SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES
OF R.J. REYNOLDS TOBACCO COMPANY
IN PUERTO RICO
INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 30, 1993 AND 1992
SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
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TABLE OF CONTENTS
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Page
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Independent Auditors' Report 1
Financial Statements:
Statements of Net Assets Available for Benefits
as of December 30, 1993 and 1992 2-3
Statements of Changes in Net Assets Available
for Benefits for the Years Ended December 30,
1993 and 1992 4-5
Notes to Financial Statements 6-11
INDEPENDENT AUDITORS' REPORT
- - ----------------------------
Board of Directors,
RJR Nabisco, Inc.:
We have audited the accompanying statements of net assets available for benefits
of the Savings and Investment Plan for Employees of R.J. Reynolds Tobacco
Company in Puerto Rico (the "Plan") as of December 30, 1993 and 1992, 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 as of December 30,
1993 and 1992, 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 performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Fund Information in the statements
of net assets available for benefits and the statements of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the statements of net assets available for benefits and the
statements of changes in net assets available for benefits of each fund. The
Fund Information has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
June 24, 1994
SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
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STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 30, 1993
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Fund Information
------------------------------------------------------------------------------------------------
General Growth Real Interest Preferred Common Government
Stock Stock Estate Income Stock Stock Securities
Fund Fund Fund Fund Fund Fund Fund Total
---------- ---------- -------- -------- -------- --------- -------- ------
ASSETS
Master Trust investments
at fair value
- Notes 1, 2, 3
Interest in commingled
funds $2,239,818 $ 932,568 $ 52,394 $3,420,629 $ ---- $ ---- $ 62,656 $6,708,065
Preferred Stock ---- ---- ---- ---- ---- ---- ---- ----
Common Stock ---- ---- ---- ---- ---- 369,083 ---- 369,083
Diversified Short-Term
Investment Fund ---- ---- ---- ---- ---- 2,569 ---- 2,569
--------- ---------- ------- -------- -------- --------- -------- ---------
Total Master Trust
Investment 2,239,818 932,568 52,394 3,420,629 ---- 371,652 62,656 7,079,717
--------- ---------- ------- --------- -------- --------- -------- ---------
Net investment income
receivable 9 5 ---- 12,296 ---- 20 18 12,348
--------- ---------- ------- --------- -------- --------- -------- ---------
NET ASSETS AVAILABLE
FOR BENEFITS $2,239,827 $ 932,573 $ 52,394 $3,432,925 $ ---- $371,672 $ 62,674 $7,092,065
========== ========== ======= ========= ======== ========= ======== =========
See notes to financial statements.
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SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
- - --------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 30, 1992
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Fund Information
-----------------------------------------------------------------------------
General Growth Real Interest Preferred Common Government
Stock Stock Estate Income Stock Stock Secutities
Fund Fund Fund Fund Fund Fund Fund Total
-------- -------- ---------- --------- ---------- ------- -------- ------
ASSETS
Master Trust investments at fair value
- Notes 1, 2 & 3
Interest in commingled funds $1,893,034 $ 808,264 $ 51,682 $3,215,067 $ ---- $ ---- $ 63,784 $6,031,831
Preferred Stock ---- ---- ---- ---- 1,203 ---- ---- 1,203
Common Stock ---- ---- ---- ---- ---- 352,213 ---- 352,213
Diversified Short-Term Investment
Fund ---- ---- ---- ---- 427 25,069 ---- 25,496
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Master Trust Investments 1,893,034 808,264 51,682 3,215,067 1,630 377,282 63,784 6,410,743
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income receivable (70) (81) 15 4,138 26 35 66 4,129
TOTAL ASSETS 1,892,964 808,183 51,697 3,219,205 1,656 377,317 63,850 6,414,872
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
Due to trustee for purchase
of investments ---- ---- ---- ---- ---- 22,094 ---- 22,094
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $1,892,964 $ 808,183 $ 51,697 $3,219,205 $ 1,656 $ 355,223 $ 63,850 $6,392,778
========== ========== ========== ========== ========== ========== ========== ==========
See notes to financial statements.
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SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
- - --------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 30, 1993
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Fund Information
-----------------------------------------------------------------------------
General Growth Real Interest Preferred Common Government
Stock Stock Estate Income Stock Stock Secutities
Fund Fund Fund Fund Fund Fund Fund Total
-------- -------- ---------- --------- ---------- ------- -------- ------
MASTER TRUST INVESTMENT
INCOME / (LOSS)
Net appreciation / (depreciation) in
fair value of investments -
Note 3 $ 216,409 $ 49,707 $ 1,300 $ 4,806 $ (29) $ (80,083) $ ---- $ 192,110
Interest and dividends, net of
administrative fees 69,901 18,722 (1,544) 214,530 14 (813) 1,830 302,640
-------- -------- --------- --------- --------- -------- -------- ---------
TOTAL MASTER TRUST INVESTMENT
INCOME / (LOSS) 286,310 68,429 (244) 219,336 (15) (80,896) 1,830 494,750
-------- -------- --------- --------- --------- -------- -------- ---------
CONTRIBUTIONS
Employee 342,420 227,718 17,952 695,716 ---- 204,683 12,128 1,500,617
Employer 87,156 61,214 5,196 182,099 ---- 55,888 3,591 395,144
-------- -------- --------- --------- --------- -------- -------- ---------
TOTAL CONTRIBUTIONS 429,576 288,932 23,148 877,815 ---- 260,571 15,719 1,895,761
-------- -------- --------- --------- --------- -------- -------- ---------
DEDUCTIONS
Employee withdrawals - Note 4 486,580 210,253 10,858 854,801 95 126,171 11,376 1,700,134
-------- -------- --------- --------- --------- -------- -------- ---------
Net interfund transfers 115,708 (22,718) (11,349) (35,691) (1,546) (37,055) (7,349) ----
-------- -------- --------- --------- --------- -------- -------- ---------
Transfers to the Plan - Note 6 1,849 ---- ---- 7,061 ---- ---- ---- 8,910
-------- -------- --------- --------- --------- -------- -------- ---------
Net increase (decrease) 346,863 124,390 697 213,720 (1,656) 16,449 (1,176) 699,287
NET ASSETS AVAIABLE FOR BENEFITS
AT BEGINNING OF YEAR 1,892,964 808,183 51,697 3,219,205 1,656 355,223 63,850 6,392,778
--------- -------- --------- --------- --------- -------- -------- ---------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 2,239,827 $ 932,573 $ 52,394 $3,432,925 $ ---- $ 371,672 $ 62,674 $7,092,065
========= ======== ========= ========= ========= ======== ======== =========
See notes to financial statements.
- 4 -
SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
- - --------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 30, 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
Fund Information
-----------------------------------------------------------------------------
General Growth Real Interest Preferred Common Government
Stock Stock Estate Income Stock Stock Secutities
Fund Fund Fund Fund Fund Fund Fund Total
-------- -------- ---------- --------- ---------- ------- -------- ------
MASTER TRUST INVESTMENT
INCOME / (LOSS)
Net appreciation / (depreciation) in
fair value of investments -
Note 3 $ 106,106 $ 39,176 $ (1,981) $ 8,050 $ (318) $ (56,408) $ ---- $ 94,625
Interest and dividends, net of
administrative fees 83,213 18,962 (1,764) 200,276 155 (255) 686 301,273
-------- -------- --------- --------- --------- -------- -------- ---------
TOTAL MASTER TRUST INVESTMENT
INCOME / (LOSS) 189,319 58,138 (3,745) 208,326 (163) (56,663) 686 395,898
-------- -------- --------- --------- --------- -------- -------- ---------
CONTRIBUTIONS
Employee 294,282 201,883 19,387 625,040 2,332 185,094 7,383 1,335,401
Employer 78,223 53,366 5,517 172,573 772 54,364 2,859 367,674
-------- -------- --------- --------- --------- -------- -------- ---------
TOTAL CONTRIBUTIONS 372,505 255,249 24,904 797,613 3,104 239,458 10,242 1,703,075
-------- -------- --------- --------- --------- -------- -------- ---------
DEDUCTIONS
Employee withdrawals - Note 4 359,999 142,448 7,981 660,514 81 55,181 272 1,226,476
-------- -------- --------- --------- --------- -------- -------- ---------
Net interfund transfers (1,152) (44,502) (7,137) (23,004) (8,453) 31,054 53,194 ----
-------- -------- --------- --------- --------- -------- -------- ---------
Net increase (decrease) 200,673 126,437 6,041 322,421 (5,593) 158,668 63,850 872,497
NET ASSETS AVAIABLE FOR BENEFITS
AT BEGINNING OF YEAR 1,692,291 681,746 45,656 2,896,784 7,249 196,555 ---- 5,520,281
--------- ------- --------- --------- --------- -------- -------- ---------
NET ASSETS AVAILABLE FOR BENEFITS
AT END OF YEAR $ 1,892,964 $ 808,183 $ 51,697 $3,219,205 $ 1,656 $ 355,223 $ 63,850 $6,392,778
========= ======== ========= ========= ========= ======== ======== =========
See notes to financial statements.
- 5 -
SAVINGS AND INVESTMENT PLAN FOR EMPLOYEES OF
R.J. REYNOLDS TOBACCO COMPANY IN PUERTO RICO
- - --------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN
The Savings and Investment Plan for Employees of R.J. Reynolds Tobacco
Company in Puerto Rico (the "Plan") is a voluntary defined contribution
plan for all regular, full-time employees of R.J. Reynolds Tobacco Company
(a Delaware Corporation) in Puerto Rico. The Plan was established
effective July 1, 1989 and is sponsored by R.J. Reynolds Tobacco Company (a
Delaware Corporation) (the "Company") an indirect subsidiary of RJR
Nabisco, Inc. ("RJRN"). Employees may contribute, through payroll
deductions, up to 16% of compensation. The Company makes matching
contributions to the Plan for each pay period equal to 50% of each
participant's basic contribution (basic contribution is 1% to 6% of
compensation). Forfeitures of non-vested Company contributions are used to
reduce future Company contributions to the Plan. As of January 1, 1992 the
Plan document was amended to allow pre-tax contributions. Although it has
not expressed any intent to do so, the Company has the right under the Plan
to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA. In the event of plan termination,
participants will become 100 percent vested in their accounts.
Under the provisions of the Plan, participating employees may elect to
invest their contributions in one or more of the following investment funds
(see explanation of commingled funds in Note 2 and changes in investment
options in Note 7):
General Stock Fund Diversified fund of primarily common
stocks selected to achieve long-term
capital growth and current income.
Growth Stock Fund Diversified fund of common stocks and
other securities selected to achieve
significant capital gains.
Real Estate Fund Pooled funds selected to achieve
stable long-term rates of return
through direct ownership of income
producing properties diversified
by usage and location.
Common Stock Fund Common stock issued by RJR Nabisco
Holdings Corp. ("Holdings").
Government Securities Fund Short-term U.S. Government
Securities that mature within one
year, with a maximum average
maturity of 90 days selected to
maximize current income that is
consistent with the preservation of
capital and liquidity. This fund
was opened to participant
contributions commencing in 1992.
-6-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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1. DESCRIPTION OF THE PLAN - CONTINUED
Direct transfers between the Government Securities Fund and the Interest
Income Fund are not allowed due to restrictions in the investment contracts
in the Interest Income Fund. During 1993 the Company was required to
liquidate the Preferred Stock Fund due to Securities and Exchange
Commission trading rules and restrictions and the relatively light trading
volume. As a result, balances in the Preferred Stock Fund were transferred
to the Government Securities Fund. These funds hold assets as follows:
Preferred Stock Fund Cumulative convertible preferred stock
issued by Holdings and convertible into
Holdings common stock.
Interest Income Fund Contracts issued by insurance companies
or financial institutions as well as one
to three year investment grade fixed
income securities. Contracts are
diversified by size, maturity, quality
and interest rate.
Information about the Plan agreement and the vesting and benefit provisions
is available from the RJR Employee Benefits Committee (the "Committee").
2. SIGNIFICANT ACCOUNTING POLICIES
Commingled Funds - The RJR Nabisco, Inc. Defined Contribution Master Trust
----------------
(the "Wachovia Trust") administers pooled assets and related liabilities
within various funds established on behalf of participating defined
contribution plans for employees of RJRN and affiliated companies. Each
participating defined contribution plan owns an interest in the fair value
of net assets held in the Wachovia Trust. The trustee and custodian of the
Wachovia Trust is Wachovia Bank of North Carolina, N.A. ("Wachovia").
Banco Popular de Puerto Rico was co-trustee of the Wachovia Trust through
July 30, 1993.
Effective July 30, 1993, the Wachovia Trust was amended to provide that
Wachovia no longer serves as co-trustee and the assets of the Plan are to
be held by Banco Popular de Puerto Rico as sole trustee (the "Trustee") of
the RJR Nabisco, Inc. Puerto Rico Defined Contribution Master Trust ("P.R.
Trust"). Wachovia serves as custodian for the P.R. Trust.
Valuation of Investments in Master Trust - All investments held by the
----------------------------------------
Wachovia Trust are valued at fair value (except unallocated insurance
contracts which are valued at contract value) as follows. Securities which
are traded on a national securities exchange are valued at the last
reported sales price on the last business day of the Plan year. Over-the-
counter investments traded on the NASDAQ and listed securities for which no
sale was reported on the last business day of the Plan year are valued at
the average of the last reported bid and ask prices.
-7-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- - --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
All other over-the-counter investments are valued at the last reported bid.
The fair market value of real estate is based on periodic independent
appraisals. The fair market value of fixed income investments is based on
an institutional based pricing system. Investment grade bonds are valued
on a pricing system based on treasury securities. The fair market value of
the participation units in common trust funds is based on quoted redemption
value on the last business day of the Plan year.
Plan Expenses - Expenses relating to the purchase or sale of investments
-------------
are included in the cost or deducted from the proceeds, respectively.
Direct charges and expenses including investment manager fees attributable
to specific investment funds may be charged against that investment fund.
Other Plan expenses, including trustee, auditor, and Internal Revenue
Service user fees may be paid directly from the P.R. Trust. Other expenses
continue to be paid by the Company.
3. INVESTMENTS
Within the Wachovia Trust at December 30, 1993, the Plan owned 0.62, 0.53,
0.60, 0.54, 0.62 and 0.44 percent of the total current value of the
investments of the General Stock Fund, Growth Stock Fund, Real Estate Fund,
Interest Income Fund, Government Securities Fund, and Common Stock Fund,
respectively.
Within the Wachovia Trust at December 30, 1992, the Plan owned 0.61, 0.50,
0.51, 0.52, 1.24, 0.07, and 0.46 percent of the total current value of the
investments of the General Stock Fund, Growth Stock Fund, Real Estate Fund,
Interest Income Fund, Government Securities Fund, Preferred Stock Fund and
Common Stock Fund, respectively.
Investment income and the net appreciation (depreciation) in the fair value
of the investments held by the Wachovia Trust are allocated to the
participating defined contribution plans based on each plan's percentage
interest in the fair value of such investments.
During 1993 and 1992, the Wachovia Trust 's investments (including
investments bought, sold, as well as held during the year) appreciated
(depreciated) in fair value as follows:
-8-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- - ----------------------------------------------------------------------------------------------------------------
3. INVESTMENTS - CONTINUED
YEAR ENDED DECEMBER 30, 1993 YEAR ENDED DECEMBER 30, 1992
---------------------------------- ---------------------------------
Net Appreciation Net Appreciation
(Depreciation) Fair (Depreciation) Fair
in Fair Value Value at in Fair Value Value at
During Year End of Year During Year End of Year
------------------ -------------- ------------------ -------------
GENERAL STOCK FUND
Equity investment funds $ 36,352,032 $ 357,698,005 $ 17,974,032 $ 307,653,297
Wachovia Bank of North Carolina,
N.A. Diversified Short-Term
Investment Fund ---- 1,266,484 ---- 256,596
Other Short-Term Investments ---- 1,380 ---- ----
------------- ------------- ------------- -------------
$ 36,352,032 $ 358,965,869 $ 17,974,032 $ 307,909,893
------------- ------------- ------------- -------------
Plan's interest therein $ 216,409 $ 2,239,818 $ 106,106 $ 1,893,034
------------- ------------- ------------- -------------
GROWTH STOCK FUND
Equity investment funds $ 9,173,988 $ 174,798,915 $ 7,058,911 $ 159,930,462
Wachovia Bank of North Carolina,
N.A. Diversified Short-Term
Investment Fund ---- 1,042,500 ---- 177,387
Other Short-Term Investments ---- 1,110 ---- ----
------------- ------------- ------------- -------------
$ 9,173,988 $ 175,842,525 $ 7,058,911 $ 160,107,849
------------- ------------- ------------- -------------
Plan's interest therein $ 49,707 $ 932,568 $ 39,176 $ 808,264
------------- ------------- ------------- -------------
REAL ESTATE FUND
Real Estate investment funds $ 230,547 $ 8,749,673 $ (385,135) $ 10,110,263
Wachovia Bank of North Carolina,
N.A. Diversified Short-Term
Investment Fund ---- 52,012 ---- 122,515
------------- ------------- ------------- -------------
$ 230,547 $ 8,801,685 $ (385,135) $ 10,232,778
------------- ------------- ------------- -------------
Plan's interest therein $ 1,300 $ 52,394 $ (1,981) $ 51,682
------------- ------------- ------------- -------------
INTEREST INCOME FUND
Guaranteed insurance contracts $ ---- $ 446,272,955 $ ---- $ 448,477,423
Treasury Obligations 541,444 8,005,040 2,075,764 60,108,170
Federal Agency CMOs (97,635) ---- 8,154 18,295,300
Corporate Mortgage Pools 669,823 21,046 (422,771) 64,877,320
Bond Investment Funds (231,370) 150,344,174 ---- ----
Wells Fargo Bank Money
Market Fund ---- 84 ---- ----
Fisher Francis Trees & Watts
Short-Term Investment Fund ---- ---- ---- 12,674,376
Wachovia Bank of North Carolina,
N.A. Diversified Short-Term
Investment Fund ---- 28,285,509 ---- 8,293,268
Other Short-Term Investments ---- 14,149 25,199 688
------------- ------------- ------------- -------------
$ 882,262 $ 632,942,957 $ 1,686,346 $ 612,726,545
------------- ------------- ------------- -------------
Plan's interest therein $ 4,806 $ 3,420,629 $ 8,050 $ 3,215,067
------------- ------------- ------------- -------------
- 9 -
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- - ----------------------------------------------------------------------------------------------------------------
3. INVESTMENTS - CONTINUED
YEAR ENDED DECEMBER 30, 1993 YEAR ENDED DECEMBER 30, 1992
---------------------------------- ---------------------------------
Net Appreciation Net Appreciation
(Depreciation) Fair (Depreciation) Fair
in Fair Value Value at in Fair Value Value at
During Year End of Year During Year End of Year
------------------ -------------- ------------------ -------------
PREFERRED STOCK FUND
RJR Nabisco Holdings Corp.
Cumulative Convertible
Preferred Stock $ (232,322) $ ---- $ (434,756) $ 2,202,441
RJR Nabisco Holdings Corp.
Common Stock ---- ---- 3,605 ----
Wachovia Bank of North Carolina
N.A. Diversified Short-Term
Investment Fund ---- ---- ---- 52,680
------------- ------------- ------------- -------------
$ (232,322) $ ---- $ (431,151) $ 2,255,121
------------- ------------- ------------- -------------
Plan's interest therein $ (29) $ ---- $ (318) $ 1,630
------------- ------------- ------------- -------------
COMMON STOCK FUND
RJR Nabisco Holdings Corp.
Common Stock $ (17,335,826) $ 82,893,245 $ (20,315,710) $ 79,417,339
Wachovia Bank of North Carolina
N.A. Diversified Short-Term
Investment Fund ---- 1,478,403 ---- 2,014,456
------------- ------------- ------------- -------------
$ (17,335,826) $ 84,371,648 $ (20,315,710) $ 81,431,795
------------- ------------- ------------- -------------
Plan's interest therein $ (80,083) $ 371,652 $ (56,408) $ 377,282
------------- ------------- ------------- -------------
GOVERNMENT SECURITIES FUND
Equity Investment Funds $ ---- $ 22,366 $ ---- $ 5,034,108
Wachovia Bank of North Carolina
N.A. Diversified Short-Term
Investment Fund ---- 10,100,939 ---- 108,475
Other Short-Term Investments ---- 2,389 ---- ----
------------- ------------- ------------- -------------
$ ---- $ 10,125,694 $ ---- $ 5,142,583
------------- ------------- ------------- -------------
Plan's interest therein $ ---- $ 62,656 $ ---- $ 63,784
------------- ------------- ------------- -------------
- 10 -
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- - --------------------------------------------------------------------------------
4. EMPLOYEE WITHDRAWALS
At December 30, 1993, there were no pending employee withdrawal requests.
At December 30, 1992, employee withdrawal requests of $98,558 were not
accrued in accordance with the AICPA Audit and Accounting Guide "Audits of
Employee Benefit Plans".
5. INCOME TAX STATUS
The Plan received an IRS determination letter dated 11/93 which states that
the Plan qualifies under Sections 401(a) and 401(k) of the Internal Revenue
Code ("IRC") and its related Trust is exempt from federal income tax under
Section 501. The Plan is also intended to comply with Section 165(a) of
the Puerto Rico Income Tax Act of 1954 ("ITA"). The Plan is required to
operate in conformity with the IRC and ITA to maintain its qualification.
The Committee is not aware of any course of action or series of events that
have occurred that might adversely affect the Plan's qualified status.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
6. TRANSFERS TO THE PLAN
During 1993, transfers of assets of $8,910 were made to the Plan due to
employees transferring between affiliated plans.
7. SUBSEQUENT EVENTS
New investment options became available for participants' future
contributions effective January 1, 1994 and for accumulated balances
effective March 1, 1994. Three current investment options will remain:
the Interest Income Fund, the Real Estate Fund and the Common Stock Fund.
The new investment options available include the U.S. Stock Index Fund, the
International Stock Index Fund and the Balanced Funds. The U.S. Stock
Index Fund replaces the General Stock and Growth Stock Funds. As of
January 1, 1994, all contributions to these discontinued funds will be
directed to the U.S. Stock Index Fund. Balances remaining in these funds
on December 31, 1993 will be automatically transferred to the U.S. Stock
Index Fund on January 1, 1994. The Government Securities Fund is
discontinued and as of January 1, 1994 all contributions to this fund will
be directed to the Interest Income Fund. Balances remaining in the
Government Securities Fund on December 31, 1993 will be automatically
transferred to the Interest Income Fund on January 1, 1994.
-11-