------------------------------------------
401(k) Plan for Employees
of New England Business
Service, Inc.
Financial Statements for the
Years Ended June 28, 1997 and
June 29, 1996, and Supplemental Schedules
as of and for the Year Ended June 28, 1997
and Independent Auditors' Report
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF JUNE 28, 1997 AND JUNE 29, 1996 AND FOR
THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-8
SUPPLEMENTAL SCHEDULES AS OF JUNE 28, 1997 AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 9
Item 27d - Schedule of Reportable Transactions 10
Schedules required under the Employee Retirement Income Security Act of 1974,
other than the schedules listed above, are omitted because of the absence of
the conditions under which the schedules are required.
INDEPENDENT AUDITORS' REPORT
401(k) Plan for Employees of
New England Business Service, Inc.
We have audited the accompanying statements of net assets available for
benefits of the 401(k) Plan for the Employees of New England Business Service,
Inc. (the "Plan") (formerly Deferred Profit-Sharing and Employee Stock
Ownership Plan) as of June 28, 1997, and June 29, 1996, and the related
statements of changes in net assets available for benefits for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at June 28, 1997
and June 29, 1996, and the changes in its net assets available for benefits for
the years then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental
schedules, listed in the Table of Contents, are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These schedules are the responsibility
of the Plan's management. Such supplemental schedules have been subjected to
the auditing procedures applied in our audit of the basic 1997 financial
statements and, in our opinion, are fairly stated in all material respects when
considered in relation to the basic financial statements taken as a whole.
/S/Deloitte & Touche LLP,
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November 26, 1997
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 28, 1997 AND JUNE 29, 1996
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1997 1996
ASSETS:
Investments, at fair value:
Norwest Stable Return GIC Fund (common/collective Trust) $ 5,304,654 $ 4,797,148
New England Business Service, Inc. common stock
(180,543 shares in 1997 and 423,213 shares in 1996) 4,750,191 8,252,652
Equity income mutual funds 12,996,220 9,694,290
Bond mutual fund 1,111,058 1,009,913
Norwest money market fund 1,973,023 11,263
Loans to participants 664,284 528,881
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Total investments 26,799,430 24,294,147
Cash 5,811,095 41,716
Receivables - accrued income 950 208
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NET ASSETS AVAILABLE FOR BENEFITS $ 32,611,475 $ 24,336,071
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See notes to financial statements.
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401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED JUNE 28, 1997 AND JUNE 29, 1996
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1997 1996
ADDITIONS:
Employee contributions $ 2,886,980 $ 3,003,685
Rollover contributions 210,260 185,889
Employer contributions 1,065,005 1,128,779
Net appreciation in fair value of investments 5,683,030 1,115,488
Interest and dividend income 691,990 556,596
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Total additions 10,537,265 5,990,437
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DEDUCTIONS:
Distributions to participants 2,237,320 2,228,608
Administrative fees 24,541 27,248
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Total deductions 2,261,861 2,255,856
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NET INCREASE 8,275,404 3,734,581
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 24,336,071 20,601,490
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End of year $ 32,611,475 $ 24,336,071
============ ============
See notes to financial statements.
-3-
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN
The following brief description of the 401(k) Plan for Employees of New England
Business Service, Inc. (the "Plan") (formerly the Deferred Profit-Sharing and
Employee Stock Ownership Plan) provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
Plan's provisions.
General Information - On October 26, 1984, New England Business Service, Inc.
("NEBS" or the "Company") adopted a deferred profit-sharing and stock ownership
plan. The Plan became effective as of June 30, 1984. On July 1, 1993, the
Plan was amended to incorporate provisions of Section 401(k) of the Internal
Revenue Code. The Plan is designed to allow eligible employees to accumulate
savings for retirement in the Plan without paying income taxes until the
savings are actually received. Employees may elect to defer receipt of a
portion of their eligible pay by having such amounts paid into the Plan. If an
employee chooses to defer payment of this eligible pay, the Company will make
an additional contribution to the Plan on the employee's behalf. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
Eligibility - To be eligible for participation in the Plan, an employee must
complete one year of defined service (and, in the case of retail employees,
also attain age 21) and elect participation in writing. Officers and directors
of the Company who are full-time employees and meet the foregoing eligibility
requirements are eligible for participation.
Administration of the Plan - The Plan is administered by the NEBS Retirement
Committee (the "Plan Committee"), whose members are appointed by the Board of
Directors of the Company. The Trustee of the Plan is Norwest Bank Minnesota,
N.A. ("Norwest"). Certain administrative costs of the Plan have been assumed
by the Company.
Company Contributions - When an employee makes a deferral, the Company will
make a matching contribution of cash or shares of its common stock. The
matching contribution is equal in value to one-half of the amount of the
deferral but not to exceed 6% of the non-retail employee's eligible pay, and
equal in value to 100% of the amount of the deferral but not to exceed 5% of
the employee's eligible pay for retail employees.
Employee Contributions - Eligible employees must complete a notice of election
to become participants and must elect to defer receipt of a portion (in
multiples of 1%) of their eligible pay as defined by the Plan. The deferral
may not exceed 15% of a participant's eligible pay. A participant may
change the size of future deferrals by giving notice 30 days before the start
of any fiscal quarter to the Plan Committee.
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1. DESCRIPTION OF THE PLAN (CONTINUED)
Loans to Participants - Eligible participants may apply for and obtain a loan
in an amount as defined in the Plan (not less than $1,000 and not greater than
$50,000 or 50% of their vested balance). Loans bear a market rate of interest
equal to the prime lending rate plus 2 percentage points, as published in The
Wall Street Journal. The loan must be for a nonrenewable term of no more than
five years and repaid by regular payroll deductions. Payments of principal and
interest are credited to the participant's account. Only one loan will be
allowed to a participant at any given time. The loans are collateralized by
50% of the participant's vested account balance.
Investment of Contributions - Company matching contributions are invested in
Company common stock. Employee contributions are invested at the direction of
the employee in any combination of the following: (1) Company common stock;
(2) three mutual funds; (3) fixed income investments such as investment
contracts providing a guaranteed interest rate; or (4) any other investments
subsequently authorized by the Plan Committee. Dividends, interest and other
distributions received in any fund with respect to any type of contribution are
reinvested in the same fund. In the absence of directions by the employee
concerning investment of employee contributions, they are invested in the fixed
income fund.
Vesting - Participants are fully vested with respect to deferrals and Company
contributions made pursuant to the Plan.
Withdrawals and Distributions - Contributions to the Plan from all sources, and
earnings thereon, are generally payable at termination of employment due to
retirement, disability, death or any other reason. Distribution payments may
be made in cash in a lump sum, in whole shares of Company common stock held in
the employee's account in the Plan with the value of fractional shares paid in
cash, or in installments for a period not exceeding the employee's life
expectancy or the joint life expectancies of the employee and beneficiary, up
to a maximum of fifteen years. The form of distribution is elected in writing
by the employee.
Withdrawals prior to termination of employment are subject to certain
limitations and restrictions.
Participants' Accounts - An account is set up in the name of each participant
to record employee and Company matching contributions made on the participant's
behalf and other transactions that occur in connection with the employee's
participation in the Plan. Each fiscal quarter, participants receive a
statement of account, listing contributions, number of shares of Company common
stock in the account and the market value of the funds in the account.
Plan Amendment and Termination - The Company has the right to
amend, suspend or terminate the Plan, but may not do so in a way
which would divest a participant of accrued benefits. If the
Plan is terminated, the Trustee will distribute the assets held
in the Trust, after payment of expenses, in such a manner as the
Plan Committee shall determine and as may be required by law.
-5-
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting - The financial statements of the Plan are prepared on the
accrual basis of accounting. Purchases and sales of securities are recorded on
the trade-date basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the plan administrator to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results may differ from those estimates.
Investments - Investments are stated at fair value based on quoted market
prices.
Distributions to Participants - Distributions to participants are recorded when
paid.
Reclassifications - Certain amounts reported in the prior year have been
reclassified to conform to current year presentation.
3. INVESTMENTS
Investments that represent 5% or more of net assets available for benefits as
of June 28, 1997 and June 29, 1996 are as follows:
1997 1996
Norwest Stable Return GIC Fund
(common/collective Trust) $5,304,654 $4,797,148
Fidelity Balanced Fund 5,246,614 4,088,728
Fidelity Contrafund 7,749,606 5,605,562
New England Business Service, Inc. common stock 4,750,191 8,252,652
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated in value by $5,683,030 and
$1,115,488, respectively, as follows:
1997 1996
At fair value based on quoted market prices:
Norwest Stable Return GIC Fund $ 316,224 $ 292,981
Fidelity Intermediate Bond Fund 5,075 (23,844)
Fidelity Balanced Fund 760,087 54,460
Fidelity Contrafund 1,400,290 901,187
New England Business Service, Inc. common stock 3,201,354 (109,296)
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Total $5,683,030 $1,115,488
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The Plan's principal fund investments include the following:
Norwest Stable Return GIC Fund - A collective investment trust whose underlying
investments include guaranteed investment contracts.
Fidelity Balanced Fund - Fund invests in foreign and domestic equity and fixed
income securities.
Fidelity Contrafund - Fund invests in equity securities of U.S. and foreign
issuers, including those in emerging markets.
4. TAX STATUS OF THE PLAN
The Plan obtained its latest determination letter on February 12, 1996 in which
the Internal Revenue Service stated that Plan, as then designed, was in
compliance with applicable requirements of the Internal Revenue Code (the
"Code"). The plan administrator believes that the Plan is currently designed
and being operated in compliance with applicable requirements of the Code.
Accordingly, no provision for income taxes has been included in these financial
statements.
5. SUBSEQUENT EVENT
The Plan was amended effective July 1, 1997 to provide for Company
contributions equal to 3% of eligible compensation, changes to Company matching
contributions, expanded investment options and new vesting schedules for
Company and Company matching contributions.
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6. BY-FUND INFORMATION
Investment income, contributions, benefits paid and net appreciation (depreciation) for the years ended
June 28, 1997 and June 29,1996 are as follows:
1997
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Net
Interest Appreciation
and Distributions in Fair Value
Dividend Contributions Employee Rollover to of
Income Employer Contributions Contributions Participants Investments
Norwest Stable Return Fund $ - $ $ 614,472 $ 70,570 $ 342,861 $ 316,224
Fidelity Intermediate Bond Fund 62,509 192,739 224 23,330 5,075
Fidelity Balanced Fund 208,455 688,915 62,091 260,798 760,087
Fidelity Contrafund 58,113 1,151,653 60,295 477,331 1,400,280
Stock Fund (a) 362,813 1,065,005 239,201 17,080 693,716 3,201,134
Other Investments - 439,284
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$ 691,990 $1,065,005 $2,886,980 $ 210,260 $2,237,320 $ 5,683,030
========== ========== ========== ========== ========== ===========
1996
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Net
Interest Appreciation
and Distributions in Fair Value
Dividend Contributions Employee Rollover to of
Income Employer Contributions Contributions Participants Investments
Norwest Stable Return Fund $ - $ $ 672,673 $ 26,819 $ 494,533 $ 292,981
Fidelity Intermediate Bond Fund 55,267 203,144 19,537 31,221 (23,844)
Fidelity Balanced Fund 172,188 756,020 43,119 340,900 54,460
Fidelity Contrafund 10,033 1,062,636 92,075 320,261 901,187
Stock Fund (a) 319,108 1,128,779 309,212 4,339 742,774 (109,296)
Other Investments - 298,919
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$ 556,596 $1,128,779 $3,003,685 $ 185,889 $2,228,608 $ 1,115,488
========== ========== ========== ========== ========== ===========
/TABLE>
(a) Includes NEBS common stock, money market fund and interest receivable.
-8-
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JUNE 28, 1997
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<CAPTION
c) Description of Investment, Including
b) Identity of Issue, Borrower, Maturity Date, Interest Rate, e) Current
a) Lessor, or Similar Party Collateral and Par or Maturity Value d) Cost Value
* Norwest Stable Return GIC Fund Collective Trust
217,642 units $4,530,176 $5,304,654
Fidelity Intermediate Bond Fund Bond Mutual Fund
110,884 shares 1,112,127 1,111,058
Fidelity Balanced Fund Equity Income Mutual Fund
337,402 shares 4,402,333 5,246,614
Fidelity Contrafund Equity Mutual Fund
168,068 shares 6,035,436 7,749,606
* Participant loans Maturity dates ranging from
1 - 5 years at varying interest rates
(prime plus 2%) 664,284 664,284
* New England Business Service, Inc. Common stock
180,543 shares 3,380,487 4,750,191
* Norwest Short-Term
Investment Fund Money market fund
1,973,023 shares 1,973,023 1,973,023
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TOTAL $ 22,097,866 $26,799,430
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* Represents party-in-interest to the Plan.
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401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED JUNE 30, 1997
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b) Description of Asset f) Expense h) Current
(Including Interest Incurred Value of i) Net
a) Identity of Rate and Maturity in c) Purchase d) Selling e) Lease With g) Cost of Asset on Gain
Party Involved Case of a Loan) Price Price Rental Transaction Asset Transaction (loss)
Date
Single
Transaction
NEBS Common Stock $ - $3,193,733 $ - $ - $2,322,751 $3,193,733 $870,982
NEBS Common Stock - 2,579,074 - - 1,872,446 2,579,074 706,628
Series of
Transactions
Fidelity
Contrafund Equity Income Fund $1,922,105 $ - $ - $ - $1,922,105 $1,922,105 $ -
NEBS Stock Fund - 8,763,076 - - 6,411,952 8,763,076 2,351,124
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