------------------------------------------
401(k) Plan for Employees
of New England Business
Service, Inc.
Financial Statements for the
Years Ended June 27, 1998 and
June 28, 1997, and Supplemental Schedules
as of and for the Year Ended June 27, 1998
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 27, 1998 AND JUNE 28, 1997 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 4-9
SUPPLEMENTAL SCHEDULES AS OF JUNE 27, 1998 AND FOR THE YEAR THEN ENDED:
Item 27a - Schedule of Assets Held for Investment Purposes 10
Item 27d - Schedule of Reportable Transactions 11
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") as of June 27, 1998, and June 28, 1997, 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 27, 1998
and June 28, 1997, 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 1998 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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December 18, 1998
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
JUNE 27, 1998 AND JUNE 28, 1997
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1998 1997
ASSETS:
Investments, at fair value:
Norwest Stable Return GIC Fund (common/collective trust) $ 7,646,763 $ 5,304,654
New England Business Service, Inc. common stock
(389,701 shares in 1998 and 180,543 shares in 1997) 12,567,847 4,750,191
Equity mutual funds 34,271,207 12,996,220
Bond mutual funds 2,340,342 1,111,058
Norwest money market fund 371,725 1,973,023
Loans to participants 1,662,157 664,284
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Total investments 58,860,041 26,799,430
Cash 97,349 5,811,095
Receivables - accrued income 1,605 950
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NET ASSETS AVAILABLE FOR BENEFITS $ 58,958,995 $ 32,611,475
============= ============
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 27, 1998 AND JUNE 28, 1997
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1998 1997
ADDITIONS:
Employee contributions $ 6,608,078 $ 2,886,980
Rollover contributions 11,395,278 210,260
Employer contributions 3,836,351 1,065,005
Net appreciation in fair value of investments 6,933,780 5,683,030
Interest and dividend income 811,639 691,990
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Total additions 29,585,126 10,537,265
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DEDUCTIONS:
Benefits paid to participants 3,195,351 2,237,320
Administrative fees 42,255 24,541
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Total deductions 3,237,606 2,261,861
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NET INCREASE 26,347,520 8,275,404
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 32,611,475 24,336,071
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End of year $ 58,958,995 $ 32,611,475
============ ============
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") provides general information only.
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 monies
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"). The plan was last amended effective as of July 1, 1997.
Eligibility - Regular Employees are eligible to participate in the Plan the
first day of the month following the date of hire. For Non-Regular Employees
(temporary or limited term employees) the employee must complete one year of
eligibility service (1,000 hours of service). 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. If the
employee has less than five years of service, the matching contribution is
equal in value to one-half of the amount of the deferral but not to exceed 6%
of the employee's eligible pay. If the employee has greater than five years of
service, the matching contribution is equal in value to 100% of the amount of
the deferral but not to exceed 6% of the employee's eligible pay. In addition,
the
Company contributes 3% of an employee's eligible salary, even if the employee
does not contribute to the Plan.
Employee Contributions - Eligible employees must complete a notice of election
to become participants and may 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 rate of future deferrals through the Norwest Benefits Helpline. The
change is effective the first of the following month.
-4-
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 to exceed the
lessor of $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 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)
six 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. Employees have the option to move the
Company contribution from Company common stock to any of the six mutual funds.
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 employee contributions.
Company contributions made pursuant to the Plan subsequent to July 1, 1997 are
vested 20% after completing one year of service, 50% after completing two years
of service and 100% vested after completing three years of service. All
Company contributions prior to July 1, 1997 are 100% vested. All forfeitures
are used to reduce future employer contributions.
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.
3. INVESTMENTS
Investments that represent 5% or more of net assets available for benefits as
of June 27, 1998 and June 28, 1997 are as follows:
1998 1997
Norwest Stable Return GIC Fund
(common/collective Trust) $7,646,763 5,304,654
Fidelity Balanced Fund - 5,246,614
Fidelity Contrafund 11,450,790 7,749,606
New England Business Service, Inc. common stock 12,567,847 4,750,191
Dodge and Cox Balanced Fund 7,644,785 -
Vanguard Index Trust 500 Fund 8,863,846 -
Norwest Small Cap Opportunies Fund 3,953,796 -
-6-
3. INVESTMENTS (CONTINUED)
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) appreciated in value by $6,933,780 and
$5,683,030, respectively, as follows:
1998 1997
At fair value based on quoted market prices:
Norwest Stable Return GIC Fund $ 440,233 $ 316,224
Fidelity Intermediate Bond Fund 3,343 5,075
Fidelity Balanced Fund 84,347 760,087
Fidelity Contrafund 2,371,456 1,400,290
New England Business Service, Inc. common stock 1,333,761 3,201,354
Strategic Income Fund 153,782 -
Dodge & Cox Balanced Fund 600,490 -
Vanguard Index Trust 500 Fund 1,548,529 -
Norwest Small-Cap Opportunities Fund 302,610 -
Euro-Pacific Growth Fund 95,229 -
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Total $6,933,780 $5,683,030
========== ==========
The Plan's principal investments include the following:
Norwest Stable Return GIC Fund - A collective investment trust whose underlying
investments include guaranteed investment contracts.
Dodge & Cox Balanced Fund - Fund invests in both equity securities and
convertible bonds.
Vanguard Index Trust 500 Fund - Fund invests in equity securities of large
domestic companies that comprise the Standard & Poor's 500 Index.
Norwest Small-Cap Opportunities Fund - Fund invests solely in investment assets
of smaller companies.
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.
New England Business Service, Inc. Common Stock - Invests solely in common
stock of New England Business Service, Inc.
-7-
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 has subsequently been amended, however 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.
-8-
5. BY-FUND INFORMATION
Interest and dividend income, contributions, benefits paid and net appreciation for the years ended
June 27, 1998 and June 28,1997 are as follows:
Net
Interest Benefits Appreciation
and Paid in Fair Value
Dividend Employer Participant Rollover to of
Income Contributions Contributions Contributions Participants Investments
1998
Norwest Stable Return Fund $ - $ - $ 540,022 $ 2,056,134 $ 479,929 $ 440,233
Fidelity Intermediate Bond Fund 6,264 - - - - 3,343
Fidelity Balanced Fund - - - - - 84,347
Fidelity Contrafund 59,856 - 897,442 2,016,450 495,804 2,371,456
Stock Fund (a) 282,822 3,836,351 1,056,096 841,276 648,673 1,333,761
Strategic Income Fund 87,924 - 182,483 754,503 118,616 153,782
Dodge & Cox Balanced Fund 174,191 - 571,845 2,026,607 454,237 600,490
Vanguard Index Trust 500 Fund 75,962 - 908,535 2,060,189 222,972 1,548,529
Norwest Small-Cap Opportunities Fund 83,658 - 501,216 973,562 139,624 302,610
Euro-Pacific Growth Fund 40,962 - 378,767 666,557 61,696 95,229
Other Investments - - 1,571,672 - 573,800 -
---------- ---------- ---------- ---------- ---------- -----------
$ 811,639 $3,836,351 $6,608,078 $11,395,278 $3,195,351 $ 6,933,780
========== ========== ========== ========== ========== ===========
1997
Norwest Stable Return Fund $ - $ - $ 614,472 $ 70,570 $ 342,861 $ 316,224
Fidelity Intermediate Bond Fund 62,609 - 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 1,400,290
Stock Fund (a) 362,813 1,065,005 239,201 17,080 693,716 3,201,354
Other Investments - - - - 439,284 -
---------- ---------- ---------- ---------- ---------- -----------
$ 691,990 $1,065,005 $2,886,980 $ 210,260 $2,237,320 $ 5,683,030
========== ========== ========== ========== ========== ===========
(a) Includes NEBS common stock, money market fund and interest receivable.
-9-
401(k) PLAN FOR EMPLOYEES OF
NEW ENGLAND BUSINESS SERVICE, INC.
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JUNE 27, 1998
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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, 295,116 shares $ 6,756,690 $ 7,646,763
Fidelity Contrafund Equity Mutual Fund, 209,683 shares 8,563,194 11,450,790
* Participant loans Maturity dates ranging from 1,662,157 1,662,157
1 - 5 years at varying interest rates
(prime plus 2%)
* New England Business Service, Inc. Common Stock, 389,701 shares 9,742,715 12,567,847
* Norwest Short-Term Money market fund, 371,725 shares 371,725 371,725
Investment Fund
Strategic Income Fund Bond Mutual Fund, 117,842 shares 2,253,583 2,340,342
Dodge & Cox Balanced Fund Equity Mutual Fund, 110,171 shares 7,457,397 7,644,785
Vanguard Index Trust 500 Fund Equity Mutual Fund, 84,177 shares 7,456,248 8,863,846
* Norwest Small-Cap Opportunities Fund Equity Mutual Fund, 167,251 shares 3,712,362 3,953,796
Euro-Pacific Growth Fund Equity Mutual Fund, 81,748 shares 2,335,672 2,357,990
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TOTAL $ 50,311,743 $58,860,041
============ ===========
* 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 27, 1998
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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
Norwest Stable Equity Income Mutual $ 1,883,220 - - - $ 1,883,220 $ 1,883,220 -
Return Fund Funds
Fidelity Balanced Equity Income Mutual - $ 5,330,950 - - 4,402,323 5,330,950 $928,627
Fund Funds
NEBS Common Stock 3,194,683 - - - 3,194,683 3,194,683 -
NEBS Common Stock - 3,823,984 - - 3,823,984 3,823,984 -
Dodge & Cox Equity Income Mutual 4,817,839 - - - 4,817,839 4,817,839 -
Balanced Fund Funds
Dodge & Cox Equity Income Mutual 1,877,194 - - - 1,877,194 1,877,194 -
Balanced Fund Funds
Vanguard Index Equity Income Mutual 3,974,764 - - - 3,974,764 3,974,764 -
Trust 500 Fund Funds
Vanguard Index Equity Income Mutual 1,714,932 - - - 1,714,932 1,714,932 -
Trust 500 Fund Funds
Norwest Small-Cap Equity Income Mutual 2,170,698 2,170,698 2,170,698 -
Opportunities Fund Funds
Series of Transactions
Norwest Stable Equity Income Mutual 4,685,872 - - - 4,685,872 4,685,872 -
Return Fund Funds
Norwest Stable Equity Income Mutual - 2,708,177 - - 2,387,433 2,708,177 320,744
Return Fund Funds
Fidelity Equity Income Mutual 4,160,996 - - - 4,160,996 4,160,996 -
Contrafund Funds
Fidelity Equity Income Mutual - 2,029,694 - - 1,574,549 2,029,694 455,145
Contrafund Funds
NEBS Common Stock 7,564,724 - - - 7,564,724 7,564,724 -
NEBS Common Stock 2,346,855 - - - 2,346,855 2,346,855 -
NEBS Common Stock - 9,166,022 - - 9,166,022 9,166,022 -
Strategic Income Equity Income Mutual 2,713,290 - - - 2,713,290 2,713,290 -
Fund Funds
Dodge & Cox Equity Income Mutual 8,250,801 - - - 8,250,801 8,250,801 -
Balanced Fund Funds
Vanguard Index Equity Income Mutual 8,869,307 - - - 8,869,307 8,869,307 -
Trust 500 Fund Funds
Norwest Small-Cap Equity Income Mutual 4,794,561 - - - 4,794,561 4,794,561 -
Opportunities Fund Funds
Euro-Pacific Equity Income Mutual 3,406,115 - - - 3,406,115 3,406,115 -
Growth Fund Funds
- 11 -