERISA. If the Employer's
Plan is a Nonstandardized profit sharing plan, it may elect in its Adoption
Agreement to permit the aggregate investments in qualifying Employer securities
and in qualifying Employer real property to exceed 10% of the value of Plan
assets.
10.04 RECORDS AND STATEMENTS. The records of the Trustee pertaining to
the Plan must be open to the inspection of the Plan Administrator, the
Advisory Committee and the Employer at all reasonable times and may be audited
from time to time by any person or persons as the Employer, Plan Administrator
or Advisory Committee may specify in writing. The Trustee must furnish the Plan
Administrator or Advisory Committee with whatever information relating to the
trust Fund the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. A Trustee or Custodian will
receive reasonable annual compensation as may be agreed upon from time to
time between the Employer and the Trustee or Custodian. No person who is
receiving full pay from the Employer may receive compensation for services as
Trustee or as Custodian. The Trustee will pay from the trust fund all fees and
expenses reasonably incurred by the Plan, to the extent such fees and expenses
are for the ordinary and necessary administration and operation of the Plan,
unless the Employer pays such fees and expenses. Any fee or expense paid,
directly or indirectly, by the Employer is not an Employer contribution to the
Plan, provided the fee or expense relates to the ordinary and necessary
administration of the Fund.
10.06 PARTIES TO LITIGATION. Except as otherwise provided by ERISA,
no Participant or Beneficiary is a necessary party or is required to
receive notice of process in any court proceeding involving the Plan, the Trust
Fund or any fiduciary of the Plan. Any final judgment entered in any proceeding
will be conclusive upon the employer, the Plan Administrator, the Advisory
Committee, the Trustee, Custodian, Participants and Beneficiaries.
<PAGE>
10.07 PROFESSIONAL AGENTS. The Trustee may employ and pay
from the Trust Fund reasonable compensation to agents, attorneys, accountants
and other persons to advise the Trustee as in its opinion may be necessary. The
Trustee may delegate to any agent, attorney, accountant or other person selected
by it any non-trustee power or duty vested in it by the Plan, and the Trustee
may act or refrain from acting on the advice or opinion of any agent, attorney,
accountant or other person so selected.
10.08 DISTRIBUTION OF CASH OR PROPERTY. The Trustee may make
distribution under the Plan in cash or property, or partly in each, at its
fair market value as determined by the Trustee. For purposes of a distribution
to a Participant or to a Participant's designated Beneficiary or surviving
spouse, "property" includes a Nontransferable Annuity Contract, provided the
contract satisfies the requirements of this Plan.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or
distribution made from the Trust, the Trustee must promptly notify the
Advisory Committee and then dispose of the payment in accordance with the
subsequent direction of the Advisory Committee.
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the Trustee
is obligated to see to the proper application of any money paid or property
delivered to the Trustee, or to inquire whether the Trustee has acted pursuant
to any of the terms of the Plan. Each person dealing with the Trustee may act
upon any notice, request or representation in writing by the Trustee, or by the
Trustee's duly authorized agent, and is not liable to any person in so acting.
The certificate of the Trustee that it is acting in accordance with the Plan
will be conclusive in favor of any person relying on the certificate. If more
than two persons controls with respect to any decision regarding the
administration or investment of the Trust Fund or of any portion of the Trust
Fund with respect to which such persons act as Trustee. However, the signature
of only one Trustee is necessary to effect any transaction on behalf of the
Trust.
10.11 RESIGNATION. The Trustee or Custodian may resign its position at
any time by giving 30 days' written notice in advance to the Employer and
to the Advisory Committee. If the Employer fails to appoint a successor Trustee
within 60 days of its receipt of the trustee's written notice of resignation,
the Trustee will treat the employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee. The
employer, in its sole discretion, may replace a Custodian. If the Employer does
not replace a Custodian, the discretionary Trustee will assume possession of
Plan assets held by the former Custodian.
<PAGE>
10.12 REMOVAL. The employer, by giving 30 days' written notice in
advance to the trustee, may remove any Trustee or Custodian. In the event
of the resignation or removal of a Trustee, the employer must appoint a
successor Trustee if it intends to continue the Plan. If two or more persons
hold the position of Trustee, in the event of the removal of one such person,
during any period the selection of a replacement is pending, or during any
period such person is unable to serve for any reason, the remaining person or
persons will act as the Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor
Trustee succeeds to the title to the Trust vested in his predecessor by
accepting in writing his appointment as successor Trustee and by filing the
acceptance with the former Trustee and the advisory Committee without the
signing or filing of any further statement. The resigning or removed Trustee,
upon receipt of acceptance in writing of the Trust by the successor Trustee,
must execute all documents and do all acts necessary to vest the title of record
in any successor Trustee. Each successor Trustee has and enjoys all of the
powers, both discretionary and ministerial, conferred under this Agreement upon
his predecessor. A successor Trustee is not personally liable for any act or
failure to act of any predecessor Trustee, except as required under ERISA. With
the approval of the Employer and the Advisory Committee, a successor Trustee,
with respect to the Plan, may accept the account rendered and the property
delivered to it by a predecessor Trustee without incurring any liability or
responsibility for so doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as of
each Accounting Date to determine the fair market value of each
Participant's Accrued Benefit in the Trust. The Trustee also must value the
Trust Fund on such other valuation dates as directed in writing by the Advisory
Committee or as required by the Employer's Adoption Agreement.
10.15 LIMITATION ON LIABILITY - IF INVESTMENT MANAGER, ANCILLARY
TRUSTEE OR INDEPENDENT FIDUCIARY APPOINTED. The Trustee is not liable for
the acts or omissions of any Investment Manager the Advisory Committee may
appoint, nor is the Trustee under any obligation to invest or otherwise manage
any asset of the Plan which is subject tot he management of a properly appointed
Investment Manager. The Advisory Committee, the Trustee and any properly
appointed Investment Manager may execute a letter agreement as a part of this
Plan delineating the duties, responsibilities and liabilities of the Investment
Manager with respect to any part of the trust Fund under the control of the
Investment Manager.
The limitation on liability described in this Section 10.15 also applies
to the acts or omissions of any ancillary trustee or independent fiduciary
properly appointed under Section 10.17 of the Plan. However, if a discretionary
Trustee, pursuant to the delegation described in Section 10.17 of the Plan,
<PAGE>
appoints an ancillary trustee, the discretionary Trustee is responsible for
the periodic review of the ancillary trustee's actions and must exercise its
delegated authority in accordance with the terms of the Plan and in a manner
consistent with ERISA. The Employer, the discretionary Trustee and an ancillary
trustee may execute a letter agreement as a part of this Plan delineating any
indemnification agreement between the parties.
10.16 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting this
Plan, specifically authorizes the Trustee to invest all or any portion of
the assets comprising the Trust Fund in any group trust fund which at the time
of the investment provides for the pooling of the assets of plans qualified
under Code ss.401(a). This authorization applies solely to a group trust fund
exempt from taxation under Code ss.501(a) and the trust agreement of which
satisfies the requirements of Revenue Rule 81-100. The provisions of the group
trust fund agreement, as amended from time to time, are by this reference
incorporated within this Plan and Trust. The provisions of the group trust fund
will govern any investment of Plan assets in that fund. The Employer must
specify in an attachment to its adoption agreement the group trust fund(s) to
which this authorization applies. If the Trustee is acting as a nondiscretionary
Trustee, the investment in the group trust fund is available only in accordance
with a proper direction, by the Named Fiduciary, in accordance with Section
10.03(B). Pursuant to paragraph (c) of Section 10.03(A) of the Plan, a Trustee
has the authority to invest in certain common trust funds and collective
investment funds without the need for the authorizing addendum described in this
Section 10.16.
Furthermore, at the Employer's direction, the Trustee, for collective
investment purposes, may combine into one trust fund the Trust created under
this Plan with the Trust created under any other qualified retirement plan the
Employer maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to reflect properly each
Participant's Accrued Benefit under the plan(s) in which he is a Participant.
10.17 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT FIDUCIARY.
The employer, in writing, may appoint a person in any State to act as
ancillary trustee with respect to a designated portion of the Trust Fund,
subject to the consent required under Section 1.02 if the Master Plan Sponsor is
a financial institution. An ancillary trustee must acknowledge in writing its
acceptance of the terms and conditions of its appointment as ancillary trustee
and its fiduciary status under ERISA. The ancillary trustee has the rights,
powers, duties and discretion as the Employer may delegate, subject to any
limitations or directions specified in the instrument evidencing appointment of
the ancillary trustee and to the terms of the Plan or of ERISA. The investment
<PAGE>
powers delegated to the ancillary trustee may include any investment powers
delegated to the ancillary trustee may include any investment powers available
under Section 10.03 of the Plan including the right to invest any portion of the
assets of the Trust Fund in a common trust fund, as described in Code ss.584, or
in any collective investment fund, the provisions of which govern the investment
of such assets and which the Plan incorporates by this reference, but only if
the ancillary trustee is a bank or similar financial institution supervised by
the United States or by a State and the ancillary trustee (or its affiliate, as
defined in Code ss.1504) maintains the common trust fund or collective
investment fund exclusively for the collective investment of money contributed
by the ancillary trustee (or its affiliate) in a trustee capacity and which
conforms to the rules of the Comptroller of the currency. The Employer also may
appoint as an ancillary trustee, the trustee of any group trust fund designated
for investment pursuant to the provisions of Section 10.16 of the plan.
The ancillary trustee may resign its position at any time by providing at
least 30 days' advance written notice to the Employer, unless the Employer
waives this notice requirement. The employer, in writing, may remove an
ancillary trustee at any time. In the event of resignation or removal, the
Employer may appoint another ancillary trustee, return the assets to the control
and management of the Trustee or receive such assets in the capacity of
ancillary trustee. The Employer may delegate its responsibilities under this
Section 10.17 to a discretionary Trustee under the Plan, but not to a
nondiscretionary Trustee or to a Custodian, subject to the acceptance by the
discretionary Trustee of that delegation.
If the U.S. Department of Labor ("the Department") requires engagement of
an independent fiduciary to have control or management of all or a portion of
the Trust Fund, the Employer will appoint such independent fiduciary, as
directed by the Department. The independent fiduciary will have the duties,
responsibilities and powers prescribed by the Department and will exercise those
duties, responsibilities and powers in accordance with the terms, restrictions
and conditions established by the Department and, to the extent not inconsistent
with ERISA, the terms of the Plan. The independent fiduciary must accept its
appointment in writing and must acknowledge its status as a fiduciary of the
Plan.
ARTICLE XI
PROVISIONS RELATING TO
INSURANCE AND INSURANCE COMPANY
11.01 INSURANCE BENEFIT. The Employer may elect to provide incidental
life insurance benefits for insurable Participants who consent to life
insurance benefits by signing the appropriate insurance company application
form. The Trustee will not purchase any incidental life insurance benefit for
<PAGE>
any Participant prior to an allocation to the Participant's Account. At an
insured Participant's written direction, the Trustee will use all or any portion
of the Participant's nondeductible voluntary contributions, if any, to pay
insurance premiums covering the Participant's life. This Section 11.01 also
authorizes the purchase of life insurance, for the benefit of the Participant,
on the life of a family member of the Participant or on any person in whom the
Participant has an insurable interest. However, if the policy is on the joint
lives of the Participant and another person, the Trustee may not maintain that
policy if that other person predeceases the Participant.
The Employer will direct the Trustee as to the insurance company and
insurance agent through which the Trustee is to purchase the insurance
contracts, the amount of the coverage and the applicable dividend plan. Each
application for a policy, and the policies themselves, must designate the
Trustee as sole owner, with the right reserved to the Trustee to exercise any
right or option contained in the policies, subject to the terms and provisions
of this Agreement. The Trustee must be the named beneficiary for the Account of
the insured Participant. Proceeds of insurance contracts paid to the
Participant's Account under this Article XI are subject to the distribution
requirements of Article V and of Article VI. The Trustee will not retain any
such proceeds for the benefit of the Trust.
The Trustee will charge the premiums on any incidental benefit insurance
contract covering the life of a Participant against the Account of that
Participant. The Trustee will hold all incidental benefit insurance contracts
issued under the Plan as assets of the Trust created under the Plan.
(A) Incidental insurance benefits. The aggregate of life
insurance premiums paid for the benefit of a Participant, at all times, may
not exceed the following percentages of the aggregate of the Employer's
contributions allocated to any Participant's Account: (i) 49% in the case of the
purchase of ordinary life insurance contracts; or (ii) 25% in the case of the
purchase of term life insurance or universal life insurance contracts. If the
Trustee purchases a combination of ordinary life insurance contract(s) and term
life insurance or universal life insurance contract(s), then the sum of one-half
of the premiums paid for the ordinary life insurance contract(s) and the
premiums paid for the term life insurance or universal life insurance
contract(s) may not exceed 25% of the Employer contributions allocated to any
Participant's Account.
(B) Exception for certain profit sharing plans. If the Employer's
Plan is a profit sharing plan, the incidental insurance benefits
requirement does not apply to the Plan if the Plan purchases life insurance
benefits only from Employer contributions accumulated in the Participant's
Account for at least two years (measured from the allocation date).
<PAGE>
11.02 LIMITATION ON LIFE INSURANCE PROTECTION. The Trustee will not
continue any life insurance protection for any Participant beyond his annuity
starting date (as defined in Article VI). If the trustee holds any incidental
benefit insurance contract(s) for the benefit of a Participant when he
terminates his employment (other than by reason of death), the Trustee must
proceed as follows:
(a) If the entire cash value of the contract(s) is vested in the
terminating Participant, or if the contract(s) will have no cash value at
the end of the policy year in which termination of employment occurs, the
Trustee will transfer the contract(s) to the Participant endorsed so as to
vest in the transferee all right, title and interest to the contract(s),
free and clear of the Trust; subject however, to restrictions as to
surrender or payment of benefits as the issuing insurance company may
permit and as the Advisory Committee directs;
(b) If only part of the cash value of the contract(s) is vested in
the terminating Participant, the Trustee, to the extent the Participant's
interest in the cash value of the contract(s) is not vested, may adjust
the Participant's interest in the value of his Account attributable to
Trust assets other than incidental benefit insurance contracts and proceed
as in (a), or the Trustee must effect a loan from the issuing insurance
company on the sole security of the contract(s) for an amount equal to the
difference between the cash value of the contract(s) at the end of the
policy year in which termination of employment occurs and the amount of
the cash value that is vested in the terminating Participant, and the
Trustee must transfer the contract(s) endorsed so as to vest in the
transferee all right, title and interest to the contract(s), free and
clear of the Trust; subject however, to the restrictions as to surrender
or payment of benefits as the issuing insurance company may permit and the
Advisory Committee directs;
(c) If no part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee must surrender the contract(s) for
cash proceeds as may be available.
In accordance with the written direction of the Advisory Committee, the
Trustee will make any transfer of contract(s) under this Section 11.02 on the
Participant's annuity starting date (or as soon as administratively practicable
after that date). The Trustee may not transfer any contract under this Section
11.02 which contains a method of payment not specifically authorized by Article
<PAGE>
VI or which fails to comply with the joint and survivor annuity
requirements, if applicable, of Article VI. In this regard, the Trustee either
must convert such a contract to cash and distribute the cash instead of the
contract, of before making the transfer, require the issuing company to delete
the unauthorized method of payment option from the contract.
11.03 DEFINITIONS. For purposes of this Article XI:
(a) "Policy" means an ordinary life insurance contract or a term
life insurance contract issued by an insurer on the life of a Participant.
(b) "Issuing insurance company" is any life insurance company which
has issued a policy upon application by the Trustee under the terms of
this Agreement.
(c) "Contract" or "Contracts" means a policy of insurance. In the
event of any conflict between the provisions of this Plan and the terms
of any contract or policy of insurance issued in accordance with this
Article XI, the provisions of the Plan control.
(d) "Insurable Participant" means a Participant to whom an insurance
company, upon an application being submitted in accordance with the Plan,
will issue insurance coverage, either as a standard risk or as a risk in
an extra mortality classification.
11.04 DIVIDEND PLAN. The dividend plan is premium reduction nless the
Advisory Committee directs the Trustee to the contrary. The Trustee must use all
dividends for a contract to purchase insurance benefits or additional insurance
benefits for the Participant on whose life the insurance company has issued the
contract. Furthermore, the Trustee must arrange, where possible, for all
policies issued on the lives of Participants under the Plan to have the same
premium due date and all ordinary life insurance contracts to contain guaranteed
cash values with as uniform basic options as are possible to obtain. The term
"dividends" includes policy dividends, refunds of premiums and other credits.
11.05 INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance company,
solely in its capacity as an issuing insurance company, is a party to this
Agreement nor is the company responsible for its validity.
11.06 INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS. No
insurance company, solely in its capacity as an issuing insurance company, need
examine the terms of this Agreement nor is responsible for any action taken by
the Trustee.
<PAGE>
11.07 INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For
the purpose of making application to an insurance company and in the exercise of
any right or option contained in any policy, the insurance company may rely upon
the signature of the trustee and is saved harmless and completely discharged in
acting at the direction and authorization of the Trustee.
11.08 ACQUITTANCE. An insurance company is discharged from all
liability for any amount paid to the Trustee or paid in accordance with the
direction of the Trustee, and is not obliged to see to the distribution or
further application of any moneys it so pays.
11.09 DUTIES OF INSURANCE COMPANY. Each insurance company must keep
such records, make such identification of contracts, funds and accounts
within funds, and supply such information as may be necessary for the proper
administration of the Plan under which it is carrying insurance benefits.
Note: The provisions of this Article XI are not applicable, and the Plan
may not invest in insurance contracts, if a Custodian signatory to the Adoption
Agreement is a bank which has not acquired trust powers from its governing state
banking authority.
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms of
the Plan may do so by certificate, affidavit, document or other information
which the person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper party or
parties. The Advisory Committee and the Trustee are fully protected in acting
and relying upon any evidence described under the immediately preceding
sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the trustee nor
the advisory Committee has any obligation or responsibility with respect to
any action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others, or on the part of any
other person who has any responsibility regarding the management, administration
or operation of the Plan, whether by the express terms of the Plan or by a
separate agreement authorized by the Plan or by the applicable provisions of
ERISA. Any action required of a corporate Employer must be by its Board of
Directors or its designate.
<PAGE>
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory Committee,
the Plan Administrator and the Employer in no way guarantee the Trust Fund
from loss or depreciation. The Employer does not guarantee the payment of any
money which may be or becomes due to any person from the Trust Fund. The
liability of the Advisory Committee and the Trustee to make any payment from the
Trust Fund at any time and all times is limited to the then available assets of
the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under the Plan
may waiver the notice, unless the Code or Treasury regulations prescribe
the notice or ERISA specifically or impliedly prohibits such a waiver.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled
to benefits under the plan, their respective heirs and legal
representatives, upon the Employer, its successors and assigns, and upon the
Trustee, the Advisory Committee, the Plan Administrator and their successors.
12.06 WORD USAGE. Words used in the masculine also apply to the
feminine where applicable, and wherever the context of the Employer's Plan
dictates, the plural includes the singular and the singular includes the plural.
12.07 STATE LAW. The law of the state of the Employer's principal place
of business (unless otherwise designated in an addendum to the Employer's
Adoption Agreement) will determine all questions arising with respect to the
provisions of this Agreement except to the extent superseded by Federal law.
12.08 EMPLOYER'S RIGHT TO PARTICIPATE. If the Employer's Plan fails
to qualify or to maintain qualification or if the Employer makes any
amendment or modification to a provision of this Plan (other than a proper
completion of an elective provision under the Adoption Agreement or the
attachment of an addendum authorized by the Plan or by the Adoption Agreement),
the Employer may no longer participate under this Master Plan. The Employer also
may not participate (or continue to participate) in this Master Plan if the
Trustee or Custodian (or a change in the trustee or Custodian) does not satisfy
the requirements of Section 1.02 of the Plan. If the Employer is not entitled to
participate under this Master Plan, the Employer's Plan is an
individually-designed plan and the reliance procedures specified in the
applicable Adoption Agreement no longer will apply.
<PAGE>
12.09 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or
with respect to the establishment of the Trust, or any modification or
amendment to the Plan or Trust, or in the creation of any Account, or the
payment of any benefit, gives any Employee, Employee-Participant or any
Beneficiary any right to continue employment, any legal or equitable right
against the Employer, or Employee of the Employer, or against the Trustee, or
its agents or employees, or against the Plan Administrator, except as expressly
provided by the Plan, the Trust, ERISA or by a separate agreement.
ARTICLE XIII
EXCLUSIVE BENEFIT,
AMENDMENT, TERMINATION
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III,
the Employer has no beneficial interest in any asset of the Trust and no
part of any asset in the Trust may ever revert to or be repaid to an Employer,
either directly or indirectly; nor, prior to the satisfaction of all liabilities
with respect to the Participants and their Beneficiaries under the Plan, may any
part of the corpus or income of the Trust Fund, or any asset of the Trust, be
(at any time) used for, or diverted to, purposes other than the exclusive
benefit of the Participants or their Beneficiaries. However, if the Commissioner
of Internal Revenue, upon the Employer's request for initial approval of this
Plan, determines the Trust created under the Plan is not a qualified trust
exempt from Federal income tax, then (and only then) the Trustee, upon written
notice from the Employer, will return the Employer's contributions (and
increment attributable to the contributions) to the Employer. The Trustee must
make the return of the Employer contribution under this Section 13.01 within one
year of a final disposition of the Employer's request for initial approval of
the Plan. The Employer's Plan and Trust will terminate upon the trustee's return
of the Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The employer has the right at
any time and from time to time:
(a) To amend the elective provisions of the Adoption Agreement in any
manner it deems necessary or advisable in order to qualify (or maintain
qualification of) this Plan and the Trust created under it under the
provisions of Code ss.401(a);
(b) To amend the Plan to allow the Plan to operate under
a waiver of the minimum funding requirement; and
(c) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
<PAGE>
of the Trust Fund to revert to or become a property of the Employer. The
Employer also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the Advisory
committee without the written consent of the affected Trustee, the Plan
Administrator or the affected member of the Advisory Committee. The employer
must make all amendments in writing. Each amendment must state the date to which
it is either retroactively or prospectively effective. See Section 12.08 for the
effect of certain amendments adopted by the Employer.
(A) Code ss.411(d)(6) protected benefits. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code
ss.412(c)(8), and may not reduce or eliminate Code ss.411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
ss.411(d)(6) protected benefits if the amendment has the effect of either (1)
eliminating or reducing an early retirement benefit or a retirement type subsidy
(as defined in Treasury regulations, eliminating an optional form of benefit.
The Advisory Committee must disregard an amendment to the extent application of
the amendment would fail to satisfy this paragraph. If the Advisory Committee
must disregard an amendment because the amendment would violate clause (1) or
clause (2), the Advisory Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan must continue for
the affected Participants.
13.03 AMENDMENT BY MASTER PLAN SPONSOR. The Master Plan Sponsor
(or PPD, as agent of the Master Plan Sponsor), without the Employer's
consent, may amend the Plan and Trust, from time to time, in order to conform
the Plan and Trust to any requirement for qualification of the Plan and Trust
under the Internal Revenue Code. The Master Plan Sponsor may not amend the Plan
in any manner which would modify any election made by the Employer under the
Plan without the Employer's written consent. Furthermore, the Master Plan
Sponsor may not amend the Plan in any manner which would violate the
proscription of Section 13.02. A Trustee does not have the power to amend the
Plan or Trust.
13.04 DISCONTINUANCE. The Employer has the right, at any time, to \
suspend or discontinue its contributions under the Plan, and to terminate,
at any time, this Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following:
(a) The date terminated by action of the Employer;
<PAGE>
(b) The dissolution or merger of the Employer, unless the
successor makes provision to continue the Plan, in which event the
successor must substitute itself as the Employer under this Plan. Any
termination of the Plan resulting from this paragraph (b) is not effective
until compliance with any applicable notice requirements under ERISA.
13.05 FULL VESTING ON TERMINATION. Upon either full or partial
termination of the Plan, or, if applicable, upon complete discontinuance of
profit sharing plan contributions to the Plan, an affected Participant's right
to his Accrued Benefit is 100% Nonforfeitable, irrespective of the
Nonforfeitable percentage which otherwise would apply under Article V.
13.06 MERGER/DIRECT TRANSFER. The trustee may not consent to, or
by a party to, any merger or consolidation with another plan, or to a
transfer of assets or liabilities to another plan, unless immediately after the
merger, consolidation or transfer, the surviving Plan provides each Participant
a benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer. The trustee possesses the specific authority to enter into merger
agreements or direct transfer of assets agreements with the trustees of other
retirement plans described in Code ss.401(a), including an elective transfer,
and to accept the direct transfer of plan assets, or to transfer plan assets, as
a party to any such agreement.
The Trustee may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Trustee accepts such a direct transfer of plan assets, the
Advisory Committee and Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan.
(A) Elective transfers. The Trustee, after August 9, 1988, may not
consent to, or be a party to a merger, consolidation or transfer of assets
with a defined benefit plan, except with respect to an elective transfer, or
unless the transferred benefits are in the form of paid-up individual annuity
contracts guaranteeing the payment of the transferred benefits in accordance
with the terms of the transferor plan and in a manner consistent with the Code
and with ERISA. The Trustee will hold, administer and distribute the transferred
assets as a part of the trust Fund and the Trustee must maintain a separate
Employer contribution Account for the benefit of the Employee on whose behalf
the Trustee accepted the transfer in order to reflect the value of the
transferred assets. Unless a transfer of assets to this Plan is an elective
transfer, the Plan will preserve all Code ss.411(d)(6) protected benefits with
<PAGE>
respect to those transferred assets, in the manner described in Section
13.02. A transfer is an elective transfer if: (1) the transfer satisfies the
first paragraph of this Section 13.06; (2) the transfer is voluntary, under a
fully informed election by the Participant; (3) the Participant has an
alternative that retains his Code ss.411(d)(6) protected benefits (including an
option to leave his benefit in the transferor plan, if that plan is not
terminating); (4) the transfer satisfies the applicable spousal consent
requirements of the Code; (5) the transferor plan satisfies the joint and
survivor notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a right to
immediate distribution rom the transferor plan, in lieu of the elective
transfer; (7) the transferred benefit is at least the greater of the single sum
distribution provided by the transferor plan for which the Participant is
eligible or the present value of the Participant's accrued benefit under the
transferor plan payable at that plan"s normal retirement age; (8) the
Participant has a 100% Nonforfeitable interest in the transferred benefit; and
(9) the transfer otherwise satisfies applicable Treasury regulations. An
elective transfer may occur between qualified plans of any type. Any direct
transfer of assets from a defined benefit plan after August 9, 1988, which does
not satisfy the requirements of this paragraph will render the Employer's Plan
individually-designed. See Section 12.08.
(B) Distribution restrictions under Code ss.401(k). If the Plan
receives a direct transfer (by merger otherwise) of elective contributions
(or amounts treated as elective contributions) under a Plan with a Code
ss.401(k) arrangement, the distribution restrictions of Code ss.401(k)(2) and
(10) continue to apply to those transferred elective contributions.
13.07 TERMINATION.
(a) Procedure. Upon termination of the Plan, the distribution
provisions of Article VI remain operative, with the following exceptions:
(1) If the present value of the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, the Advisory Committee will direct
the Trustee to distribute the Participant's Nonforfeitable Accrued Benefit to
him in lump sum as soon as administratively practicable after the Plan
terminates; and
(2) If the present value of the Participant's Nonforfeitable
Accrued Benefit exceeds $3,500, the Participant or the Beneficiary, in
addition to the distribution events permitted under Article VI, may elect to
have the Trustee commence distribution of his Nonforfeitable Accrued Benefit as
soon as administratively practicable after the Plan terminates.
<PAGE>
To liquidate the Trust, the Advisory committee will purchase a deferred
annuity contract for each Participant which protects the Participant's
distribution rights under the plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500 and the Participant does not elect an immediate
distribution pursuant to
Paragraph (2).
If the Employer's Plan is a profit sharing plan, in lieu of the preceding
provisions of this Section 13.07 and the distribution provisions of Article VI,
the Advisory Committee will direct the Trustee to distribute each Participant's
Nonforfeitable Accrued Benefit, in lump sum, as soon as administratively
practicable after the termination of the Plan, irrespective of the present value
of the Participant's Nonforfeitable Accrued Benefit and whether the Participant
consents to that distribution. This paragraph does not apply if: (1) the Plan
provides an annuity option; or (2) as of the period between the Plan termination
date and the final distribution of assets, the Employer maintains any other
defined contribution plan (other than an ESOP). The Employer, in an addendum to
its Adoption Agreement numbered 13.07, may elect not to have this paragraph
apply.
The Trust will continue until the trustee in accordance with the direction
of the Advisory Committee has distributed all of the benefits under the Plan. On
each valuation date, the Advisory Committee will credit any part of a
Participant's Accrued Benefit retained in the trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III will revert to the Employer, subject to the conditions of the
treasury regulations permitting such a reversion. A resolution or amendment to
freeze all future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.07.
(B) Distribution restrictions under Code ss.401(k). If the Employer's
Plan includes a Code ss.401(k) arrangement or if transferred assets
described in Section 13.06 are subject to the distribution restrictions of Code
ss.401(k)(2) and (10), the special distribution provisions of this Section 13.07
are subject to the restrictions of this paragraph. The portion of the
Participant's Nonforfeitable Accrued Benefit attributable to elective
contributions (or to amounts treated under the Code ss.401(k) arrangement as
elective contributions) is not distributable on account of Plan termination, as
described in this Section 13.07, unless: (a) the Participant otherwise is
entitled under the Plan to a distribution of that portion of his Nonforfeitable
Accrued Benefit; or (b) the Plan termination occurs without the establishment of
a successor plan. A successor plan under clause (b) is a defined contribution
plan (other than an ESOP) maintained by the Employer (or by a related employer)
<PAGE>
at the time of the termination of the Plan or within the period ending
twelve months after the final distribution of assets. A distribution made after
March 31, 1988, pursuant to clause (b), must be part of a lump sum distribution
to the Participant of his Nonforfeitable Accrued Benefit.
ARTICLE XIV
CODE ss.401(k) AND CODE ss.401(m) ARRANGEMENTS
14.01 APPLICATION. This Article XIV applies to an Employer's Plan
only if the Employer is maintaining the terms of the Code ss.401(k)
arrangement, if any, under the Plan. If the Employer's Plan is a Standardized
Plan, the Code ss.401(k) arrangement must be a salary reduction arrangement. If
the Employer's Plan is a Nonstandardized Plan, the Code ss.401(k) arrangement
may be a salary reduction arrangement or a cash or deferred arrangement.
(A) Salary Reduction Arrangement. If the Employer elects a
salary reduction arrangement, any Employee eligible to participate in the
Plan may file a salary reduction agreement with the Advisory Committee. The
salary reduction agreement may not be effective earlier than the following date
which occurs last: (i) the Employee's Plan Entry Date (or, in the case of a
reemployed Employee, his participation date under Article II); (ii) the
execution date of the employee's salary reduction agreement; (iii) the date the
Employer adopts the Code ss.401(k) arrangement by executing the Adoption
Agreement; or (iv) the effective date of the Code ss.401(k) arrangement, as
specified in the Employer's Adoption Agreement. Regarding clause (i), an
Employee subject to the Break in Service rule of Section 2.03(B) of the Plan may
not enter into a salary reduction agreement until the Employee has completed a
sufficient number of Hours of Service to receive credit for a Year of Service
(as defined in Section 2.02) following his reemployment commencement date. A
salary reduction agreement will apply only to Compensation which becomes
currently available to the Employee after the effective date of the salary
reduction agreement. The Employer will apply a reduction election to all
Compensation (and to increases in such Compensation) unless the Employee
specifies in his salary reduction agreement to limit the election to certain
Compensation. The Employer will specify in Adoption Agreement Section 3.01 the
rules and restrictions applicable to the Employees salary reduction agreements.
(B) Cash or deferred arrangement. If the Employer elects a
cash or deferred arrangement, a Participant may elect to make a cash
election against his proportionate share of the Employer's Cash or Deferred
Contribution, in accordance with the Employer's elections in Adoption Agreement
Section 3.01. A Participant's proportionate share of the Employer's Cash or
Deferred Contribution is the percentage of the total Cash or Deferred
Contribution which bears the same ratio that the Participant's Compensation for
<PAGE>
the Plan Year bears to the total Compensation of all Participants for the
Plan Year. For purposes of determining each Participant's proportionate share of
the Cash or Deferred Contribution, a Participant's Compensation is his
Compensation as determined under Section 1.12 of the Plan (as modified by
Section 3.06 for allocation purposes), excluding any effect the proportionate
share may have on the Participant's Compensation for the Plan Year. The Advisory
Committee will determine the proportionate share prior to the Employer's actual
contribution to the Trust, to provide the Participants the opportunity to file
cash elections. The Employer will pay directly to the Participant the portion of
his proportionate share the Participant has elected to receive in cash.
(C) Election not to participate. A Participant's or Employee's
election not to participate, pursuant to Section 2.06, includes his right
to enter into a salary reduction agreement or to share in the allocation of a
Cash or Deferred Contribution, unless the Participant or Employee limits the
effect of the election to the non-401(k) portions of the Plan.
14.03 DEFINITIONS. For purposes of this Article XIV:
(a) "Highly Compensated Employee" means an Eligible Employee who
satisfies the definition in Section 1.09 of the Plan. Family members
aggregated as a single Employee under Section 1.09 constitute a single
Highly Compensated Employee, whether a particular family member is
a Highly Compensated Employee or a Nonhighly Compensated Employee
without the application of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who
is not a Highly Compensated Employee and who is not a family member
treated as a Highly Compensated Employee.
(c) "Eligible Employee" means, for purposes of the ADP test described
in Section 14.08, an Employee who is eligible to enter into a salary
reduction agreement for the Plan Year, irrespective of whether he actually
enters into such an agreement, and a Participant who is eligible for an
allocation of the Employer's Cash or Deferred Contribution for the Plan
Year. For purposes of the ACP test described in Section 14.09, an
"Eligible Employee" means a Participant who is eligible to receive an
allocation of matching contributions (or would be eligible if he made the
type of contributions necessary to receive an allocation of matching
contributions) and a Participant who is eligible to make nondeductible
contributions, irrespective of whether he actually makes nondeductible
contributions. An Employee continues to be an Eligible Employee during
a period the Plan suspends the Employee's right to make elective
deferrals or nondeductible contributions following a hardship
distribution.
<PAGE>
(d) "Highly Compensated Group" means the group of Eligible
Employees who are Highly Compensated Employees for the Plan
Year.
(f) "Compensation" means, except as specifically provided in this
Article XIV, Compensation as defined for nondiscrimination purposes
in Section 1.12(B) of the Plan. For Plan Years beginning prior to
the later of January 1, 1992, or 60 days after the Treasury issues
final regulations under Code ss.401(k) and ss.401(m), the Plan may limit
Compensation taken into account to Compensation received only for the
portion of the Plan Year in which the Employee was an Eligible
Employee and only for the portion of the Plan Year in which the
Plan or the Code ss.401(k) arrangement was in effect. For subsequent
Plan Years, Compensation must include Compensation for the entire Plan
Year, irrespective of whether the Plan or the Code ss.401(k) arrangement
was in effect for the entire Plan Year or whether the Employee begins,
resumes or ceases to be an Eligible Employee during the Plan Year.
(g) "Deferral contributions" are Salary Reduction Contributions
and Cash or Deferred Contributions the Employer contributes to the Trust
on behalf of an Eligible Employee, irrespective of whether, in the case
of Cash or Deferred Contributions, the contribution is at the
election of the Employee.
(h) "Elective deferrals" are all Salary Reduction Contributions
and that portion of any Cash or Deferred Contribution which the
Employer contributes to the Trust at the election of an Eligible
Employee. Any portion of a Cash or Deferred Contribution contributed
to the Trust because of the Employee's failure to make a cash election
is an elective deferral. However, any portion of a Cash or Deferred
Contribution over which the Employee does not have a cash election
is not an elective deferral. Elective deferrals do not include
amounts which have become currently available to the Employee prior
to the election nor amounts designated as nondeductible contributions
at the time of deferral or contribution.
(i) "Matching contributions" are contributions made by the
Employer on account of elective deferrals under a Code ss.401(k)
arrangement or on account of employee contributions. Matching
contributions also include Participant forfeitures allocated on account
of such elective deferrals or employee contributions.
(j) "Nonelective contributions" are contributions made by the
Employer which are not subject to a deferral election by an Employee and
which are not matching contributions.
<PAGE>
(k) "Qualified matching contributions" are matching contributions
which are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in paragraph (m). Matching
contributions are not 100% Nonforfeitable at all times if the Employee has
a 100% Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any matching contributions allocated to
a Participant's Qualified Matching Contributions Account under the Plan
automatically satisfy the definition of qualified matching contributions.
(l) "Qualified nonelective contributions" are nonelective
contributions which are 100% Nonforfeitable at all times and which are
subject to the distribution restrictions described in paragraph (m).
Nonelective contributions are not 100% Nonforfeitable at all times if the
Employee has a 100% Nonforfeitable interest because of his Years of
Service taken into account under a vesting schedule. Any nonelective
contributions allocated to a Participant's Qualified Nonelective
Contributions Account under the Plan automatically satisfy the
definition of qualified nonelective contributions.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (l) the Participant's death,
disability, termination of employment or attainment of age 59 1/2, (2)
financial hardship satisfying the requirements of Code ss.401(k) and the
applicable Treasury regulations, (3) a plan termination, without
establishment of a successor defined contribution plan (other than an
ESOP), (4) a sale of substantially all of the assets (within the meaning
of Code ss.409(d)(2)) used in a trade or business, but only to an employee
who continues employment with the corporation acquiring those assets, or
(5) a sale by a corporation of its interest in a subsidiary (within the
meaning of Code ss.409(d)(3)), but only to an employee who continues
employment with the subsidiary. For Plan Years beginning after December
31, 1988, a distribution on account of financial hardship, as described in
clause (2), may not include earnings on elective deferrals credited as of
a date later than December 31, 1988, and may not include qualified
matching contributions and qualified nonelective contributions, nor any
earnings on such contributions, irrespective of when credited. A
distribution described in clauses (3), (4) or (5), if made after March 31,
1988, must be a lump sum distribution, as required under Code
ss.401(k)(10).
(n) "Employee contributions" are contributions made by a Participant
on an after-tax basis, whether voluntary or mandatory, and designated, at
the time of contribution, as an employee (or nondeductible) contribution.
<PAGE>
Elective deferrals and deferral contributions are not employee
contributions. Participant nondeductible contributions, made pursuant
to Section 4.01 of the Plan, are employee contributions.
14.04 MATCHING CONTRIBUTIONS/EMPLOYEE CONTRIBUTIONS. The Employer may
elect in Adoption Agreement Section 3.01 to provide matching contributions. The
Employer also may elect in Adoption Agreement Section 4.01 to permit or to
require a Participant to make nondeductible contributions.
(A) Mandatory contributions. Any Participant nondeductible
contributions eligible for matching contributions are mandatory
contributions. The Advisory Committee will maintain a separate accounting,
pursuant to Section 4.06 of the Plan, to reflect the Participant's Accrued
Benefit derived from his mandatory contributions. The Employer, under Adoption
Agreement Section 4.05, may prescribe special distribution restrictions which
will apply to the Mandatory Contributions Account prior to the Participant's
Separation from Service. Following his Separation from Service, the general
distribution provisions of Article VI apply to the distribution of the
Participant's Mandatory Contributions Account.
14.05 TIME OF PAYMENT OF CONTRIBUTIONS. The Employer must make Salary
Reduction Contributions to the Trust within an administratively reasonable
period of time after withholding the corresponding Compensation from the
Participant. Furthermore, the Employer must make Salary Reduction Contributions,
Cash or Deferred Contributions, Employer matching contributions (including
qualified Employer matching contributions) and qualified Employer nonelective
contributions no later than the time prescribed by the Code or by applicable
Treasury regulations. Salary Reduction Contributions and Cash or Deferred
Contributions are Employer contributions for all purposes under this Plan,
except to the extent the Code or Treasury regulations prohibit the use of these
contributions to satisfy the qualification requirements of the Code.
14.06 SPECIAL LOCATION PROVISIONS--DEFERRAL CONTRIBUTIONS, MATCHING
CONTRIBUTIONS AND QUALIFIED NONELECTIVE CONTRIBUTIONS. To make allocations under
the Plan, the Advisory Committee must establish a Deferral Contributions
Account, a Qualified Matching Contributions Account, a Regular Matching
Contributions Account, a Qualified Nonelective Contributions Account and an
Employer Contributions Account for each Participant.
(A) Deferral contributions. The Advisory Committee will allocate to
each Participant's Deferral Contributions Account the amount of Deferral
Contributions the Employer makes to the Trust on behalf of the Participant. The
Advisory Committee will make this allocation as of the last day of each Plan
Year unless, in Adoption Agreement Section 3.04, the Employer elects more
frequent allocation dates for salary reduction contributions.
<PAGE>
(B) Matching contributions. The employer must specify in its
Adoption Agreement whether the Advisory Committee will allocate matching
contributions to the Qualified Matching Contributions Account or to the Regular
Matching Contributions Account of each Participant. The Advisory Committee will
make this allocation as of the last day of each Plan Year unless, in Adoption
Agreement Section 3.04, the Employer elects more frequent allocation dates for
matching contributions.
(1) To the extent the Employer makes matching contributions under a
fixed matching contribution formula, the Advisory Committee will allocate
the matching contribution to the Account of the Participant on whose
behalf the Employer makes that contribution. A fixed matching
contribution formula is a formula under which the Employer contributes
a certain percentage or dollar amount on behalf of a Participant based on
that Participant's deferral contributions or nondeductible contributions
eligible for a match, as specified in Section 3.01 of the Employer's
Adoption Agreement. The employer may contribute on a Participant's behalf
under a specific matching contribution formula only if the Participant
satisfies the accrual requirements for matching contributions specified in
Section 3.06 of the Employer's Adoption Agreement and only to the extent
the matching contribution does not exceed the Participant's annual
additions limitation in Part 2 of Article III.
(2) To the extent the Employer makes matching contributions under a
discretionary formula, the Advisory Committee will allocate the
discretionary matching contributions to the Account of each Participant
who satisfies the accrual requirements for matching contributions
specified in Section 3.06 of the Employer's Adoption Agreement. The
allocation of discretionary matching contributions to a Participant's
Account is in the same proportion that each Participant's eligible
contributions bear to the total eligible contributions of all
Participants. If the discretionary formula is a tiered formula, the
Advisory Committee will make this allocation separately with respect to
each tier of eligible contributions, allocating in such manner the amount
of the matching contributions made with respect to that tier. "Eligible
contributions" are the Participant's deferral contributions or
nondeductible contributions eligible for an allocation of matching
contributions, as specified in Section 3.01 of the Employer's Adoption
Agreement.
If the matching contribution formula applies both to deferral
contributions and to Participant nondeductible contributions, the matching
contributions apply first to deferral contributions. Furthermore, the matching
contribution formula does not apply to deferral contributions that are excess
<PAGE>
deferrals under Section 14.07. For this purpose: (a) excess deferrals
relate first to deferral contributions for the Plan Year not otherwise eligible
for a matching contribution; and (2) if the Plan Year is not a calendar year,
the excess deferrals for a Plan Year are the last elective deferrals made for a
calendar year.
(C) Qualified nonelective contributions. If the employer, at the
time of contribution, designates a contribution to be a qualified
nonelective contribution for the Plan Year, the Advisory Committee will allocate
that qualified nonelective contribution to the Qualified Nonelective
Contributions Account of each Participant eligible for an allocation of that
designated contribution, as specified in Section 3.04 of the Employer's Adoption
Agreement. The Advisory Committee will make the allocation to each eligible
Participant's Account in the same ratio that the Participant's Compensation for
the Plan Year bears to the total Compensation of all eligible Participants for
the Plan Year. The Advisory Committee will determine a Participant's
Compensation in accordance with the general definition of Compensation under
Section 1.12 of the Plan, as modified by the Employer in Sections 1.12 and 3.06
of its Adoption Agreement.
(D) Nonelective contributions. To the extent the Employer makes
nonelective contributions for the Plan Year which, at the time of contribution,
it does not designate as qualified nonelective contributions, the Advisory
Committee will allocate those contributions in accordance with the elections
under Section 3.04 of the Employer's Adoption Agreement. For purposes of the
special nondiscrimination tests described in Sections 14.08 and 14.09, the
Advisory Committee may treat nonelective contributions allocated under this
paragraph as qualified nonelective contributions, if the contributions otherwise
satisfy the definition of qualified nonelective contributions.
14.07 ANNUAL ELECTIVE DEFERRAL LIMITATION.
(A) Annual Elective Deferral Limitation. An Employee's elective
deferrals for a calendar year beginning after December 31, 1986, may not
exceed the 402(g) limitation. The 402(g) limitation is the greater of $7,000 or
the adjusted amount determined by the Secretary of the Treasury. If, pursuant to
a salary reduction agreement or pursuant to a cash or deferral election, the
Employer determines the Employee's elective deferrals to the Plan for a calendar
year would exceed the 402(g) limitation, the Employer will suspend the
Employee's salary reduction agreement, if any, until the following January 1 and
pay in cash the portion of a cash or deferral election which would result in the
Employee's elective deferrals for the calendar year exceeding the 402(g)
limitation. If the Advisory Committee determines an Employee's elective
deferrals already contributed to the Plan for a calendar year exceed the 402(g)
<PAGE>
limitation, the Advisory Committee will distribute the amount in excess of
the 402(g) limitation (the "excess deferral"), as adjusted for allocable income,
no later than April 15 of the following calendar year. If the Advisory Committee
distributes the excess deferral by the appropriate April 15, it may make the
distribution irrespective of any other provision under this Plan or under the
Code. The Advisory Committee will reduce the amount of excess deferrals for a
calendar year distributable to the Employee by the amount of excess
contributions (as determined in Section 14.08), if any, previously distributed
to the Employee for the Plan Year beginning in that calendar year.
If an Employee participates in another plan under which he makes elective
deferrals pursuant to a Code ss.401(k) arrangement, elective deferrals under a
Simplified Employee Pension, or salary reduction contributions to a
tax-sheltered annuity, irrespective of whether the Employer maintains the other
plan, he may provide the Advisory Committee a written claim for excess deferrals
made for a calendar year. The Employee must submit the claim no later than the
March 1 following the close of the particular calendar year and the claim must
specify the amount of the Employee's elective deferrals under this Plan which
are excess deferrals. If the Advisory Committee receives a timely claim, it will
distribute the excess deferral (as adjusted for allocable income) the Employee
has assigned to this Plan, in accordance with the distribution procedure
described in the immediately preceding paragraph.
(B) Allocable income. For purposes of making a distribution of
excess deferrals pursuant to this Section 14.07, allocable income means net
income or net loss allocable to the excess deferrals for the calendar year in
which the Employee made the excess deferral and for the "gap period" measured
from the beginning of the next calendar year to the date of the distribution. If
the distribution of the excess deferral occurs during the calendar year in which
the Employee made the excess deferral, the Advisory Committee will treat as a
"gap period" the period from the first day of that calendar year to the date of
the distribution. The Advisory Committee will determine allocable income in the
same manner as described in Section 14.08(F) for excess contributions, except
the numerator of the allocation fraction will be the amount of the Employee's
excess deferrals and the denominator of the allocation fraction will be the
Employee's Accrued Benefit attributable to his elective deferrals.
14.08 ACTUAL DEFERRAL PERCENTAGE ("ADP") TEST. For each Plan Year,
the Advisory Committee must determine whether the Plan's Code ss.401(k)
arrangement satisfies either of the following ADP tests:
(i) The average ADP for the Highly Compensated Group does
not exceed 1.25 times the average ADP of the Nonhighly
Compensated Group; or
<PAGE>
(ii) The average ADP for the Highly Compensated Group does not exceed
the average ADP for the Nonhighly Compensated Group by more than
two percentage points (or the lesser percentage permitted by the multiple
use limitation in Section 14.10) and the average ADP for the Highly
Compensated Group is not more than twice the average ADP for the
Non-highly Compensated Group.
(A) Calculation of ADP. The average ADP for a group is the average
of the separate ADPs calculated for each Eligible Employee who is a member
of that group. An Eligible Employee's ADP for a Plan Year is the ratio of the
Eligible Employee's deferral contributions for the Plan Year to the Employee's
Compensation for the Plan Year. For aggregated family members treated as a
single Highly Compensated Employee, the ADP of the family unit is the greater
of: (i) the ADP determined by combining the deferral contributions and
Compensation of the family members who are Highly Compensated Employees without
family aggregation; or (ii) the ADP determined by combining the deferral
contributions and Compensation of all aggregated family members. A Nonhighly
Compensated Employee's ADP doesn't include elective deferrals made to this Plan
or to any other Plan maintained by the Employer to the extent such elective
deferrals exceed the 402(g) limitation described in Section 14.07(A).
The Advisory Committee may determine (in a manner consistent with Treasury
regulations) the ADPs of the Eligible Employees by taking into account qualified
nonelective contributions or qualified matching contributions, or both, made to
this Plan or to any other qualified Plan maintained by the employer. The
Advisory Committee may not include qualified nonelective contributions in the
ADP test unless the allocation of nonelective contributions is nondiscriminatory
when the Advisory Committee takes into account all nonelective contributions
(including the qualified nonelective contributions) and also when the Advisory
Committee takes into account only the nonelective contributions not used in
either the ADP test described in this Section 14.09. For Plan Years beginning
after December 31, 1989, the Advisory Committee may not include in the ADP test
any qualified nonelective contributions or qualified matching contributions
under another qualified plan unless that plan has the same plan year as this
Plan. The Advisory Committee must maintain records to demonstrate compliance
with the ADP test, including the extent to which the Plan used qualified
nonelective contributions or qualified matching contributions to satisfy the
test.
(B) Special aggregation rule for Highly Compensated Employees.
To determine the ADP of any Highly Compensated Employee, the deferral
contributions taken into account must include any elective deferrals made by the
Highly Compensated Employee under any other Code ss.401(k) arrangement
<PAGE>
maintained by the Employer, unless the elective deferrals are to an ESOP.
If the plans containing the Code ss.401(k) arrangements have different plan
years, the Advisory Committee will determine the combined deferral contributions
on the basis of the plan years ending in the same calendar year.
(C) Aggregation of certain Code ss.401(k) arrangements. If the
Employer treats two plans as a unit for coverage or nondiscrimination
purposes, the Employer must combine the Code ss.401(k) arrangements under such
plans to determine whether either plan satisfies the ADP test. This aggregation
rule applies to the ADP determination for all Eligible Employees, irrespective
of whether an Eligible Employee is a Highly Compensated Employee or a nonhighly
Compensated Employee. The Advisory Committee also may elect to aggregate the
Code ss.401(k) arrangements under plans which the Employer does not treat as a
unit for coverage or nondiscrimination purposes. For Plan Years beginning after
December 31, 1989, an aggregation of Code ss.401(k) arrangements under this
paragraph does not apply to plans which have different plan years and, for Plan
Years beginning after December 31, 1988, the Advisory Committee may not
aggregate an ESOP )(or the ESOP portion of a plan) with a non-ESOP plan (or
non-ESOP portion of a plan).
(D) Characterization of excess contributions. If, pursuant to this
Section 14.08, the Advisory Committee has elected to include qualified
matching contributions in the average ADP, the Advisory Committee will treat
excess contributions as attributable proportionately to deferral contributions
and to qualified matching contributions allocated on the basis of those deferral
contributions. If the total amount of a Highly Compensated Employee's excess
contributions for the Plan Year exceeds his deferral contributions or qualified
matching contributions for the Plan Year, the Advisory Committee will treat the
remaining portion of his excess contributions as attributable to qualified
nonelective contributions. The Advisory Committee will reduce the amount of
excess contributions for a Plan Year distributable to a Highly Compensated
Employee by the amount of excess deferrals (as determined in Section 14.07), if
any, previously distributed to that Employee for the Employee's taxable year
ending in that Plan Year.
(E) Distribution of excess contributions. If the Advisory
Committee determines the Plan fails to satisfy the ADO test for a plan
Year, it must distribute the excess contributions, as adjusted for allocable
income, during the next Plan Year. However, the Employer will incur an excise
tax equal to 10% of the amount of excess contributions for a Plan Year not
distributed tot he appropriate Highly Compensated Employees during the first 2
1/2 months of that next Plan Year. The excess contributions are the amount of
deferral contributions made by the Highly compensated Employees with causes the
<PAGE>
Plan to fail to satisfy the ADP test. The Advisory Committee will
distribute to each Highly Compensated Employee his respective share of the
excess contributions. The Advisory Committee will determine the respective
shares of excess contributions by starting with the Highly Compensated
Employee(s) who has the greatest ADP of the Highly Compensated Employee(s) whose
ADP the Advisory Committee already has reduced), and continuing in this manner
until the average ADP for the Highly Compensated Group satisfies the ADP test.
If the Highly Compensated Employee si part of an aggregated family group, the
Advisory Committee, in accordance with the applicable Treasury regulations, will
determine each aggregated family member's allocable share of the excess
contributions assigned to the family unit.
(F) Allocable income. To determine the amount of the
corrective distribution required under this Section 14.08, the Advisory
Committee must calculate the allocable income for the Plan Year in which the
excess contributions arose and for the "gap period" measured from the beginning
of the next Plan Year to the date of the distribution. "Allocable income" means
net income or net loss. To calculate allocable income for the Plan Year, the
Advisory Committee: (1) first will determine the net income or net loss for the
Plan Year on the Highly Compensated Employee's Accrued Benefit attributable to
deferral contributions; and (2) then will multiply this net income or net loss
by the following fraction:
Amount of the Highly Compensated
Employee's excess contributions
--------------------------------------------------------
Accrued Benefit attributable to deferral contributions
The Accrued Benefit attributable to deferral contributions includes the
Accrued Benefit attributable to qualified matching contributions and qualified
nonelective contributions taken into account in the ADP test for the Plan Year
or for any prior Plan Year. For purposes of the denominator of the fraction, the
Advisory Committee will calculate the Accrued Benefit attributable to deferral
contributions as of the last day of the Plan Year (without regard to the net
income or net loss for the Plan Year on that Accrued Benefit).
To calculate allocable income for the "gap period," the Advisory Committee
will perform the same calculation as described in the preceding paragraph,
except in clause (1) the Advisory Committee will determine, as of the last day
of the month preceding the date of distribution, the net income or net loss for
the "gap period" and in clause (2) will calculate the Accrued Benefit
attributable to deferral contributions as of the day before the distribution. If
the Plan does not perform a valuation on the last day of the month preceding the
date of distribution, the Advisory Committee, in lieu of the calculation
described in this paragraph, will calculate allocable income for each month in
<PAGE>
the "gap period" as equal to 10% of the allocable income for the Plan Year.
Under this alternate calculation, the Advisory Committee will disregard the
month in which the distribution occurs, if the Plan makes the distribution no
later than the 15th day of that month.
14.09 NONDISCRIMINATION RULES FOR EMPLOYER MATCHING
CONTRIBUTIONS/PARTICIPANT NON-DEDUCTIBLE CONTRIBUTIONS. For Plan Years beginning
after December 31, 1986, the Advisory Committee must determine whether the
annual Employer matching contributions (other than qualified matching
contributions used in the ADP under Section 14.08), if any, and the Employee
contributions, if any, satisfy either of the following average contribution
percentage ("ACP") tests:
(i) The ACP for the Highly Compensated Group doe snot
exceed 1.25 times the ACP of the Nonhighly Compensated Group;
or
(ii) The ACP for the Highly Compensated Group does not exceed the ACP
for the Nonhighly Compensated Group by more than two percentage points
(or the lesser percentage permitted by the multiple use limitation
in Section 14.10) and the ACP for the Highly Compensated Group is not more
than twice the ACP for the Nonhighly Compensated Group.
(A) Calculation of ACP. The average contribution percentage for a
group is the average of the separate contribution percentages calculated
for each Eligible Employee who is a member of that group. An Eligible Employee's
contribution percentage for a Plan Year is the ratio of the Eligible Employee's
aggregate contributions for the Plan Year to the Employee's Compensation for the
Plan Year. "Aggregate contributions" are Employer matching contributions (other
than qualified matching contributions used in the ADP test under Section 14.08)
and employee contributions (as defined in Section 14.03). For aggregated family
members treated as a single Highly Compensated Employee, the contribution
percentage of the family unit is the greater of: (i) the contribution percentage
determined by combining the aggregate contributions and Compensation of the
family members who are Highly Compensated Employees without family aggregation;
or (ii) the contribution percentage determined by combining the aggregate
contributions and Compensation of all aggregated family members.
The Advisory Committee, in a manner consistent with Treasury regulations,
may determine the contribution percentages of the Eligible Employees by taking
into account qualified nonelective contributions (other than qualified
nonelective contributions used in the ADP test under Section 14.08) or elective
deferrals, or both, made to this Plan or to any other qualified Plan maintained
by the Employer. The Advisory Committee may not include qualified nonelective
<PAGE>
contributions in the ACP test unless the allocation of nonelective
contributions is nondiscriminatory when the Advisory Committee takes into
account all nonelective contributions (including the qualified nonelective
contributions) and also when the advisory Committee takes into account only the
nonelective contributions not used in either the ADP test described in Section
14.08 or the ACP test described in this Section 14.09. The Advisory Committee
may not include elective deferrals in the ACP test, unless the Plan which
includes the elective deferrals satisfies the ADP test both with and without the
elective deferrals included in this ACP test. For Plan Years beginning after
December 31, 1989, the Advisory Committee may not include in the ACP test any
qualified nonelective contributions or elective deferrals under another
qualified plan unless that plan has the same plan year as this Plan. The
Advisory Committee must maintain records to demonstrate compliance with the ACP
test, including the extent to which the Plan used qualified nonelective
contributions or elective deferrals to satisfy the test.
(B) Special aggregation rule for Highly Compensated Employees.
To determine the contribution percentage of any Highly Compensated
Employee, the aggregate contributions taken into account must include any
matching contributions (other than qualified matching contributions used in the
ADP test) and any Employee contributions made on his behalf to any other plan
maintained by the Employer, unless the other plan is an ESOP. If the plans have
different plan years, the Advisory Committee will determine the combined
aggregate contributions on the basis of the plan years ending in the same
calendar year.
(C) Aggregation of certain plans. If the Employer treats two plans
as a unit for coverage or nondiscrimination purposes, the Employer must
combine the plans to determine whether either plan satisfies the ACP test. This
aggregation rule applies to the contribution percentage determination for all
Eligible Employees, irrespective of whether an Eligible Employee is a Highly
Compensated Employee or a Nonhighly Compensated Employee. The Advisory Committee
also may elect to aggregate plans which the employer does not treat as a unit
for coverage or nondiscrimination purposes. For Plan Years beginning after
December 31, 1989, in aggregation of plans under this paragraph does not apply
to plans which have different plan years and, for Plan Years beginning after
December 31, 1988, the Advisory Committee may not aggregate an ESOP (or the ESOP
portion of a plan) with a non-ESOP plan (or non-ESOP portion of a plan).
(D) Distribution of excess aggregate contributions. The Advisory
Committee will determine excess aggregate contributions after determining
excess deferrals under Section 14.07 and excess contributions under Section
14.08. If the advisory Committee determines the Plan fails to satisfy the ACP
test for a plan Year, it must distribute the excess aggregate contributions, as
<PAGE>
adjusted for allocable income, during the next Plan Year. However, the
Employer will incur an excise tax equal to 10% of the amount of excess aggregate
contributions for a Plan Year not distributed to the appropriate Highly
Compensated Employees during the first 2 1/2 months of that next Plan Year. The
excess aggregate contributions are the amount of aggregate contributions
allocated on behalf of the Highly Compensated Employees which causes the Plan to
fail to satisfy the ACP test. The Advisory Committee will distribute to each
Highly Compensated Employee his respective share of the excess aggregate
contributions. The Advisory Committee will determine the respective shares of
excess aggregate contributions by starting with the Highly Compensated
Employee(s) who has the greatest contribution percentage, reducing his
contribution percentage to the next highest contribution percentage, then, if
necessary, reducing the contribution percentage of the Highly Compensated
Employee(s) at the next highest contribution percentage level (including the
contribution percentage of the Highly Compensated Employee(s) whose contribution
percentage the Advisory Committee already has reduced), and continuing in this
manner until the ACP for the Highly Compensated Group satisfies the ACP test. if
the Highly Compensated Employee is part of an aggregated family group, the
Advisory Committee, in accordance with the applicable Treasury regulations, will
determine each aggregated family member's allocable share of the excess
aggregate contributions assigned to the family unit.
(E) Allocable income. To determine the amount of the
corrective distribution required under this Section 14.09, the Advisory
Committee must calculate the allocable income for the Plan Year in which the
excess aggregate contributions arose and for the "gap period" measured from the
beginning of the next Plan Year to the date of the distribution. "Allocable
income" means net income or net loss. The Advisory Committee will determine
allocable income in the same manner as described in Section 14.08(F) for excess
contributions, except the numerator of the allocation fraction will be the
Highly Compensated Employee's excess aggregate contributions and the denominator
of the allocation fraction will be the Employee's Accrued Benefit attributable
to aggregate contributions and, if applicable, to qualified nonelective
contributions and elective deferrals included in the ACP test for the Plan Year
or for any prior Plan Year.
(F) Characterization of excess aggregate contributions. The
Advisory Committee will treat a Highly Compensated Employee's allocable
share of excess aggregate contributions in the following priority: (1) first as
attributable to his Employee contributions which are voluntary contributions, if
any; (2) then as matching contributions allocable with respect to excess
contributions determined under the ADP test described in Section 14.08; (3) then
on a pro rata basis to matching contributions and to the deferral contributions
<PAGE>
relating to those matching contributions which the Advisory Committee has
included in the ACP test; (4) then on a pro rata basis to Employee contributions
which are mandatory contributions, if any and to the matching contributions
allocated on the basis of those mandatory contributions; and (5) last to
qualified nonelective contributions used int he ACP test. To the extent the
Highly Compensated Employee's excess aggregate contributions are attributable to
matching contributions, and he is not 100% vested in his Accrued Benefit
attributable to matching contributions, the Advisory Committee will distribute
only the vested portion and forfeit the nonvested portion. The vested portion of
the Highly Compensated Employee's excess aggregate contributions attributable to
Employer matching contributions is the total amount of such excess aggregate
contributions (as adjusted for allocable income) multiplied by his vested
percentage (determined as of the last day of the Plan Year for which the
Employer made the matching contribution). The Employer will specify in Adoption
Agreement Section 3.05 the manner in which the Plan will allocate forfeited
excess aggregate contributions.
14.10 MULTIPLE USE LIMITATION. For Plan Years beginning after
December 31, 1988, if at least one Highly Compensated Employee is
includible in the ADP test under Section 14.08 and in the ACP test under Section
14.09, the sum of the Highly Compensated Group's ADP and ACP may not exceed the
multiple use limitation.
The multiple use limitation is the sum of (i) and (ii):
(i) 125% of the greater of: (a) the ADP of the Nonhighly Compensated
Group under the Code ss.401(k) arrangement; or (b) the ACP of the
Nonhighly Compensated Group for the Plan Year beginning with or within the
Plan Year of the Code ss.401(k) arrangement.
(ii) 2% plus the lesser of (i)(a) or (i)(b), but no more
than twice the lesser of (i)(a) or (i)(b).
For Plan Years beginning prior to the later of January 1, 1992, or 60 days
after the Treasury issues final regulations under Code ss.401(m), the Advisory
Committee, in lieu of determining the multiple use limitation as the sum of (i)
and (ii), may elect to determine the multiple use limitation as the sum of (iii)
and (iv):
(iii) 125% of the lesser of: (a) the ADP of the Nonhighly
Compensated Group under the Code ss.401(k) arrangement; or (b) the
ACP of the Nonhighly Compensated Group for the Plan Year beginning with or
within the Plan Year of the Code ss.401(k) arrangement.
(iv) 2% plus the greater of (iii)(a) or (iii)(b), but no
more than twice the greater of (iii)(a) or (iii)(b).
<PAGE>
The Advisory Committee will determine whether the Plan satisfies the
multiple use limitation after applying the ADP test under Section 14.08 and the
ACP test under Section 14.09 and after making any corrective distributions
required by those Sections. If, after applying this Section 14.10, the Advisory
Committee determines the Plan has failed to satisfy the multiple use limitation,
the Advisory Committee will correct the failure by treating the excess amount as
excess aggregate contributions under Section 14.09. This Section 14.10 does not
apply unless, prior to application of the multiple use limitation, the ADP and
the ACP of the Highly Compensated Group each exceeds 125% of the respective
percentages for the Nonhighly Compensated Group.
14.11 DISTRIBUTION RESTRICTIONS. The Employer must elect in Section
6.03 of the Adoption Agreement the distribution events permitted under the
Plan. The distribution events applicable to the Participant's Deferral
Contributions Account, Qualified Nonelective Contributions Account and Qualified
Matching Contributions Account must satisfy the distribution restrictions
described in paragraph (m) of Section 14.03.
(A) Hardship distributions from Deferral Contributions Account.
The Employer must elect in Adoption Agreement Section 6.03 whether a
Participant may receive hardship distributions from his Deferral Contributions
Account prior to the Participant's Separation from Service. Hardship
distributions from the Deferral Contributions Account must satisfy the
requirements of this Section 14.11. A hardship distribution option may not apply
to the Participant's Qualified Nonelective Contributions Account or Qualified
Matching Contributions Account.
(l) Definition of hardship. A hardship distribution under this
Section 14.11 must be on account of one or more of the following immediate
and heavy financial needs: (1) medical expenses described in Code ss.213(d)
incurred by the Participant, by the Participant's spouse, or by any of the
Participant's dependents; (2) the purchase (excluding mortgage payments) of a
principal residence for the Participant; (3) the payment of post-secondary
education tuition, for the next semester or for the next quarter, for the
Participant, for the Participant's spouse, or for any of the Participant's
dependents; or (4) to prevent the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's principal
residence.
(2) Restrictions. The following restrictions apply to a
Participant who receives a hardship distribution: (a) the Participant may
not make elective deferrals or employee contributions to the Plan for the
12-month period following the date of his hardship distribution; (b) the
distribution is not in excess of the amount of the immediate and heavy financial
need; (c) the Participant must have obtained all distributions, other than
<PAGE>
hardship distributions, and all nontaxable loans currently available under this
Plan and all other qualified plans maintained by the Employer; and (d) the
Participant agrees to limit elective deferrals under this Plan and under any
other qualified Plan maintained by the Employer, for the Participant's taxable
year immediately following the taxable year of the hardship distribution, to the
402(g) limitation (as described in Section 14.07), reduced by the amount of the
Participant's elective deferrals made in the taxable year of the hardship
distribution. The suspension of elective deferrals and employee contributions
described in clause (a) also must apply to all other qualified plans and to all
nonqualified plans of deferred compensation maintained by the Employer, other
than any mandatory employee contribution portion of a defined benefit plan,
including stock option, stock purchase and other similar plans, but not
including health or welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan).
(3) Earnings. For Plan Years beginning after December 31, 1988, a
hardship distribution under this Section 14.11 may not include earnings on
an Employee's elective deferrals credited after December 31, 1988, and may not
include qualified matching contributions and qualified nonelective
contributions, nor any earnings on such contributions, irrespective of when
credited.
(B) Distributions after Separation from Service. Following the
Participant's Separation from Service, the distribution events applicable to the
Participant apply equally to all of the Participant's Accounts, except as
elected in Section 6.03 of the Employer's Adoption Agreement.
14.12 SPECIAL ALLOCATION RULES. If the Code ss.401(k) arrangement
provides for salary reduction contributions, if the Plan accepts Employee
contributions, pursuant to Adoption Agreement Section 4.01, or if the Plan
allocates matching contributions as of any date other than the last day of the
Plan Year, the Employer must elect in Adoption Agreement 9.11 whether any
special allocation provisions will apply under Section 9.11 of the Plan. For
purposes of the elections:
(a) A "segregated Account" direction means the Advisory Committee
will establish a segregated Account for the applicable contributions
made on the Participant's behalf during the Plan Year. The Trustee must
invest the segregated Account in Federally insured interest
bearing savings account(s) or time deposits, or a combination of
both, or in any other fixed income investments, unless otherwise
specified in the Employer's Adoption Agreement. As of the last day of
<PAGE>
each Plan Year (or, if earlier, an allocation date coinciding with a
valuation date described in Section 9.11), the Advisory Committee will
reallocate the segregate Account to the Participant's appropriate
Account in accordance with Section 3.04 or Section 4.06, whichever
applies to the contributions.
(b) A "weighted average allocation" method will treat a weighted
portion of the applicable contributions as if includible in the
Participant's Account as of the beginning of the valuation period. The
weighted portion is a fraction, the numerator of which is the number
of months in the valuation period, excluding each month in the valuation
period which begins prior to the contribution date of the applicable
contributions, and the denominator of which is the number of months in
the valuation period. The Employer may elect in its Adoption
Agreement to substitute a weighting period other than months for
purposes of this weighted average allocation.
Call toll-free:
800-525-8085
303/779-1233 in metro Denver
Ask for Retirement Services
The Financial Funds
Post Office Box 2040
Denver, Colorado 80201
adop-agr\mp&ta.01
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
INVESCO S&P 500 Index Fund
Total return performance for the Fund will be computed by determining the
average annual compounded rates of return that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P (1 + T) exponent n = ERV
where: P = initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
The total return performance figures are determined by solving the above formula
for "T", applying the SEC Total Return Formula in the Investment Company Act
Rel. No. 16245 (May 1, 1988):
P = $1,000 initial payment
T = average annual total return
n = number of years
ERV = ending redeemable value
P(1+T) exponent n = ERV
The formula given on pages 64 and 65 of the Investment Company Act Rel. No.
16245 (May 1, 1988) is written to solve for Ending Redeemable Value. However,
the quantity to be reported is T (Average Annual Total Return).
Because P, n and ERV are known values we will solve for T as follows.
T = (n/( ERV/P)) - 1
and will report those amounts as the total return.
<TABLE> <S> <C>
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<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> INVESCO WORLDWIDE CAPITAL GOODS FUND
<S> <C>
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<ASSETS-OTHER> 27866
<OTHER-ITEMS-ASSETS> 564
<TOTAL-ASSETS> 14257225
<PAYABLE-FOR-SECURITIES> 1036273
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 125527
<TOTAL-LIABILITIES> 1161800
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<SHARES-COMMON-PRIOR> 1751600
<ACCUMULATED-NII-CURRENT> 1853
<OVERDISTRIBUTION-NII> 0
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<DIVIDEND-INCOME> 234827
<INTEREST-INCOME> 79688
<OTHER-INCOME> (6313)
<EXPENSES-NET> 350175
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<REALIZED-GAINS-CURRENT> 1152932
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<NET-CHANGE-FROM-OPS> (726005)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1745282
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<NUMBER-OF-SHARES-SOLD> 3535109
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<SHARES-REINVESTED> 155040
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<PER-SHARE-NAV-BEGIN> 12.70
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<PER-SHARE-NAV-END> 11.17
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> INVESCO WORLDWIDE COMMUNICATIONS FUND
<S> <C>
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<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 245260739
<INVESTMENTS-AT-VALUE> 287676058
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<OTHER-ITEMS-ASSETS> 22964
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42415202
<NET-ASSETS> 276576506
<DIVIDEND-INCOME> 905027
<INTEREST-INCOME> 782213
<OTHER-INCOME> (53802)
<EXPENSES-NET> 1863652
<NET-INVESTMENT-INCOME> (230214)
<REALIZED-GAINS-CURRENT> 6087498
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<NET-CHANGE-FROM-OPS> 36409274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 5103352
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<NUMBER-OF-SHARES-SOLD> 28810576
<NUMBER-OF-SHARES-REDEEMED> 19749078
<SHARES-REINVESTED> 319200
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<ACCUMULATED-NII-PRIOR> (61753)
<ACCUMULATED-GAINS-PRIOR> 4343767
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1877253
<AVERAGE-NET-ASSETS> 142547694
<PER-SHARE-NAV-BEGIN> 15.31
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 5.32
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<PER-SHARE-NAV-END> 19.60
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> INVESCO LATIN AMERICAN GROWTH FUND
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<DISTRIBUTIONS-OF-INCOME> 1644
<DISTRIBUTIONS-OF-GAINS> 9345510
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<NUMBER-OF-SHARES-SOLD> 2743691
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<PER-SHARE-NII> 3.38
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> INVESCO EUROPEAN SMALL COMPANY FUND
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<PERIOD-END> JUL-31-1998
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<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 5
<NAME> INVESCO ASIAN GROWTH FUND
<S> <C>
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<OTHER-INCOME> (20851)
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 6
<NAME> INVESCO REALTY FUND
<S> <C>
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<PERIOD-END> JUL-31-1998
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<DIVIDEND-INCOME> 1608753
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<OTHER-INCOME> (5257)
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<REALIZED-GAINS-CURRENT> 4205231
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 2808471
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<NUMBER-OF-SHARES-SOLD> 11521060
<NUMBER-OF-SHARES-REDEEMED> 12649335
<SHARES-REINVESTED> 366311
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<PER-SHARE-NAV-BEGIN> 10.99
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923705
<NAME> INVESCO SPECIALTY FUNDS, INC.
<SERIES>
<NUMBER> 7
<NAME> INVESCO S & P INDEX FUND - CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
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<DIVIDEND-INCOME> 65357
<INTEREST-INCOME> 53728
<OTHER-INCOME> (605)
<EXPENSES-NET> 26676
<NET-INVESTMENT-INCOME> 91804
<REALIZED-GAINS-CURRENT> 132729
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<NAME> INVESCO S & P 500 INDEX FUND - CLASS II
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