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Dated: June 28, 2006
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By: | /s/ Darren Wells | ||
Darren Wells, Senior Vice President Business Development and Treasurer |
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Page | ||||||||
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Financial Statements: |
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4-16 | ||||||||
Supplemental Information |
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Schedule of Assets (Held at End of Year) |
Schedule I | |||||||
EX-23.1 Consent of Bober, Markey, Feborovich & Company |
Note: | Certain schedules required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because of the absence of the conditions under which they are required. |
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(Dollars in Thousands) | December 31, | December 31, | ||||||
2005 | 2004 | |||||||
Plans Interest in Commingled Trust at fair value |
$ | 757,136 | $ | 726,118 | ||||
Participant Loans |
47,983 | 44,871 | ||||||
Net Assets Available for Benefits |
$ | 805,119 | $ | 770,989 | ||||
(Dollars in Thousands) | Year Ended | Year Ended | ||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Contributions: |
||||||||
Employer Contributions |
$ | | $ | | ||||
Employee Contributions |
43,846 | 43,661 | ||||||
Total Additions |
43,846 | 43,661 | ||||||
Deductions: |
||||||||
Benefits Paid to Participants or Their Beneficiaries |
(60,800 | ) | (48,560 | ) | ||||
Administrative Expenses |
(685 | ) | (643 | ) | ||||
Net Transfers Out |
(198 | ) | (65 | ) | ||||
Interest From Participant Loans |
2,489 | 2,002 | ||||||
Investment Gain from Plans Interest in Master Trust |
49,478 | 102,166 | ||||||
Increase in
Assets Available for Benefits During the Year |
34,130 | 98,561 | ||||||
Net Assets Available for Benefits at Beginning of the Year |
770,989 | 672,428 | ||||||
Net Assets Available for Benefits at End of Year |
$ | 805,119 | $ | 770,989 | ||||
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1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: | |
Basis of Accounting | ||
The accounts of The Goodyear Tire & Rubber Company Employee Savings Plan for Bargaining Unit Employees (the Plan) are maintained on the accrual basis of accounting and in accordance with The Northern Trust Company (the Trustee) Trust Agreement, effective as of November 1, 1995. | ||
Plan Year | ||
The Plan Year is a Calendar year. | ||
Trust Assets | ||
Savings plans sponsored by The Goodyear Tire & Rubber Company and certain subsidiaries (the Company) maintain their assets in a master trust entitled The Goodyear Tire & Rubber Company Commingled Trust (the Commingled Trust) administered by the Trustee. The Company sponsored two savings plans at December 31, 2005 and 2004, respectively, that participated in the Commingled Trust . The Plans undivided interest in the trust is presented in the accompanying financial statements in accordance with the allocation made by the Trustee. | ||
Recordkeeper | ||
On August 1, 2005, JP Morgan Retirement Plan Services, LLC became the recordkeeper, replacing Hewitt Associates. There were changes to the investment funds offered by the Plan (See Note 2). | ||
Asset Valuation | ||
The majority of the assets of the Plan are valued at fair market value. Investments in the Goodyear Stock Fund are valued at the last reported sales price on the last business day of the month. If no sales were reported on that date, the shares are valued at the last bid price. Investments held in the Stable Value Fund are invested in various instruments that have a rate of return, and are reported at contract value (See Note 8). Investments in the Bond Fund, Target Retirement Income Fund, Target Retirement 2005 Fund, Target Retirement 2015 Fund, Target Retirement 2025 Fund, Target Retirement 2035 Fund, Target Retirement 2045 Fund, S&P 500 Index Stock Equity Fund, Large Capitalization Growth Fund, Large Capitalization Value Fund, Small Capitalization Growth Fund, Small Capitalization Value Fund, International Equity Fund, and Self-Directed Account are valued based on units of participation in commingled funds or mutual funds as reported by the fund manager, which approximates fair market value. The allocation of assets, interest and dividend income, and realized and unrealized appreciation and depreciation is made based upon contributions |
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2. | GENERAL DESCRIPTION AND OPERATION OF THE PLAN: | |
Inception | ||
The Plan is a defined contribution plan, which became effective July 1, 1984. | ||
Eligibility | ||
All employees who are members of a bargaining unit, which had adopted the Plan, are eligible to participate in the Plan as of the first enrollment date after completing three months of continuous service with the Company. At December 31, 2005 and 2004, approximately 15,200 employees (16,500 in 2004) of the Company were eligible with approximately 9,000 employees (11,300 in 2004) participating in the Plan. | ||
Vesting | ||
Employee contributions are fully vested. Employer matching contributions become vested after the participant has completed three years of continuous service with the Company. | ||
Contributions | ||
Eligible employees may elect to contribute any whole percent from 1% to 50% of earnings, including wages, bonuses, commissions, overtime and vacation pay into the Plan. In addition, the Plan permits catch-up contributions by participants who have attained age 50 by December 31 of each year subject to certain limitations under the Internal Revenue Code. Participating employees may elect to have their contributions invested in any of the funds available for employees at the time of their contributions. The Company calculates and deducts employee contributions from gross earnings each pay period based on the percent elected by the employee. Employees may change their contribution percent any time. The change will become effective as soon as administratively possible after participant makes it. Employees may transfer amounts attributable to employee contributions from one fund to the other on a daily basis. Employees may suspend their contributions at any time effective immediately. | ||
The Plan has been established under section 401 of the Internal Revenue Code. Therefore, employee and employer contributions to the Plan are not subject to federal withholding tax, but are taxable when they are withdrawn from the Plan. |
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| Stable Value Fund Employee contributions are invested in various investment contracts that provide for rates of return for particular periods of time. The investment contracts are backed by high quality fixed income securities that may be held directly or through units of a commingled fund. The Investment Contracts and the Short-Term Investments Fund are the current investments related to this fund. | ||
| Bond Fund Employee contributions are invested in fixed income securities and other debt instruments of domestic and foreign entities, including corporate bonds, securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, mortgage-backed securities and money market instruments. The fund may invest up to 20% of its total assets in non-U.S. dollar-denominated securities. The fund became available on August 1, 2005. | ||
| Target Retirement Income Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors currently in retirement. The fund became available on August 1, 2005. | ||
| Target Retirement 2005 Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of 2005. The funds asset allocation will become more conservative over time. Within 5 to 10 years after 2005, the funds asset allocation will become similar to that of the Target Retirement Income Fund. The fund became available on August 1, 2005. | ||
| Target Retirement 2015 Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of 2015. The funds asset allocation will become more conservative over time. Within 5 to 10 years after 2015, the funds asset allocation will become similar to that of the Target Retirement Income Fund. The fund became available on August 1, 2005. |
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| Target Retirement 2025 Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of 2025. The funds asset allocation will become more conservative over time. Within 5 to 10 years after 2025, the funds asset allocation will become similar to that of the Target Retirement Income Fund. The fund became available on August 1, 2005. | ||
| Target Retirement 2035 Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of 2035. The funds asset allocation will become more conservative over time. Within 5 to 10 years after 2035, the funds asset allocation will become similar to that of the Target Retirement Income Fund. The fund became available on August 1, 2005. | ||
| Target Retirement 2045 Fund Employee contributions are invested in other Vanguard index mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of 2045. The funds asset allocation will become more conservative over time. Within 5 to 10 years after 2045, the funds asset allocation will become similar to that of the Target Retirement Income Fund. The fund became available on August 1, 2005. | ||
| S&P 500 Index Stock Equity Fund Employee contributions are invested in a commingled fund consisting of a portfolio of common stocks, which provide a return similar to the Standard and Poors Composite Index of 500 stocks plus reinvested dividends. | ||
| Large Capitalization Growth Fund Employee contributions are invested in a mutual fund containing a portfolio of common stocks of medium and large companies that are expected to provide better-than-average prospects for appreciation. | ||
| Large Capitalization Value Fund Employee contributions are invested in a diversified portfolio of 70-110 U.S. large-cap companies. These companies are identified as undervalued relative to their estimated worth. The fund became available on August 1, 2005. | ||
| Small Capitalization Growth Fund Employee contributions are invested in a diversified portfolio of common stocks of small-cap U.S. growth companies that are expected to provide long-term capital growth. | ||
| Small Capitalization Value Fund Employee contributions are invested in equity securities of companies with market capitalization of up to $3 billion, which the manager believes are undervalued. Most of the assets are invested securities on U.S. companies, but may also invest any portion of its assets in foreign securities. The fund became available on August 1, 2005. |
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| International Equity Fund Employee contributions are invested in equities consistent with the Morgan Stanley Capital International Index of Europe, Australia and Far East (MSCI EAFE Index). | ||
| Goodyear Stock Fund Employer and employee contributions are invested in Goodyear common stock except for short-term investments needed for Plan operations. During 2005 the price per share of Goodyear common stock on The New York Stock Exchange composite transactions ranged from $11.24 to $18.57 ($7.06 to $15.01 during 2004.) The closing price per share of Goodyear common stock on The New York Stock Exchange was $17.38 at December 30, 2005 ($14.66 at December 31, 2004). The common stock of The Goodyear Tire & Rubber Company and a Short-Term Investments Fund are the current investments of this fund. The portion of this fund related to employer contributions was converted to an employee stock ownership plan (ESOP). | ||
| Loan Investment Fund Employee contributions are transferred from other funds into the Loan Investment Fund, and then loaned to the participant. The interest rate on the loan is prime plus 1% at the date the loan is extended to the participant. The Promissory Notes are the current investments related to this fund. | ||
| Self-Directed Account Employee contributions are invested in the mutual fund(s) of the participants choice through the establishment of a brokerage account for the participant administered by Charles Schwab. | ||
| Conservative Asset Allocation Fund Employee contributions are invested in a commingled fund containing a portfolio of U.S. common stocks and bonds which provide an investment return similar to a portfolio invested 40% in the Russell 3000 Equity Index plus reinvested dividends and 60% in bonds which compose the Lehman Aggregate Long-Term Bond Index. The assets transferred to the Target Retirement 2005 Fund on August 1, 2005. | ||
| Moderate Asset Allocation Fund Employee contributions are invested in a commingled fund containing a portfolio of U.S. common stocks and bonds which provide an investment return similar to a portfolio invested 60% in the Russell 3000 Equity Index plus reinvested dividends and 40% in bonds which compose the Lehman Aggregate Long-Term Bond Index. The assets transferred to the Target Retirement 2025 Fund on August 1, 2005. | ||
| Aggressive Asset Allocation Fund Employee contributions are invested in a commingled fund containing a portfolio of U.S. common stocks, international stocks, and bonds which provide an investment return similar to a portfolio invested 65% in the Russell 3000 Equity Index plus reinvested dividends, 15% in the MSCI EAFE Index, and 20% in bonds which compose the Lehman Aggregate Long-Term Bond Index. The assets transferred to the Target Retirement 2045 Fund on August 1, 2005. |
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| International Stock Equity Fund Employee contributions are invested in a mutual fund containing a portfolio of common stocks and debt obligations of companies and governments located outside of the United States that are expected to provide long-term capital growth. Effective October 1, 2004, participants who both buy and sell units of the fund within a 30day period incur a redemption fee equal to 2% of the trade amount. The assets transferred to the International Equity Fund on August 1, 2005. | ||
| Small Capitalization Stock Equity Fund Employee contributions are invested in a mutual fund containing a portfolio of common stocks of small companies that are expected to provide long-term capital growth. The assets transferred to the Small Cap Growth Fund on August 1, 2005. |
| Attain the age of 591/2, or |
| Qualify for a financial hardship. |
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3. | RELATED PARTY TRANSACTIONS: | |
The Trustee serves as the fund manager of the S&P 500 Index Stock Equity Fund. They also replaced State Street Global Advisors as the Investment Manager for the Conservative, Moderate, and Aggressive Asset Allocation Funds effective January 1, 2005. The percentages invested in each asset class remained the same as disclosed in these Financial Statements. | ||
The recordkeeper (JP Morgan Retirement Plan Services, LLC) serves as the fund manager of the Large Capitalization Value Fund and the International Equity Fund. | ||
On August 1, 2005, the Conservative, Moderate, and Aggressive, Asset Allocation Funds were transferred to the Vanguard Target Retirement 2005, Vanguard Target Retirement 2025, and Vanguard Target Retirement 2045 Funds, respectfully. These transitions coincided with the August 1, 2005 recordkeeper conversion from Hewitt Associates to JP Morgan Retirement Plan Services, LLC. | ||
The Goodyear Stock Fund is designed primarily for investment in common stock of the Company. | ||
4. | TAX STATUS OF PLAN: | |
The Internal Revenue Service has determined and informed the Company by a letter dated February 25, 2003 that the Plan is qualified and the trust established for the Plan is exempt from Federal Income Tax under the appropriate Sections of the Internal Revenue Code. The Plan has been amended since receiving the determination letter. However, the Company and Plans tax counsel believe the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plans financial statements. | ||
5. | LITIGATION: | |
In October 2003, the Company announced that it would restate its financial results for the years ended 1998-2002 and for the first and second quarters of 2003. Following the announcement, a purported class action lawsuit was filed against the Company in the United States District Court for the Northern District of Ohio on behalf of purchasers of Goodyear common stock alleging violations of federal securities laws. After that date, a total of 20 of these purported class actions were filed against the Company in that court. These lawsuits name as defendants several of Goodyears present or former officers and directors, including Goodyears current chief executive officer, Robert J. Keegan, Goodyears current chief financial officer, Richard J. Kramer, and Goodyears former chief financial officer, Robert W. Tieken, and allege, among other things, that Goodyear and the other named defendants violated federal securities laws by artificially inflating and maintaining the market price of |
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Goodyears securities. Five derivative lawsuits were also filed by purported shareholders on behalf of Goodyear in the United States District Court for the Northern District of Ohio and two similar derivative lawsuits originally filed in the Court of Common Pleas for Summit County, Ohio were removed to federal court. The derivative actions are against present and former directors, Goodyears present and former chief executive officers and Goodyears former chief financial officer and allege, among other things, breach of fiduciary duty and corporate waste arising out of the same events and circumstances upon which the securities class actions are based. The plaintiffs in the federal derivative actions also allege violations of Section 304 of the Sarbanes-Oxley Act of 2002, by certain of the named defendants. Finally, at least 11 lawsuits have been filed in the United States District Court for the Northern District of Ohio against Goodyear, The Northern Trust Company, and current and/or former officers of Goodyear asserting breach of fiduciary claims under the Employee Retirement Income Security Act (ERISA) on behalf of a putative class of participants in Goodyears Employee Savings Plan for Bargaining Unit Employees and Goodyears Savings Plan for Salaried Employees. The plaintiffs claims in these actions arise out of the same events and circumstances upon which the securities class actions and derivative actions are based. All of these actions have been consolidated into three separate actions before the Honorable Judge John Adams in the United States District Court for the Northern District of Ohio. On June 28 and July 16, 2004, amended complaints were filed in each of the three consolidated actions. The amended complaint in the purported ERISA class action added certain current and former directors and associates of Goodyear as additional defendants and the Northern Trust Company was subsequently dismissed without prejudice from this action. On November 15, 2004, the defendants filed motions to dismiss all three consolidated cases and the Court is considering these motions. On March 20, 2006, the Court granted Goodyears motion to dismiss the purported securities class action. The Court has yet to rule on the motions to dismiss the two remaining actions. While Goodyear believes these claims are without merit and intends to vigorously defend them, it is unable to predict their outcome. | ||
6. | RECONCILIATION OF FINANCIAL STATEMENTS TO 5500 | |
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2005 and December 31, 2004 to the Form 5500: |
(Dollars in Thousands) | December 31, | December 31, | ||||||
2005 | 2004 | |||||||
Net Assets Available for Benefits per
the Financial Statements |
$ | 805,119 | $ | 770,989 | ||||
Amounts Allocated to Withdrawing Participants |
(1 | ) | | |||||
Net Assets Available for Benefits per
the Form 5500 |
$ | 805,118 | $ | 770,989 | ||||
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(Dollars in Thousands) | Year Ended | Year Ended | ||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Benefits Paid to Participants per the Financial
Statements |
$ | 60,800 | $ | 48,560 | ||||
Add: Amounts Allocated to Withdrawing Participants |
1 | | ||||||
Less: Amounts Allocated to Withdrawing Participants
at December 31, 2004 and December 31, 2003 |
| (514 | ) | |||||
Benefits Paid to Participants per the Form 5500 |
$ | 60,801 | $ | 48,046 | ||||
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to the plan year end, but not yet paid as of that date. | |||
7. | FINANCIAL DATA OF THE COMMINGLED TRUST: | ||
All of the Plans investments except for the participant loans are in the Commingled Trust, which was established for the investment of assets of the Plan. Each Participating plan has an undivided interest in the Commingled Trust. At December 31, 2005 and 2004, the Plans interest in the net assets of the Commingled Trust was approximately 36.8% and 36.6% respectively. The Commingled Trust assets are held by the Trustee. | |||
The financial data of the Commingled Trust is as follows: |
(Dollars in Thousands) | December 31, | December 31, | ||||||||||
2005 | 2004 | |||||||||||
Common Collective Trusts |
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U S Active Large Capitalization Value Fund |
$ | 15,265 | $ | | ||||||||
Daily S
& P 500 Equity Index Fund |
* | * | 419,274 | 414,398 | ||||||||
EAFE Plus Fund |
76,264 | | ||||||||||
State Street Income and Growth Fund |
| 24,605 | ||||||||||
State Street Moderate Asset Allocation Fund |
| 63,919 | ||||||||||
State Street Life Solutions Aggressive Fund |
| 36,385 |
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(Dollars in Thousands) | December 31, | December 31, | ||||||||||
2005 | 2004 | |||||||||||
Short-Term Investments |
$ | 28,930 | $ | 41,402 | ||||||||
Mutual Funds |
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Western Asset Core Plus Bond Fund |
5,193 | | ||||||||||
Vanguard Target Retirement Income Fund |
915 | |||||||||||
Vanguard
Target Retirement 2005 Fund |
27,448 | |||||||||||
Vanguard Target Retirement 2015 Fund |
6,492 | | ||||||||||
Vanguard Target Retirement 2025 Fund |
68,540 | | ||||||||||
Vanguard Target Retirement 2035 Fund |
2,884 | | ||||||||||
Vanguard Target Retirement 2045 Fund |
39,381 | | ||||||||||
American Century Ultra Institutional Class Fund |
* | 77,133 | 83,271 | |||||||||
Artisan Small Capitalization Growth Fund |
* | * | 119,269 | | ||||||||
RS Partners Small Capitalization Value Fund |
9,908 | | ||||||||||
Franklin Strategic Series Small Cap Fund II |
* | * | | 148,799 | ||||||||
Templeton Foreign Fund |
| 51,917 | ||||||||||
Charles Schwab Self Directed Account |
22,204 | 18,752 | ||||||||||
Common Stock of The Goodyear Tire & Rubber Company |
* | * | 294,533 | 306,052 | ||||||||
Investment Contracts (See Note 8) |
* | * | 839,204 | 793,157 | ||||||||
Total Investments |
2,052,837 | 1,982,657 | ||||||||||
Receivables: |
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Accrued Interest and Dividends |
3,343 | | ||||||||||
Total Assets Available for Benefits |
2,056,180 | 1,982,657 | ||||||||||
Liabilities: |
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Administrative Expenses Payable |
548 | 360 | ||||||||||
Total Liabilities |
548 | 360 | ||||||||||
Net Assets Available for Benefits |
$ | 2,055,632 | $ | 1,982,297 | ||||||||
* | American Century Ultra Fund was converted from the retail class of mutual fund shares to the institutional class on August 1, 2005. This change reduced the investment fee paid by the participants invested in the fund. | |
** | Individual investment represents 5% or more of the Net Assets Available for Benefits. |
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(Dollars in Thousands) | Year Ended | Year Ended | ||||||
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Net Appreciation in Fair Value of Investments: |
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Common Collective Trust |
$ | 27,408 | $ | 51,655 | ||||
Mutual Funds |
14,885 | 29,547 | ||||||
Common Stock |
51,958 | 145,630 | ||||||
Self Directed Funds Mutual Funds |
1,792 | 1,875 | ||||||
96,043 | 228,707 | |||||||
Interest |
38,292 | 35,389 | ||||||
Investment Gain from Plans Interest in Master Trust |
134,335 | 264,096 | ||||||
Administrative Expenses |
(1,706 | ) | (1,898 | ) | ||||
Total Income |
$ | 132,629 | $ | 262,198 | ||||
8. | INVESTMENT CONTRACTS: | ||
The Commingled Trust holds fully benefit-responsive investment contracts, which are presented at contract value in the Statement of Net Assets Available for Benefits as previously stated in Note 1. The fair values of the contracts at December 31, 2005 and December 31, 2004 were approximately $849,741,018 and $810,618,145, respectively. The average effective yield and the average crediting interest rate associated with the contracts were approximately 4.72% and 4.73% at December 31, 2005 and December 31, 2004, respectively. The Commingled Trust holds one guarantee investment contract (GIC), the other investments are contracts that are backed by high quality fixed income securities that may be held directly or through units of a commingled fund. |
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(c) Description of investment | ||||||||||||||
(a) | (b) Identity of issue, borrower | Including maturity date, rate of interest, | ||||||||||||
lessor or similar party | collateral par, or maturity value | (d) Cost | (e) Current Value | |||||||||||
Participant Loans | 5.0% - 10.5 | % | $ | | $ 47,983,144 |
Note: | This schedule excludes the Plans interest in the Commingled Trust, which is not required to be reported on the schedule pursuant to the Department of Labors Rules and Regulations for reporting and disclosure requirements under the Employee Retirement Income Security Act of 1974. |