As filed with the Securities and Exchange Commission on June 20, 1995
Registration No. 33-59363
811-7287
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 1
(Check appropriate box or boxes.)
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
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(Exact name of Registrant as specified in Charter)
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300
Lisa Curcio, Secretary
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
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(Name and address of agent for service)
With a copy to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue, New York, New York 10022
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Approximate date of proposed public offering
As soon as practicable after the Registration Statement become effective
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Pursuant to Rule 24(f)(2) under the Investment Company Act of 1940,
the registrant hereby elects to register an indefinite number of shares of
common stock, $.001 par value per share, of all series of the Registrant,
now existing or hereafter created. The Registration Fee required by
Rule 24f-2 is $500.00.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8 (a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PART A
Items in Part A Prospectus
of Form N-1A Prospectus Caption Page Number
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1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Information *
4. General Description of Registrant 2
5. Management of the Fund 9
5a. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities 17
7. Purchase of Securities Being Offered 10
8. Redemption or Repurchase 12
9. Legal Proceedings *
Note * Omitted since answer is negative or inapplicable
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LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
STATEMENT OF ADDITIONAL STATEMENT OF ADDITIONAL
PART B INFORMATION CAPTION INFORMATION PAGE NUMBER
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10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History 17 (Part A)
13. Investment Objectives and Policies 2
14. Management of the Registrant 5
15. Control Persons and Principal Holders 8
of Securities
16. Investment Advisory and Other Services 8
17. Brokerage Allocation and Other Practices 9
18. Capital Stock and Other Securities 17 (Part A)
19. Purchase, Redemption and Pricing of 10, 12(Part A)
securities being offered
20. Tax Status 12
21. Underwriters 9 (Part A)
22. Calculation of Yield Quotations on Money *
Market Funds
23. Financial Statements 18
PART C
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Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement.
* Not Applicable
Lexington Crosby
Small Cap Asia Growth Fund, Inc.
PROSPECTUS
July 15, 1995
P.O. Box 1515/Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Shareholder Services-1-800-526-0056
Institutional/Financial Adviser Services-1-800-367-9160
24 Hour Account Information-1-800-526-0052
A NO-LOAD MUTUAL FUND WHOSE INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION THROUGH INVESTMENT IN COMPANIES DOMICILED IN THE ASIA REGION WITH A
MARKET CAPITALIZATION OF LESS THAN $1 BILLION.
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Lexington Crosby Small Cap Asia Growth Fund (the "Fund") is a
no-load open-end diversified management investment company. The Fund's
investment objective is to seek long-term capital appreciation through
investment in common stocks and equivalents of companies domiciled in
the Asia Region with a market capitalization of less $1 billion.
Shareholders may invest, reinvest, or redeem shares at any time
without charge or penalty.
Lexington Management Corporation ("LMC") is the Fund's investment
adviser. Crosby Asset Management U.S., Inc. ("CROSBY") is the
sub-adviser of the Fund. Lexington Funds Distributor, Inc. ("LFD") is
the distributor of Fund shares.
This Prospectus sets forth information about the Fund you should
know before investing. It should be read and retained for future
reference.
A Statement of Additional Information dated July 15, 1995, which
provides a further discussion of certain matters in this Prospectus and
other matters that may be of interest to some investors, has been filed
with the Securities and Exchange Commission and is incorporated herein
by reference. For a free copy, call the appropriate telephone number
above or write to the address listed above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Investors Should Read and Retain this Prospectus for Future Reference
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FEE TABLE
Annual Fund Operating Expenses:
(as a percentage of average net assets) (net of reimbursement):
Management fees ..................................................... 1.25%
Other fees .......................................................... 0.50%
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Total Fund Operating Expenses ................................... 1.75%
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Example: 1 year 3 years
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You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each period ................ $18 $55
The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
and indirectly. Shareholder Servicing Agents acting as agents for their
customers may provide administrative and recordkeeping services on behalf of the
Fund. For these services, each Shareholder Servicing Agent receives fees, which
may be paid periodically, provided that such fees will not exceed, on an annual
basis, 0.25% of the average daily net assets of the Fund represented by shares
owned during the period for which payment is made. Each Shareholder Servicing
Agent may, from time to time, voluntarily waive all or a portion of the fees
payable to it. LMC has agreed to voluntarily limit the total expenses of the
Fund (excluding interest, taxes, brokerage, and extraordinary expenses but
including management fee and operating expenses) to an annual rate of 1.75% of
the Fund's average net assets. (For more complete descriptions of the various
costs and expenses, see "Management of the Fund" below.) The Expenses and
Example appearing in the table above are based on the Fund's estimated expenses
for the current fiscal year. The Example shown in the table above should not be
considered a representation of the past or future expenses and actual expenses
may be greater or less than those shown.
INVESTMENT OBJECTIVE AND POLICIES
Lexington Crosby Small Cap Asia Growth Fund (the "Fund"), a series of
Lexington Crosby Small Cap Asia Growth Fund, Inc. (the "Company"), is an
open-end, diversified management investment company. The Fund's investment
objective is to seek long-term capital appreciation through investment in common
stocks and equivalents of companies domiciled in the Asia Region with a market
capitalization of less than $1 billion which the investment adviser or
sub-adviser believes offer exceptional growth opportunities at attractive
relative prices. The Fund's portfolio will be invested primarily in equities
listed on stock exchanges in the Asia region consisting of Bangladesh, China,
Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam ("the Asia Region"). The Fund
also intends to invest in Australia and New Zealand. The Fund may also invest in
unlisted securities.
The Fund will seek to achieve its objective through investment in a
diversified portfolio of securities that will consist of all types of common
stocks and equivalents (the following constitute equivalents: convertible debt
securities, warrants and options). The Fund may also invest in preferred stocks,
bonds and other debt obligations which consist of money market instruments, cash
and deposits, all of which will be denominated in U.S. Dollars or currencies
related thereto. There is no assurance that the Fund will be able to achieve its
investment objective.
Under normal market conditions, the Fund will invest substantially all of
its assets in three or more countries in the Asia Region. The Fund seeks to
provide investors with the opportunity to invest in a portfolio of securities of
companies and governments located in the Asia Region. In making the allocation
of assets among the various countries the adviser and sub-adviser ordinarily
consider such factors as: prospects for relative economic growth; expected
levels of inflation and interest rates; government policies influencing business
conditions; the range of investment opportunities available to international
investors; and other pertinent financial tax, social, political and national
factors-all in relation to the prevailing prices of the securities in the Asia
Region.
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The Fund will invest at least 65% of its assets in securities of issuers
which are organized under the laws of countries located in the Asia Region, for
which the principal securities trading market is in the Asia Region and the
securities of issuers which derive at least 50% of their revenues or profits
from the Asia Region.
The Fund will invest at least 65% of its assets in small capitilization
growth companies in the Asia Region which have a market capitalization of less
than $1 billion. Approximately 13,000 companies are listed on recognized
exchanges in the Asia Region. Only some 300 companies are capitalized over $1
billion. These companies form the principal components of their respective
market indices and consequently attract the majority of foreign investment in
the region. Approximately 3,000 companies which have a market capitalization
between $100 million and $1 billion will be the primary focus for the Fund's
investments. These companies are frequently under-researched by international
investors and undervalued by their markets. The companies in which the Fund
intends to invest will generally have the following characteristics:
* have a market capitalization of less than $1 billion
* are within industry sectors with particularly strong growth prospects
* have proven management
* are under-researched by the investment community
* are undervalued
By following these criteria, the Fund intends to select securities which can
have enhanced growth prospects and may provide investment returns superior to
the market as a whole. However, the market value of these companies securities
tends to be volatile and in the past have offered greater potential for gain as
well as loss than securities of companies traded in developed countries. While
the Fund invests only in countries that it considers as having governments which
favor foreign investment, it is possible that certain Fund investments could be
subject to foreign expropriation or exchange control restrictions. See "Risk
Considerations".
The Fund may temporarily invest up to 100% of its assets in debt
obligations, which consist of repurchase agreements, money market instruments of
foreign or domestic companies and U.S. Government and foreign governments,
governmental and international organizations. When, in the judgement of the
adviser or sub-adviser, conditions in the securities market would make pursuing
the Fund's basic investment strategy inconsistent with the best interest of the
shareholders.
Portfolio Turnover:
Although the Fund does not generally intend to invest for the purpose of
seeking short-term profits, the Fund's investments may be changed when
circumstances warrant, without regard to the length of time a particular
security has been held. It is expected that the Fund will have an annual
portfolio turnover rate that will generally not exceed 150%. A 100% turnover
rate would occur if all the Fund's portfolio investments were sold and either
repurchased or replaced within a year. A high turnover rate (100% or more)
results in correspondingly greater brokerage commissions and other transactional
expenses which are borne by the Fund. High portfolio turnover may result in the
realization of net short-term capital gains by the Fund which, when distributed
to shareholders, will be taxable as ordinary income. See "Tax Matters."
Certain Investment Methods: The Fund may from time to time engage in the
following investment practices:
Settlement Transactions-The Fund will attempt to insulate itself against
possible losses and gains resulting from a change in the relationship between
the United States dollar and the foreign currency during the period between the
date a security is purchased or sold and the date on which payment is made or
received. To do so, the Fund may, for a fixed amount of United States dollars,
enter into a forward foreign exchange contract for the purchase or sale of the
amount of foreign currency involved in the underlying securities transaction.
This process is known as "transaction hedging".
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To effect the exchange of the amount of foreign currencies involved in the
purchase and sale of foreign securities and to effect the "transaction hedging"
described above, the Fund may purchase or sell foreign currencies on a "spot"
(i.e. cash) basis or on a forward basis whereby the Fund purchases or sells a
specific amount of foreign currency, at a price set at the time of the contract,
for receipt or delivery at a specified date which may be any fixed number of
days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Fund's portfolio or securities or prevent loss if the price
of such securities should decline.
Portfolio Hedging-When, in the opinion of LMC or Crosby it is desirable to limit
or reduce exposure in a foreign currency in order to moderate potential changes
in the United States dollar value of the portfolio, the Fund may enter into a
forward foreign currency exchange contract by which the United States dollar
value of the underlying foreign portfolio securities can be approximately
matched by an equivalent United States dollar liability. The Fund, for hedging
purposes only, may also enter into forward currency exchange contracts to
increase its exposure to a foreign currency that LMC or Crosby expects to
increase in value relative to the United States dollar. The Fund will not
attempt to hedge all of its portfolio positions and will enter into such
transactions only to the extent, if any, deemed appropriate by the investment
adviser or sub-adviser. Hedging against a decline in the value of currency does
not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. The Fund will not enter into
forward foreign currency exchange transactions for speculative purposes. The
Fund intends to limit such transactions as described in this paragraph to not
more than 70% of total Fund assets.
Forward Commitments-The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser or sub-adviser deems it
appropriate to do so. The Fund may realize short-term profits or losses upon the
sale of forward commitments.
Covered Call Options-The Fund may seek to preserve capital by writing covered
call options on securities which it owns. Such an option on an underlying
security would obligate the Fund to sell, and give the purchaser of the option
the right to buy that security at a stated exercise price at anytime until a
stated expiration date of the option. The premium paid by the purchaser of an
option will be income to the Fund. The Fund will cause its custodian to
segregate cash, U.S. Government Securities or other high grade liquid debt
obligations having a value sufficient to meet the Fund's obligations under the
call options.
Repurchase Agreements-A repurchase agreement is a contract under which the Fund
would acquire a security for a relatively short period (usually not more than 7
days) subject to the obligations of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). Although the Fund may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the Fund's present intention to
enter into repurchase agreements only with respect to obligations of the United
States government or its agencies or instrumentalities to meet anticipated
redemptions or pending investments or reinvestment of Fund assets in portfolio
securities. The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with "primary dealers" in United States
government securities. Repurchase agreements are considered to be loans which
must be fully collateralized including interest earned thereon during the entire
term of the agreement. If the institution defaults on the repurchase agreement,
the Fund will retain possession of the underlying securities. In addition, if
bankruptcy proceedings are commenced with
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respect to the seller, realization on the collateral by the Fund may be delayed
or limited and the Fund may incur additional costs. In such case, the Fund will
be subject to risks associated with changes in market value of the collateral
securities. The Fund intends to limit repurchase agreements to institutions
believed by LMC or Crosby to present minimal credit risk The Fund will not enter
into repurchase agreements maturing in more than 7 days if the aggregate of such
repurchase agreements and all other illiquid securities when taken together
would exceed 15% of the total assets of the Fund.
Except as otherwise specifically noted, the Fund's investment objective and
its investment restrictions are fundamental and may not be changed without the
approval of a majority of the outstanding voting securities of the Fund. The
Statement of Additional Information contains a complete description of the
Fund's restrictions and additional information on policies relating to the
investment of its assets and its activities.
Portfolio Transactions
The primary consideration in placing security transactions is execution at
the most favorable prices, consistent with best execution. See the Statement of
Additional Information for a further discussion of brokerage allocation.
RISK CONSIDERATIONS
Investors should recognize that investing in securities of foreign companies
and in particular securities of companies domiciled in or doing business in
Asian markets and countries involves certain risk considerations, including
those set forth below, which are not typically associated with investing in
securities of U.S. companies.
Foreign Small Cap Securities
Many companies traded on securities markets in many foreign countries are
smaller, newer and less seasoned than companies whose securities are traded on
securities markets in the United States. Investments in smaller companies
involve greater risk than is customarily associated with investing in larger
companies. Smaller companies may have limited product lines, markets or
financial or managerial resources and may be more susceptible to losses and
risks of bankruptcy. Additionally, market making and arbitrage activities are
generally less extensive in such markets and with respect to such companies,
which may contribute to increased volatility and reduced liquidity of such
markets or such securities. Accordingly, each of these markets and companies may
be subject to greater influence by adverse events generally affecting the
market, and by large investors trading significant blocks of securities, than is
usual in the United States. To the extent that any of these countries
experiences rapid increases in its money supply and investment in equity
securities for speculative purposes, the equity securities traded in any such
country may trade at price-earning multiples higher than those of comparable
companies trading on securities markets in the United States, which may not be
sustainable. In addition, risks due to the lack of modern technology, the lack
of a sufficient capital base to expand business operations, the possibility of
permanent or temporary termination of trading, and greater spreads between bid
and ask prices may exist in such markets.
Foreign Currency Considerations
The Fund's assets will be invested in securities of foreign companies and
substantially all income will be received by the Fund in foreign currencies.
However, the Fund will compute and distribute its income in U.S. dollars, and
the computation of income will be made on the date of its receipt by the Fund at
the foreign exchange rate in effect on that date. Therefore, if the value of the
foreign currencies in which the Fund receives its income falls relative to the
dollar between receipt of the income and the making of Fund distributions, the
Fund will be required to liquidate securities in order to make distributions if
the Fund has insufficient cash in dollars to meet distribution requirements.
The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Fund may incur costs in connection with
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conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward or futures contracts to purchase or
sell foreign currencies. A discussion of the risk considerations pertaining to
such currency hedging may be found in the Statement of Additonal Information.
Investment and Repatriation Restrictions
Some foreign countries have laws and regulations which currently preclude
direct foreign investment in the securities of their companies. However,
indirect foreign investment in the securities of companies listed and traded on
the stock exchanges in these countries is permitted by certain foreign countries
through investment funds which have been specifically authorized. The Fund may
invest in these investment funds subject to the provisions of the 1940 Act as
discussed under "Investment Restrictions" in the Statement of Additional
Information. If the Fund invests in such investment funds, the Fund's
shareholders will bear not only their proportionate share of the expenses of the
Fund (including operating expenses and the advisory fees), but also will bear
indirectly similar expenses of the underlying investment funds.
In addition to the foregoing investment restrictions, prior governmental
approval for foreign investments may be required under certain circumstances in
some foreign countries, while the extent of foreign investment in domestic
companies may be subject to limitation in other foreign countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies in foreign countries to prevent, among other concerns, violation of
foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
foreign countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.
Foreign Securities Markets
Trading volume on foreign stock exchanges is substantially less than that on
the New York Stock Exchange. Further, securities of some foreign companies are
less liquid and more volatile than securities of comparable U.S. companies.
Similarly, volume and liquidity in most foreign bond markets is substantially
less than in the U.S. and, consequently, volatility of price can be greater than
in the U.S. Fixed commissions on foreign stock exchanges are generally higher
than negotiated commissions on U.S. exchanges, although the Fund endeavors to
achieve the most favorable net results on its portfolio transactions and may be
able to purchase the securities in which the Fund may invest on other stock
exchanges where commissions are negotiable.
Trading practices in certain foreign securities markets are also
significantly different from those in the U.S. Brokerage commissions and other
transaction costs on the securities exchanges in many countries are generally
higher than in the United States. In addition, securities settlements and
clearance procedures in certain countries, and, in particular, in emerging
market countries, are less developed and less reliable than those in the United
States and the Fund may be subject to delays or other material difficulties and
could experience a loss if a counterparty defaults. Delays in settlement could
result in temporary periods when assets of the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to the Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.
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Companies in foreign countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about a foreign company than
about a U.S. company. Further, there is generally less governmental supervision
and regulation of foreign stock exchanges, brokers and listed companies than in
the U.S. Brokers in some countries may not be as well capitalized as those in
the U.S., so that they may be more susceptible to financial failure in times of
market, political, or economic stress, exposing the Fund to a risk of loss.
Further, the Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts.
Economic and Political Risks
The economies of individual foreign countries in which the Fund invests may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, capital reinvestment, resource
self sufficiency and balance of payments position. Further, the economies of
developing countries generally are heavily dependent upon international trade
and, accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade. The export-driven
nature of Asian economies is often dependent on the strength of their trading
partners in the United States and Europe, although growing intra-regional trade
may mitigate some of this external dependence.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Fund's
investments in those countries. In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.
Inflation
Many countries have experienced substantial, and in some periods extremely
high and volatile, rates of inflation. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of these countries and emerging market
countries in particular. In an attempt to control inflation, wage and price
controls have been imposed at times in certain countries.
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in certain types of securities or engaging in
certain transactions. The most significant of these restrictions provide that:
(1) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (c) for temporary
emergency purposes, the Fund may borrow money in amounts not exceeding
5% of the value of its total assets at the time when the loan is made;
(d) The Fund may pledge its portfolio securities or receivables or
transfer or assign or otherwise encumber them in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
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borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test. The
Fund only will invest up to 5% of its total assets in reverse repurchase
agreements.
(2) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase transactions and (c) lend portfolio securities
provided that the value of such loaned securities does not exceed
one-third of the Fund's total assets.
(3) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in
securities issued by companies principally engaged in any one industry.
The Fund considers foreign government securities and supra national
organizations to be industries. This limitation, however, will not apply
to securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities.
(4) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction
shall not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities or, with respect to 25%
of the Fund's total assets, to securities issued or guaranteed by the
government of any country other than the United States which is a member
of the Organization for Economic Cooperation and Development ("OECD").
The member countries of OECD are at present: Australia, Austria,
Belgium, Canada, Denmark, Germany, Finland, France, Greece, Iceland,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more
than 10% of the outstanding voting securities of such issuer being held
by the Fund.
The forgoing investment restrictions (as well as certain others set forth in
the Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of the majority of the
shareholders of the Fund.
The investment policies described below are non-fundamental, therefore,
changes to such policies may be made in the future by the Board of Directors
without the approval of the shareholders of the Fund:
(1) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.
(2) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced price.
Such securities include, but are not limited to, time deposits and
repurchase agreements with maturities longer than 7 days. Securities
that may be resold under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended, shall not be
deemed illiquid solely by reason of being unregistered. The Investment
Adviser or Sub-Adviser shall determine whether a particular security is
deemed to be liquid based on the trading markets for the specific
security and other factors.
The Statement Information contains a complete description of the Fund's
restrictions and and additional information on policies relating to the
investment of its assets and its activities.
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MANAGEMENT OF THE FUND
The Fund has a Board of Directors which establishes the Fund's policies and
supervises and reviews the operations and management of the Fund. There are
currently ten directors (of whom seven are non-interested persons as defined
under the Investment Company Act of 1940) who meet four times each year. The
Statement of Additional Information contains more data regarding the Directors
and Officers of the Fund.
PORTFOLIO MANAGERS
The Fund is managed by a portfolio management team. The lead managers are
Christina Lam and Nigel Webber of Crosby Asset Management U.S., Inc.
Nigel Webber is Vice President and Portfolio Manager of the Fund. Mr. Webber
is responsible for the Fund's overall investment strategy. Mr. Webber was
appointed a Managing Director of Crosby Asset Management in October 1993 with
primary responsibility for business development. He joined Crosby Asset
Management after being a partner in Causeway Capital Limited, a leading
independent U.K. investment management firm specializing in private equity
investment and smaller listed companies.
He started his career at KPMG Peat Marwick, followed by five years at
Citicorp International Bank Limited in London and New York and three years with
Mercantile House Holdings PLC a leading financial services group. In 1987, he
joined as Managing Director, an investment company specializing in the financial
sector where he first became associated with the Crosby Group. He was a Director
and member of the investment committee of The Thai Development Capital Fund
Limited and The China Investment Company Ltd., two funds managed by Crosby Asset
Management from their launch until September 1993.
Christina Lam is Vice President and Portfolio Manager of the Fund. Ms. Lam
joined Crsoby Asset Management in 1991. She is responsible for the investment
management of the listed equity portfolios under the management of Crosby Asset
Management which include a major Asian small capitalization account since 1993.
After graduating with a Law Degree with Honors from Warwick University, she
qualified as a Barrister from Lincoln's Inn in London. She moved to Hong Kong in
1987 where she joined Schroder Securities Limited in Hong Kong as an investment
analyst, where her coverage included the utilities, industrials and retail
sectors and conglomerates.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
The Fund has entered into an investment advisory contract with Lexington
Management Corporation (LMC), P.O. Box 1515/Park 80 West Plaza Two, Saddle
Brook, New Jersey 07663. LMC provides investment advice and in general conducts
the management and investment program of the Fund under the supervision and
control of the Directors of the Fund. LMC has entered into a sub-advisory
contract with Crosby Asset Management U.S. Inc. ("Crosby"), 27/F Pacific Place
Two, 88 Queensway, Admiralty, Hong Kong, under which Crosby will provide the
Fund with investment advice and management of the Fund's investment program.
Lexington Funds Distributor, Inc. ("LFD"), a registered broker dealer, is
the Fund's distributor.
LMC, established in 1938, currently manages over $3.8 billion in assets. LMC
serves as investment adviser to other investment companies and private and
institutional investment accounts. Included among these clients are persons and
organizations which own significant amounts of capital stock of LMC's parent,
Piedmont Management Company Inc. The clients pay fees which LMC considers
comparable to the fees paid by similarly served clients.
LMC also acts as administrator to the Fund and performs certain
administrative and accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for
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semiannual and annual reports, preparing registration statements, calculating
net asset values, shareholder communications and supervision of the custodian,
transfer agent and provides facilities for such services. The Fund shall
reimburses LMC for its actual cost in providing such services, facilities and
expenses.
LMC and LFD are wholly-owned subsidiaries of Piedmont Management Company
Inc., a Delaware corporation with offices at 80 Maiden Lane, New York, New York
10038. Descendants of Lunsford Richardson, Sr. and their spouses, trusts and
other related entities have a majority voting control of outstanding shares of
Piedmont Management Company Inc. common stock.
Crosby Asset Management U.S., Inc. was established on October 4, 1990 in the
British Virgin Islands. Crosby manages assets and provides investment advice for
investment company and institutional private accounts around the world including
the United States. It is a subsidiary of the Crosby Group.
The Crosby Group was founded in 1984 and is a leading independent merchant
bank in Asia, providing services including investment management, research and
stockbrokerage and corporate finance. The Crosby Group is headquartered in Hong
Kong with 18 offices located in 11 countries throughout the region, and in
London and New York.
The Crosby Group employs over 500 people worldwide, over 400 of whom are
resident in the Asia region. Research is undertaken by over 65 professionals the
majority of whom are nationals of the countries in which they are located. The
Crosby Group provides services to its international investment clients from
offices in New York and London, as well as its Asian locations. The Crosby Group
conducts regular business with over 300 institutions worldwide and had a
transaction volume in excess of US $12 billion in the 12 months to March 31,
1995. Crosby Securities was one of the first international securities firm to
have research offices in all of the major stockmarkets in the region (namely
Thailand, Malaysia, Singapore, Indonesia and Hong Kong) and also to establish an
office in China where it has seats on ithe Shanghai and Shenzhen Stock
Exchanges.
LMC, as owner of the registered service mark "Lexington," will sublicense to
the Fund to include the word "Lexington" as part of its corporate name subject
to revocation by LMC in the event that the Fund ceases to engage LMC or its
affiliate as investment advisor or distributor. Crosby Asset Management U.S.
Inc. has authorized the fund to include the word "Crosby" as part of its
corporate name subject to revocation by Crosby in the event the fund ceases to
engage Crosby as sub adviser. In that event the Fund will be required upon
demand of LMC or Crosby to change its name to delete the word "Lexington" or
"Crosby" therefrom.
As compensation for its services, the Fund pays LMC a monthly management fee
at the annual rate of 1.25% of the average daily net assets. This fee is higher
than that paid by most other investment companies. However, it is not
necessarily greater than the management fee of other investment companies with
objectives and policies similar to this Fund. LMC will pay Crosby an annual
sub-advisory fee of 0.625% of the Fund's average daily net assets. The
sub-advisory fee will be paid by LMC, not the Fund. See "Investment Adviser and
Distributor" in the Statement of Additional Information. LMC has agreed to
voluntarily limit the total expenses of the Fund (excluding interest, taxes,
brokerage, and extraordinary expenses but including management fee and operating
expenses) to an annual rate of 1.75% of the Fund's average net assets through
April 30, 1996 or such later date to be determined by LMC.
HOW TO PURCHASE SHARES
Initial Investments: Minimum $1,000. By Wire: (1) Telephone the Fund at the
applicable toll free telephone number on the front cover and provide the account
registration, address, and social security or tax identification number, the
amount being wired, the name of the wiring bank, and the name and telephone
number of the person to be contacted in connection with the order. You will then
be provided with an account number. (2) Instruct your bank to wire the specified
amount, along with the account number and registration to State Street Bank and
Trust Company ("Agent") Attn: Mutual Funds Depart., (re: Lexington Crosby Small
Cap Asia Growth Fund, Account No. ------------. (3) A completed New Account
Application must then be forwarded to the Fund at the address on the
Application.
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By Mail: Send a check payable to Lexington Crosby Small Cap Asia Growth Fund,
along with a completed New Account Application, to the Agent at the address on
the Application.
Subsequent Investments - By Wire: Instruct your bank to wire the specified
amount and appropriate information to State Street Bank and Trust Company (see
"Initial Investments - By Wire"-(2), above).
By Mail - Minimum $50: Send a check payable to Lexington Crosby Small Cap Asia
Growth Fund to the Agent (see back cover of this prospectus for address),
accompanied by either (a) the detachable form which accompanies the Agent's
confirmation of a prior transaction, or (b) a letter indicating the dollar
amount of the shares to be purchased and identifying the Fund, the account
number and registration.
The Open Account: By investing in the Fund, a shareholder appoints the Agent, as
his agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares. Stock certificates will be issued for full shares
only when requested in writing. Unless payment for shares is made by certified
or cashier's check or federal funds wire, certificates will not be issued for 30
days. In order to facilitate redemptions and transfers, most shareholders elect
not to receive certificates.
Automatic Investing Plan with "Lex-O-Matic". A shareholder may arrange to
make additional purchases of shares automatically on a monthly or quarterly
basis. The investments of $50 or more are automatically deducted from a checking
account on or about the 15th day of each month. The institution must be an
Automated Clearing House (ACH) member. Should an order to purchase shares of a
fund be cancelled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.
On payroll deduction accounts administered by an employer and on payments
into qualified pension or profit sharing plans and other continuing purchase
programs, there are no minimum purchase requirements.
Determination of Net Asset Value: The net asset value of the shares of the Fund
is computed as of the close of trading on each day the New York Stock Exchange
is open, by dividing the value of the Fund's securities plus any cash and other
assets (including accrued dividends and interest) less all liabilities
(including accrued expenses) by the number of shares outstanding, the result
being adjusted to the nearest whole cent. A security listed or traded on a
recognized stock exchange is valued at its last sale price prior to the time
when assets are valued on the principal exchange on which the security is
traded. If nosale is reported at that time, the mean between the current bid and
asked price will be used. All other securities for which the over-the-counter
market quotations are readily available are valued at the mean between the last
current bid and asked price. Short-term securities having maturity of 60 days or
less are valued at cost when it is determined by the Fund's Board of Directors
that amortized cost reflects the fair value of such securities. Securities for
which market quotations are not readily available and other assets are valued at
fair value as determined by the management and approved in good faith by the
Board of Directors.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the New York Stock Exchange (the "Exchange"). Foreign currency exchange
rates are also generally determined prior to the close of the Exchange.
Occasionally, events affecting the value of such securities and such exchange
rates may occur between the times at which they are determined and the close of
the Exchange, which will not be reflected in the computation of net asset value.
If during such periods, events occur which materially affect the value of such
securities, the securities will be valued at their fair market value as
determined by LMC and approved in good faith by the Directors.
For purposes of determining the net asset value per share of the Fund all
assets and liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean between the bid and offer
prices of such currencies against United States dollars quoted by any major
bank.
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Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear,the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss the Fund reserves the right to
redeem shares owned by the purchaser, seek reimbursement directly from the
purchaser and may prohibit or restrict the purchaser in placing future orders in
any of the Lexington Funds.
The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.
Shareholder Servicing Agents: The Fund may enter into Shareholder Servicing
Agreements with one or more Shareholder Servicing Agents. The Shareholder
Servicing Agent may, as agent for its customers, among other things: answer
customer inquiries regarding account status, account history and purchase and
redemption procedures; assist shareholders in designating and changing dividend
options, account designations and addresses; provide necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist in
processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to purchase
or redeem shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish monthly and year-end statements and confirmations of purchases and
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updated prospectuses and other communications to shareholders of the Fund;
receive, tabulate and transmit to the Fund proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and provide such other related
services as the Fund or a shareholder may request. For these services, each
Shareholder Servicing Agent receives fees, which may be paid periodically,
provided that such fees will not exceed, on an annual basis, 0.25% of the
average daily net assets of the Fund represented by shares owned during the
period for which payment is made. LMC, at no additional cost to the Fund may pay
to Shareholder Servicing Agents additional amounts from its past profits. Each
Shareholder Servicing Agent may, from time to time, voluntarily waive all or a
portion of the fees payable to it.
Account Statements: The Agent will send shareholders either purchasing or
redeeming shares of the Fund, a confirmation of the transaction indicating the
date the purchase or redemption was accepted, the number of shares purchased or
redeemed, the purchase or redemption price per share, and the amount purchased
or redemption proceeds. A statement is also sent to shareholders whenever a
distribution is paid, or when a change in the registration, address, or dividend
option occurs. Shareholders are urged to retain their account statements for tax
purposes.
HOW TO REDEEM SHARES
By Mail: Send to the Agent: (1) a written request for redemption, signed by each
registered owner exactly as the shares are registered including the name of the
Fund, account number and exact registration; (2) stock certificates for any
shares to be redeemed which are held by the shareholder; (3) signature
guarantees, when required, and (4) the additional documents required for
redemptions by corporations, executors, administrators, trustees, and guardians.
Redemptions by mail will not become effective until all documents in proper form
have been received by the Agent. If a shareholder has any questions regarding
the requirements for redeeming shares, he should call the Fund at the toll free
number on the back cover prior to submitting a redemption request. If a
redemption request is sent to the Fund in New Jersey, it will be forwarded to
the Agent and the effective date of redemption will be the date received by the
Agent.
Checks for redemption proceeds will normally be mailed within seven days,
but will not be mailed until all checks in payment for the shares to be redeemed
have been cleared.
Signature Guarantee: Signature guarantees are required in connection with (a)
redemptions by mail involving $10,000 or more; (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
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<PAGE>
other than the registered owners; (c) changes in instructions as to where the
proceeds of redemptions are to be sent, and (d) share transfer requests.
The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.
With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") specifying the total number
of shares to be redeemed, or (c) on all stock certificates tendered for
redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power.
Redemption Price: The redemption price will be the net asset value per share of
the Fund next determined after receipt by the Agent of a redemption request in
proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information).
The right of redemption may be suspended (a) for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
("SEC") determines that trading on the Exchange is restricted, (b) when there is
an emergency as determined by the SEC as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (c) for such other periods as the SEC may
by order permit for the protection of shareholders of the Fund. Due to the
proportionately high cost of maintaining smaller accounts, the Fund reserves the
right to involuntarily redeem all shares in an account with a value of less than
$500 (except retirement plan accounts) for reasons other than market
fluctuations and mail the proceeds to the shareholder. Shareholders will be
notified before these redemptions are to be made and will have 30 days to make
an additional investment to bring their accounts up to the required minimum.
SHAREHOLDER SERVICES
Transfer: Shares of the Fund may be transferred to another owner. A signature
guarantee of the registered owner is required on the letter of instruction or
accompanying stock power.
Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.
Group Sub-Accounting: To minimize recordkeeping by fiduciaries, corporations and
certain other investors, the minimum initial investment may be waived.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share, next determined at the
time of the exchange. In the event shares of one or more of these funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the fifth business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.
The Lexington Funds currently available for exchange are:
LEXINGTON GLOBAL FUND, INC. (NASDAQ Symbol: LXGLX)/Seeks long-term growth of
capital primarily through investment in common stocks of companies domiciled in
foreign countries and the United States.
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LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)/Seeks
long-term growth of capital/primarily through investment in equity securities of
companies domiciled in, or doing business in, emerging countries.
LEXINGTON INTERNATIONAL FUND, INC. (NASDAQ Symbol: LEXIX)/Seeks long-term growth
of capital through investment in common stocks and equivalents of companies
domiciled in foreign countries.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND (NASDAQ Symbol: )/Seeks long-term
capital appreciation through investment in companies domiciled in the Asia
Region with a market capitalization of less than $1 billion.
LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)/Seeks high current
income. Capital appreciation is a secondary objective.
LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)/Seeks long-term
capital growth and income through investment in an equal number of shares of the
common stocks of a fixed list of American blue chip corporations.
LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)/Seeks long-term
capital appreciation through investments in stocks of large, ably managed and
well financed companies. Income is a secondary objective.
LEXINGTON GOLDFUND, INC. (NASDAQ Symbol: LEXMX)/Seeks capital appreciation and
such hedge against loss of buying power as may be obtained through investment in
gold bullion and equity securities of companies engaged in mining or processing
gold throughout the world.
LEXINGTON CONVERTIBLE SECURITIES FUND (NASDAQ Symbol: CNCVX)/Seeks total return
by providing capital appreciation, current income and conservation of capital
through investments in a diversified portfolio of securities convertible into
shares of common stock. Shares are not presently available for sale in Vermont.
LEXINGTON GNMA INCOME FUND, INC. (NASDAQ Symbol: LEXNX)/Seeks a high level of
current income, consistent with liquidity and safety of principal, through
investment primarily in mortgage-backed GNMA Certificates.
LEXINGTON SHORT-INTERMEDIATE GOVERNMENT SECURITIES FUND, INC. (NASDAQ Symbol:
LSGXX)/Seeks current income as is consistent with preservation of capital by
investing in a portfolio of U.S. Government Securities.
LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX)/Seeks a high level of
current income consistent with preservation of capital and liquidity through
investments in interest bearing short term money market instruments.
LEXINGTON TAX FREE MONEY FUND, INC. (NASDAQ Symbol: LTFXX)/Seeks current income
exempt from Federal income taxes while maintaining liquidity and stability of
principal through investment in short term municipal securities.
Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired. If an exchange involves investing in a
Lexington Fund not already owned and a new account has to be established, the
dollar amount exchanged must meet the minimum initial investment of the fund
being purchased. If, however, an account already exists in the fund being
bought, there is a $500 minimum exchange required. Shareholders must provide the
account number of the existing account. Any exchange between mutual funds is, in
effect, a redemption of shares in one fund and a purchase in the other fund.
Shareholders should consider the possible tax effects of an exchange.
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<PAGE>
TELEPHONE EXCHANGE PROVISIONS-Exchange instructions may be given in writing or
by telephone. Telephone exchanges may only be made if a Telephone Authorization
form has been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of 7 days have elapsed from the date of a
previous exchange. Exchanges may not be made until all checks in payment for the
shares to be exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at the Agent;
shares held in certificate form by the shareholder cannot be included. However,
outstanding certificates can be returned to the Agent and qualify for these
services. Any new account established with the same registration will also have
the privilege of exchange by telephone in the Lexington Funds. All accounts
involved in a telephone exchange must have the same registration and dividend as
the account from which the shares were transferred and will also have the
privilege of exchange by telephone in the Lexington Funds in which these
services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds, as the true and lawful attorney to
surrender for redemption or exchange any and all non-certificate shares held by
the Agent in account(s) designated, or in any other account with the Lexington
Funds, present or future which has the identical registration, with full power
of substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent or the Fund(s) will be liable for any loss,
expense or cost arising out of any requests effected in accordance with this
authorization which would include requests effected by imposters or persons
otherwise unauthorized to act on behalf of the account. LFD, the Agent and the
Fund, will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if they do not employ reasonable
procedures they may be liable for any losses due to unauthorized or fraudulent
instructions. The following identification procedures may include, but are not
limited to, the following: account number, registration and address, taxpayer
identification number and other information particular to the account. In
addition, all exchange transactions will take place on recorded telephone lines
and each transaction will be confirmed in writing by the Fund. LFD reserves the
right to cease to act as agent subject to the above appointment upon thirty (30)
days written notice to the address of record. If the shareholder is an entity
other than an individual, such entity may be required to certify that certain
persons have been duly elected and are now legally holding the titles given and
that the said corporation, trust, unincorporated association, etc. is duly
organized and existing and has the power to take action called for by this
continuing authorization.
Exchange Authorization forms, Telephone Authorization forms and prospectuses
of the other funds may be obtained from LFD.
This exchange offer is available only in states where shares of the Fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers a Prototype Pension and Profit Sharing Plan, including a
Keogh Plan, IRA's, SEP-IRA's and IRA Rollover Accounts, 401(k) Salary Reduction
Plans, Section 457 Deferred Compensation Plans and 403(b)(7) Plans. Plan support
services are available through the Shareholder Services Department of LMC. For
further information call 1-800-526-0056. (See "Tax Sheltered Retirement Plans"
in the Statement of Additional Information.)
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PERFORMANCE CALCULATION
The Fund will calculate performance on a total return basis for various
periods. The total return basis combines changes in principal and dividends for
the periods shown. Principal changes are based on the difference between the
beginning and closing net asset value for the period and assumes reinvestment of
dividends paid by the Fund. Dividends are comprised of net investment income and
net realized capital gains, respectively.
Performance will vary from time to time and past results are not necessarily
representative of future results. A shareholder should remember that performance
is a function of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index, Standard & Poor's 500 Composite Stock Price Index and
Morgan Stanley Capital International World Index. Such comparative performance
information will be stated in the same terms in which the comparative data and
indices are stated. Further information about the Fund's performance is
contained in the annual report, which may be obtained without charge.
DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY
The Fund intends to declare or distribute a dividend from its net investment
income and/or net capital gain income to shareholders annually or more
frequently if necessary in order to comply with distribution requirements of the
Code to avoid the imposition of regular Federal income tax, and if applicable, a
4% excise tax.
Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies the Agent in writing that he
wants to receive his payments in cash. This request must be received by the
Agent at least seven days before the dividend record date. Upon receipt by the
Agent of such written notice, all further payments will be made in cash until
written notice to the contrary is received. An account of such shares owned by
each shareholder will be maintained by the Agent. Shareholders whose accounts
are maintained by the Agent will have the same rights as other shareholders with
respect to shares so registered (see "How to Purchase Shares-The Open Account").
TAX MATTERS
The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification of
assets, distribution of income and sources of income. It is the Fund's policy to
distribute to shareholders all of its investment income (net of expenses) and
any capital gains (net of capital losses) so that, in addition to satisfying the
distribution requirement of Subchapter M, the Fund will not be subject to
federal income tax or the 4% excise tax.
Distributions by the Fund of its net investment income (which includes
certain foreign currency gains and losses) and the excess, if any, of its net
short-term capital gain over its net long-term capital loss are taxable to
shareholders as ordinary income. These distributions are treated as dividends
for federal income tax purposes, but in any year only a portion thereof (which
cannot exceed the aggregate amount of qualifying dividends from domestic
corporations received by the Fund during the year) may qualify for the 70%
dividends-received deduction for corporate shareholders. Because the Fund's
investment income will include almost entirely dividends from foreign
corporations and the Fund may have interest income and short-term capital gains,
substantially all of the ordinary income dividends paid by the Fund should not
qualify for the dividends-received deduction. Distributions by the Fund of the
excess, if any, of its net
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long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder held his shares.
A portion of the income earned by the Fund may be subject to foreign
withholding taxes. The economic effect of such withholding taxes upon the return
earned by the Fund cannot be predicted. Under certain circumstances, the Fund
may elect to "pass-through" to its shareholders the income or other taxes paid
by the Fund to foreign governments during a year. Each shareholder will be
required to include his pro rata portion of these foreign taxes in his gross
income, but will be able to deduct or (subject to various limitations) claim a
foreign tax credit for such amount.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by the
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made or deemed made
during the year, including any amount of foreign taxes "passed-through", will be
sent to shareholders promptly after the end of each year.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the record date of any ordinary income dividend or capital
gain dividend. Those investors purchasing shares just prior to an ordinary
income or capital gain dividend will be taxed on the entire amount of the
dividend received, even though the net asset value per share on the date of such
purchase reflected the amount of such dividend.
A shareholder will recognize gain or loss upon the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
Any loss realized upon a taxable disposition of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any capital gain dividends received on such shares. All or a portion
of any loss realized upon a taxable disposition of shares of the Fund may be
disallowed if other shares of the Fund are purchased within 30 days before or
after such disposition.
Under the back-up withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on ordinary income dividends,
capital gain dividends and redemption payments made by the Fund. In order to
avoid this back-up withholding, a shareholder must provide the Fund with a
correct taxpayer identification number (which for most individuals is their
Social Security number) or certify that it is a corporation or otherwise exempt
from or not subject to back-up withholding. The new account application included
with this Prospectus provides for shareholder compliance with these
certification requirements.
The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, a prospective shareholder should also review the
more detailed discussion of federal income tax considerations relevant to the
Fund that is contained in the Statement of Additional Information. In addition,
each prospective shareholder should consult with his own tax adviser as to the
tax consequences of investments in the Fund, including the application of state
and local taxes which may differ from the federal income tax consequences
described above.
ORGANIZATION AND DESCRIPTION OF COMMON STOCK
The Company is an open-end, diversified management investment company
organized as a corporation under the laws of the State of Maryland on April 19,
1995, and has authorized capital of 1,000,000,000 shares of common stock, par
value $.001 of which 500,000,000 have been designated the Lexington Crosby Small
Cap Asia Growth Fund Series. Each share of common stock has one vote and shares
equally in dividends and distributions when and if declared by the
17
<PAGE>
Company and in the Company's net assets upon liquidation. All shares, when
issued, are fully paid and non-assessable. There are no preemptive, conversion
or exchange rights. Fund shares do not have cumulative voting rights and, as
such, holders of at least 50% of the shares voting for Directors can elect all
Directors and the remaining shareholders would not be able to elect any
Directors.
The Company will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as custodian for the Fund's portfolio securities
including those to be held by foreign banks and foreign securities depositories
that qualify as eligible foreign custodians under the rules adopted by the SEC
and for the Fund's domestic securities and other assets. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, has been
retained to act as the transfer agent and dividend disbursing agent for the
Fund. Neither Chase Manhattan Bank, N.A. nor State Street Bank and Trust Company
have any part in determining the investment policies of the Fund or in
determining which portfolio securities are to be purchased or sold by the Fund
or in the declaration of dividends and distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919 Third Avenue, New
York, New York 10022 will pass upon legal matters for the Fund in connection
with the shares offered by this Prospectus. KPMG Peat Marwick LLP, 345 Park
Avenue, New York, New York 10154, has been selected as independent auditors for
the Fund for the fiscal period ending December 31, 1995.
OTHER INFORMATION
This prospectus omits certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Statement of Additional
Information included in such registration statement may be obtained without
charge from the Fund.
The Code of Ethics adopted by each of the Adviser, Sub-Adviser and the Fund
prohibits all affiliated personnel from engaging in personal investment
activities which compete with or attempt to take advantage of the Fund's planned
portfolio transactions. The objective of each Code of Ethics is that the
operations of the Adviser, Sub-Adviser and Fund be carried out for the exclusive
benefit of the Fund's shareholders. All organizations maintain careful
monitoring of compliance with the Code of Ethics.
Additional portfolios may be created from time to time with investment
objectives and policies different from those of the Fund. In addition, the
Directors may, subject to any necessary regulatory approvals, create more than
one class of shares in the Fund, with the classes being subject to different
charges and expenses and having such other different rights as the Directors may
prescribe.
18
<PAGE>
The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares. Such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus, and information or
representations not herein contained, if given or made, must not be relied upon
as having been authorized by the Fund . This Prospectus does not constitute an
offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
19
<PAGE>
Left Column
Investment Adviser
- -----------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
Sub-Adviser
- -----------------------------------------------------------
CROSBY ASSET MANAGEMENT U.S. INC.
27/F Pacific Place Two,
88 Queensway
Admiralty, Hong Kong
Distributor
- -----------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663
All shareholder requests for services of any kind should be
sent to:
Transfer Agent
- -----------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
Or call toll free:
Service: 1-800-526-0056
Institutional/Financial Adviser Services: 1-800-367-9160
24 Hour Account Information: 1-800-526-0052
Table of Contents Page
- -----------------------------------------------------------
Fee Table ............................................. 2
Investment Objective and Policies ..................... 2
Risk Considerations ................................... 5
Investment Restrictions ............................... 7
Management of the Fund ................................ 9
Portfolio Managers .................................... 9
Investment Adviser, Sub-Adviser, Distributor
and Administrator.................................... 9
How to Purchase Shares ................................ 11
How to Redeem Shares .................................. 13
Shareholder Services .................................. 13
Exchange Privilege .................................... 14
Tax-Sheltered Retirement Plans ........................ 16
Performance Calculation ............................... 16
Dividend, Distribution and Reinvestment Policy ........ 16
Tax Matters ........................................... 16
Organization and Description of Common Stock .......... 18
Custodian, Transfer Agent and Dividend Disbursing Agent 18
Counsel and Independent Auditors ...................... 18
Other Information ..................................... 18
Right Column
- -----------------------------------------------------------
L E X I N G T O N
- -----------------------------------------------------------
- -----------------------------------------------------------
LEXINGTON
CROSBY SMALL CAP
ASIA GROWTH FUND,
INC.
- -----------------------------------------------------------
* Asian Growth
Companies
* Free telephone
exchange privilege
* No sales charge
* No redemption fee
- ----------------------------------------------------------
The Lexington Group
of No Load
Investment Companies
- ----------------------------------------------------------
P R O S P E C T U S
July 15, 1995
-------------------
-------------------
<PAGE>
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JULY 15, 1995
This Statement of Additional Information, which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Crosby Small Cap
Asia Growth Fund, Inc. (the "Fund"), dated July 15, 1995, and as it may be
revised from time to time. To obtain a copy of the Fund's prospectus at no
charge, please write to the Fund at P.O. Box 1515/Park 80 West - Plaza Two,
Saddle Brook, New Jersey 07663 or call the following toll-free numbers:
Shareholder Services Information:-1-800-526-0056
Institutional/Financial Adviser Services:-1-800-367-9160
24 Hour Account Information:-1-800-526-0052
Lexington Management Corporation ("LMC") is the Fund's investment adviser.
Crosby Asset Management U.S. Inc. ("Crosby") is the Fund's sub-adviser.
Lexington Funds Distributor, Inc. is the Fund's distributor.
TABLE OF CONTENTS
Page
Investment Objectives and Policies........................................... 2
Risk Considerations.......................................................... 3
Management of the Fund....................................................... 5
Investment Restrictions...................................................... 6
Investment Adviser, Sub-Adviser, Distributor and Administrator............... 8
Portfolio Transactions and Brokerage Commissions............................. 9
Determination of Net Asset Value............................................. 10
Telephone Exchange Provisions................................................ 10
Tax-Sheltered Retirement Plans............................................... 10
Tax Matters.................................................................. 11
Performance Calculation...................................................... 16
Shareholder Reports.......................................................... 17
Financial Statements.........................................................
1
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
For a full description of the Fund's investment objective and policies, see
the Prospectus under "Investment Objective and Policies".
CERTAIN INVESTMENT METHODS
Settlement Transactions- When the Fund enters into contracts for purchase or
sale of a portfolio security denominated in a foreign currency, it may be
required to settle a purchase transaction in the relevant foreign currency or
receive the proceeds of a sale in that currency. In either event, the Fund will
be obligated to acquire or dispose of such foreign currency as is represented by
the transaction by selling or buying an equivalent amount of United States
dollars. Furthermore, the Fund may wish to "lock in" the United States dollar
value of the transaction at or near the time of a purchase or sale of portfolio
securities at the exchange rate or rates then prevailing between the United
States dollar and the currency in which the foreign security is denominated.
Therefore, the Fund may, for a fixed amount of United States dollars, enter into
a forward foreign exchange contract for the purchase or sale of the amount of
foreign currency involved in the underlying securities transaction. In so doing,
the Fund will attempt to insulate itself against possible losses and gains
resulting from a change in the relationship between the United States dollar and
the foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is known
as "transaction hedging".
To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign dollar and the relevant foreign currency
when foreign securities are purchased or sold for settlement beyond customary
settlement time (as described below). Neither type of foreign currency
transaction will eliminate fluctuations in the prices of the Fund's portfolio or
securities or prevent loss if the price of such securities should decline.
Portfolio Hedging- Some or all of the Fund's portfolio will be denominated in
foreign currencies. As a result, in addition to the risk of change in the market
value of portfolio securities, the value of the portfolio in United States
dollars is subject to fluctuations in the exchange rate between such foreign
currencies and the United States dollar. When, in the opinion of LMC or Crosby
it is desirable to limit or reduce exposure in a foreign currency in order to
moderate potential changes in the United States dollar value of the portfolio,
the Fund may enter into a forward foreign currency exchange contract by which
the United States dollar value of the underlying foreign portfolio securities
can be approximately matched by an equivalent United States dollar liability.
This technique is known as "portfolio hedging" and moderates or reduces the risk
of change in the United States dollar value of the Fund's portfolio only during
the period before the maturity of the forward contract (which will not be in
excess of one year). The Fund, for hedging purposes only, may also enter into
forward foreign currency exchange contracts to increase its exposure to a
foreign currency that the Fund's investment adviser or sub-adviser expects to
increase in value relative to the United States dollar. The Fund will not
attempt to hedge all of its foreign portfolio positions and will enter into such
transactions only to the extent, if any deemed appropriate by the investment
adviser or sub-adviser. Hedging against a decline in the value of currency does
not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. The Fund will not enter into
forward foreign currency exchange transactions for speculative purposes. The
Fund intends to limit transactions as described in this paragraph to not more
than 70% of the total Fund assets.
Forward Commitments-The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments.
Covered Call Options-Call options may also be used as a means of participating
in an anticipated price increase of a security on a more limited basis than
would be possible if the security itself were purchased. The Fund may write only
covered call options. Since it can be expected that a call option will be
exercised if the market value of the underlying security increases to a level
greater than the exercise price, this strategy will generally be used when the
investment adviser believes that the call premium received by the Fund plus
anticipated appreciation in the price of the underlying
2
<PAGE>
security, up to the exercise price of the call, will be greater than the
appreciation in the price of the security. The Fund intends to limit
transactions as described in this paragraph to less than 5% of total Fund
assets. The Fund will not purchase put and call options written by others. Also,
the Fund will not write any put options. The Fund will cause its custodian to
segregate cash, U.S. Government Securities or other high grade liquid debt
obligations having a value sufficient to meet the Fund's obligations under the
call options.
Repurchase Agreements-A repurchase agreement is a contract under which the Fund
would acquire a security for a relatively short period (usually not more than 7
days) subject to the obligations of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). Although the Fund may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the Fund's present intention to
enter into repurchase agreements only with respect to obligations of the United
States government or its agencies or instrumentalities to meet anticipated
redemptions or pending investments or reinvestment of Fund assets in portfolio
securities. The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with "primary dealers" in United States
government securities. In addition if bankruptcy proceedings are commenced with
respect to the seller, be subject to risks associated with changes in market
value of the collateral securities. The Fund intends to limit repurchase
agreements to institutions believed by LMC or Crosby to present minimal credit
risk. The Fund will not enter into repurchase agreements maturing in more than
seven days if the aggregate of such repurchase agreements and all other illiquid
securities when taken together would exceed 15% of the total assets of the Fund.
Except as otherwise specifically noted, the Fund's investment objective and
its investment restrictions are fundamental and may not be changed without the
approval of a majority of the outstanding voting securities of the Fund.
RISK CONSIDERATIONS
Investors should recognize that investing in securities of foreign companies
and in particular securities of companies domiciled in or doing business in
emerging markets and emerging countries involves certain risk considerations,
including those set forth below, which are not typically associated with
investing in securities of U.S. companies.
Foreign Currency Considerations
The Fund's assets will be invested in securities of foreign companies and
substantially all income will be received by the Fund in foreign currencies.
However, the Fund will compute and distribute its income in dollars, and the
computation of income will be made on the date of its receipt by the Fund at the
foreign exchange rate in effect on that date. Therefore, if the value of the
foreign currencies in which the Fund receives its income falls relative to the
dollar between receipt of the income and the making of Fund distributions, the
Fund will be required to liquidate securities in order to make distributions if
the Fund has insufficient cash in dollars to meet distribution requirements.
The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward or futures contracts to purchase or
sell foreign currencies.
Risks Associated With Hedging Transactions
Hedging transactions have special risks associated with them, including
possible default by the Counterparty to the transaction, illiquidity and, to the
extent the Adviser's view as to certain market movements is incorrect, the risk
that the use of a hedging transaction could result in losses greater than if it
had not been used. Use of call options could result in losses to the Fund, force
the sale or purchase of portfolio securities at inopportune times or for prices
lower than current market values, or cause the Fund to hold a security it might
otherwise sell.
Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, the risk exists that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Fund is engaging in proxy hedging.
Currency transactions are also subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls,
3
<PAGE>
limitations or restrictions on repatriation of currency, and manipulations or
exchange restrictions imposed by governments. These forms of governmental
actions can result in losses to the Fund if it is unable to deliver or receive
currency or monies in settlement of obligations and could also cause hedges it
has entered into to be rendered useless, resulting in full currency exposure as
well as incurring transaction costs.
Losses resulting from the use of hedging transactions will reduce the Fund's
net asset value, and possibly income, and the losses can be greater than if
hedging transactions had not been used.
Risks of Hedging Transactions Outside the United States
When conducted outside the U.S., hedging transactions may not be regulated
as rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and will be subject to the risk of government actions affecting
trading in, or the price of, foreign securities, currencies and other
instruments. The value of positions taken as part of non-U.S. hedging
transactions also could be adversely affected by: (1) other complex foreign
political, legal and economic factors, (2) lesser availability of data on which
to make trading decisions than in the U.S., (3) delays in the Fund's ability to
act upon economic events occurring in foreign markets during non-business hours
in the U.S., (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the U.S. and (5) lower trading volume
and liquidity.
Investment and Repatriation Restrictions
Some foreign countries may have laws and regulations which currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain foreign
countries through investment funds which have been specifically authorized. The
Fund may invest in these investment funds subject to the provisions of the 1940
Act as discussed below under "Investment Restrictions". If the Fund invests in
such investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the Investment Manager), but also will bear indirectly similar
expenses of the underlying investment funds.
In addition to the foregoing investment restrictions, prior governmental
approval for foreign investments may be required under certain circumstances in
some foreign countries, while the extent of foreign investment in domestic
companies may be subject to limitation in other foreign countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies in foreign countries to prevent, among other concerns, violation of
foreign investment limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
foreign countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.
Foreign Securities Markets
Trading volume on foreign country stock exchanges is substantially less than
that on the New York Stock Exchange. Further, securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Similarly, volume and liquidity in most foreign bond markets is
substantially less than in the U.S. and, consequently, volatility of price can
be greater than in the U.S. Fixed commissions on foreign exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Fund
endeavors to achieve the most favorable net results on its portfolio
transactions and may be able to purchase the securities in which the Fund may
invest on other stock exchanges where commissions are negotiable.
Companies in foreign countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about a foreign company than
about a U.S. company. Further, there is generally less governmental supervision
and regulation of foreign stock exchanges, brokers and listed companies than in
the U.S. Further, these Funds may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts.
Economic and Political Risks
The economies of individual foreign countries in which the Fund invests may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Further, the economies of
foreign countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by
4
<PAGE>
the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. The export driven nature of Asian economies is often dependent
on the strength of their trading partners in the United States and Europe,
although growing intra-regional trade is seen mitigating some of this
external dependence.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Fund's
investments in those countries. In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.
MANAGEMENT OF THE FUND
The Directors and executive officers of the Fund and their principal
occupations are set forth below:
*+ROBERT M. DEMICHELE, President and Director. P.O. Box 1515, Saddle Brook, N.J.
07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; Chairman and Chief Executive Officer, Lexington Funds
Distributor, Inc.; President and Director, Piedmont Management Company,
Inc.; Director, Reinsurance Corporation of New York; Director, Unione
Italiana Reinsurance; Vice Chairman of the Board of Trustees, Union College;
Director, Continental National Corporation; Director, The Navigator's Group,
Inc.; Chairman, Lexington Capital Management, Inc.; Chairman, LCM Financial
Services, Inc.; Director, Vanguard Cellular Systems Inc.; Chairman of the
Board, Market System Research, Inc. and Market Systems Research Advisors,
Inc. (registered investment advisers): Trustee, Smith Richardson Foundation.
+BEVERLEY C. DUER, Director, 340 East 72nd Street, News York, N.Y. 10021.
Private Investor. Formerly, Manager of Operations Research Department-CPC
International, Inc.
*+BARBARA R. EVANS, Director, 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May, 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation; prior to March 1987, Vice
President-Institutional Equity Sales, L.F. Rothschild, Unterberg, Towbin.
*+LAWRENCE KANTOR, Vice President and Director. P.O. Box 1515, Saddle Brook, N.J
07663. Managing Director, General Manager and Director, Lexington Management
Corporation; Executive Vice President and Director, Lexington Funds
Distributor, Inc.
+DONALD B. MILLER, Director. 10725 Quail Covey Road, Boynton Beach, FL 33436.
Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds; Director, Maquire
Group of Connecticut; prior to January 1989, President, Director and C.E.O.,
Media General Broadcast Services (advertising firm).
+FRANCIS OLMSTED, Director. 50 Van Hooten Court, San Anselmo, CA 94960. Private
Investor. Formerly, Manager-Commercial Development (West Coast) Essex
Chemical Corporation, Clifton, New Jersey (chemical manufacturers).
+JOHN G. PRESTON, Director. 3 Woodfield Road, Wellesley, Massachusetts 02181.
Associate Professor of Finance, Boston College, Boston, Massachusetts.
+MARGARET RUSSELL. Director. 55 North Mountain Avenue, Montclair, N.J. 07042.
Private Investor. Formerly, Community Affairs Director, Union Camp
Corporation.
+PHILIP C. SMITH, Director. 87 Lord's Highway, Weston, Connecticut 06883.
Private Investor; Director, Southwest Investors Income Fund, Inc.,
Government Income Fund, Inc., U.S Trend Fund, Inc., Investors Cash Reserve
and Plimony Fund, Inc.
+FRANCIS A. SUNDERLAND, Director. 309 Quito Place, Castle Pines, Castle Rock,
Colorado 80104. Private Investor.
*CHRISTINA LAM, Vice President and Portfolio Manager. 25/F 3 Lockhart Road, Wan
Chai, Hong Kong. Vice President, Crosby Asset Management.
*NIGEL WEBBER, Vice President and Portfolio Manager. 25/F 3 Lockhart Road, Wan
Chai, Admiralty, Hong Kong. Managing Director, Crosby Asset Management.
*+LISA CURCIO, Vice President and Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds Distributor, Inc.
*+RICHARD M. HISEY, Vice President and Treasurer. P. O. Box 1515, Saddle Brook,
N.J. 07663. Managing Director, Director and Chief Financial Officer,
Lexington Management Corporation; Chief Financial Officer, Vice President
and Director, Lexington Funds Distributor, Inc.; Chief Financial Officer,
Market Systems Research Advisors, Inc.
*+RICHARD LAVERY, CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.
*+JANICE CARNICELLI, Vice President. P.O. Box 1515, Saddle Brook, N.J. 07663.
*+CHRISTIE CARR, Assistant Treasurer P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to October 1992, Senior Accountant. KPMG Peat Marwick LLP.
5
<PAGE>
*+SIOBHAN GILFILLAN, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.
*+THOMAS LUEHS, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to November 1993, Supervisor of Investment Accounting, Alliance
Capital Management.
*+SHERI MOSCA, Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J. 07663.
Prior to September 1990, Fund Accounting Manager, Lexington Group of
Investment Companies.
*+ANDREW PETRUSKI, Assistant Treasurer. P.O. Box 1515, Saddle Brook, 07663.
Prior to May 1994, Supervising Senior Accountant, NY Life Securities. Prior
to December 1990, Senior Accountant Dreyfus Corporation.
*+PETER CORNIOTES, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J. 07663.
Assistant Secretary, Lexington Management Corporation. Assistant Secretary,
Lexington Funds Distributor, Inc.
*+ENRIQUE J. FAUST, Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator, Lexington
Management Corporation.
*"Interested person" and/or "Affiliated person" of LMC or Crosby as defined in
the Investment Company Act of 1940, as amended.
+Messrs. Corniotes, DeMichele, Duer, Faust, Hisey, Kantor, Lavery, Luehs,
Miller, Olmsted, Petruski, Preston, Smith and Sunderland and Mmes. Carnicelli,
Carr, Curcio, Evans, Gilfillan, Mosca. and Russell hold similar officers with
some or all of the other investment companies advised and/or distributed by LMC
and LFD.
Directors not employed by the Fund or its affiliates receive an annual fee
of $600 and a fee of $150 for each meeting attended plus reimbursement of
expenses for attendance at regular meetings. The Board does not have any audit,
nominating or compensation committees.
As of December 31, 1994, the aggregate renumeration paid to the directors
was as follows:
________________________________________________________________________________
Aggregate Total Compensation Number of
Compensation from From fund and Directorships in
Name of Director Fund Fund Complex Fund Complex
________________________________________________________________________________
Robert M. DeMichele $0 $ 0 16
________________________________________________________________________________
Beverley C. Duer 0 $20,250 16
________________________________________________________________________________
Barbara R. Evans 0 0 15
________________________________________________________________________________
Lawrence Kantor 0 0 16
________________________________________________________________________________
Donald B. Miller 0 $20,250 15
________________________________________________________________________________
Francis Olmsted 0 $18,900 14
________________________________________________________________________________
John G. Preston 0 $20,250 15
________________________________________________________________________________
Margaret Russell 0 $18,900 14
________________________________________________________________________________
Philip C. Smith 0 $20,250 15
________________________________________________________________________________
Francis A. Sunderland 0 $16,800 14
________________________________________________________________________________
INVESTMENT RESTRICTIONS
The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters or fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:
(1) the Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including
reverse repurchase agreements, foreign exchange contracts, delayed
delivery and whenissued securities, which may be considered the issuance
of senior securities; (b) the Fund may engage in transactions that may
result in the issuance of a senior security to the extent permitted
under applicable regulations, interpretation of the 1940 Act or an
exemptive order; (c) the Fund may engage in short sales of securities to
the extent permitted in its investment program and other restrictions;
(d) the purchase or sale of futures contracts and related options shall
not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as
authorized by the 1940 Act.
(2) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's
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investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (c) for temporary
emergency purposes, the Fund may borrow money in amounts not exceeding
5% of the value of its total assets at the time when the loan is made;
(d) The Fund may pledge its portfolio securities or receivables or
transfer or assign or otherwise encumber them in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test.
(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities
by the Fund, the Fund may be deemed to be an underwriter under the
provisions of the 1933 Act.
(4) The Fund will not purchase real estate, interests in real estate or real
estate limited partnership interests except that, to the extent
appropriate under its investment program, the Fund may invest in
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which deal in real
estate or interests therein.
(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase transactions and (c) lend portfolio securities
provided that the value of such loaned securities does not exceed
one-third of the Fund's total assets.
(6) The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase
securities of companies engaged in such activities, may enter into
transactions in financial and index futures contracts and related
options, may engage in transactions on a when-issued or forward
commitment basis, and may enter into forward currency contracts.
(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in
securities issued by companies principally engaged in any one industry.
The Fund considers foreign government securities and supranational
organizations to be industries. This limitation, however, will not apply
to securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities.
(8) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction
shall not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities or, with respect to 25%
of the Fund's total assets, to securities issued or guaranteed by the
government of any country other than the United States which is a member
of the Organization for Economic Cooperation and Development ("OECD").
The member countries of OECD are at present: Australia, Austria,
Belgium, Canada, Denmark, Germany, Finland, France, Greece, Iceland,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more
than 10% of the outstanding voting securities of such issuer being held
by the Fund .
In addition to the above fundamental restrictions, the Fund has undertaken the
following non fundamental restrictions, which may be changed in the future by
the Board of Directors, without a vote of the shareholders of the Fund:
(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under
the management of the investment adviser or sub-adviser to save
commissions or to average prices among them is not deemed to result in a
securities trading account.
(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.
(3) The Fund will not make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this
7
<PAGE>
restriction will not be applied to limit the use of options, futures
contracts and related options, in the manner otherwise permitted by the
investment restrictions, policies and investment programs of the Fund.
(4) The Fund will not purchase securities of an issuer if to the Fund's
knowledge, one or more of the Directors or officers of the Fund or LMC
individually owns beneficially more than 0.5% and together own
beneficially more than 5% of the securities of such issuer nor will the
Fund hold the securities of such issuer.
(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.
(6) The Fund will not, except for investments which, in the aggregate, do
not exceed 5% of the Fund's total assets taken at market value, purchase
securities unless the issuer thereof or any company on whose credit the
purchase was based has a record of at least three years continuous
operations prior to the purchase.
(7) The Fund will not invest for the purpose of exercising control over or
management of any company.
(8)The Fund will not purchase warrants except in units with other securities
in orig inal issuance thereof or attached to other securities, if at the
time of the purchase, the Fund's investment in warrants, valued at the
lower of cost or market, would exceed 5% of the Fund's total assets.
Warrants which are not listed on a United States securities exchange
shall not exceed 2% of the Fund's net assets. For these purposes,
warrants attached to units or other securities shall be deemed to be
without value.
(9) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced price.
Such securities include, but are not limited to, time deposits and
repurchase agreements with maturities longer than seven days. Securities
that may be resold under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended, shall not be
deemed illiquid solely by reason of being unregistered. The Investment
Adviser shall determine whether a particular security is deemed to be
liquid based on the trading markets for the specific security and other
factors.
(10) The Fund will not purchase interests in oil, gas, mineral leases or
other exploration programs; however, this policy will not prohibit the
acquisition of securities of companies engaged in the production or
transmission of oil, gas or other materials.
The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.
INVESTMENT ADVISER, SUB-ADVISER, DISTRIBUTOR AND ADMINISTRATOR
Lexington Management Corporation ("LMC"), P.O. Box 1515, Saddle Brook, New
Jersey 07663 is the investment adviser to the Fund pursuant to an Investment
Management Agreement dated May 16, 1995, (the "Advisory Agreement"). Lexington
Funds Distributor, Inc. ("LFD") is the distributor of Fund shares pursuant to a
Distribution Agreement dated May 16, 1995, (the "Distribution Agreement"). LMC
has entered into a sub-adviser contract with Crosby Asset Management U.S., Inc.
under which Crosby will provide the Fund with investment advice and management
of the Fund's investment program. LMC makes recommendations to the Fund with
respect to its investments and investment policies. These agreements were
approved by the Fund's Board of Directors (including a majority of the Directors
who were not parties to either the Advisory Agreement, Sub-Advisory Agreement or
the Distribution Agreement or "interested persons" of any such party) on May 16,
1995.
LMC also acts as administrator to the Fund and performs certain
administrative and accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
LMC's investment advisory fee will be reduced for any fiscal year by any
amount necessary to prevent Fund expenses from exceeding the most restrictive
expense limitations imposed by the securities laws or regulations of those
states or jurisdictions in which the Fund's shares are registered or qualified
for sale. Currently, the most restrictive of such expense limitation would
require LMC to reduce its fee so that ordinary expenses (excluding interest,
taxes, brokerage commissions and extraordinary expenses) for any fiscal year do
not exceed 2.5% of the first $30 million of the Fund's average daily net assets,
plus 2.0% of the next $70 million, plus 1.5% of the Fund's average daily net
assets in
8
<PAGE>
excess of $100 million. LMC has agreed to voluntarily limit the total expenses
of the Fund (excluding interest, taxes, brokerage, and extraordinary expenses
but including management fee and operating expenses) to an annual rate of 1.75%
of the Fund's average net assets through April 30, 1996 or such later date to be
determined by LMC. LFD pays the advertising and sales expenses related to the
continuous offering of Fund shares, including the cost of printing prospectuses,
proxies and shareholder reports for persons other than existing shareholders.
The Fund furnishes LFD, at printer's overrun cost paid by LFD, such copies of
its prospectus and annual, semi-annual and other reports and shareholder
communications as may reasonably be required for sales purposes.
The Advisory Agreement, Sub-Advisory Agreement, the Distribution Agreement
and the Administrative Services Agreement are subject to annual approval by the
Fund's Board of Directors and by the affirmative vote, cast in person at a
meeting called for such purpose, of a majority of the Directors who are not
parties either to the Advisory Agreement, Sub-Advisory Agreement of the
Distribution Agreement, as the case may be, or "interested persons" of any such
party. Either the Fund or LMC may terminate the Advisory Agreement and the Fund
or LFD may terminate the Distribution Agreement on 60 days' written notice
without penalty. The Advisory Agreement terminates automatically in the event of
assignment, as defined in the Investment Company Act of 1940. As compensation
for its services, the Fund pays LMC a monthly management fee at the annual rate
of 1.25% of the average daily net assets. This fee is higher than that paid by
most other investment companies. However, it is not necessarily greater than the
management fee of other investment companies with objectives and policies
similar to this Fund. LMC will pay Crosby an annual sub-advisory fee of 0.625%
of the Fund's average daily net assets. The sub-advisory fee will be paid by
LMC, not the Fund. See "Investment Adviser and Distributor" in the Statement of
Additional Information.
LMC as owner of the registered service mark "Lexington" will sublicense to
the Fund to include the word "Lexington" as part of its corporate name subject
to revocation by LMC in the event that the Fund ceases to engage LMC or its
affiliate as investment adviser or distributor Crosby Asset Management U.S.,
Inc. has authorized the fund to include the word "Crosby" as part of its
corporate name subject to revocation by Crsoby in the event the fund ceases to
engage Crosby as sub-adviser. In that event the Fund will be required upon
demand of LMC to change its name to delete the word "Lexington" or "Crosby"
therefrom.
LMC shall not be liable to the Fund or its shareholders for any act or
omission by LMC, its officers, directors or employees or any loss sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.
LMC and LFD are wholly owned subsidiaries of Piedmont Management Company
Inc., a publicly traded corporation. Descendants of Lunsford Richardson, Sr.,
their spouses, trusts and other related entities have a majority voting control
of outstanding shares of Piedmont Management Company Inc.
Crosby Asset Management U.S., Inc. was established on October 4, 1990 in the
British Virgin Islands. Crosby manages assets and provides investment advice for
investment companies and institutional private accounts around the world
including the United States. It is a wholly owned subsidiary of the Crosby Group
and its holding company, Crosby group.
The Crosby Group was founded in 1984 and is a leading independent merchant
bank in Asia, providing services including investment management, stockbrokerage
and research and corporate finance. The Crosby Group is headquartered in Hong
Kong with 18 offices located in 11 countries throughout the region, and in
London and New York.
Of the directors, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Lavery, Luehs, Petruski and
Saler and Mmes. Carnicelli, Carr, Curcio, Gilfillan and Mosca (see "Management
of the Fund"), may also be deemed affiliates of LMC and LFD by virtue of being
officers, directors or employees thereof.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with this policy, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and such other
policies as the Directors may determine, LMC and Crosby may consider sales of
shares of the Fund and of the other Lexington Funds as a factor in the selection
of brokers and dealers and the market in which a transaction is executed.
Consistent with this policy, the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and such other policies as the
Directors may determine, LMC and Crosby may consider sales of shares of the Fund
and of the other Lexington Funds as a factor in the selection of broker-dealers
to execute the Fund's portfolio transactions. However, pursuant to the Fund's
investment management agreement, management consideration may be given in the
selection of broker-dealers to
9
<PAGE>
research provided and payment may be made of a commission higher than that
charged by another broker-dealer which does not furnish research services or
which furnishes research services deemed to be a lesser value, so long as the
criteria of Section 28(e) of the Securities Exchange Act of 1934 are met.
Section 28(e) of the Securities Exchange Act of 1934 was adopted in 1975 and
specifies that a person with investment discretion shall not be "deemed to have
acted unlawfully or to have breached a fiduciary duty" solely because such
person has caused the account to pay higher commission than the lowest available
under certain circumstances, provided that the person so exercising investment
discretion makes a good faith determination that the person so commissions paid
are "reasonable in the relation to the value of the brokerage and research
services provided . . . viewed in terms of either that particular transaction or
his overall responsibilities with respect to the accounts as to which he
exercises investment discretion."
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services might exceed commissions
that would be payable for executions services alone. Nor generally can the value
of research services to the Fund be measured. Research services furnished might
be useful and of value to LMC and Crosby and its affiliates, in serving other
clients as well as the Fund. On the other hand, any research services obtained
by LMC and Crosby or its affiliates from the placement of portfolio brokerage of
other clients might be useful and of value to LMC and Crosby in carrying out its
obligations to the Fund.
The Fund anticipates that its brokerage transactions involving securities of
companies domiciled in countries other than the United States will normally be
conducted on the principal stock exchanges of those countries. Fixed commissions
of foreign stock exchange transactions are generally higher than the negotiated
commission rates available in the United States. There is generally less
government supervision and regulation of foreign stock exchanges and
broker-dealers than in the United States.
The Directors have adopted certain procedures incorporating the standards of
Rule 17e-1 under the Investment Company Act of 1940, as amended, which require
that the commissions paid to LFD or to broker-dealers affiliated with LFD must
be "reasonable and fair compared to the commission, fee or other remuneration
comparable transactions involving similar transactions and similar securities .
. . being purchased or sold on a securities . . . exchange during a comparable
period of time". Rule 17e-1 and the procedures require the Directors to
periodically review the transactions with affiliated broker-dealers and the
procedures themselves. The procedures also require LMC and Crosby to furnish
reports to the Directors and to maintain records in connection with commissions
paid to affiliated broker-dealers.
DETERMINATION OF NET ASSET VALUE
The Fund calculates net asset value as of the close of normal trading on the
New York Stock Exchange (currently 4:00 p.m., Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing time) each
business day. It is expected that the New York Stock Exchange will be closed on
Saturdays and Sundays and on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
See the Prospectus for the further discussion of net asset value.
TELEPHONE EXCHANGE PROVISIONS
Exchange instructions may be given in writing or by telephone. Telephone
exchanges may only be made if a Telephone Authorization form has been previously
executed and filed with LFD. Telephone exchanges are permitted only after a
minimum of seven (7) days have elapsed from the date of a previous exchange.
Exchanges may not be made until all checks in payment for the shares to be
exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at State Street
Bank and Trust Company (the "Agent"); shares held in certificate form by the
shareholder cannot be included. However, outstanding certificates can be
returned to the Agent and qualify for these services. Any new account
established with the same registration will also have the privilege of exchange
by telephone in the Lexington Funds. All accounts involved in a telephonic
exchange must have the same registration and dividend option as the account from
which the shares were transferred and will also have the privilege of exchange
by telephone in the Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds, as the true and lawful attorney to
surrender for redemption or exchange any and all non-certificate shares held by
the Agent in account(s) designated, or in any other account with the Lexington
Funds, present or future which has the identical registration, with full power
of substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, or the Fund(s) will be liable for any loss,
expense or cost arising
10
<PAGE>
out of any requests effected in accordance with this authorization which would
include requests effected by impostors or persons otherwise unauthorized to act
on behalf of the account. LFD reserves the right to cease to act as agent
subject to the above appointment upon thirty (30) days written notice to the
address of record. If the shareholder is an entity other than an individual,
such entity may be required to certify that certain persons have been duly
elected and are now legally holding the titles given and that the said
corporation, trust, unincorporated association, etc. is duly organized and
existing and has the power to take action called for by this continuing
authorization .
Exchange Authorizations forms, Telephone Authorization forms and
prospectuses of the other funds may be obtained from LFD.
LFD has made arrangements with certain dealers to accept instructions by
telephone to exchange shares of the Fund or shares of one of the other Lexington
Funds at net asset value as described above. Under this procedure, the dealer
must agree to indemnify LFD and the funds from any loss or liability that any of
them might incur as a result of the acceptance of such telephone exchange
orders. A properly signed Exchange Authorization must be received by LFD within
5 days of the exchange request. LFD reserves the right to reject any telephone
exchange request. In each such exchange, the registration of the shares of the
Fund being acquired must be identical to the registration of the shares of the
Fund being exchanged. Any telephone exchange orders so rejected may be processed
by mail.
This exchange offer is available only in states where shares of the Fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
TAX-SHELTERED RETIREMENT PLANS
The Fund makes available a variety of Prototype Pension and Profit Sharing
plans including a 401(k) Salary Reduction Plan and a 403(b)(7} Plan. Plan
services are available by contacting the Shareholder Services Department of the
Distributor at 1-800-526-0056.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA"): Individuals may make tax deductible
contributions to their own Individual Retirement Accounts established under
Section 408 of the Internal Revenue Code (the "Code"). Married investors filing
a joint return neither of whom is an active participant in an employer sponsored
retirement plan, or who have an adjusted gross income of $40,000 or less
($25,000 or less for single taxpayers) may continue to make a $2,000 ($2,500 for
spousal IRAs) annual deductible IRA contribution. For adjusted gross incomes
above $40,000 ($25,000 for single taxpayers, the IRA deduction limit is
generally phased out ratably over the next $10,000 of adjusted gross income,
subject to a minimum $200 deductible contribution. Investors who are not able to
deduct a full $2,000 ($2,250 spousal) IRA contribution because of the
limitations may make a nondeductible contribution to their IRA to the extent a
deductible contribution is not allowed. Federal income tax on accumulations
earned on nondeductible contributions is deferred until such time as these
amounts are deemed distributed to an investor. Rollovers are also permitted
under the Plan. The disclosure statement required by the Internal Revenue
Service ("IRS") is provided by the Fund.
The minimum initial investment to establish a tax-sheltered plan is $250.
Subsequent investments are subject to a minimum of $50 for each account.
SELF-EMPLOYED RETIREMENT PLAN (HR-10): Self-employed individuals may make
tax deductible contributions to a prototype defined contribution pension plan or
profit sharing plan. There are, however, a number of special rules which apply
when self-employed individuals participate in such plans. Currently purchase
payments under a self-employed plan are deductible only to the extent of the
lesser of (i) $30,000 or (ii) 25% of the individuals earned annual income (as
defined in the Code) and in applying these limitations not more than $200,000 of
"earned income" may be taken into account.
CORPORATE PENSION AND PROFIT SHARING PLANS: The Fund makes available a
Prototype Defined Contribution Pension Plan and a Prototype Profit Sharing Plan.
All purchases and redemptions of Fund shares pursuant to any one of the
Fund's tax sheltered plans must be carried out in accordance with the provisions
of the Plan. Accordingly, all plan documents should be reviewed carefully before
adopting or enrolling in the Plan. Investors should especially note that a
penalty tax of 10% may be imposed by the IRS on early withdrawals under
corporate, Keogh or IRA plans. It is recommended by the IRS that an investor
consult a tax adviser before investing in the Fund through any of these plans.
An investor participating in any of the Fund's special plans has no
obligation to continue to invest in the Fund and may terminate the Plan with the
Fund at any time. Except for expenses of sales and promotion, executive and
administrative personnel, and certain services which are furnished by LMC, the
cost of the plans generally is borne by the Fund; however, each IRA Plan account
is subject to an annual maintenance fee of $12.00 charged by the Agent.
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<PAGE>
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless the Fund
elects otherwise), will generally be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes
12
<PAGE>
of the Short-Short Gain Test, the holding period of an option written by the
Fund will commence on the date it is written and end on the date it lapses or
the date a closing transaction is entered into. Accordingly, the Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by the Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of such
date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital gain
or loss for the taxable year with respect to Section 1256 contracts (including
any capital gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is generally treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. A Fund, however, may elect not to have this
special tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of the Fund that are not Section 1256
contracts. The IRS has held in several private rulings (and Treasury Regulations
now provide) that gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
The Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it may elect to
treat the PFIC as a qualifying electing fund (a "QEF") in which event the Fund
will each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earning or capital gain from
the PFIC. If the Fund does not (because it is unable to, chooses not to or
otherwise) elect to treat the PFIC as a QEF, then in general (1) any gain
recognized by the Fund upon sale or other disposition of its interest in the
PFIC or any excess distribution received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Fund level), (3) the Fund shall be liable for tax on the portions of such gain
or excess distribution so allocated to prior years in an amount equal to, for
each such prior year, (i) the amount of gain or excess distribution allocated to
such prior year multiplied by the highest tax rate (individual or corporate) in
effect for such prior year plus (ii) interest on the amount determined under
clause (i) for the period from the due date for filing a return for such prior
year until the date for filing a return for the year in which the gain is
recognized or the excess distribution is received at the rates and methods
applicable to underpayments of tax for such period, and (4) the distribution by
the Fund to shareholders of the portions of such gain or excess distribution so
allocated to prior years (net of the tax payable by the Fund thereon) will again
be taxable to the shareholders as an ordinary income dividend.
Under recently proposed Treasury Regulations the Fund can elect to recognize
as gain the excess, as of the last day of its taxable year, of the fair market
value of each share of PFIC stock over the Fund's adjusted tax basis in that
share ("mark to market gain"). Such mark to market gain will be included by the
Fund as ordinary income, such gain will not be subject to the Short-Short Gain
Test, and the Fund's holding period with respect to such PFIC stock commences on
the first day of the next taxable year. If the Fund makes such election in the
first taxable year it holds PFIC stock, the Fund will include ordinary income
from any mark to market gain, if any, and will not incur the tax described in
the previous paragraph.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of
13
<PAGE>
other regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
Generally, an option (call or put) with respect to a security is treated as
issued by the issuer of the security not the issuer of the option.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they generally should not qualify for the 70%
dividends-received deduction for corporate shareholders.
A Fund may either retain or distribute to shareholders its net capital gain
for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
Conversely, if the Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4):
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such (or
substantially identical) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or
14
<PAGE>
otherwise) to make related payments with respect to positions in substantially
similar or related property; or (3) to the extent the stock on which the
dividend is paid is treated as debt-financed under the rules of Code Section
246A. Moreover, the dividends-received deduction for a corporate shareholder may
be disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (2) by
application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). Since an insignificant portion of the Fund will be invested in stock of
domestic corporations, the ordinary dividends distributed by the Fund will not
qualify for the dividends-received deduction for corporate shareholders.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. In addition, under the Superfund Amendments and Reauthorization Act of
1986, a tax is imposed for taxable years beginning after 1986 and before 1996 at
the rate of 0.12% on the excess of a corporate taxpayer's AMTI (determined
without regard to the deduction for this tax and the AMT net operating loss
deduction) over $2 million. For purposes of the corporate AMT and the
environmental superfund tax (which are discussed above), the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, corporate shareholders will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.
Distributions by the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has
15
<PAGE>
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Furthermore,
such a foreign shareholder may be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) on the gross income resulting from the Fund's
election to treat any foreign taxes paid by it as paid by its shareholders, but
may not be allowed a deduction against this gross income or a credit against
this U.S. withholding tax for the foreign shareholder's pro rata share of such
foreign taxes which it is treated as having paid. Such a foreign shareholder
would generally be exempt from U.S. federal income tax on gains realized on the
sale of shares of the Fund, capital gain dividends and amounts retained by the
Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Fund, including
the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Fund.
PERFORMANCE CALCULATION
For the purpose of quoting and comparing the performance of the Fund to that
of other mutual funds and to other relevant market indices in advertisements or
in reports to shareholders, performance may be stated in terms of total
16
<PAGE>
return. Under the rules of the Securities and Exchange Commission ("SEC rules"),
funds advertising performance must include total return quotes calculated
according to the following formula:
P(l + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods or
at the end of the 1, 5 or 10 year periods
(or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the effectiveness
of the Fund's Registration Statement. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectus on the reinvestment
dates during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5 and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.
The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or with the performance of
the Standard and Poor's 500 Stock Index or the Dow Jones Industrial Average, the
Fund calculates its aggregate total return for the specified periods of timely
assuming the investment of $10,000 in Fund shares and assuming the reinvestment
of each dividend or other distribution at net asset value on the reinvestment
date. Percentage increases are determined by subtracting the initial value of
the investment from the ending value and by dividing the remainder by the
beginning value.
SHAREHOLDER REPORTS
Shareholders will receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders will receive annual
financial statements audited by KPMG Peat Marwick LLP, the Fund's independent
auditors.
17
PART C. OTHER INFORMATION
- -----------------------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
(a) Financial Statements:
In Part A: None
In Part B: Auditor's Report and Statement of Assets and
Liabilities
In Part C: None
<PAGE>
ITEM 24. Financial Statements and Exhibits - List (cont'd)
-------------------------------------------------
(b) Exhibits:
1. Articles of Incorporation - Incorporated by reference -
Filed 5/16/95
2. By-Laws - Incorporated by reference -
Filed 5/16/95
3. Not Applicable
4. Stock Certificate Specimen - Incorporated by reference -
Filed 5/16/95
5a. Investment Advisory Agreement between Registrant and
Lexington Management Corporation - Incorporated by reference -
Filed 5/16/95
5b. Sub-Advisory Investment Management Agreement between
Lexington Management Corporation and Crosby Asset
Management U.S. - Incorporated by reference - Filed 5/16/95
6. Distribution Agreement between Registrant and Lexington
Funds Distributor, Inc. - Incorporated by reference -
Filed 5/16/95
7. Not Applicable
8. Form of Custodian Agreement between Registrant
and Chase Manhattan Bank, N.A. - Incorporated by reference -
Filed 5/16/95
9a. Transfer Agency Agreement between Registrant
and State Street Bank and Trust Company
- Incorporated by reference - Filed 5/16/95
9b. Form of Administrative Services Agreement between
Registrant and Lexington Management Corporation
- Incorporated by reference - Filed 5/16/95
10. Opinion of Counsel as to Legality of Securities Filed Electronically
being registered
11. Consents
(a) Consent of Counsel Filed Electronically
(b) Consent of Independent Auditors Filed Electronically
12. Not Applicable
13. Not Applicable
14. Retirement Plans Filed Electronically
15. Not Applicable
16. Not Applicable
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each such
person indicate (1) if a company, the state or other sovereign power under the
laws of which it is organized, (2) the percentage of voting securities owned
or other basis of control by the person, if any, immediately controlling it.
See "Management of the Fund" in the Prospectus and Statement of
Additional Information.
Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a specified
date within 90 days prior to the date of filing, the number of record holders
of each class of securities of the Registrant.
The following information is given as of June 16, 1995:
Title of Class Number of Record Holders
-------------- ------------------------
Capital Stock 1
($0.001 par value)
Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the
Company's By-Laws, the Company may indemnify any person who was or is a
director, officer or employee of the Company to the maximum extent permitted
by the Maryland General Corporation Law; provided, however, that Company only
as authorized in the specific case upon a determination that indemnification
of such persons is proper in the circumstances. Such determination shall be
made (I) by the Board of Directors, by a majority vote of a quorum which
consists of directors who are neither "interested persons" of Company as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding, or
(ii) if the required quorum is not obtainable or if a quorum of such directors
so directs by independent legal counsel in a written opinion. No
indemnification will be provided by the Company to any director or officer of
the Company for any liability to the Company or Shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or employment of a
substantial nature in which the investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in
the capacity of director, officer, employee, partner or trustee.
See Prospectus Part A and Statement of Additional Information Part B
("Management of the Fund").
Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Tax Free Money Fund, Inc.
Lexington Growth and Income Fund, Inc.
Lexington Short-Intermediate Government Securities Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Ramirez Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Fund, Inc.
Lexington Natural Resources Trust
Lexington Corporate Leaders Trust Fund
Lexington Convertible Securities Fund
Lexington Strategic Investments Fund, Inc.
Lexington Strategic Silver Fund, Inc.
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
<PAGE>
29 (b)
Position and Offices
Name and Principal with Principal Position and Offices
Business Address Underwriter With Registrant
- ------------------ -------------------- --------------------
Peter Corniotes* Assistant Secretary Asst. Secretary
Lisa A. Curcio* Vice President and Vice President and
Secretary Secretary
Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President
Richard M. Hisey* Chief Financial Officer Chief Financial
and Director Officer and Vice Pres.
Lawrence Kantor* Executive Vice President, Director and Vice Pres.
General Manager & Director
Richard Lavery* Vice President Vice President
Janice Violette* Assistant Treasurer None
(c)
Not Applicable.
*P.O. Box 1515
Saddle Brook, New Jersey 07663
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document required to be
maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270, 31a-1
to 31a-3) promulgated thereunder, furnish the name and address of each person
maintaining physical possession of each such account, book or other document.
The Registrant, Lexington Crosby Small Cap Asia Growth Fund, Inc., Park 80
West - Plaza Two, Saddle Brook, New Jersey 07663 will maintain physical
possession of such of each such account, book or other document of the Company,
except for those maintained by the Registrant's Custodian, Chase Manhattan
Bank, N.A., 1211 Avenue of the Americas, New York New York 10036, or Transfer
Agent, State Street Bank and Trust Company, c/o National Financial Data
Services, City Center Square, 1100 Main, Kansas City, Missouri 64105.
Item 31. Management Services
-------------------
Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B
of this Form (because the contract was not believed to be
material to a purchaser of securities of the Registrant) under
which services are provided to the Registrant, indicating the
parties to the contract, the total dollars paid and by whom for
the last three fiscal years.
None.
Item 32. Undertakings -
-------------
The Registrant, Lexington Crosby Small Cap Asia Growth Fund, Inc.,
undertakes to furnish a copy of the Fund's latest annual report, upon request
and without charge, to every person to whom a prospectus is delivered.
The Registrant undertakes to file a post-effective amendment, using
reasonably current financial statements which need not be certified, within
four to six months from the effective date of the Registrant's Registration
Statement.
<PAGE>
Registration No. 33-59363
811-7287
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
EXHIBIT INDEX
The following documents are being filed electronically as exhibits to this
filing:
Financial Statement (Statement of Assets and Liabilities & Auditor's
Report)
Opinion of Counsel
Consent of Counsel
Consent of Independent Auditors
Retirement Plans
Financial Data Schedule
Cover (Acceleration Request)
Cover
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the Undersigned, thereunto duly
authorized, in the City of Saddle Brook and State of New Jersey, on the 20th
day of June, 1995.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
Robert M. DeMichele
_______________________________________________
By Robert M. DeMichele
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Robert M. DeMichele
__________________________ Chairman of the Board June 20, 1995
Robert M. DeMichele Principal Executive
Officer
Richard M Hisey
__________________________ Principal Financial June 20, 1995
Richard M. Hisey and Accounting Officer
Lisa Curcio
__________________________ Principal Compliance June 20, 1995
Lisa Curcio Officer
*Beverley C. Duer, P.E. Director June 20, 1995
- --------------------------
Beverley C. Duer, P.E.
*Barbara M. Evans Director June 20, 1995
- --------------------------
Barbara M. Evans
<PAGE>
Signature Title Date
*Lawrence Kantor Director June 20, 1995
- --------------------------
Lawrence Kantor
*Donald B. Miller Director June 20, 1995
- --------------------------
Donald B. Miller
*Francis Olmsted Director June 20, 1995
- --------------------------
Francis Olmsted
*John G. Preston Director June 20, 1995
- -------------------------
John G. Preston
*Margaret W. Russell Director June 20, 1995
- -------------------------
Margaret W. Russell
*Philip C. Smith Director June 20, 1995
- -------------------------
Philip C. Smith
*Francis A. Sunderland Director June 20, 1995
- -------------------------
Francis A. Sunderland
Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
Statement of Assets and Liabilities
June 16, 1995
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . .$100,000
Deferred organization and registration expenses
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 50,000
--------
Total Assets. . . . . . . . . . . . . . . . . . . .$150,000
--------
LIABILITIES
Payable to Lexington Management Corporation
(Note 2) . . . . . . . . . . . . . . . . . . . . . . . .$ 50,000
--------
Total Liabilities . . . . . . . . . . . . . . . . .$ 50,000
--------
NET ASSETS applicable to 10,000 outstanding shares of
common stock, $.001 par value per share, respectively . . .$100,000
========
NET ASSETS consist of:
Common stock - at par value, $.001 per share, authorized
1,000,000,000 shares; issued and outstanding 10,000
(Note 1) . . . . . . . . . . . . . . . . . . . . . . . . $ 10
Additional Paid in Capital . . . . . . . . . . . . . . . . . . 99,990
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$100,000
========
NET ASSET VALUE offering and redemption price per share
($100,000/10,000 shares) . . . . . . . . . . . . . . . . . .$10.00
======
NOTES:
(1) The Lexington Crosby Small Cap Asia Growth Fund, Inc. (the Fund )
was formed on April 19, 1995 as a Maryland Corporation and has had
no operations through June 16, 1995 other than matters relating to
its organization and registration as a diversified, open-end
investment company under the Investment Company Act of 1940 and the
sale and issuance of 10,000 shares of its common stock to the
Lexington Management Corporation at an aggregate purchase price of
$100,000 to provide the initial capital of the Fund.
<PAGE>
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.
Statement of Assets and Liabilities
June 16, 1995
(Continued)
(2) Organization and initial offering expenses will be borne by the Fund
and will be advanced by Lexington Management Corporation (LMC). It
is estimated that such expenses will not exceed $50,000 and will be
amortized from the date operations commence over a period which it
is expected that a benefit will be realized, not to exceed five
years. The Fund will reimburse LMC for such expenses when the
Fund s assets exceed $20 million or when the Fund has completed one
year of operations, whichever occurs first. Lexington Management
Corporation has agreed that in the event that any of the initial
10,000 shares are redeemed during the period of amortization of the
Fund s organizational expenses, the redemption proceeds will be
reduced by any such unamortized organizational expenses in the same
proportion as the number of initial shares being redeemed bears to
the number of initial shares (10,000) outstanding at the time of
redemption.
(3) The Fund intends to comply in its initial year and thereafter with
the requirements of the Internal Revenue Code necessary to qualify
as a regulated investment company and as such will not be subject to
federal income taxes on otherwise taxable income (including net
realized capital gains) which is distributed to shareholders.
<PAGE>
Independent Auditors' Report
To the Shareholders and Directors of
Lexington Crosby Small Cap Asia Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
Lexington Crosby Small Cap Asia Growth Fund, Inc. (the "Fund") as of June
16, 1995. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conduct our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of
Lexington Crosby Small Cap Asia Growth Fund, Inc. as of June 16, 1995 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
June 16, 1995
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
June 20, 1995
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, N.J. 07662
Gentlemen:
We have acted as counsel for Lexington Crosby Small Cap Asia
Growth Fund, Inc., a Maryland corporation (the "Fund"), in connection with the
proposed public offering of shares of common stock, $.001 par value of its
Lexington Crosby Small Cap Asia Growth Fund series ( the "Shares" ) pursuant
to a registration statement on Form N-1A (File No. 33-59363) (the
"Registration Statement"), filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and the Investment Company Act
of 1940, as amended.
We have reviewed the Fund's Articles of Incorporation, its By-
Laws, resolutions of the Board of Directors of the Fund, and the Registration
Statement (including exhibits thereto). We have also made such inquires and
have examined originals, certified copies or copies otherwise identified to
our satisfaction of such documents, records and other instruments as we have
deemed necessary or appropriate for the purposes of this opinion. For
purposes of such examination, we have assumed the genuineness of all
signatures on original documents and the conformity to the original documents
of all copies submitted.
We are members of the Bar of the State of New York and do not hold
ourselves out as experts as to the law of any other state or jurisdiction. We
have received and relied upon an opinion from Venable, Baetjer and Howard,
LLP, Special Maryland Counsel, a copy of which is attached herewith,
concerning the organization of the Fund and the authorization and issuance of
the Shares.
Based upon and subject to the foregoing, we are of the opinion,
and so advise you as follows:
i. The Fund is duly organized and validly
existing as a corporation in good standing
under the laws of the State of Maryland.
ii. The Shares to be offered for sale pursuant to the
Prospectus are duly authorized and, when sold, issued
and paid for as contemplated by the Prospectus, will
have been validly and legally issued and will be fully
paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 3852
(212) 715 9100
FAX
(212) 715-8000
______
WRITER'S DIRECT
NUMBER
(212) 715-9100
June 20, 1995
Lexington Crosby Small Cap Asia Growth Fund, Inc.
Park 80 West
Plaza Two
Saddle Brook, N.J. 07662
Gentlemen:
We hereby consent to the reference of our firm as counsel in the
Registration Statement on Form N-1A of the Lexington Crosby Small Cap Asia
Growth Fund, Inc. (File No. 33-59363).
Very truly yours,
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
Independent Auditors' Consent
To the Shareholders and Directors of the
Lexington Crosby Small Cap Asia Growth Fund, Inc.:
We consent to the use of our report dated June 16, 1995 included in the
Registration Statement Form N-1A.
KPMG PEAT MARWICK LLP
New York, New York
June 16, 1995
LEXINGTON MANAGEMENT CORPORATION
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
BASIC DOCUMENT #01
PROTOTYPE
MONEY PURCHASE PENSION AND
PROFIT SHARING PLAN
TABLE OF CONTENTS
Section Page
ARTICLE 1
GENERAL
1.1 Purpose......................................... 1
1.2 Trust........................................... 1
ARTICLE 2
DEFINITIONS
2.1 Account......................................... 1
2.2 Adoption Agreement.............................. 1
2.3 Affiliated Employers............................ 1
2.4 Beneficiary..................................... 2
2.5 Break in Service................................ 2
2.6 Code............................................ 2
2.7 Compensation.................................... 2
2.8 Custodian....................................... 3
2.9 Determination Date.............................. 3
2.10 Early Retirement Date........................... 3
2.11 Earned Income................................... 3
2.12 Effective Date.................................. 3
2.13 Eligibility Computation Period.................. 3
2.14 Employee........................................ 4
2.15 Employer........................................ 4
2.16 Employer Contributions.......................... 4
2.17 Entry Dates..................................... 4
2.18 ERISA........................................... 4
2.19 Hour of Service................................. 4
2.20 Integration Level............................... 7
2.21 Key Employee.................................... 7
2.22 Leased Employee................................. 7
2.23 Maximum Disparity Rate.......................... 8
2.24 Maximum Profit Sharing Disparity Rate........... 9
2.25 Non-Key Employee................................ 9
2.26 Normal Retirement Age........................... 9
2.27 Owner-Employee.................................. 9
2.28 Participant..................................... 10
2.29 Plan............................................ 10
2.30 Plan Administrator.............................. 10
2.31 Plan Year....................................... 10
2.32 Self-Employed Individuals....................... 10
2.33 Shares.......................................... 10
2.34 Sponsor......................................... 10
2.35 Taxable Wage Base............................... 10
2.36 Total and Permanent Disability.................. 10
2.37 Trust........................................... 11
2.38 Trust Agreement................................. 11
2.39 Trustee......................................... 11
2.40 Valuation Date.................................. 11
2.41 Vesting Computation Period...................... 11
2.42 Year of Service................................. 11
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility Requirements........................ 11
3.2 Participation and Service Upon Reemployment..... 12
3.3 Predecessor Employers........................... 12
ARTICLE 4
CONTRIBUTIONS
4.1 Employer Contributions.......................... 13
4.2 Payment......................................... 13
4.3 Nondeductible Voluntary Contributions by
Participants.................................... 14
4.4 Rollovers....................................... 14
4.5 Direct Transfers................................ 14
ARTICLE 5
ALLOCATIONS
5.1 Individual Accounts............................. 15
5.2 Minimum Allocation.............................. 16
5.3 Allocation of Employer Contributions and
Forfeitures..................................... 17
5.4 Coordination of Social Security Integration..... 19
5.5 Withdrawals and Distributions................... 19
5.6 Determination of Value of Trust Fund and of Net
Earnings or Losses.............................. 19
5.7 Allocation of Net Earnings or Losses............ 20
5.8 Responsibilities of the Plan Administrator...... 21
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers Who Do Not Maintain Other Qualified
Plans........................................... 21
6.2 Employers Who Maintain Other Qualified Master
or Prototype Defined Contribution Plans......... 22
6.3 Employers Who, In Addition to This Plan,
Maintain Other Qualified Plans Which are
Defined Contribution Plans Other Than Master or
Prototype Plans................................. 24
6.4 Employers, Who In Addition To This Plan,
Maintain A Qualified Defined Benefit Plan....... 24
6.5 Definitions..................................... 24
ARTICLE 7
TRUST FUND
7.1 Receipt of Contributions by Trustee............. 29
7.2 Investment Responsibility....................... 29
7.3 Investment Limitations.......................... 30
ARTICLE 8
VESTING
8.1 Nondeductible Voluntary Contributions and
Earnings........................................ 30
8.2 Rollovers, Transfers and Earnings............... 31
8.3 Employer Contributions and Earnings............. 31
8.4 Amendments to Vesting Schedule.................. 31
8.5 Determination of Years of Service............... 32
8.6 Forfeiture of Nonvested Amounts................. 33
8.7 Reinstatement of Benefit........................ 33
ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General......................................... 34
9.2 Qualified Joint and Survivor Annuity............ 34
9.3 Qualified Preretirement Survivor Annuity........ 34
9.4 Definitions..................................... 34
9.5 Notice Requirements............................. 36
9.6 Safe Harbor Rules............................... 38
9.7 Transitional Rules.............................. 39
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting on Distribution Before Break in Service. 41
10.2 Restrictions on Immediate Distributions......... 42
10.3 Commencement of Benefits........................ 44
10.4 Early Retirement With Age and Service Require-
ment............................................ 44
10.5 Nontransferability of Annuities................. 44
10.6 Conflicts With Annuity Contracts................ 44
ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General Rules................................... 45
11.2 Required Beginning Date......................... 45
11.3 Limits on Distribution Periods.................. 45
11.4 Determination of Amount to be Distributed Each
Year............................................ 45
11.5 Death Distribution Provisions................... 46
11.6 Designation of Beneficiary...................... 48
11.7 Definitions..................................... 48
11.8 Transitional Rules.............................. 51
11.9 Optional Forms of Benefit....................... 52
ARTICLE 12
WITHDRAWALS
12.1 Withdrawal of Nondeductible Voluntary Contribu-
tions........................................... 54
12.2 Hardship Withdrawals............................ 54
12.3 Manner of Making Withdrawals.................... 55
12.4 Limitations on Withdrawals...................... 55
ARTICLE 13
LOANS
13.1 General Provisions.............................. 55
13.2 Administration of Loan Program.................. 57
13.3 Amount of Loan.................................. 57
13.4 Manner of Making Loans.......................... 57
13.5 Terms of Loan................................... 58
13.6 Security for Loan............................... 58
13.7 Segregated Investment........................... 59
13.8 Repayment of Loan............................... 59
13.9 Default on Loan................................. 59
13.10Unpaid Amounts.................................. 59
ARTICLE 14
INSURANCE
14.1 Insurance....................................... 60
14.2 Policies........................................ 60
14.3 Beneficiary..................................... 60
14.4 Payment of Premiums............................. 60
14.5 Limitation on Insurance Premiums................ 61
14.6 Insurance Company............................... 62
14.7 Distribution of Policies........................ 62
14.8 Policy Features................................. 64
14.9 Changed Conditions.............................. 64
14.10Conflicts....................................... 64
ARTICLE 15
ADMINISTRATION
15.1 Duties and Responsibilities of Fiduciaries;
Allocation of Fiduciary Responsibility.......... 64
15.2 Powers and Responsibilities of the Plan
Administrator................................... 65
15.3 Allocation of Duties and Responsibilities....... 67
15.4 Appointment of the Plan Administrator........... 67
15.5 Expenses........................................ 67
15.6 Liabilities..................................... 67
15.7 Claims Procedure................................ 68
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's Power to Amend........................ 69
16.2 Amendment by Adopting Employer.................. 69
16.3 Vesting Upon Plan Termination................... 70
16.4 Vesting Upon Complete Discontinuance of
Contributions................................... 70
16.5 Maintenance of Benefits Upon Merger............. 70
16.6 Special Amendments.............................. 70
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive Benefit of Participants and
Beneficiaries................................... 70
17.2 Nonguarantee of Employment...................... 71
17.3 Rights to Trust Assets.......................... 71
17.4 Nonalienation of Benefits....................... 71
17.5 Aggregation Rules............................... 72
17.6 Failure of Qualification........................ 73
17.7 Applicable Law.................................. 73
<PAGE>
ARTICLE 1
GENERAL
1.1 Purpose. The Employer hereby establishes this Plan to provide
retirement, death and disability benefits for eligible employees and their
Beneficiaries. This Plan is a standardized prototype paired defined
contribution plan and is designed to permit adoption of profit sharing
provisions, money purchase pension provisions, or both. The provisions
herein and the selections made by the Employer by execution of the money
purchase pension or profit sharing Adoption Agreement or Agreements, shall
constitute the Plan. It is intended that the Plan and Trust qualify under
sections 401 and 501 of the Internal Revenue Code of 1986, as amended and
that it comply with the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
1.2 Trust. The Employer has simultaneously adopted a Trust to
receive, invest, and distribute funds in accordance with the Plan.
ARTICLE 2
DEFINITIONS
2.1 Account. The aggregate of the individual bookkeeping
subaccounts established for each Participant, as provided in section 5.1.
2.2 Adoption_Agreement. The written agreement or agreements of
the Employer and the Trustee by which the Employer establishes this Plan
and adopts the Trust Agreement forming a part hereof, as the same may be
amended from time to time. The Adoption Agreement contains all the
options that may be selected by the Employer. The information set forth
in the Adoption Agreement executed by the Employer shall be deemed to be
a part of this Plan as if set forth in full herein.
2.3 Affiliated_Employers. The Employer and any corporation which
is a member of a controlled group of corporations (as defined in section
-1-
<PAGE>
414(b) of the Code) which includes the Employer, any trade or business
(whether or not incorporated) which is under common control (as defined
in section 414(c) of the Code) with the Employer, or any service
organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in sections 414(m) and (o) of the
Code) which includes the Employer.
2.4 Beneficiary. The person or persons (natural or otherwise)
designated by a Participant in accordance with section 11.6 to receive any
undistributed amounts credited to the Participant's Account under the Plan
at the time of the Participant's death.
2.5 Break_in_Service. An Eligibility Computation Period or
Vesting Computation Period in which an Employee fails to complete more
than five hundred (500) Hours of Service.
2.6 Code. The Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
2.7 Compensation.
(a) Compensation will mean all of each Participant's W-2
earnings.
(b) For any self-employed individual covered under the Plan,
Compensation will mean Earned Income.
(c) Compensation shall include only that Compensation that
is actually paid to the Participant during the Plan Year.
(d) Notwithstanding the above, if elected by the Employer
in the Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and
which is not includable in the gross income of the Employee under sections
125, 402(a)(8), 402(h) or 403(b) of the Code. The effective date of this
subsection shall be elected by the Employer in the Adoption Agreement.
(e) The annual Compensation of each Participant taken into
-2-
<PAGE>
account under the Plan for any year shall not exceed two hundred thousand
dollars ($200,000), as adjusted by the Secretary at the same time and in
the same manner as under section 415(d) of the Code. In determining the
Compensation of a Participant for purposes of this limitation, the rules
of section 414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the Spouse of the Participant
and any lineal descendants of the Participant who have not attained age
nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted two hundred thousand dollar
($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the Integration Level to the
extent this Plan provides for permitted disparity), the limitation shall
be prorated among the affected individuals in proportion to each such
individual's Compensation as determined under this section prior to the
application of this limitation.
(f) The effective date of this subsection shall be the
first Plan Year beginning on or after January 1, 1989.
2.8 Custodian. The custodian, if any, designated in the Adoption
Agreement.
2.9 Determination_Date. With respect to any Plan Year subsequent
to the first Plan Year, the last day of the preceding Plan Year. For the
first Plan Year of the Plan, the last day of that Plan Year.
2.10 Early_Retirement_Date. The first day of the month coincident
with or next following the date upon which the Participant satisfies the
early retirement age and service requirements in the Adoption Agreement;
provided, however, such requirements may not be less than age fifty- five
(55), nor more than fifteen (15) Years of Service.
2.11 Earned_Income. The net earnings from self- employment in the
trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items. Net
earnings are reduced by contributions to a qualified plan to the extent
deductible under section 404 of the Code. Net earnings shall be
determined with regard to the deduction allowed to the Employer by section
164(f) of the Code for taxable years beginning after December 31, 1989.
2.12 Effective_Date. The first day of the first Plan Year for
which the Plan is effective as specified in the Adoption Agreement.
2.13 Eligibility_Computation_Period. For purposes of determining
Years of Service and Breaks in Service for eligibility to participate, the
initial Eligibility Computation Period shall be the twelve (12)
consecutive month period beginning with the day the Employee first
performs an Hour of Service for the Employer (employment commencement
date). The succeeding twelve (12) consecutive month periods commence with
the first anniversary of the Employee's employment commencement date.
-3-
<PAGE>
2.14 Employee. Any person, including a Self-Employed Individual,
who is employed by the Employer maintaining the Plan or any other employer
required to be aggregated with such Employer under sections 414(b), (c),
(m) or (o) of the Code. The term "Employee" shall also include any Leased
Employee deemed to be an Employee of any Employer described above as
provided in sections 414(n) or (o) of the Code.
2.15 Employer. The corporation, proprietorship, partnership or
other organization that adopts the Plan by execution of an Adoption
Agreement.
2.16 Employer_Contributions. The contribution of the Employer to
the Plan and Trust as set forth in section 4.1 and the Adoption Agreement.
2.17 Entry_Dates. The Effective Date shall be the first Entry
Date. Thereafter, the Entry Dates shall be the first day of each Plan
Year and the first day of the seventh month of each Plan Year.
2.18 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
2.19 Hour_of_Service.
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These hours
shall be credited to the Employee only for the computation period or
periods in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence. No
more than five hundred one (501) Hours of Service shall be credited under
this paragraph to an Employee on account of any single, continuous period
during which the Employee performs no duties (whether or not such period
occurs in a single computation period). Hours under this paragraph will
be calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor regulations which are incorporated herein by this
reference.
-4-
<PAGE>
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Employer. The same
Hours of Service shall not be credited both under paragraph (a) or
paragraph (b), as the case may be, and under this paragraph (c). These
hours shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement, or payment is made.
(d) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include an
uncompensated authorized leave of absence not in excess of two (2) years,
or military leave while the Employee's reemployment rights are protected
by law or such additional or other periods as granted by the Employer as
military leave (credited on the basis of forty (40) Hours of Service per
each week or eight (8) Hours of Service per working day), provided the
Employee returns to employment at the end of his leave of absence or
within ninety (90) days of the end of his military leave, whichever is
applicable.
(e) Hours of Service will be credited for employment with
other members of an affiliated service group (under section 414(m)), a
controlled group of corporations (under section 414(b)), or a group of
trades or businesses under common control (under section 414(c)) of which
the adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to section 414(o) and the
regulations thereunder. Hours of Service will also be credited for any
individual considered an Employee for purposes of this Plan under section
414(n) or section 414(o) and the regulations thereunder.
(f) Solely for purposes of determining whether an Employee
has a Break in Service, Hours of Service shall also include absence from
work for maternity or paternity reasons, if the absence begins on or after
the first day of the first Plan Year beginning after 1984. During this
absence, the Employee shall be credited with the Hours of Service which
would have been credited but for the absence, or, if such hours cannot be
determined with eight (8) hours per day. An absence from work for
maternity or paternity reasons means an absence:
-5-
<PAGE>
(i) by reason of the pregnancy of an Employee;
(ii) by reason of the birth of a child of the
Employee;
(iii) by reason of the placement of a child with the
Employee in connection with adoption; or
(iv) for purposes of caring for such a child for a
period immediately following such birth or placement.
These Hours of Service shall be credited in the computation period
following the computation period in which the absence begins, except as
necessary to prevent a Break in Service in the computation period in which
the absence begins. However, no more than five hundred one (501) Hours
of Service will be credited for purposes of any such maternity or
paternity absence from work.
(g) The Employer may elect to compute Hours of Service by
the use of one of the service equivalencies in the Adoption Agreement.
Only one method may be selected. If selected, the service equivalency
must be applied to all Employees covered under the Plan.
(h) If the Employer amends the method of crediting service
from the elapsed time method described in section 1.410(a)-7 of the
Treasury regulations to the Hours of Service computation method by the
adoption of this Plan, or an Employee transfers from a plan under which
service is determined on the basis of elapsed time, the following rules
shall apply for purposes of determining the Employee's service under this
Plan up to the time of amendment or transfer:
(i) the Employee shall receive credit, as of the date
of amendment or transfer, for a number of Years of Service equal to the
number of one (1) year periods of service credited to the Employee as of
the date of the amendment or transfer; and
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(ii) the Employee shall receive credit in the
applicable computation period which includes the date of amendment or
transfer, for a number of Hours of Service determined by applying the
weekly service equivalency specified in paragraph (g) to any fractional
part of a year credited to the Employee under this paragraph (h) as of the
date of amendment or transfer. The use of the weekly service equivalency
shall apply to all Employees who formerly were credited with service under
the elapsed time method.
2.20 Integration_Level. The Taxable Wage Base or such lesser
amount elected by the Employer in the Adoption Agreement.
2.21 Key_Employee.
(a) Any Employee or former Employee (and the Beneficiaries
of such Employee) who at any time during the determination period was an
officer of the Employer if such individual's annual Compensation exceeds
fifty percent (50%) of the dollar limitation under section 415(b)(1)(A)
of the Code; an owner (or considered an owner under section 318 of the
Code) of one of the ten (10) largest interests in the Employer if such
individual's Compensation exceeds one hundred percent (100%) of the dollar
limitation under section 415(c)(1)(A) of the Code; a Five Percent (5%)
Owner of the Employer; or a one percent (1%) owner of the Employer who has
annual Compensation of more than one hundred fifty thousand dollars
($150,000).
(b) For purposes of this section, annual Compensation means
compensation as defined in section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludable from the Employee's gross income under
sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
(c) For purposes of this section, determination period is
the Plan Year containing the Determination Date and the four (4) preceding
Plan Years.
2.22 Leased_Employee.
(a) Any person (other than an Employee of any of the
Affiliated Employers) who, pursuant to an agreement between any of the
Affiliated Employers and any other person ("leasing organization"), has
performed service for any of the Affiliated Employers (or for any of the
Affiliated Employers and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full-time basis for a
period of at least one (1) year and such services are of a type
historically performed by employees in the Affiliated Employer's business
field. Contributions or benefits provided a Leased Employee by the
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leasing organization which are attributable to services performed for the
Affiliated Employer shall be treated as provided by the Affiliated
Employer.
(b) A Leased Employee shall not be considered an Employee
of an Affiliated Employer if:
(i) such employee is covered by a money purchase
pension plan providing:
(1) a nonintegrated employer contribution rate
of at least ten percent (10%) of compensation (as defined in section
415(c)(3) of the Code), but including amounts contributed pursuant to a
salary reduction agreement which are excludable from the employee's gross
income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code;
(2) immediate participation; and
(3) full and immediate vesting.
and
(ii) Leased Employees do not constitute more than
twenty percent (20%) of the Affiliated Employer's non-Highly-Compensated
workforce.
(c) The determination of whether a person is a Leased
Employee will be made pursuant to section 414(n) of the Code.
2.23 Maximum_Disparity_Rate. The lesser of:
(a) five and seven-tenths percent (5.7%);
(b) the applicable percentage determined in accordance with
the table below:
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If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 5.7%
X of TWB 80% of TWB 4.3%
80% of TWB Y **/ 5.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is five and seven-tenths percent (5.7%).
2.24 Maximum_Profit_Sharing_Disparity_Rate. The lesser of:
(a) two and seven-tenths percent (2.7%);
(b) the applicable percentage determined in accordance with
the table below:
If the Integration Level is
The Applicable
More_Than But_Not_More_Than Percentage_Is:
$0 X */ 2.7%
X of TWB 80% of TWB 1.3%
80% of TWB Y **/ 2.4%
*/ X = the greater of $10,000 or 20% of the Taxable Wage Base.
**/ Y = any amount more than 80% of the Taxable Wage Base but less than
100% of the Taxable Wage Base.
"TWB" means the Taxable Wage Base.
If the Integration Level used is equal to the Taxable Wage Base, the
applicable percentage is two and seven-tenths percent (2.7%).
2.25 Non-Key_Employee. Any Employee or former Employee who is not
a Key Employee. In addition, any Beneficiary of a Non-Key Employee shall
be treated as a Non- Key Employee.
2.26 Normal_Retirement_Age. The age selected in the Adoption
Agreement, but not less than age fifty-five (55). If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the
lesser of that mandatory age or the age specified in the Adoption
Agreement.
2.27 Owner-Employee. An individual who is a sole proprietor, or
who is a partner owning more than ten percent (10%) of either the capital
or profits interest of a partnership.
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2.28 Participant. A person who has met the eligibility
requirements of section 3.1 and whose Account hereunder has been neither
completely forfeited nor completely distributed.
2.29 Plan. The prototype paired defined contribution profit
sharing and money purchase pension plan provided under this basic plan
document. References to the Plan shall refer to the profit sharing
provisions, the money purchase pension provisions, or both, as the context
may require.
2.30 Plan_Administrator. The person, persons or entity appointed
by the Employer pursuant to ARTICLE 15 to manage and administer the Plan.
2.31 Plan_Year. The twelve (12) consecutive month period
designated by the Employer in the Adoption Agreement.
2.32 Self-Employed_Individual. An individual who has Earned Income
for the taxable year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income for the
taxable year but for the fact that the trade or business had no net
profits for the taxable year.
2.33 Shares. Shares of stock in any regulated investment company
registered under the Investment Company Act of 1940 that are made
available for investment purposes as an investment option under this Plan.
2.34 Sponsor. The sponsor designated in the Adoption Agreement
which has made this Plan available to the Employer.
2.35 Taxable_Wage_Base. The maximum amount of earnings which may
be considered wages for a year under section 3121(a)(1) of the Code in
effect as of the beginning of the Plan Year.
2.36 Total_and_Permanent_Disability. The inability of the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment, which condition, in
the opinion of a physician chosen by the Plan Administrator, can be
expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months.
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2.37 Trust. The fund maintained by the Trustee for the investment
of Plan assets in accordance with the terms and conditions of the Trust
Agreement.
2.38 Trust_Agreement. The agreement between the Employer and the
Trustee under which the assets of the Plan are held, administered, and
managed. The provisions of the Trust Agreement shall be considered an
integral part of this Plan as if set forth fully herein.
2.39 Trustee. The individual or corporate Trustee or Trustees
under the Trust Agreement as they may be constituted from time to time.
2.40 Valuation_Date. The last day of each Plan Year and such other
dates as may be determined by the Plan Administrator, as provided in
section 5.6 for valuing the Trust assets.
2.41 Vesting_Computation_Period. The Plan Year.
2.42 Year_of_Service. An Eligibility Computation Period, Vesting
Computation Period, or Plan Year, whichever is applicable, during which
an Employee has completed at least one thousand (1,000) Hours of Service
(whether or not continuous). The Employer may, in the Adoption Agreement,
specify a fewer number of hours.
ARTICLE 3
ELIGIBILITY AND YEARS OF SERVICE
3.1 Eligibility_Requirements.
(a) Each Employee of the Affiliated Employers shall become
a Participant in the Plan as of the first Entry Date after the date on
which the Employee has satisfied the minimum age and service requirements
specified in the Adoption Agreement.
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(b) The Employer may elect in the Adoption Agreement to
exclude from participation:
(i) Employees included in a unit of employees covered
by a collective bargaining agreement between the Employer and Employee
representatives, if retirement benefits were the subject of good faith
bargaining. For this purpose, the term "Employee representatives" does
not include any organization more than half of whose members are Employees
who are owners, officers, or executives of the Employer; and
(ii) nonresident aliens who receive no earned income
from the Employer which constitutes income from sources within the United
States.
3.2 Participation_and_Service_Upon_Reemployment. Upon the
reemployment of any Employee, the following rules shall determine his
eligibility to participate in the Plan and his credit for prior service.
(a) Participation. If the reemployed Employee was a
Participant in the Plan during his prior period of employment, he shall
be eligible upon reemployment to resume participation in the Plan. If the
reemployed Employee was not a Participant in the Plan, he shall be
considered a new Employee and required to meet the requirements of section
3.1 in order to be eligible to participate in the Plan, subject to the
reinstatement of credit for prior service under paragraph (b) below.
(b) Credit_for_Prior_Service. In the case of any Employee
who is reemployed before or after incurring a Break in Service, any Hour
of Service and Year of Service credited to the Employee at the end of his
prior period of employment shall be reinstated as of the date of his
reemployment.
3.3 Predecessor_Employers. If specified in the Adoption
Agreement, Years of Service with a predecessor employer will be treated
as service for the Employer for eligibility purposes; provided, however,
if the Employer maintains the plan of a predecessor employer, Years of
Service with such employer will be treated as service with the Employer
without regard to any election.
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ARTICLE 4
CONTRIBUTIONS
4.1 Employer_Contributions.
(a) Money_Purchase_Pension_Contributions. For each Plan
Year, the Employer shall contribute to the Trust an amount equal to such
uniform percentage of Compensation of each eligible Participant as may be
determined by the Employer in accordance with the money purchase pension
contribution formula specified in the Adoption Agreement. Subject to the
limitations of section 5.4, the money purchase pension contribution
formula may be integrated with Social Security, as set forth in the
Adoption Agreement.
(b) Profit_Sharing_Contribution. For each Plan Year, the
Employer shall contribute to the Trust an amount as may be determined by
the Employer in accordance with the profit sharing formula set forth in
the Adoption Agreement.
(c) Eligible_Participants. Subject to the Minimum
Allocation rules of section 5.2 and the exclusions specified in this
section, each Participant shall be eligible to share in the Employer
Contribution. An Employer may elect in the Adoption Agreement that
Participants who terminate employment during the Plan Year with not more
than five hundred (500) Hours of Service and who are not Employees as of
the last day of the Plan Year (other than Participants who die, retire or
become totally and Permanently Disabled during the Plan Year) shall not
be eligible to share in the Employer Contribution. An Employer may
further elect in the Adoption Agreement to allocate a contribution on
behalf of a Participant who completes fewer than five hundred (500) Hours
of Service and is otherwise ineligible to share in the Employer
Contribution. If the Employer fails to specify in the Adoption Agreement
the number of Hours of Service required to share in the Employer
Contribution, the number shall be five hundred (500) Hours of Service.
(d) Contribution_Limitation. In no event shall any Employer
Contribution exceed the maximum amount deductible from the Employer's
income under section 404 of the Code, or the maximum limitations under
section 415 of the Code provided in ARTICLE 6.
4.2 Payment. All Employer Contributions to the Trust for any Plan
Year shall be made either in one lump-sum or in installments in U.S.
currency, by check, or in Shares within the time prescribed by law,
including extensions granted by the Internal Revenue Service, for filing
the Employer's federal income tax return for the taxable year with or
within which such Plan Year ends. All Employer Contributions to the Trust
for a money purchase pension plan for any Plan Year shall be made within
the time prescribed by regulations under section 412(c)(10) of the Code.
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4.3 Nondeductible_Voluntary_Contributions_by_Partici pants.
(a) This Plan will not accept nondeductible Employee
contributions for Plan Years beginning after the Plan Year in which this
Plan is adopted by the Employer. Employee contributions made with respect
to Plan years beginning after December 31, 1986 will be limited so as to
meet the nondiscrimination test of section 401(m).
(b) A separate account shall be maintained by the Trustee
for the nondeductible Employee contributions of each Participant.
(c) Employee contributions and earnings thereon shall be
fully vested and nonforfeitable at all times.
(d) The provisions of this section shall apply to Employee
contributions made prior to the first Plan Year after the Plan Year in
which the Employer adopts this Plan.
4.4 Rollovers.
(a) Subject to the approval of the Plan Administrator, a
participant who has participated in any other qualified plan described in
section 401(a) of the Code or in a qualified annuity plan described in
section 403(a) of the Code shall be permitted to make a rollover
contribution in the form of cash to the Trustee of an amount received by
the Participant that is attributable to participation in such other plan
(reduced by any nondeductible voluntary contributions he made to the
plan), provided that the rollover contribution complies with all
requirements of sections 402(a)(5) or 403(a)(4) of the Code, whichever is
applicable.
(b) Before approving such a Participant rollover, the Plan
Administrator may request from the Participant or the Employer any
documents which the Plan Administrator, in its discretion, deems necessary
for such rollover.
(c) Any rollover contribution to the Trust shall be credited
to the Participant's rollover subaccount established under section 5.1 and
separately accounted for.
4.5 Direct_Transfers.
(a) The Plan shall accept a transfer of assets directly from
another plan qualified under sections 401(a) or 403(a) of the Code only
if the Plan Administrator, in its sole discretion, agrees to accept such
a transfer. In determining whether to accept such a transfer the Plan
Administrator shall consider the administrative inconvenience engendered
by such a transfer and any risks to the continued qualification of the
Plan under section 401(a) of the Code. Acceptance of any such transfer
shall not preclude the Plan Administrator from refusing any subsequent
such transfers.
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(b) Any transfer of assets accepted under this section shall
be credited to the Participant's direct transfer subaccount and shall be
separately accounted for at all times and shall remain subject to the
provisions of the transferor plan (as it existed at the time of such
transfer) to the extent required by section 411(d)(6) of the Code
(including, but not limited to, any rights to Qualified Joint and Survivor
Annuities and qualified preretirement survivor annuities) as if such
provisions were part of the Plan. In all other respects, however, such
transferred assets will be subject to the provisions of the Plan.
(c) Assets accepted under this section shall be fully vested
and nonforfeitable.
(d) Before approving such a direct transfer, the Plan
Administrator may request from the Participant or the Employer (or the
prior employer) any documents the Plan Administrator, in its discretion,
deems necessary for such direct transfer.
ARTICLE 5
ALLOCATIONS
5.1 Individual_Accounts. The Plan Administrator shall establish
and maintain an Account in the name of each Participant. The Account
shall contain the following subaccounts:
(a) A money purchase pension contribution subaccount to
which shall be credited each such Participant's share of (i) Employer
Contributions under section 4.1(a); (ii) the net earnings or net losses
on the investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(b) A profit sharing contribution subaccount to which shall
be credited each such Participant's share of (i) Employer Contributions
under section 4.1(b); (ii) forfeitures; (iii) the net earnings or net
losses on the investment of the assets of the trust; (iv) distributions;
and (v) dividends, capital gain distributions and other earnings received
on any Shares credited to the Participant's subaccount;
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(c) A nondeductible voluntary contribution subaccount to
which shall be credited (i) nondeductible voluntary contributions by the
Participant under section 4.3; (ii) the net earnings or net losses on the
investment of the assets of the Trust; (iii) distributions; and
(iv) dividends, capital gain distributions and other earnings received on
any Shares credited to the Participant's subaccount;
(d) A direct transfer subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.5(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount;
(e) A rollover subaccount to which shall be credited
(i) contributions to the Trust accepted under section 4.4(a); (ii) the net
earnings or net losses on the investment of the assets of the Trust;
(iii) distributions; and (iv) dividends, capital gain distributions and
other earnings received on any Shares credited to the Participant's
subaccount.
5.2 Minimum_Allocation.
(a) Except as otherwise provided in this section, the
Employer Contributions and forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the lesser
of three percent (3%) of such Participant's Compensation or in the case
where the Employer has no defined benefit plan which designates this Plan
to satisfy section 401 of the Code, the largest percentage of Employer
Contributions and forfeitures, as a percentage of the first two hundred
thousand dollars ($200,000) of the Key Employee's Compensation, allocated
on behalf of any Key Employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This
minimum allocation shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an allocation,
or would have received a lesser allocation for the year because of (i) the
Participant's failure to complete one thousand (1,000) Hours of Service
(or any equivalent provided in the Plan); or (ii) the Participant's
failure to make mandatory Employee contributions to the Plan; or
(iii) Compensation less than a stated amount. For purposes of this
subsection, all defined contribution plans required to be included in an
aggregation group under section 416(g)(2)(A)(i) shall be treated as a
single plan.
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(b) For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in section 6.5(b) of the
Plan.
(c) The provision in subsection (a) above shall not apply
to any Participant who was not employed by the Employer on the last day
of the Plan Year.
(d) The provision in subsection (a) above shall not apply
to any Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer has provided in the
Adoption Agreement that the minimum allocation or benefit requirement
applicable to top-heavy plans will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required
to be nonforfeitable under section 416(b)) may not be forfeited under
section 411(a)(3)(B) or 411(a)(3)(D).
5.3 Allocation_of_Employer_Contributions_and_Forfeitures.
(a) All money purchase pension contributions for a given
Plan Year shall be allocated to the Account of the Participant for whom
such contribution was made. Any forfeiture from a Participant's money
purchase pension contribution subaccount arising under the Plan for a
given Plan Year shall be applied as specified in the Adoption Agreement,
either: (i) to reduce the Employer Contribution in that year, or if in
excess of the Employer Contribution for such Plan Year, the excess amounts
shall be used to reduce the Employer Contribution in the next succeeding
Plan Year or Years or (ii) to be added to the Employer Contributions and
allocated accordingly.
(b) All profit sharing contributions and forfeitures from
a Participant's profit sharing contribution subaccount will be allocated
to the Account of each Participant in the ratio that such Participant's
Compensation bears to the Compensation of all Participants. However, if
the profit sharing contribution formula selected in the Adoption
Agreement is integrated with Social Security, profit sharing contributions
for the Plan Year plus any forfeitures will be allocated to Participants'
Accounts as follows:
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(i) Step_One. Contributions and forfeitures will be
allocated to each Participant's Account in the ratio that each
Participant's total Compensation bears to all Participants' total
Compensation, but not in excess of three percent (3%) of each
Participant's Compensation. (Step One is not applicable if the Employer
enters into the money purchase pension Adoption Agreement).
(ii) Step_Two. Any contributions and forfeitures
remaining after the allocation in Step One (if any) will be allocated to
each Participant's Account in the ratio that each Participant's
Compensation for the Plan Year in excess of the Integration Level bears
to the excess Compensation of all Participants, but not in excess of three
percent (3%). (Step Two is not applicable if the Employer enters into the
money purchase pension Adoption Agreement).
(iii) Step_Three. Any contributions and forfeitures
remaining after the allocation in Step Two (if any) will be allocated to
each Participant's Account in the ratio that the sum of each Participant's
total Compensation and Compensation in excess of the Integration Level
bears to the sum of all Participants' total Compensation and Compensation
in excess of the Integration Level, but not in excess of whichever of the
following is applicable:
(i) if the Employer has not adopted the money
purchase pension Adoption Agreement, then the Maximum Profit Sharing
Disparity Rate; or
(ii) If the Employer has adopted the money purchase
pension Adoption Agreement, then the lesser of:
(1) the percentage of each Participant's
Compensation for the Plan Year up to the Integration Level determined by
dividing the allocation by such Compensation (the base contribution
percentage); or
(2) the Maximum Disparity Rate.
(iv) Step_Four. Any remaining contributions or
forfeitures will be allocated to each Participant's Account in the ratio
that each Participant's total Compensation for the Plan Year bears to all
Participants' total Compensation for that year.
(c) Notwithstanding anything in (a) or (b) above to the
contrary, forfeitures arising under a Participant's money purchase pension
contribution subaccount will only be used to reduce the contributions of
the Participant's Employer who adopted this Plan, and forfeitures arising
under a Participant's profit sharing contribution subaccount will be
reallocated only for the benefit of Employees of the Participant's
Employer who adopted this Plan.
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5.4 Coordination_of_Social_Security_Integration. If the Employer
maintains plans involving integration with Social Security other than this
Plan, and if any Participant is eligible to participate in more than one
of such plans, all such plans will be considered to be integrated if the
extent of the integration of all such plans does not exceed one hundred
percent (100%). For purposes of the preceding sentence, the extent of
integration of a plan is the ratio (expressed as a percentage) which the
actual benefits, benefit rate, offset rate, or Employer Contribution rate
under the plan bears to the integration limitation applicable to such
plan. If the Employer enters into both the money purchase pension
Adoption Agreement and the profit sharing Adoption Agreement under this
Plan, integration with Social Security may only be selected in one Adop-
tion Agreement.
5.5 Withdrawals_and_Distributions. Any distribution to a
Participant or his Beneficiary, any amount transferred from a
Participant's Account directly to the Trustee of any other qualified plan
described in section 401(a) of the Code or to a qualified annuity plan
described in section 403(a) of the Code, or any withdrawal by a
Participant shall be charged to the appropriate subaccount(s) of the
Participant as of the date of the distribution or the withdrawal.
5.6 Determination_of_Value_of_Trust_Fund_and_of_Net
Earnings_or_Losses. As of each Valuation Date the Trustee shall determine
for the period then ended the sum of the net earnings or losses of the
Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) receipts or income
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets) which shall reflect accrued but unpaid interest,
dividends, gains, or losses realized from the sale, exchange or collection
of assets, other income received, appreciation in the fair market value
of assets, depreciation in the fair market value of assets, administration
expenses, and taxes and other expenses paid. Gains or losses realized and
adjustments for appreciation or depreciation in fair market value shall
be computed with respect to the difference between such value as of the
preceding Valuation Date or date of purchase, whichever is applicable, and
the value as of the date of disposition or the current Valuation Date,
whichever is applicable.
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5.7 Allocation_of_Net_Earnings_or_Losses.
(a) As of each Valuation Date the net earnings or losses of
the Trust (excluding with respect to Shares and other assets specifically
allocated to a specific Participant's subaccount, (i) dividends and
capital gain distributions from Shares, (ii) dividends or credits
attributable to insurance policies, (iii) income gains and/or losses
attributable to a Participant's loans made pursuant to ARTICLE 13 or to
any other assets, all of which shall be allocated to such Participant's
subaccount) for the valuation period then ending shall be allocated to the
Accounts of all Participants (or Beneficiaries) having credits in the fund
both on such date and at the beginning of such valuation period. Such
allocation shall be made by the application of a fraction, the numerator
of which is the value of the Account of a specific Participant (or
Beneficiary) as of the immediately preceding Valuation Date, reduced by
any distributions therefrom since such preceding Valuation Date, and the
denominator of which is the total value of all such Accounts as of the
preceding Valuation Date, reduced by any distributions therefrom since
such preceding Valuation Date.
(b) To the extent that Shares and other assets are
specifically allocated to a specific Participant's subaccount:
(i) dividends and capital gain distributions from Shares; (ii) dividends
or credits attributable to insurance policies; and (iii) income gains
and/or losses attributable to a Participant's loans made pursuant to
ARTICLE 13 or to any other assets, all shall be allocated to such Partici-
pant's subaccount.
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5.8 Responsibilities_of_the_Plan_Administrator. The Plan
Administrator shall maintain accurate records with respect to the
contributions made by or on behalf of Participants under the Plan, and
shall furnish the Trustee with written instructions directing the Trustee
to allocate all Plan contributions to the Trust among the separate
Accounts of Participants in accordance with section 5.1 above. In making
any such allocation, the Trustee shall be fully entitled to rely on the
instructions furnished by the Plan Administrator, and shall be under no
duty to make any inquiry or investigation with respect thereto.
ARTICLE 6
LIMITATIONS ON ALLOCATIONS
6.1 Employers_Who_Do_Not_Maintain_Other_Qualified Plans.
(a) If the Participant does not participate in, and has
never participated in another qualified plan or a welfare benefit fund,
as defined in section 419(e) of the Code, maintained by the Employer, or
an individual medical account, as defined in section 415(l)(2) of the
Code, maintained by the Employer, which provides an Annual Addition as
defined in section 6.5(a), the amount of Annual Additions that may be
credited to the Participant's Account for any Limitation Year will not
exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan. If the Employer Contribution that
would otherwise be contributed or allocated to the Participant's Account
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated.
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to subsection (c) or as a result of the
allocation of forfeitures, there is an Excess Amount the excess will be
disposed of as follows:
(i) Any nondeductible voluntary Employee
contributions, to the extent they would reduce the Excess Amount, will be
returned to the Participant;
(ii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the Participant's
Account will be used to reduce Employer Contributions (including any
allocation of forfeitures) for such Participant in the next Limitation
Year, and each succeeding Limitation Year if necessary;
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(iii) If after the application of paragraph (i) an
Excess Amount still exists, and the Participant is not covered by the Plan
at the end of the Limitation Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be applied
to reduce future Employer Contributions (including allocation of any
forfeitures) for all remaining Participants in the next Limitation Year,
and each succeeding Limitation Year if necessary;
(iv) If a suspense account is in existence at any time
during the Limitation Year pursuant to this section, it will not
participate in the allocation of the Trust's investment gains and losses.
If a suspense account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be allocated and
reallocated to Participants' Accounts before any Employer or any Employee
contributions may be made to the Plan for that Limitation Year. Excess
amounts may not be distributed to Participants or former Participants.
6.2 Employers_Who_Maintain_Other_Qualified_Master_or
Prototype_Defined_Contribution_Plans.
(a) This section applies if, in addition to this Plan, the
Participant is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, a welfare benefit fund, as
defined in section 419(e) of the Code maintained by the Employer or an
individual medical account, as defined in section 415(l)(2) of the Code,
maintained by the Employer which provides an Annual Addition as defined
in section 6.5(a), during any Limitation Year. The Annual Additions that
may be credited to a Participant's Account under this Plan for any such
Limitation Year will not exceed the Maximum Permissible Amount reduced by
the Annual Additions credited to a Participant's Account under the other
plans and welfare benefit funds for the same Limitation Year. If the
Annual Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the Participant's
Account under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed or
allocated will be reduced so that the Annual Additions under all such
plans and funds for the Limitation Year will equal the Maximum Permissible
Amount. If the Annual Additions with respect to the Participant under
such other defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the Maximum Permissible Amount, no
amount will be contributed or allocated to the Participant's Account under
this Plan for the Limitation Year.
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(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant in the manner described in
section 6.1(b).
(c) As soon as is administratively feasible after the end
of the Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to section 6.2(c), or as a result of the
allocation of forfeitures, a Participant's Annual Additions under this
Plan and such other plans would result in an Excess Amount for a
Limitation Year, the Excess Amount will be deemed to consist of the Annual
Additions last allocated, except that Annual Additions attributable to a
welfare benefit fund or individual medical account will be deemed to have
been allocated first regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on
an allocation date of this Plan which coincides with an allocation date
of another plan, the Excess Amount attributed to this Plan will be the
product of:
(i) the total Excess Amount allocated as of such
date, times
(ii) the ratio of (1) the Annual Additions allocated
to the Participant for the Limitation Year as of such date under this Plan
to (2) the total Annual Additions allocated to the Participant for the
Limitation Year as of such date under this and all the other qualified
master or prototype defined contribution plans.
(f) Any Excess Amount attributed to this Plan will be
disposed of in the manner described in section 6.1(d).
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6.3 Employers_Who,_In_Addition_to_this_Plan,_Maintain
Other_Qualified_Plans_Which_Are_Defined_Contribution_Plans
Other_than_Master_or_Prototype_Plans. If the Participant is covered under
another qualified defined contribution plan maintained by the Employer
which is not a Master or Prototype Plan, Annual Additions which may be
credited to the Participant's Account under this Plan for any Limitation
Year will be limited in accordance with section 6.2 as though the other
plan were a Master or Prototype Plan unless the Employer provides other
limitations in the Adoption Agreement.
6.4 Employers_Who,_In_Addition_to_This_Plan,_Maintain
A_Qualified_Defined_Benefit_Plan. If the Employer maintains, or at any
time maintained, a qualified defined benefit plan covering any Participant
in this Plan, the sum of the Participant's Defined Benefit Fraction and
Defined Contribution Fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with
the Adoption Agreement.
6.5 Definitions. Unless otherwise expressly provided herein, for
purposes of this ARTICLE only, the following definitions and rules of
interpretation shall apply:
(a) Annual_Additions. The sum of the following amounts
credited to a Participant's Account for the Limitation Year:
(i) Employer Contributions;
(ii) Employee contributions;
(iii) forfeitures; and
(iv) amounts allocated after March 31, 1984 to an
individual medical account, as defined in section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also, amounts
derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to post-
retirement medical benefits allocated to the separate account of a key
employee, as defined in section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in section 419(e) of the Code, maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For this purpose, any Excess Amount applied under sections 6.1(d) or
6.2(f) in the Limitation Year to reduce Employer Contributions will be
considered Annual Additions for such Limitation Year.
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(b) Compensation. A Participant's earned income, wages,
salaries, and fees for professional services and other amounts received
for personal services actually rendered in the course of employment with
the Employer maintaining the Plan (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and
bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer Contributions under a
simplified employee pension plan to the extent such contributions are
excluded from the Employee's gross income, or any distributions from a
plan of deferred compensation;
(ii) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or property) held by
the Employee either becomes freely transferable or is no longer subject
to a substantial risk of forfeiture;
(iii) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(iv) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity described
in section 403(b) of the Code (whether or not the amounts are actually
excludable from the gross income of the Employee).
For purposes of applying the limitations of this
ARTICLE, Compensation for a Limitation Year is the Compensation actually
paid or includable in gross income during such year.
Notwithstanding the preceding sentence, Compensation for
a Participant in a defined contribution plan who is Totally and
Permanently Disabled (as defined in section 22(e)(3) of the Code) is the
Compensation such Participant would have received for the Limitation Year
if the Participant had been paid at the rate of Compensation paid
immediately before becoming permanently and totally disabled; such imputed
Compensation for the disabled Participant may be taken into account only
if the Participant is not a Highly-Compensated Employee (as defined in
section 414(q) of the Code), and contributions made on behalf of such
Participant are nonforfeitable when made.
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(c) Defined_Benefit_Fraction. A fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits under all
the defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of one hundred
percent (100%) of the dollar limitation determined for the Limitation Year
under sections 415(b) and (d) of the Code or one hundred forty percent
(140%) of highest average compensation, including any adjustments under
section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than one hundred twenty-five percent
(125%) of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last Limitation Year
beginning before January 1, 1987, disregarding any changes in the terms
and conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(d) Defined_Contribution_Dollar_Limitation. Thirty thousand
dollars ($30,000) or, if greater, one- fourth (1/4) of the defined benefit
dollar limitation set forth in section 415(b)(1) of the Code as in effect
for the Limitation Year.
(e) Defined_Contribution_Fraction. A fraction, the
numerator of which is the sum of the Annual Additions to the Participant's
Account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions attributable to the
Participant's nondeductible voluntary contributions to all defined benefit
plans, whether or not terminated, maintained by the Employer, and the
Annual Additions attributable to all welfare benefit funds, as defined in
section 419(e) of the Code and individual medical accounts, as defined in
section 415(l)(2) of the Code, maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for the
current and all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any Limitation Year is the
lesser of one hundred percent (100%) of the dollar limitation in effect
under section 415(c)(1)(A) of the Code or thirty-five percent (35%) of the
Participant's Compensation for such year.
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If the Participant was a Participant as of the end of the
first day of the first Limitation Year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last Limitation Year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987. The Annual
Addition for any Limitation Year beginning before January 1, 1987, shall
not be recomputed to treat all Employee contributions as Annual Additions.
(f) Employer. For purposes of this ARTICLE, Employer shall
mean the employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in section 414(b) of the Code as
modified by section 415(h) of the Code), all commonly controlled trades
or businesses (as defined in section 414(c) of the Code as modified by
section 415(h) of the Code), or affiliated service groups (as defined in
section 414(m) of the Code) of which the adopting Employer is a part and
any other entity required to be aggregated with the Employer pursuant to
regulations under section 414(o) of the Code.
(g) Excess_Amount. The excess of the Participant's Annual
Addition for the Limitation Year over the Maximum Permissible Amount.
(h) Highest_Average_Compensation. The average compensation
for the three consecutive Plan Years that produce the highest average.
(i) Limitation_Year. A Plan Year, or the twelve (12)
consecutive month period elected by the Employer in the Adoption
Agreement. All qualified plans maintained by the Employer must use the
same Limitation Year. If the Limitation Year is amended to a different
twelve (12) consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year in which the amendment is made.
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(j) Master_or_Prototype_Plan. A plan the form of which is
the subject of a favorable opinion letter from the Internal Revenue
Service.
(k) Maximum_Permissible_Amount. The maximum Annual Addition
that may be contributed or allocated to a Participant's Account under the
Plan for any Limitation Year shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation;
or
(b) twenty-five percent (25%) of the Participant's
Compensation for the Limitation Year.
The Compensation limitation referred to in subsection (b)
shall not apply to any contribution for medical benefits (within the
meaning of section 401(h) or section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under section 415(l)(1) or section
419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different twelve (12) consecutive month
period, the Maximum Permissible Amount will not exceed the Defined
Contribution Dollar Limitation multiplied by the following fraction:
Number of Months in the Short Limitation Year
---------------------------------------------
12
(l) Projected_Annual_Benefit. The annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or
Qualified Joint and Survivor Annuity) to which the Participant would be
entitled under the terms of the Plan assuming:
(i) the Participant will continue employment until
Normal Retirement Age under the Plan (or current age, if later), and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation Years.
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ARTICLE 7
TRUST FUND
7.1 Receipt_of_Contributions_by_Trustee. All contributions to the
Trust that are received by the Trustee, together with any earnings
thereon, shall be held, managed and administered by the Trustee named in
the Adoption Agreement in accordance with the terms and conditions of the
Trust Agreement and the Plan. The Trustee may use a Custodian designated
by the Sponsor to perform recordkeeping and custodial functions. The
Trustee shall be subject to the proper directions of the Employer or the
Plan Administrator made in accordance with the terms of the Plan and
ERISA.
7.2 Investment_Responsibility.
(a) If the Employer elects in the Adoption Agreement to
exercise investment authority and responsibility, the selection of the
investments in which assets of the Trust are invested shall be the
responsibility of the Plan Administrator and each Participant will have
a ratable interest in all assets of the Trust.
(b) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, no person, including the Trustee and the Plan
Administrator, shall be liable for any loss or for any breach of fiduciary
duty which results from such Participant's or Beneficiary's exercise of
control.
(c) If the Adoption Agreement so provides and the Employer
elects to permit each Participant or Beneficiary to select the investments
in his Account, the Employer or the Plan Administrator must complete a
schedule of Participant designations.
(d) If Participants and Beneficiaries are permitted to
select the investment in their Accounts, all investment related expenses,
including administrative fees charged by brokerage houses, will be charged
against the Accounts of the Participants.
(e) The Plan Administrator may at any time change the
selection of investments in which the assets of the Trust are invested,
or subject to such reasonable restrictions as may be imposed by the
Sponsor for administrative convenience, may submit an amended schedule of
Participant designations. Such amended documents may provide for a
variance in the percentages of contributions to any particular investment
or a request that Shares in the Trust be reinvested in whole or in part
in other Shares.
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7.3 Investment_Limitations. The Sponsor may impose reasonable
investment limitations on the Employer and the Plan Administrator relating
to the type of permissible investments in the Trust or the minimum
percentage of Trust assets to be invested in Shares.
ARTICLE 8
VESTING
8.1 Nondeductible_Voluntary_Contributions_and Earnings. The
Participant's nondeductible voluntary contribution subaccount shall be
fully vested and nonforfeitable at all times and no forfeitures will occur
as a result of an Employee's withdrawal of nondeductible voluntary
contributions.
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8.2 Rollovers,_Transfers_and_Earnings. The Participant's rollover
subaccount and direct transfer subaccount shall be fully vested and
nonforfeitable at all times.
8.3 Employer_Contributions_and_Earnings. Notwithstanding the
vesting schedule elected by the Employer in the Adoption Agreement, the
Participant's money purchase pension contribution subaccount and profit
sharing contribution subaccount shall be fully vested and nonforfeitable
upon the Participant's death, disability, attainment of Normal Retirement
Age, or, if the Adoption Agreement provides for an Early Retirement Date,
attainment of the required age and completion of the required service.
In the absence of any of the preceding events, the Participant's money
purchase contribution subaccount and his profit sharing contribution
subaccount shall vest in accordance with a minimum vesting schedule
specified in the Adoption Agreement. The schedule must be at least as
favorable to Participants as either schedule (a) or (b) below.
(a) Graduated vesting according to the following schedule:
Years_of_Service Vested_Percentage
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
(b) Full one hundred percent (100%) vesting after three (3)
Years of Service.
8.4 Amendments_to_Vesting_Schedule.
(a) If the Plan's vesting schedule is amended, or the Plan
is amended in any way that directly or indirectly affects the computation
of the Participant's nonforfeitable percentage or if the Plan is deemed
amended by an automatic change to or from a top-heavy vesting schedule,
each Participant with at least three (3) Years of Service with the
Employer may elect, within a reasonable period after the adoption of the
amendment or change, to have the nonforfeitable percentage computed under
the Plan without regard to such amendment or change. For any Participants
who do not have at least one (1) Hour of Service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be applied
by substituting "five (5) Years of Service" for "three (3) Years of
Service" where such language appears.
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(b) The period during which the election may be made shall
commence with the date the amendment is adopted or deemed to be made and
shall end on the latest of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes
effective; or
(iii) sixty (60) days after the Participant is issued
written notice of the amendment by the Employer or Plan Administrator.
(c) No amendment to the Plan shall be effective to the
extent that it has the effect of decreasing a Participant's accrued
benefit. Notwithstanding the preceding sentence, a Participant's Account
balance may be reduced to the extent permitted under section 412(c)(8) of
the Code. For purposes of this paragraph, a Plan amendment which has the
effect of decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits attributable to service
before the amendment shall be treated as reducing an accrued benefit.
Furthermore, if the vesting schedule of a Plan is amended, in the case of
an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's right to his
Employer-derived accrued benefit will not be less than his percentage
computed under the Plan without regard to such amendment.
8.5 Determination_of_Years_of_Service. For purposes of
determining the vested and nonforfeitable percentage of the Participant's
Employer Contribution subaccounts, all of the Participant's Years of
Service with the Employer or an Affiliated Employer shall be taken into
account. If specified in the Adoption Agreement, Years of Service with
a predecessor employer will be treated as service for the Employer;
provided, however, if the Employer maintains the plan of a predecessor
employer, Years of Service with such predecessor employer will be treated
as service with the Employer without regard to any election.
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8.6 Forfeiture_of_Nonvested_Amounts.
(a) For Plan Years beginning before 1985, any portion of a
Participant's Account that is not vested shall be forfeited by him as of
the last day of the Plan Year in which a Break in Service occurs. For
Plan Years beginning after 1984, any portion of a Participant's Account
that is not vested shall be forfeited by him as of the last day of the
Plan Year in which his fifth consecutive Break in Service occurs. Any
amounts thus forfeited shall be reallocated as provided in ARTICLE 5 and
shall not be considered part of a Participant's Account in computing his
vested interest. The remaining portion of the Participant's Account will
be nonforfeitable.
(b) If a distribution is made at a time when a Participant
has a vested right to less than one hundred percent (100%) of the value
of the Participant's Account attributable to Employer Contributions and
forfeitures, as determined in accordance with the provisions of section
8.3, and the nonvested portion of the Participant's Account has not yet
been forfeited in accordance with paragraph (a) above:
(i) a separate remainder subaccount shall be
established for the Participant's interest in the Plan as of the time of
the distribution, and
(ii) at any relevant time the Participant's vested
portion of the separate remainder subaccount shall be equal to an amount
("X") determined by the following formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula: P is the vested
percentage at the relevant time; AB is the Account balance at the relevant
time; D is the amount of the distribution; and R is the ratio of the
Account balance at the relevant time to the Account balance after
distribution.
8.7 Reinstatement_of_Benefit. If a benefit is forfeited because
a Participant or Beneficiary cannot be found, such benefit will be
reinstated if a claim is made by the Participant or Beneficiary.
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ARTICLE 9
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 General. The provisions of this ARTICLE shall apply to any
Participant who is credited with at least one (1) Hour of Service with the
Employer on or after August 23, 1984, and such other Participants as
provided in section 9.7.
9.2 Qualified_Joint_and_Survivor_Annuity. Unless an optional form
of benefit is selected pursuant to a Qualified Election within the ninety
(90) day period ending on the Annuity Starting Date, a married
Participant's Vested Account Balance will be paid in the form of a
Qualified Joint and Survivor Annuity and an unmarried Participant's Vested
Account Balance will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon attainment of
the Earliest Retirement Age under the Plan.
9.3 Qualified_Preretirement_Survivor_Annuity. Unless an optional
form of benefit has been selected within the Election Period pursuant to
a Qualified Election, if a Participant dies before the Annuity Starting
Date, then the Participant's Vested Account Balance shall be applied
toward the purchase of an annuity for the life of the Surviving Spouse.
The Surviving Spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
9.4 Definitions.
(a) Election_Period.
(i) The period which begins on the first day of the
Plan Year in which the Participant attains age thirty-five (35) and ends
on the date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age thirty-five
(35) is attained, with respect to the Account balance as of the date of
separation, the Election Period shall begin on the date of separation.
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(ii) A Participant who has not yet attained age
thirty-five (35) as of the end of any current Plan Year may make a special
Qualified Election to waive the qualified preretirement survivor annuity
for the period beginning on the date of such election and ending on the
first day of the Plan Year in which the Participant will attain age
thirty-five (35). Such election shall not be valid unless the Participant
receives a written explanation of the qualified preretirement survivor
annuity in such terms as are comparable to the explanation required under
section 9.5. Qualified preretirement survivor annuity coverage will be
automatically reinstated as of the first day of the Plan Year in which the
Participant attains age thirty-five (35). Any new waiver on or after such
date shall be subject to the full requirements of this ARTICLE.
(b) Earliest_Retirement_Age. The earliest date on which,
under the Plan, the Participant could elect to receive retirement
benefits.
(c) Qualified_Election.
(i) A waiver of a Qualified Joint and Survivor
Annuity or a qualified preretirement survivor annuity. Any waiver of a
Qualified Joint and Survivor Annuity or a qualified preretirement survivor
annuity shall not be effective unless:
(1) the Participant's Spouse consents in
writing to the election;
(2) the election designates a specific
Beneficiary, including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Participant without any
further spousal consent);
(3) the Spouse's consent acknowledges the
effect of the election; and
(4) the Spouse's consent is witnessed by a Plan
representative or notary public. Additionally, a Participant's waiver of
the Qualified Joint and Survivor Annuity shall not be effective unless the
election designates a form of benefit payment which may not be changed
without spousal consent (or the Spouse expressly permits designations by
the participant without any further spousal consent). If it is
established to the satisfaction of a Plan representative that there is no
Spouse or that the Spouse cannot be located, a waiver will be deemed a
Qualified Election.
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(ii) Any consent by a Spouse obtained under this
provision (or establishment that the consent of Spouse may not be
obtained) shall be effective only with respect to such Spouse. A consent
that permits designations by the Participant without any requirement of
further consent by such Spouse must acknowledge that the Spouse has the
right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior waiver
may be made by a Participant without the consent of the Spouse at any time
before the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in section 9.5.
(d) Qualified_Joint_and_Survivor_Annuity. An immediate
annuity for the life of the Participant with a survivor annuity for the
life of the Spouse which equals fifty percent (50%) of the amount of the
annuity which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with the
Participant's Vested Account Balance.
(e) Spouse_(Surviving_Spouse). The Spouse or Surviving
Spouse of the Participant, provided that a former spouse will be treated
as the Spouse or Surviving Spouse and a current Spouse will not be treated
as the Spouse or Surviving Spouse to the extent provided under a qualified
domestic relations order as described in section 414(p) of the Code.
(f) Annuity_Starting_Date. The first day of the first
period for which an amount is paid as an annuity or any other form.
(g) Vested_Account_Balance. The aggregate value of the
Participant's Vested Account Balances derived from Employer and Employee
contributions (including rollovers and direct transfers), whether vested
before or upon death, including the proceeds of insurance contracts if
any, on the Participant's life. The provisions of this ARTICLE shall
apply to a Participant who is vested in amounts attributable to Employer
Contributions, Employee contributions (or both) at the time of death or
distribution.
9.5 Notice_Requirements.
(a) In the case of a Qualified Joint and Survivor Annuity,
the Plan Administrator shall no less than thirty (30) days and no more
than ninety (90) days prior to the Annuity Starting Date, provide each
Participant a written explanation of:
(i) the terms and conditions of a Qualified Joint and
Survivor Annuity;
(ii) the Participant's right to make and the effect
of an election to waive the Qualified Joint and Survivor Annuity form of
benefit;
(iii) the rights of a Participant's Spouse; and
(iv) the right to make, and the effect of, a
revocation of a previous election to waive the Qualified Joint and
Survivor Annuity.
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(b) In the case of a qualified preretirement survivor
annuity as described in section 9.3, the Plan Administrator shall provide
each Participant within the applicable period for such Participant a
written explanation of the qualified preretirement survivor annuity in
such terms and in such manner as would be comparable to the explanation
provided for meeting the requirements of subsection (a) applicable to a
Qualified Joint and Survivor Annuity.
(c) The applicable period for a Participant is whichever of
the following periods ends last:
(i) the period beginning with the first day of the
Plan Year in which the Participant attains age thirty-two (32) and ending
with the close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
(ii) a reasonable period ending after the individual
becomes a Participant;
(iii) a reasonable period ending after subsection (e)
ceases to apply to the Participant;
(iv) a reasonable period ending after this ARTICLE
first applies to the Participant. Notwithstanding the foregoing, notice
must be provided within a reasonable period ending after separation from
service in the case of a Participant who separates from service before
attaining age thirty-five (35).
(d) For purposes of applying subsection (c), a reasonable
period ending after the enumerated events described above in subsections
(ii), (iii) and (iv) is the end of the two-year period beginning one (1)
year prior to the date the applicable event occurs, and ending one (1)
year after that date. In the case of a Participant who separates from
service before the Plan Year in which age thirty-five (35) is attained,
notice shall be provided within the two (2) year period beginning one (1)
year prior to separation and ending one (1) year after separation. If
such a participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
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(e) Notwithstanding the other requirements of this section,
the respective notices prescribed by this section need not be given to a
Participant if:
(i) the Plan "fully subsidizes" the cost of a
Qualified Joint and Survivor Annuity or qualified preretirement survivor
annuity; and
(ii) the Plan does not allow the Participant to waive
the Qualified Joint and Survivor Annuity or qualified preretirement
survivor annuity and does not allow a married Participant to designate a
nonspouse Beneficiary.
For purposes of this subsection, a plan fully subsidizes the
costs of a benefit if no increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure to elect another
benefit.
9.6 Safe_Harbor_Rules.
(a) This section shall apply to a Participant in a profit
sharing plan, and to any distribution, made on or after the first day of
the first Plan year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated deductible Employee
contributions, as defined in section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money purchase pension plan
(including a target benefit plan) if the following conditions are
satisfied:
(i) the Participant does not or cannot elect payments
in the form of a life annuity; and
(ii) on the death of a Participant, the Participant's
Vested Account Balance will be paid to the Participant's Surviving Spouse,
but if there is no Surviving Spouse, or if the Surviving Spouse has
consented in a manner conforming to a Qualified Election, then to the
Participant's Designated Beneficiary.
(b) The Surviving Spouse may elect to have distribution of
the Vested Account Balance commence within the ninety (90) day period
following the date of the Participant's death. The Account balance shall
be adjusted for gains or losses occurring after the Participant's death
in accordance with the provisions of the Plan governing the adjustment of
Account balances for other types of distributions.
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(c) This section shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct or indirect
transferee of a defined benefit plan, money purchase plan, a target
benefit plan, stock bonus, or profit sharing plan which is subject to the
survivor annuity requirements of sections 401(a)(11) and 417 of the Code.
If this section is operative, then the provisions of this ARTICLE, other
than section 9.7, shall be inoperative.
(d) The Participant may waive the spousal death benefit
described in this section at any time provided that no such waiver shall
be effective unless it satisfies the conditions of section 9.4(c) (other
than the notification requirement referred to therein) that would apply
to the Participant's waiver of the qualified preretirement survivor
annuity.
(e) For purposes of this section, Vested Account Balance
shall mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate Account balance attributable
solely to accumulated deductible Employee contributions within the meaning
of section 72(o)(5)(B) of the Code. In the case of a profit sharing plan,
Vested Account Balance shall have the same meaning as provided in section
9.4(g).
9.7 Transitional_Rules.
(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits prescribed
by the previous sections of this ARTICLE must be given the opportunity to
elect to have the prior sections of this ARTICLE apply if such Participant
is credited with at least one (1) Hour of Service under this Plan or a
predecessor plan in a Plan Year beginning on or after January 1, 1976, and
such Participant had at least ten (10) years of vesting service when he
or she separated from service.
(b) Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one (1) Hour of Service
under this Plan or a predecessor plan on or after September 2, 1974, and
who is not otherwise credited with any service in a Plan Year beginning
on or after January 1, 1976, must be given the opportunity to have his or
her benefits paid in accordance with subsection (d).
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(c) The respective opportunities to elect (as described in
subsections (a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and ending
on the date benefits would otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to subsection
(b) and any Participant who does not elect under subsection (a) or who
meets the requirements of subsection (a) except that such Participant does
not have at least ten (10) years of vesting service when he or she
separates from service, shall have his or her benefits distributed in
accordance with all of the following requirements if benefits would have
been payable in the form of a life annuity:
(i) Automatic_Joint_and_Survivor_Annuity. If
benefits in the form of a life annuity become payable to a married
Participant who:
(1) begins to receive payments under the Plan
on or after Normal Retirement Age; or
(2) dies on or after Normal Retirement Age
while still working for the Employer; or
(3) begins to receive payments on or after the
qualified early retirement age; or
(4) separates from service on or after
attaining Normal Retirement Age (or the qualified early retirement age)
and after satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to receive
such benefits;
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has elected
otherwise during the Election Period. The Election Period must begin at
least six (6) months before the Participant attains qualified early
retirement age and end not more than ninety (90) days before the
commencement of benefits. Any election hereunder will be in writing and
may be changed by the Participant at any time.
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(ii) Election_of_Early_Survivor_Annuity. A
Participant who is employed after attaining the qualified early retirement
age will be given the opportunity to elect, during the Election Period,
to have a survivor annuity payable on death. If the Participant elects
the survivor annuity, payments under such annuity must not be less than
the payments which would have been made to the Spouse under the Qualified
Joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The Election
Period begins on the later of (1) the 90th day before the Participant
attains the qualified early retirement age; or (2) the date on which
participation begins, and ends on the date the Participant terminates
employment.
(e) The following terms shall have the meanings specified
herein:
(i) Qualified_Early_Retirement_Age. The latest of:
(1) the earliest date, under the Plan, on which
the Participant may elect to receive retirement benefits;
(2) the first day of the 120th month beginning
before the Participant reaches Normal Retirement Age; or
(3) the date the Participant begins
participation.
(ii) Qualified_Joint_and_Survivor_Annuity. An annuity
for the life of the Participant with a survivor annuity for the life of
the Spouse as described in section 9.4(d).
ARTICLE 10
DISTRIBUTION PROVISIONS
10.1 Vesting_on_Distribution_Before_Break_in_Service.
(a) If an Employee terminates service, and the value of the
Employee's Vested Account Balance derived from Employer and Employee
contributions is not greater than three thousand five hundred dollars
($3,500), the Employee will receive a distribution of the value of the
entire vested portion of such Account balance and the nonvested portion
will be treated as a forfeiture. For purposes of this section, if the
value of an Employee's Vested Account Balance is zero, the Employee shall
be deemed to have received a distribution of such Vested Account Balance.
A Participant's Vested Account Balance shall not include accumulated
deductible Employee contributions within the meaning of section
72(o)(5)(B) of the Code for Plan Years beginning prior to January 1, 1989.
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(b) If an Employee terminates service and elects, in
accordance with this ARTICLE, to receive the value of his Vested Account
Balance, the nonvested portion will be treated as a forfeiture. If the
Employee elects to have distributed less than the entire vested portion
of the Account balance derived from Employer Contributions, the part of
the nonvested portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of which is the
amount of the distribution attributable to Employer Contributions and the
denominator of which is the total value of the vested Employer derived
Account balance.
(c) If an Employee receives a distribution pursuant to this
section and the Employee resumes employment covered under this Plan, the
Employee's Employer- derived Account balance will be restored to the
amount on the date of distribution if the Employee repays to the Plan the
full amount of the distribution attributable to Employer Contributions
before the earlier of five (5) years after the first date on which the
Participant is subsequently reemployed by the Employer, or the date the
Participant incurs five (5) consecutive one (1) year Breaks in Service
following the date of the distribution. If an Employee is deemed to
receive a distribution pursuant to this section, and the Employee resumes
employment covered under this Plan before the date the Participant incurs
five (5) consecutive one (1) year Breaks in Service, upon the reemployment
of such Employee, the Employer-derived Account balance of the Employee
will be restored to the amount on the date of such deemed distribution.
10.2 Restrictions_on_Immediate_Distributions.
(a) If the value of a Participant's Vested Account Balance
derived from Employer and Employee contributions exceeds (or at the time
of any prior distribution exceeded) three thousand five hundred dollars
($3,500) and the Account balance is immediately distributable, the
Participant and the Participant's Spouse (or where either the Participant
or the Spouse has died, the survivor) must consent to any distribution of
such Account balance. The consent of the Participant and the
Participant's Spouse shall be obtained in writing within the ninety (90)
day period ending on the Annuity Starting Date. The Annuity Starting Date
is the first day of the first period for which an amount is paid as an
annuity or any other form. The Plan Administrator shall notify the
Participant and the Participant's Spouse of the right to defer any
distribution until the Participant's Account balance is no longer
immediately distributable. Such notification shall include a general
description of the material features, and an explanation of the relative
values of, the optional forms of benefit available under the Plan in a
manner that would satisfy the notice requirements of section 417(a)(3),
and shall be provided no less than thirty (30) days and no more than
ninety (90) days prior to the Annuity Starting Date.
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(b) Notwithstanding the provisions of subsection (a), only
the Participant need consent to the commencement of a distribution in the
form of a Qualified Joint and Survivor Annuity while the Account balance
is immediately distributable. (Furthermore, if payment in the form of a
Qualified Joint and Survivor Annuity is not required with respect to the
Participant pursuant to section 9.6 of the Plan, only the Participant need
consent to the distribution of an Account balance that is immediately
distributable). Neither the consent of the Participant nor the Partici-
pant's Spouse shall be required to the extent that a distribution is
required to satisfy section 401(a)(9) or section 415 of the Code. In
addition, upon termination of this Plan if the Plan does not offer an
annuity option (purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be distributed to
the Participant or transferred to another defined contribution plan (other
than an employee stock ownership plan as defined in section 4975(e)(7) of
the Code) within the same controlled group.
(c) An Account balance is immediately distributable if any
part of the Account balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains (or would have attained
if not deceased) the later of Normal Retirement Age or age sixty- two
(62).
(d) For purposes of determining the applicability of the
foregoing consent requirements to distributions made before the first day
of the first Plan Year beginning after December 31, 1988, the
Participant's Vested Account Balance shall not include amounts
attributable to accumulated deductible Employee contributions within the
meaning of section 72(o)(5)(B) of the Code.
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10.3 Commencement_of_Benefits.
(a) Unless the Participant elects otherwise, distribution
of benefits will begin no later than the 60th day after the latest of the
close of the Plan Year in which:
(i) the Participant attains age sixty-five (65) (or
Normal Retirement Age, if earlier);
(ii) the 10th anniversary of the year in which the
Participant commenced participation in the Plan occurs; or
(iii) the Participant terminates service with the
Employer.
(b) Notwithstanding the foregoing, the failure of a
Participant and Spouse to consent to a distribution while a benefit is
immediately distributable, within the meaning of section 10.2 of the Plan,
shall be deemed to be an election to defer commencement of payment of any
benefit sufficient to satisfy this section.
10.4 Early_Retirement_With_Age_and_Service_Require ment. If a
Participant separates from service before satisfying the age requirement
for early retirement, but has satisfied the service requirement, the
Participant will be entitled to elect an early retirement benefit upon
satisfaction of such age requirement.
10.5 Nontransferability_of_Annuities. Any annuity contract
distributed herefrom must be nontransferable.
10.6 Conflicts_With_Annuity_Contracts. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or Spouse
shall comply with the requirements of this Plan.
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ARTICLE 11
TIMING AND MODES OF DISTRIBUTION
11.1 General_Rules.
(a) Subject to ARTICLE 9, the requirements of this ARTICLE
shall apply to any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this ARTICLE apply to calendar
years beginning after December 31, 1984.
(b) All distributions required under this ARTICLE shall be
determined and made in accordance with the income tax regulations under
section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of section 1.401(a)(9)-2 of the proposed
regulations.
11.2 Required_Beginning_Date. The entire interest of a Participant
must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date.
11.3 Limits_on_Distribution_Periods. As of the first Distribution
Calendar Year, distributions, if not made in a single-sum, may only be
made over one of the following periods (or a combination thereof):
(a) the life of the Participant;
(b) the life of the Participant and a Designated
Beneficiary;
(c) a period certain not extending beyond the Life
Expectancy of the Participant; or
(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
11.4 Determination_of_Amount_to_be_Distributed_Each Year.
(a) Individual_Account.
(i) If a Participant's Benefit is to be distributed
over (1) a period not extending beyond the Life Expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's Designated Beneficiary or (2) a period
not extending beyond the Life Expectancy of the Designated Beneficiary,
the amount required to be distributed for each calendar year, beginning
with distributions for the first Distribution Calendar Year, must at least
equal the quotient obtained by dividing the Participant's Benefit by the
Applicable Life Expectancy.
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(ii) For calendar years beginning before January 1,
1989, if the Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least fifty percent
(50%) of the present value of the amount available for distribution is
paid within the Life Expectancy of the Participant.
(iii) For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with distributions
for the first Distribution Calendar Year shall not be less than the
quotient obtained by dividing the Participant's Benefit by the lesser of
(1) the Applicable Life Expectancy or (2) if the Participant's Spouse is
not the Designated Beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
regulations. Distributions after the death of the Participant shall be
distributed using the Applicable Life Expectancy in subsection (a)(i)
above as the relevant divisor without regard to proposed regulations
section 1.401(a)(9)-2.
(iv) The minimum distribution required for the
Participant's first Distribution Calendar Year must be made on or before
the Participant's Required Beginning Date. The minimum distribution for
other calendar years, including the minimum distribution for the
Distribution Calendar Year in which the Employee's Required Beginning Date
occurs, must be made on or before December 31 of that Distribution
Calendar Year.
(b) Other_Forms. If the Participant's Benefit is
distributed in the form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the requirements
of section 401(a)(9) of the Code and the proposed regulations thereunder.
11.5 Death_Distribution_Provisions.
(a) Distribution_Beginning_Before_Death. If the Participant
dies after distribution of his or her interest has begun, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
(b) Distribution_Beginning_After_Death. If the Participant
dies before distribution of his or her interest begins, distribution of
the Participant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive distributions in
accordance with (i) or (ii) below:
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(i) if any portion of the Participant's interest is
payable to a Designated Beneficiary, distributions may be made over the
life or over a period certain not greater than the Life Expectancy of the
Designated Beneficiary commencing on or before December 31 of the calendar
year immediately following the calendar year in which the Participant
died;
(ii) if the Designated Beneficiary is the
Participant's Surviving Spouse, the date distributions are required to
begin in accordance with (i) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the calendar
year in which the Participant died and (2) December 31 of the calendar
year in which the Participant would have attained age seventy and one-half
(70 1/2).
(c) If the Participant has not made an election pursuant to
this section by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this section; or (2) December 31 of the
calendar year which contains the fifth anniversary of the date of death
of the Participant. If the Participant has no Designated Beneficiary, or
if the Designated Beneficiary does not elect a method of distribution,
distribution of the Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death.
(d) For purposes of subsection (b) above, if the Surviving
Spouse dies after the Participant, but before payments to such Spouse
begin, the provisions of subsection (b), with the exception of paragraph
(ii) therein, shall be applied as if the Surviving Spouse were the
Participant.
(e) For purposes of this section, any amount paid to a child
of the Participant will be treated as if it had been paid to the Surviving
Spouse if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(f) For the purposes of this section, distribution of a
Participant's interest is considered to begin on the Participant's
Required Beginning Date (or, if subsection (d) above is applicable, the
date distribution is required to begin to the Surviving Spouse pursuant
to subsection (b) above). If distribution in the form of an annuity
described in section 11.4(b) above irrevocably commences to the
Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
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11.6 Designation_of_Beneficiary. Subject to the rules of
ARTICLE 9, a Participant (or former Participant) may designate from time
to time any person or persons (who may be designated contingently or
successively and may be an entity other than a natural person) as his
Beneficiary who will be entitled to receive any undistributed amounts
credited to the Participant's separate Account under the Plan at the time
of the Participant's death. Any such Beneficiary designation by a
Participant shall be made in writing in the manner prescribed by the Plan
Administrator, and shall be effective only when filed with the Plan
Administrator during the Participant's lifetime. A Participant may change
or revoke his Beneficiary designation at any time in the manner prescribed
by the Plan Administrator. If any portion of the Participant's Account
is invested in insurance pursuant to ARTICLE 14, the Beneficiary of the
benefits under the insurance policy shall be the person or persons
designated under the policy. If the Designated Beneficiary (or each of
the Designated Beneficiaries) predeceases the Participant, the Partici-
pant's Beneficiary designation shall be ineffective. If no Beneficiary
designation is in effect at the time of the Participant's death, his
Beneficiary shall be his estate.
11.7 Definitions.
(a) Applicable_Life_Expectancy. The Life Expectancy (or
joint and last survivor expectancy) calculated using the attained age of
the Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the applicable calendar year reduced
by one (1) for each calendar year which has elapsed since the date Life
Expectancy was first calculated. If Life Expectancy is being
recalculated, the Applicable Life Expectancy shall be the Life Expectancy
as so recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being recalculated
such succeeding calendar year. If annuity payments commence in accordance
with section 11.4(b) before the Required Beginning Date, the applicable
calendar year is the year such payments commence. If distribution is in
the form of an immediate annuity purchased after the Participant's death
with the Participant's remaining interest, the applicable calendar year
is the year of purchase.
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(b) Designated_Beneficiary. The individual who is
designated as the Beneficiary under the Plan in accordance with section
401(a)(9) and the proposed regulations thereunder.
(c) Distribution_Calendar_Year. A calendar year for which
a minimum distribution is required. For distributions beginning before
the Participant's death, the first Distribution Calendar Year is the
calendar year immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions beginning after
the Participant's death, the first Distribution Calendar Year is the
calendar year in which distributions are required to begin pursuant to
section 11.5 above.
(d) Life_Expectancy.
(i) Life Expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the income tax regulations.
(ii) Unless otherwise elected by the Participant (or
Spouse, in the case of distributions described in section 11.5(b)(ii)
above) by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Participant (or Spouse) and shall apply to all subsequent years. The
Life Expectancy of a non-Spouse Beneficiary may not be recalculated.
(e) Participant's_Benefit.
(i) The Account balance as of the last valuation date
in the calendar year immediately preceding the Distribution Calendar Year
(valuation calendar year) increased by the amount of any contributions or
forfeitures allocated to the Account balance as of dates in the valuation
calendar year after the valuation date and decreased by distributions made
in the valuation calendar year after the valuation date.
(ii) For purposes of subsection (i) above, if any
portion of the minimum distribution for the first Distribution Calendar
Year is made in the second Distribution Calendar Year on or before the
Required Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
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(f) Required_Beginning_Date.
(i) General_Rule. The Required Beginning Date of a
Participant is the first day of April of the calendar year following the
calendar year in which the Participant attains age seventy and one-half
(70 1/2).
(ii) Transitional_Rules. The Required Beginning Date
of a Participant who attains age seventy and one-half (70 1/2) before
January 1, 1988, shall be determined in accordance with (1) or (2) below:
(1) Non-Five-Percent_Owners. The Required
Beginning Date of a Participant who is not a Five Percent (5%) Owner is
the first day of April of the calendar year following the calendar year
in which the later of retirement or attainment of age seventy and one-
half (70 1/2) occurs.
(2) Five_Percent_Owners. The Required
Beginning Date of a Participant who is a Five Percent (5%) Owner during
any year beginning after December 31, 1979, is the first day of April
following the later of:
(A) the calendar year in which the
Participant attains age seventy and one-half (70 1/2); or
(B) the earlier of the calendar year with
or within which ends the Plan Year in which the Participant becomes a Five
Percent (5%) Owner, or the calendar year in which the Participant retires.
The Required Beginning Date of a Participant who is not a Five Percent
(5%) Owner who attains age seventy and one- half (70 1/2) during 1988 and
who has not retired as of January 1, 1989, is April 1, 1990.
(iii) Five_Percent_Owner. A Participant is treated as
a Five Percent (5%) Owner for purposes of this section if such Participant
is a Five Percent (5%) Owner as defined in section 416(i) of the Code
(determined in accordance with section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or
within the calendar year in which such owner attains age sixty-six and
one-half (66 1/2) or any subsequent year.
(iv) Once distributions have begun to a Five Percent
(5%) Owner under this section, they must continue to be distributed, even
if the Participant ceases to be a Five Percent (5%) Owner in a subsequent
year.
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11.8 Transitional_Rule.
(a) Notwithstanding the other requirements of this ARTICLE
and subject to the requirements of ARTICLE 9, distribution on behalf of
any Employee, including a Five Percent (5%) Owner, may be made in
accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust is one which would
not have disqualified such trust under section 401(a)(9) of the Internal
Revenue Code as in effect prior to amendment by the Deficit Reduction Act
of 1984.
(ii) The distribution is in accordance with a method
of distribution designated by the Employee whose interest in the Trust is
being distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
(iii) Such designation was in writing, was signed by
the Employee or the Beneficiary, and was made before January 1, 1984.
(iv) The Employee had accrued a benefit under the Plan
as of December 31, 1983.
(v) The method of distribution designated by the
Employee or the Beneficiary specifies the time at which distributions will
be made, and in the case of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains the
required information described above with respect to the distributions to
be made upon the death of the Employee.
(c) For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be presumed to
have designated the method of distribution under which the distribution
is being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in subsections (a)(i) and
(a)(v).
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(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of section 401(a)(9) of the Code and the
proposed regulations thereunder. If a designation is revoked subsequent
to the date distributions are required to begin, the Trust must distribute
by the end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy section 401(a)(9) of the
Code and the regulations thereunder but for the section 242(b)(2)
election. For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental benefit
requirements in section 1.401(a)(9)-2 of the proposed regulations. Any
changes in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
beneficiary (one not named in the designation) under the designation will
not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or indirectly
(for example, by altering the relevant measuring life). In the case in
which an amount is transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
11.9 Optional_Forms_of_Benefit.
(a) Except to the extent benefits are required to be paid
in the form of an automatic joint and survivor annuity under ARTICLE 9,
any amount which a Participant shall be entitled to receive under the Plan
shall be distributed in one or a combination of the following ways:
(i) in a lump-sum payment of cash, the amount of
which shall be determined by redeeming all Shares credited to the
Participant's Account under the Plan as of the date of distribution;
(ii) in a lump-sum payment including a distribution
in kind of all Shares credited to the Participant's Account under the Plan
as of the date of distribution;
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(iii) in substantially equal monthly, quarterly, or
annual installment payments of cash, or the distribution of Shares in
kind, over a period certain not to exceed the Life Expectancy of the
Participant or the joint and last survivor Life Expectancy of the
Participant and his Beneficiary, determined in each case as of the earlier
of: (1) the end of the Plan Year in which occurs the event entitling the
Participant to a distribution of benefits, or (2) the date such
installments commence;
(iv) if permitted by the Sponsor, in monthly,
quarterly, or annual installment payments of cash, or the distribution of
Shares in kind, so that the amount distributed in each Plan Year equals
the quotient obtained by dividing the Participant's Account at the
beginning of that Plan Year by the joint and last survivor Life Expectancy
of the Participant and the Beneficiary for that Plan Year. The Life
Expectancy will be computed using the recomputation method described in
section 11.7(d). Unless the Spouse of the retired Participant is the
Beneficiary, the actuarial present value of all expected payments to the
retired Participant must be more than fifty percent (50%) of the actuarial
present value of payments to the retired Participant and the Beneficiary;
or
(v) by application of the Participant's vested
Account to the purchase of a nontransferable immediate or deferred annuity
contract, on an individual or group basis. Unless the Spouse of the
retired Participant is the Beneficiary, the actuarial present value of all
expected payments to the retired Participant must be more than fifty
percent (50%) of the actuarial present value of payments to the retired
Participant and the Beneficiary.
(b) If the Participant fails to select a method of
distribution, except as may be required by ARTICLE 9, all amounts which
he is entitled to receive under the Plan shall be distributed to him in
a lump-sum payment.
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ARTICLE 12
WITHDRAWALS
12.1 Withdrawal_of_Nondeductible_Voluntary_Contribu tions. Subject
to the Qualified Election requirements of ARTICLE 9 and section 12.3, any
Participant who has made nondeductible voluntary contributions may, upon
thirty (30) days notice in writing filed with the Plan Administrator, have
paid to him all or any portion of the fair market value of his
nondeductible voluntary contribution subaccount.
12.2 Hardship_Withdrawals. If the Adoption Agreement so provides
and the Employer elects, this section applies only to the profit sharing
contribution subaccount and only if the profit sharing allocation formula
selected in the Adoption Agreement is not integrated with Social Security.
(a) Demonstration_of_Need. Subject to the Qualified
Election requirements of ARTICLE 9 and section 12.3, if a Participant
establishes an immediate and heavy financial need for funds because of a
hardship resulting from the purchase or renovation of a primary residence,
the education of the Participant or a member of his immediate family
(including special education), the medical or personal expenses of the
Participant or a member of his immediate family, or other demonstrable
emergency as determined by the Plan Administrator on a uniform and
nondiscriminatory basis, the Participant shall be permitted, subject to
the limitations of subsection (b) below, to make a hardship withdrawal of
an amount credited to his profit sharing contribution subaccount under the
Plan.
(b) Amount_of_Hardship_Withdrawal. The amount of any
hardship withdrawal by a Participant under subsection (a) above shall not
exceed the amount required to meet the immediate financial need created
by the hardship and not reasonably available from other resources of the
Participant.
(c) Prior_Withdrawal_of_Nondeductible_Voluntary
Participant_Contributions. A Participant shall not be permitted to make
a hardship withdrawal under subsection (a) above unless he has already
withdrawn, in accordance with section 12.1, any amount credited to his
nondeductible voluntary contributions subaccount.
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12.3 Manner_of_Making_Withdrawals. Any withdrawal by a Participant
under the Plan shall be made only after the Participant files a written
request with the Plan Administrator specifying the nature of the
withdrawal (and the reasons therefor, if a hardship withdrawal), and the
amount of funds requested to be withdrawn. Upon approving any withdrawal,
the Plan Administrator shall furnish the Trustee with written instructions
directing the Trustee to make the withdrawal in a lump-sum payment of cash
to the Participant. In making any withdrawal payment, the Trustee shall
be fully entitled to rely on the instructions furnished by the Plan
Administrator, and shall be under no duty to make any inquiry or
investigation with respect thereto. Unless section 9.6 is applicable, if
the Participant is married, his Spouse must consent to the withdrawal
pursuant to a Qualified Election (as defined in section 9.4(c)) within the
ninety (90) day period ending on the date of the withdrawal.
12.4 Limitations_on_Withdrawals. The Plan Administrator may
prescribe uniform and nondiscriminatory rules and procedures limiting the
number of times a Participant may make a withdrawal under the Plan during
any Plan Year, and the minimum amount a Participant may withdraw on any
single occasion.
ARTICLE 13
LOANS
13.1 General_Provisions.
(a) If the Adoption Agreement so provides and the Employer
so elects, loans shall be made available to any Participant or Beneficiary
who is a party-in-interest (as defined in section 3(14) of ERISA) on a
reasonably equivalent basis. A Participant or Beneficiary who is not a
party-in-interest (as defined in section 3(14) of ERISA) shall not be
eligible to receive a loan under this ARTICLE.
(b) Loans shall not be made available to Highly- Compensated
Employees (as defined in section 414(q) of the Code) in an amount greater
than the amount made available to other Employees.
(c) Loans must be adequately secured and bear a reasonable
interest rate.
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(d) No Participant loan shall exceed the present value of
the Participant's Vested Account Balance.
(e) Unless section 9.6 is applicable, a Participant must
obtain the consent of his or her Spouse, if any, to use of the Account
balance as security for the loan. Spousal consent shall be obtained no
earlier than the beginning of the ninety (90) day period that ends on the
date on which the loan is to be so secured. The consent must be in
writing, must acknowledge the effect of the loan, and must be witnessed
by a Plan representative or notary public. Such consent shall thereafter
be binding with respect to the consenting Spouse or any subsequent Spouse
with respect to that loan. A new consent shall be required if the Account
balance is used for renegotiation, extension, renewal or other revision
of the loan.
(f) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event occurs
under the Plan.
(g) Loans will not be made to any shareholder- employee or
Owner-Employee. For purposes of this requirement, a shareholder-employee
means an Employee or officer of an electing small business (subchapter S)
corporation who owns (or is considered as owning within the meaning of
section 318(a)(1) of the Code), on any day during the taxable year of such
corporation, more than five percent (5%) of the outstanding stock of the
corporation.
(h) If a valid spousal consent has been obtained in
accordance with subsection (e), then, notwithstanding any other provision
of this Plan, the portion of the Participant's Vested Account Balance used
as a security interest held by the Plan by reason of a loan outstanding
to the Participant shall be taken into account for purposes of determining
the amount of the Account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the loan.
If less than one hundred percent (100%) of the Participant's Vested
Account Balance (determined without regard to the preceding sentence) is
payable to the Surviving Spouse, then the Account balance shall be
adjusted by first reducing the Vested Account Balance by the amount of the
security used as repayment of the loan, and then determining the benefit
payable to the Surviving Spouse.
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13.2 Administration_of_Loan_Program.
(a) The Plan's loan program will be administered by the Plan
Administrator.
(b) Loan requests shall be made on a form prescribed by the
Plan Administrator and shall comply with section 13.4.
(c) Loan requests that comply with all the requirements of
this ARTICLE shall be approved by the Plan Administrator.
(d) The rate of interest to be charged on loans shall be
determined under section 13.5.
(e) The only collateral that may be used as security for a
loan, and the limitations and requirements applicable, are determined
under section 13.6.
(f) The rules regarding defaults are set forth in section
13.9.
13.3 Amount_of_Loan. Loans to any Participant or Beneficiary will
not be made to the extent that such loan, when added to the outstanding
balance of all other loans to the Participant or Beneficiary, would exceed
the lesser of:
(a) fifty thousand dollars ($50,000) reduced by the excess
(if any) of the highest outstanding balance of loans during the one (1)
year period ending on the day before the loan is made, over the
outstanding balance of loans from the Plan on the date the loan is made;
or
(b) one-half (1/2) the present value of the nonforfeitable
accrued benefit of the Participant.
(c) For the purpose of the above limitation, all loans from
all plans of the Employer and other members of a group of employers
described in sections 414(b), 414(c) and 414(m) of the Code are
aggregated.
13.4 Manner_of_Making_Loans. A request by a Participant for a loan
shall be made in writing to the Plan Administrator and shall specify the
amount of the loan, and the subaccount(s) or Shares of the Participant
from which the loan should be made. The terms and conditions on which the
Plan Administrator shall approve loans under the Plan shall be applied on
a uniform and nondiscriminatory basis with respect to all Participants.
If a Participant's request for a loan is approved by the Plan
Administrator, the Plan Administrator shall furnish the Trustee with
written instructions directing the Trustee to make the loan in a lump-sum
payment of cash to the Participant. In making any loan payment under this
ARTICLE, the Trustee shall be fully entitled to rely on the instructions
furnished by the Plan Administrator and shall be under no duty to make any
inquiry or investigation with respect thereto.
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13.5 Terms_of_Loan. Loans shall be made on such terms and subject
to such limitations as the Plan Administrator may prescribe.
Furthermore, any loan shall, by its terms, require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond five (5)
years from the date of the loan, unless such loan is used to acquire a
dwelling unit which, within a reasonable time (determined at the time the
loan is made) will be used as the principal residence of the Participant.
The rate of interest to be charged shall be determined by the Plan
Administrator in accordance with the rates quoted by representative
financial institutions in the local area for similar loans.
13.6 Security_for_Loan. Any loan to a Participant under the Plan
shall be secured by the pledge of all the Participant's right, title, and
interest in the Trust. Such pledge shall be evidenced by the execution
of a promissory note by the Participant which shall provide that, in the
event of any default by the Participant on a loan repayment, the Plan
Administrator shall be authorized (to the extent permitted by law) to
deduct the amount of the loan outstanding and any unpaid interest due
thereon from the Participant's wages or salary to be thereafter paid by
the Employer, and to take any and all other actions necessary and
appropriate to enforce collection of the unpaid loan. An assignment or
pledge of any portion of the Participant's interest in the Plan and a
loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this section.
In the event the value of the Participant's vested Account at any time is
less than one hundred twenty- five percent (125%) of the outstanding loan
balance, the Plan Administrator shall request additional collateral of
sufficient value to adequately secure the repayment of the loan. Failure
to provide such additional collateral upon a request of the Plan
Administrator shall constitute an event of default.
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13.7 Segregated_Investment. Loans shall be considered a
Participant directed investment and, for the limited purposes of
allocating earnings and losses pursuant to ARTICLE 5, shall not be
considered a part of the common fund under the Trust.
13.8 Repayment_of_Loan. The Plan Administrator shall have the sole
responsibility for ensuring that a Participant timely makes all loan
repayments, and for notifying the Trustee in the event of any default by
the Participant on the loan. Each loan repayment shall be paid to the
Trustee and shall be accompanied by written instructions from the Plan
Administrator that identify the Participant on whose behalf the loan
repayment is being made.
13.9 Default_on_Loan.
(a) In the event of a termination of the Participant's
employment with the Affiliated Employers or a default by a Participant on
a loan repayment, all remaining payments on the loan shall be immediately
due and payable. The Employer shall, upon the direction of the Plan
Administrator, to the extent permitted by law, deduct the total amount of
the loan outstanding and any unpaid interest due thereon from the wages
or salaries payable to the Participant by the Employer in accordance with
the Participant's promissory note. In addition, the Plan Administrator
shall take any and all other actions necessary and appropriate to enforce
collection of the unpaid loan. However, attachment of the Participant's
Account pledged as security will not occur until a distributable event
occurs under the Plan.
(b) For purposes of this section, the term "default" shall
mean failure, by a period of at least ten (10) days, to make any loan
payment (whether principal or interest or both) that is due and payable.
Neither the Plan Administrator nor any other fiduciary is required to give
any written or oral notice of default.
13.10 Unpaid_Amounts. Upon the occurrence of a Participant's
retirement or death, or upon a Participant's fifth consecutive Break in
Service or earlier distribution, the unpaid balance of any loan, including
any unpaid interest, shall be deducted from any payment or distribution
from the Trust to which such Participant or his Beneficiary may be
entitled. If after charging the Participant's Account with the unpaid
balance of the loan, including any unpaid interest, there still remains
an unpaid balance of any such loan and interest, then the remaining unpaid
balance of such loan and interest shall be charged against any property
pledged as security with respect to such loan.
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ARTICLE 14
INSURANCE
14.1 Insurance. If the Adoption Agreement so provides and the
Employer elects to allocate or permit Participants to allocate a portion
of their Accounts to purchase life insurance, the ensuing subsections of
this ARTICLE shall apply.
14.2 Policies. The Plan Administrator shall instruct the Trustee
to procure one or more life insurance policies on the Participant's life,
the terms of which shall conform to the requirements of the Plan and the
Code. The policies and the companies which write them shall be subject
to the approval of the Plan Administrator and the Trustee. The Trustee
shall procure and hold such policies in its name or the name of the
nominee. The Trustee shall be the sole owner of all contracts purchased
hereunder, and it shall be so designated in each policy and application
therefor.
14.3 Beneficiary. The Participant shall have the right to name the
Beneficiary and to choose the benefit option under the policy for the
Beneficiary. The Trustee shall designate the Beneficiary of all such
policies in accordance with the written directions of the Plan Adminis-
trator and the policy terms. Such designations may be outlined in the
original application as forwarded to the issuing company. However, the
Plan Administrator shall have available and shall furnish the Participant
with the necessary forms for any Beneficiary designation or change of
Beneficiary and it will keep a copy of all executed designations as part
of its records. Upon a Participant's death, the Plan Administrator will
promptly furnish the Trustee a copy of the last designation and shall
authorize the Trustee to complete such forms as the insurance company may
require in order to effect the benefit option.
14.4 Payment_of_Premiums. Subject to the provisions of sections
7.3 and 14.5, premium payments to the insurer may be made only by the
Trustee with respect to any insurance policy purchased on behalf of a
Participant and shall constitute first an investment of a portion of the
funds of the Participant's Employer Contribution subaccounts up to the
maximum amount of such subaccounts permitted to be applied toward such
premium payments, as provided in section 14.5. If a Participant's
subaccounts lack sufficient assets to pay premiums on a life insurance
policy due on his behalf, the Trustee, at the direction of the Plan
Administrator, acting upon the request of the Participant, shall borrow
under the policy loan provisions, if any, the amount necessary to pay such
premiums, using the cash value of the insurance as security, or the
Trustee may liquidate assets held in the Participant's Account, in the
same order, of sufficient value to pay such premiums. Any loans shall be
repaid by the application of earnings, contributions, or forfeitures to
the Account of the Participant insured by such policy. In the absence of
the Plan Administrator's direction to borrow or to liquidate assets to pay
premiums, the life insurance policy shall be put on a paid-up basis or,
if it has no cash value, cancelled.
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14.5 Limitation_on_Insurance_Premiums. The Trustee shall not pay,
nor shall anyone on behalf of the Trustee pay, any life insurance premium
for any Participant out of the Participant's Employer Contribution
subaccounts unless the amount of such payment, plus all premiums
previously so paid on behalf of the Participant, is less than fifty
percent (50%) of the Employer Contributions and forfeitures allocated to
the Participant's Employer Contribution subaccounts as determined on the
date such premium is paid with respect to reserve life insurance policies
and shall be less than twenty-five percent (25%) thereof with respect to
nonreserve (term) policies, or, if both reserve life and term insurance
are purchased on the life of any Participant, the sum of the term
insurance premium plus one-half (1/2) of the reserve life premiums may not
exceed twenty- five percent (25%) of the Employer Contributions made on
behalf of such Participant. For purposes of these incidental insurance
provisions, reserve life insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing premiums. Dividends
received on life insurance policies shall be considered a reduction of
premiums paid in such computations.
If payment of premiums on a Participant's life insurance
policy is prohibited because of the limitation, the Trustee, as directed
by the Plan Administrator, shall permit the Participant to maintain that
part of the coverage made available by the prohibited premiums, either by
payment of the amount of the prohibited premium by the Participant from
sources other than the Trust or by distributing the policy to the extent
of the Participant's vested interest to the Participant and eliminating
it from the Trust.
Nothing contained in the foregoing provisions of section 14.4
and this section shall be deemed to authorize the payment of any premium
or premiums for any Participant which would result in a failure to
maintain any mandatory investment in Shares required by the Sponsor in the
Account or subaccounts of any such Participant.
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14.6 Insurance_Company. No insurance company which may issue any
policies for the purposes of this Plan shall be required to take or permit
any action contrary to the provisions of said policies, nor shall such
insurance company be deemed to be a party to, or responsible for the
validity of, this Plan for any purpose. No such insurance company shall
be required to look into the terms of this Plan or question any action of
the Trustee hereunder, nor be responsible to see that any action of the
Trustee is authorized by the terms of this Plan. Any such issuing
insurance company shall be fully discharged from any and all liability for
any amount paid to the Trustee or paid in accordance with the direction
of the Trustee, as the case may be, or for any change made or action taken
by such insurance company upon such direction and no such insurance
company shall be obliged to see to the distribution or further application
of any monies paid by it. The certificate of the Trustee signed by one
of its trust officers, assistant secretary, or other authorized
representative thereof, may be received by any insurance company as
conclusive evidence of any of the matters mentioned in this Plan and any
insurance company shall be fully protected in taking or permitting any
action on the faith thereof and shall incur no liability or responsibility
for so doing.
14.7 Distribution_of_Policies. Upon a Participant's death, the
Trustee, upon direction of the Plan Administrator, shall procure the
payment of the proceeds of any policy held by the Participant in
accordance with its terms and this Plan. The Trustee shall be required
to pay over all the proceeds of any policy to the Participant's Designated
Beneficiary in accordance with the distribution provisions of this Plan.
A Participant's Spouse will be the Designated Beneficiary unless a
Qualified Election has been made in accordance with section 9.4(c) of the
Plan. Under no circumstances shall the Trust retain any part of the
proceeds. Subject to the joint and survivor annuity requirements of
ARTICLE 9, the policies shall be converted or distributed upon
commencement of benefits in accordance with the provisions of this
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section. Upon a Participant's retirement at or after his Normal
Retirement Age, unless there is a single sum distribution in which case
any policy shall be distributed, any such policy shall be converted to a
paid-up contract and delivered to the Participant but the Plan
Administrator may, with the Participant's consent, direct that a portion
or all of such cash value of the policy be converted to provide retirement
income as permitted within the terms of the policy and this Plan. Upon
a Participant's retirement due to Total and Permanent Disability, any such
policy shall be held for his account and assigned or delivered to the
Participant in addition to any other benefits provided by this Plan. Upon
a Participant's termination of employment for reasons other than death,
Total and Permanent Disability, or retirement as stated above, to the
extent of life insurance purchased by Employer Contributions, he shall be
entitled to a vested interest in any policy held for his account as his
interest is vested in the remainder of his Employer Contribution
subaccounts (exclusive of any such policy). Whenever the Participant is
entitled to one hundred percent (100%) vesting, then such policy shall be
assigned and delivered to the Participant in accordance with its terms and
the terms of the Plan. Whenever the Participant is entitled to vesting
of less than one hundred percent (100%), then the Participant shall be
entitled to a vested interest of the cash surrender value of any such
policy equal to his percent of vested interest in his Employer
Contribution subaccounts, exclusive of the policy, and one of the
following distribution procedures shall apply:
(a) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account is less than the amount
of his vested termination benefit exclusive of the policies, then, such
policy shall be assigned to the Participant and the remainder of the
Participant's vested interest in the Participant's Employer Contribution
subaccounts shall be reduced by the cash surrender value of the nonvested
portion of all policies, after which it shall be paid or distributed to
the Participant in accordance with the terms of the Plan; or
(b) If the nonvested portion of the cash surrender value of
all policies held for the Participant's Account exceeds the Participant's
vested interest in the Employer Contribution subaccount exclusive of such
policies, the Participant shall be given the opportunity to purchase such
policies by paying to the Trustee the amount of such excess within thirty
(30) days after notice to him of the amount to be paid. Upon receipt of
such payment said policy shall be assigned and delivered to the Partici-
pant to the full satisfaction of all termination benefits under this Plan.
Any such policy not so purchased shall be surrendered by the Trustee for
its cash value and the proceeds thereof deposited in the Trust for
reallocation pursuant to ARTICLE 5.
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It is the intention hereof that the total termination benefit
of a Participant whose interest is not fully vested shall be equal to the
sum of the vested percentage of his Employer Contribution subaccounts
exclusive of all such policies and the same percentage of the cash value
of all such policies held for his Account. To the extent possible under
the foregoing provisions, such total termination benefits shall be
satisfied by the transfer and delivery to the Participant of one or more
such policies with the balance, if any, to be paid in cash or in kind.
14.8 Policy_Features. The Trustee shall arrange, where possible,
that all policies purchased for the benefit of a Participant shall have
the same dividend option which shall be on the premium reduction plan, and
as nearly as may be possible all policies issued under the Plan shall have
the same anniversary date. To the extent any dividends or credits earned
on insurance policies are not applied toward the next premiums due, they
shall be allocated to the Participant's Employer Contribution subaccount
in the same manner as a Participant's directed investment.
14.9 Changed_Conditions. From time to time because of changed
conditions, the Trustee, acting at the direction of the Plan Administrator
upon the election of the Participant concerned, shall obtain an additional
contract or policy or make such change in the contracts or policies
maintained by the Trustee on the life of the Participant as may be
required by such changed conditions, within the limits permitted by the
insurance company which issued or is requested to issue a contract and the
limits established by this Plan.
14.10 Conflicts. In the event of any conflict between the terms
of the Plan and the provisions of any contract issued hereunder, the terms
of the Plan shall control.
ARTICLE 15
ADMINISTRATION
15.1 Duties_and_Responsibilities_of_Fiduciaries;
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Allocation_of_Fiduciary_Responsibility. A fiduciary of the Plan shall
have only those specific powers, duties, responsibilities, and obligations
as are explicitly given him under the Plan and Trust Agreement. In
general, the Employer shall have the sole responsibility for making
contributions to the Plan required under ARTICLE 4; appointing the Trustee
and the Plan Administrator; and determining the funds available for
investment under the Plan. The Plan Administrator shall have the sole
responsibility for the administration of the Plan, as more fully described
in section 15.2. It is intended that each fiduciary shall be responsible
only for the proper exercise of his own powers, duties, responsibilities,
and obligations under the Plan and Trust Agreement, and shall not be
responsible for any act or failure to act of another fiduciary. A
fiduciary may serve in more than one fiduciary capacity with respect to
the Plan.
15.2 Powers_and_Responsibilities_of_the_Plan_Adminis trator.
(a) Administration_of_the_Plan. The Plan Administrator
shall have all powers necessary to administer the Plan, including the
power to construe and interpret the Plan documents; to decide all
questions relating to an individual's eligibility to participate in the
Plan; to determine the amount, manner, and timing of any distribution of
benefits or withdrawal under the Plan; to approve and ensure the repayment
of any loan to a Participant under the Plan; to resolve any claim for
benefits in accordance with section 15.7; and to appoint or employ
advisors, including legal counsel; to render advice with respect to any
of the Plan Administrator's responsibilities under the Plan. Any
construction, interpretation, or application of the Plan by the Plan
Administrator shall be final, conclusive, and binding. All actions by the
Plan Administrator shall be taken pursuant to uniform standards applied
to all persons similarly situated. The Plan Administrator shall have no
power to add to, subtract from, or modify any of the terms of the Plan,
or to change or add to any benefits provided by the Plan, or to waive or
fail to apply any requirements of eligibility for a benefit under the
Plan.
(b) Records_and_Reports. The Plan Administrator shall be
responsible for maintaining sufficient records to reflect the Eligibility
Computation Periods in which an Employee is credited with one or more
Years of Service for purposes of determining his eligibility to
participate in the Plan, and the Compensation of each Participant for
purposes of determining the amount of contributions that may be made by
or on behalf of the Participant under the Plan. The Plan Administrator
shall be responsible for submitting all required reports and notifications
relating to the Plan to Participants or their Beneficiaries, the Internal
Revenue Service and the Department of Labor.
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(c) Furnishing_Trustee_with_Instructions. The Plan
Administrator shall be responsible for furnishing the Trustee with written
instructions regarding all contributions to the Trust, all distributions
to Participants in accordance with ARTICLE 10, all withdrawals by
Participants in accordance with ARTICLE 12, all loans to Participants in
accordance with ARTICLE 13 and all purchases of life insurance in
accordance with ARTICLE 14. In addition, the Plan Administrator shall be
responsible for furnishing the Trustee with any further information
respecting the Plan which the Trustee may request for the performance of
its duties or for the purpose of making any returns to the Internal
Revenue Service or Department of Labor as may be required of the Trustee.
(d) Rules_and_Decisions. The Plan Administrator may adopt
such rules as it deems necessary, desirable, or appropriate in the
administration of the Plan. All rules and decisions of the Plan
Administrator shall be applied uniformly and consistently to all
Participants in similar circumstances. When making a determination or
calculation, the Plan Administrator shall be entitled to rely upon
information furnished by a Participant or Beneficiary, the Employer, the
legal counsel of the Employer, or the Trustee.
(e) Application_and_Forms_for_Benefits. The Plan
Administrator may require a Participant or Beneficiary to complete and
file with it an application for a benefit, and to furnish all pertinent
information requested by it. The Plan Administrator may rely upon all
such information so furnished to it, including the Participant's or
Beneficiary's current mailing address.
(f) Facility_of_Payment. Whenever, in the Plan
Administrator's opinion, a person entitled to receive a payment of a
benefit or installment thereof is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial
affairs, as determined by a court of competent jurisdiction, it may direct
the Trustee to make payments to such person or to the legal representative
or to a relative or friend of such person for that person's benefit, or
it may direct the Trustee to apply the payment for the benefit of such
person in such manner as it considers advisable.
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15.3 Allocation_of_Duties_and_Responsibilities. The Plan
Administrator may, by written instrument, allocate among its members or
employees any of its duties and responsibilities not already allocated
under the Plan or may designate persons other than members or employees
to carry out any of the Plan Administrator's duties and responsibilities
under the Plan. Any such duties or responsibilities thus allocated must
be described in the written instrument. If a person other than an
Employee of the Employer is so designated, such person must acknowledge
in writing his acceptance of the duties and responsibilities allocated to
him.
15.4 Appointment_of_the_Plan_Administrator. The Employer shall
designate in the Adoption Agreement the Plan Administrator who shall
administer the Employer's Plan. Such Plan Administrator may consist of
an individual, a committee of two or more individuals, whether or not, in
either such case, the individual or any of such individuals are Employees
of the Employer, a consulting firm or other independent agent, the Trustee
(with its consent), or the Employer itself. The Plan Administrator shall
be charged with the full power and the responsibility for administering
the Plan in all its details. If no Plan Administrator has been appointed
by the Employer, or if the person designated as Plan Administrator by the
Employer is not serving as such for any reason, the Employer shall be
deemed to be the Plan Administrator of the Plan. The Plan Administrator
may be removed by the Employer, or may resign by giving notice in writing
to the Employer, and in the event of the removal, resignation, or death,
or other termination of service by the Plan Administrator, the Employer
shall, as soon as practicable, appoint a successor Plan Administrator,
such successor thereafter to have all of the rights, privileges, duties,
and obligations of the predecessor Plan Administrator.
15.5 Expenses. The Employer shall pay all expenses authorized and
incurred by the Plan Administrator in the administration of the Plan
except to the extent such expenses are paid from the Trust.
15.6 Liabilities. The Plan Administrator and each person to whom
duties and responsibilities have been allocated pursuant to section 15.3
may be indemnified and held harmless by the Employer with respect to any
alleged breach of responsibilities performed or to be performed hereunder.
The Employer and each Affiliated Employer shall indemnify and hold
harmless the Sponsor against all claims, liabilities, fines, and
penalties, and all expenses reasonably incurred by or imposed upon him
(including, but not limited to, reasonable attorney's fees) which arise
as a result of actions or failure to act in connection with the operation
and administration of the Plan.
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15.7 Claims_Procedure.
(a) Filing_a_Claim. Any Participant or Beneficiary under
the Plan may file a written claim for a Plan benefit with the Plan
Administrator or with a person named by the Plan Administrator to receive
claims under the Plan.
(b) Notice_of_Denial_of_Claim. In the event of a denial or
limitation of any benefit or payment due to or requested by any
Participant or Beneficiary under the Plan ("claimant"), claimant shall be
given a written notification containing specific reasons for the denial
or limitation of his benefit. The written notification shall contain
specific reference to the pertinent Plan provisions on which the denial
or limitation of his benefit is based. In addition, it shall contain a
description of any other material or information necessary for the
claimant to perfect a claim, and an explanation of why such material or
information is necessary. The notification shall further provide
appropriate information as to the steps to be taken if the claimant wishes
to submit his claim for review. This written notification shall be given
to a claimant within ninety (90) days after receipt of his claim by the
Plan Administrator unless special circumstances require an extension of
time for processing the claim. If such an extension of time for
processing is required, written notice of the extension shall be furnished
to the claimant prior to the termination of said ninety (90) day period,
and such notice shall indicate the special circumstances which make the
postponement appropriate.
(c) Right_of_Review. In the event of a denial or limitation
of his benefit, the claimant or his duly authorized representative shall
be permitted to review pertinent documents and to submit to the Plan
Administrator issues and comments in writing. In addition, the claimant
or his duly authorized representative may make a written request for a
full and fair review of his claim and its denial by the Plan
Administrator; provided, however, that such written request must be
received by the Plan Administrator (or its delegate to receive such
requests) within sixty (60) days after receipt by the claimant of written
notification of the denial or limitation of the claim. The sixty (60) day
requirement may be waived by the Plan Administrator in appropriate cases.
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(d) Decision_on_Review. A decision shall be rendered by the
Plan Administrator within sixty (60) days after the receipt of the request
for review, provided that where special circumstances require an extension
of time for processing the decision, it may be postponed on written notice
to the claimant (prior to the expiration of the initial sixty (60) day
period) for an additional sixty (60) days, but in no event shall the
decision be rendered more than one hundred twenty (120) days after the
receipt of such request for review. Any decision by the Plan Adminis-
trator shall be furnished to the claimant in writing and shall set forth
the specific reasons for the decision and the specific Plan provisions on
which the decision is based.
(e) Court_Action. No Participant or Beneficiary shall have
the right to seek judicial review of a denial of benefits, or to bring any
action in any court to enforce a claim for benefits prior to filing a
claim for benefits or exhausting his rights to review under this section.
ARTICLE 16
AMENDMENT, TERMINATION AND MERGER
16.1 Sponsor's_Power_to_Amend. The Sponsor may amend any part of
the Plan. For purposes of Sponsor's amendments, the mass submitter shall
be recognized as the agent of the Sponsor. If the Sponsor does not adopt
the amendments made by the mass submitter, it will no longer be identical
to or a minor modifier of the mass submitter plan.
16.2 Amendment_by_Adopting_Employer.
(a) The Employer may:
(i) change the choice of options in the Adoption
Agreement;
(ii) add overriding language in the Adoption Agreement
when such language is necessary to satisfy section 415 or section 416 of
the Code because of the required aggregation of multiple plans; and
(iii) add certain model amendments published by the
Internal Revenue Service which specifically provide that their adoption
will not cause the Plan to be treated as individually designed.
(b) An Employer that amends the Plan for any other reason,
including a waiver of the minimum funding requirement under section 412(d)
of the Code, will no longer participate in this prototype plan and will
be considered to have an individually designed plan.
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<PAGE>
16.3 Vesting_Upon_Plan_Termination. In the event of the
termination or partial termination of the Plan, the Account balance of
each affected Participant will be nonforfeitable.
16.4 Vesting_Upon_Complete_Discontinuance_of_Contribu tions. In
the event of a complete discontinuance of contributions under the Plan,
the Account balance of each affected Participant will be nonforfeitable.
16.5 Maintenance_of_Benefits_Upon_Merger. In the event of a merger
or consolidation with, or transfer of assets to any other plan, each
Participant will receive a benefit immediately after such merger,
consolidation or transfer (if the Plan then terminated) which is at least
equal to the benefit the Participant was entitled to immediately before
such merger, consolidation or transfer (if the Plan had been terminated).
16.6 Special_Amendments. The Employer may from time to time make
any amendment to the Plan that may be necessary to satisfy section 415 or
416 of the Code. Any such amendment will be adopted by the Employer by
completing overriding Plan language in the Adoption Agreement. In the
event of such an amendment, the Employer must obtain a separate
determination letter from the Internal Revenue Service to continue
reliance on the Plan's qualified status.
ARTICLE 17
MISCELLANEOUS
17.1 Exclusive_Benefit_of_Participants_and_Beneficia ries.
(a) All assets of the Trust shall be retained for the
exclusive benefit of Participants and their Beneficiaries, and shall be
used only to pay benefits to such persons or to pay the fees and expenses
of the Trust. The assets of the Trust shall not revert to the benefit of
the Employer, except as otherwise specifically provided in section
17.1(b).
(b) To the extent permitted or required by ERISA and the
Code, contributions to the Trust under this Plan are subject to the
following conditions:
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(i) If a contribution or any part thereof is made to
the Trust by the Employer under a mistake of fact, such contribution or
part thereof shall be returned to the Employer within one (1) year after
the date the contribution is made.
(ii) In the event the Plan is determined not to meet
the initial qualification requirements of section 401 of the Code,
contributions made in respect of any period for which such requirements
are not met shall be returned to the Employer within one (1) year after
the Plan is determined not to meet such requirements, but only if the
application for the qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury may
prescribe.
(iii) Contributions to the Trust are specifically
conditioned on their deductibility under the Code and, to the extent a
deduction is disallowed for any such contribution, such amount shall be
returned to the Employer within one (1) year after the date of the
disallowance of the deduction.
17.2 Nonguarantee_of_Employment. Nothing contained in this Plan
shall be construed as a contract of employment between the Employer and
any Employee, or as a right of any Employee to be continued in the
employment of the Employer, or as a limitation of the right of the
Employer to discharge any of its Employees, with or without cause.
17.3 Rights_to_Trust_Assets. No Employee, Participant, or
Beneficiary shall have any right to, or interest in, any assets of the
Trust upon termination of employment or otherwise, except as provided
under the Plan. All payments of benefits under the Plan shall be made
solely out of the assets of the Trust.
17.4 Nonalienation_of_Benefits. No benefit or interest available
hereunder will be subject to assignment or alienation, either voluntarily
or involuntarily. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit payable
with respect to a Participant pursuant to a domestic relations order,
unless such order is determined to be a qualified domestic relations
order, as defined in section 414(p) of the Code, or any domestic relations
order entered before January 1, 1985.
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17.5 Aggregation_Rules.
(a) Except as provided in ARTICLE 6, all Employees of the
Employer or any Affiliated Employer will be treated as employed by a
single employer.
(b) If this Plan provides contributions or benefits for one
or more Owner-Employees who control both the business for which this Plan
is established and one or more other trades or businesses, this Plan and
the plan established for other trades or businesses must, when looked at
as a single plan, satisfy sections 401(a) and (d) of the Code for the
Employees of this and all other trades or businesses.
(c) If the Plan provides contributions or benefits for one
or more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses must be
included in a plan which satisfies sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable than provided
for Owner-Employees under this Plan.
(d) If an individual is covered as an Owner- Employee under
the plans of two or more trades or businesses which are not controlled and
the individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trades or businesses which
are controlled must be as favorable as those provided for him under the
most favorable plan of the trade or business which is not controlled.
(e) For purposes of paragraphs (b), (c) and (d), an Owner-
Employee, or two or more Owner-Employees, will be considered to control
a trade or business if the Owner- Employee, or two or more Owner-Employees
together:
(i) own the entire interest in an unincorporated
trade or business; or
(ii) in the case of a partnership, own more than fifty
percent (50%) of either the capital interest or the profits interest in
the partnership.
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For purposes of the preceding sentence, an Owner- Employee,
or two or more Owner-Employees shall be treated as owning an interest in
a partnership which is owned, directly or indirectly, by a partnership
which such Owner- Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
17.6 Failure_of_Qualification. If the Employer's plan fails to
attain or retain qualification, such plan will no longer participate in
this master/prototype plan and will be considered an individually designed
plan.
17.7 Applicable_Law. Except to the extent otherwise required by
ERISA, as amended, this Plan shall be construed and enforced in accordance
with the laws of the state in which the Employer's principal place of
business is located, as specified in the Adoption Agreement.
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<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from its
Statement of Assets and Liabilities dated June 16, 1995 and is qualified
in its entirety by reference to such Statement of Assets and Liabilities.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-16-1995
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 150,000
<TOTAL-ASSETS> 150,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50,000
<TOTAL-LIABILITIES> 50,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
