EX-1 3 exhibit1_report.txt NEW ENGLAND BUSINESS SERVICE, INC. 401(k) Plan for Employees of New England Business Service, Inc. Independent Auditors' Report Financial Statements December 31, 2001 and 2000 Supplemental Schedule December 31, 2001 401(K) PLAN FOR EMPLOYEES OF NEW ENGLAND BUSINESS SERVICE, INC. TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEAR ENDED DECEMBER 31, 2001 Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 4 Notes to Financial Statements 6-12 SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2001: Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year) 14 Schedules required under the Employee Retirement Income Security Act of 1974, other than the schedule 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 Employees of New England Business Service, Inc. (the "Plan") as of December 31, 2001 and 2000, and the related statements of changes in net assets available for benefits for the year ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 December 31, 2001 and 2000, and the changes in its net assets available for benefits for the year ended Dedember 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan's management. Such supplemental schedule has been subjected to the auditing procedures applied in our audit of the basic 2001 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. /s/ Deloitte & Touche LLP May 3, 2002 401(k) PLAN FOR EMPLOYEES OF NEW ENGLAND BUSINESS SERVICE, INC. STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2001 AND 2000 --------------------------------------------------------------------
2001 2000 ASSETS: Investments, at fair value: Common/collective trust $ 10,367,394 $ 8,345,408 New England Business Service, Inc. common stock (912,543 shares and 748,526 shares in 2001 and 2000, respectively) 17,475,198 13,660,600 Mutual funds 54,796,783 56,128,110 Loans to participants 2,275,009 2,166,481 -------------- -------------- Total investments 84,914,384 80,300,599 Cash - 10,151 Receivables: Receivable for investments sold - 69,779 Accrued income 1,178 43,018 Employer contributions 83,875 91,485 Employee contributions 81,717 91,064 -------------- -------------- Total assets 85,081,154 80,606,096 -------------- -------------- LIABILITIES - Payable for investments purchased 114,366 - -------------- -------------- NET ASSETS AVAILABLE FOR BENEFITS $ 84,966,788 $ 80,606,096 -------------- -------------- -------------- --------------
See notes to financial statements. 401(k) PLAN FOR EMPLOYEES OF NEW ENGLAND BUSINESS SERVICE, INC. STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEAR ENDED DECEMBER 31, 2001 --------------------------------------------------------------------
ADDITIONS: Employee contributions $ 5,032,895 Rollover contributions 330,003 Employer contributions 5,202,341 Net depreciation in fair value of investments (2,668,522) Interest and dividend income 1,386,553 -------------- Total additions 9,283,270 -------------- DEDUCTIONS: Benefits paid to participants 4,875,666 Administrative fees 46,912 -------------- Total deductions 4,922,578 -------------- NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 4,360,692 NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 80,606,096 -------------- End of year $ 84,966,788 -------------- --------------
See notes to financial statements. 401(K) PLAN FOR EMPLOYEES OF NEW ENGLAND BUSINESS SERVICE, INC. NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF THE PLAN The following brief description of 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, the Plan Sponsor, 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 actually are 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 - Regular employees are eligible to participate in the Plan the first of the month following the date of hire. For nonregular employees (temporary employees), the employee must complete one year of eligible 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 Wells Fargo Bank, Minnesota, N.A. ("Wells Fargo"). 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 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 five years or more 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 pay in shares of common stock to all employees who meet the minimum eligibility requirements. Employee Contributions - Eligible employees must complete a notice of election 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. 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 lesser of $50,000 or 50% of their vested balances). Effective as of July 1, 1999, the loans will bear an interest rate as determined, from time to time, by the Plan Committee, as published in the Plan's loan policy statement. Prior to this, the loans had a market rate of interest equal to the prime lending rate plus two 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 and money market funds. Employee contributions are invested at the direction of the employee in any combination of the following: (1) company common stock; (2) mutual funds selected by the Plan Committee; (3) common collective trust income investments such as investment contracts providing a guaranteed interest rate; and (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 other investment options at any time subsequent to the initial contributions. Dividends, interest and other distributions received in any fund with respect to any type of contribution are reinvested in the same fund. Employee contributions that have not been designated for a particular investment will be invested in the Wells Fargo Stable Return Common Collective Trust. 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 completion of one year of service, 50% after completion of two years of service, and 100% after completion of three years of service. All company contributions prior to July 1, 1997 are 100% vested. Forfeitures - Participants who withdraw from the Plan due to termination of employment will forfeit unvested company contributions and related earnings. These forfeitures will be used to reduce future company contributions. If within five years the participant is re-employed by the Company, the forfeitures will be reinstated to the participant. 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 15 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. Participant 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, equivalent number of shares of company common stock in the account, and the market values of the investments 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. 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 accounting principles generally accepted in the United States of America 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. Participant loans are recorded at cost which approximates fair value. 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 December 31, 2001 and 2000 are as follows:
2001 2000 Wells Fargo Stable Return Fund (common/collective trust) $ 10,367,394 $ 8,345,408 Fidelity Contrafund 13,385,320 16,162,212 New England Business Service, Inc. Common Stock 17,475,198 13,660,600 Vanguard Institutional Index Fund 10,843,188 12,837,943 Wells Fargo Small-Cap Opportunities Fund 7,475,670 6,289,932 American Euro-Pacific Growth Fund - 4,395,679 Wells Fargo Growth Balanced Fund 8,650,945 9,321,159
The Plan's investments (including gains and losses on investments bought and sold, as well as held, during the year) depreciated in value by $2,668,522 for the year ended December 31, 2001, as follows:
At fair value based on quoted market prices: Common/collective trust $ 599,853 New England Business Service, Inc. common stock 833,632 Mutual funds (4,102,007) ------------ Total $ (2,668,522) ------------ ------------
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 the Plan, as then designed, was in compliance with applicable requirements of the Internal Revenue Code (the "Code"). The Plan subsequently has 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. 5. RELATED-PARTY TRANSACTIONS Certain plan investments are shares of mutual funds managed by Wells Fargo. Wells Fargo is the trustee as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. Fees paid to Wells Fargo for the investment management services amounted to $46,912 for the year ended December 31, 2001. 6. NONPARTICIPANT-DIRECTED INVESTMENTS The Plan requires company contributions initially to be invested within the Company's common stock. The activity within the Company's common stock investment (including the activity for the money market fund) for the year ended December 31, 2001 was as follows:
Contributions $ 5,446,528 Net appreciation in fair value of investments 833,632 Interest and dividend income 666,163 Benefits paid to participants 853,324
* * * * * * * * * * * * 401(k) PLAN FOR EMPLOYEES OF NEW ENGLAND BUSINESS SERVICE, INC. Schedule H, Part IV, Line 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR) DECEMBER 31, 2001 --------------------------------------------------------------------
a) b)Identity of Issue c)Description of Investment d)Cost e)Value Participant-Directed Investments: * Wells Fargo Stable Return Fund $10,367,394 Fidelity Contrafund 13,385,320 * Wells Fargo Strategic Income Fund 3,411,357 PIMCo Total Return Fund 1,324,833 Vanguard Institutional Index Fund 10,843,188 * Wells Fargo Small-Cap Opportunities Fund 7,475,670 American Euro-Pacific Growth Fund 3,846,819 * Wells Fargo Moderate Balanced Fund 490,381 * Wells Fargo Growth Balanced Fund 8,650,945 * Wells Fargo Strategic Growth 707,591 * Wells Fargo Diversified Equity Fund 372,644 * Wells Fargo Large Company Growth Fund 851,193 Dreyfus Founders Discovery Fund 593,732 Federated Stock Fund 301,438 Berger Small-Cap Value Fund 2,238,103 T. Rowe Price Emerging Markets Stock Fund 148,375 * Participant loans Maturity dates ranging from one to five years at varying interest rates 2,275,009 ----------- Total participant-directed investments $67,283,992 ------------ Nonparticipant-Directed Investments: * New England Business Common stock, Service, Inc. 912,543 shares 21,077,518 17,475,198 * Wells Fargo Money Market Fund 155,194 155,194 ----------- Total nonparticipant-directed investments 17,630,392 ----------- TOTAL INVESTMENTS $84,914,384 ----------- -----------
* Represents party-in-interest.