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Welcome to the John Q. Hammons 401(k) Savings Plan John Q. Hammons Hotels is committed to supporting the needs of our associates and offers you a savings plan to assist you in building for your future and helping you to retire. Revised 08/01/01 What is the John Q. Hammons Hotels 401(k) Plan? The John Q. Hammons Hotels 401(k) Plan is a savings plan designed to help you save and help your money grow. The primary purpose of the plan is to provide you with a supplemental retirement income. The plan allows you, on a voluntary basis, to put a portion of your earnings into an account where you will not have to pay federal or state income taxes until the money is withdrawn at retirement. The Company, John Q. Hammons Hotels, will also contribute to the plan for you in the form of a matching contribution. How does the 401(k) Plan help me? The John Q. Hammons 401(k) Plan is designed to allow you to contribute from 1% to 15% of your pay to a savings account on a pre-tax basis. As a result, the money you would have paid in taxes can now be working to make your savings grow. To help your money grow even faster, the Company will add 50 cents for every dollar up to 6 percent of your pay that you place in your 401(k) account. The Company match will go into your account right along with your money each pay period. This helps you start earning even sooner and this helps your savings grow even faster! Do pre-tax savings really make a difference? Yes, they do! Following are examples of what your take-home pay would look like if you saved just 2% or 6% on a pre-tax basis with your 401(k). Not With 2% 401(k) With 6% 401(k) $15,000 Annual Salary Participating Participation Participation Gross Pay Per Pay Period 576.92 576.92 576.92 401(k) Payroll Deduction 0.00 11.54 34.62 Social Security Tax 44.13 44.13 44.13 Income Tax Withholding at 20% 115.38 113.08 108.46 Take Home Pay 417.41 408.17 389.71 Your Annual Contribution 0.00 300.00 900.00 Annual Company Match 0.00 150.00 450.00 Yearly 401(k) Contribution 0.00 450.00 1,350.00 Not With 2% 401(k) With 6% 401(k) Participating Participation Participation $25,000 Annual Salary Gross Pay Per Pay Period 961.53 961.53 961.53 401(k) Payroll Deduction 0.00 19.23 57.69 Social Security Tax 73.56 73.56 73.56 Income Tax Withholding at 20% 192.30 188.46 180.77 Take Home Pay 695.67 680.28 649.51 Your Annual Contribution 0.00 500.00 1,500.00 Annual Company Match 0.00 250.00 750.00 Yearly 401(k) Contribution 0.00 750.00 2,250.00 How are my contributions made? When you enroll in the 401(k) plan you may elect from 1% to 15% of your pay* to be deferred and put into the plan for you. These funds will be deducted from your paycheck automatically each pay period before taxes are taken out. You may make changes to your contribution amount and changes in your investment choices by calling the Hotline or dialing into the WEB. Any change you make will be effective as soon as administratively possible, usually the first full pay period after you make a change. When you invest in your 401(k) account you have a savings partner. John Q. Hammons Hotels will match your contribution to your account at 50 cents on the dollar up to 6%. These matching funds are placed in your account each pay period right along with your funds. This allows your account to grow even faster! * Up to an annual limit set by the IRS. When does the Company match become mine? Vesting refers to the ownership of the money in your 401(k) account. When you are vested in the Company match that means you own the assets and can take that money with you should you leave the Company. You are always 100% vested in your contributions. You become vested in the company matching contributions and any investment earnings on the match according to the following schedule: Years of Service Vested Percent Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100% Remember, you are always 100% vested in your contributions and any investment earnings on those contributions. If I want to contribute to the 401(k) Plan, what are my investment choices? Glad you asked, you have several investments to choose from. Following is a brief description of each choice. As of September 1, 2001, you will have a total of ten investment choices. They are as follows: Large Cap Value Equity Fund Large Cap Growth Fund Small Cap Growth Fund Small Cap Value Fund International Equity Fund Multi-Sector Fixed Fund S&P 500 Investments Global Sciences and Technology Investments Government Money John Q. Hammons Stock You can learn more about these funds at the end of this presentation. Those sound great, but what if I don’t know how to invest? Salomon Smith Barney will assist you with your investment choices. The first thing you need to do is fill out the Participant Investment Planner questionnaire (PIP). After you complete this questionnaire, mail it to Salomon Smith Barney in the envelope provided. After evaluating your questionnaire Salomon Smith Barney will send you a personalized investment planner. In this planner you will find Salomon Smith Barney’s investment advise for you and additional information on the plan funds. If you need further assistance, you may call one of the brokers listed in your planner for additional advise. So let’s take a few moments now to fill out the PIP. When completed, place in the envelope, seal and give to your Human Resource Manager to mail for you. Who is eligible to participate in the plan? An associate is eligible to enroll in the plan if he/she is 18 years old, has completed six months of service, and worked a minimum of 1000 hours. Once these requirements have been met, the associate may enroll in the plan the first of the following month or anytime thereafter. How do I participate in the Plan? If you wish to contribute to the plan, and receive the company matching contribution, you must complete the enrollment process. When you enroll in the plan your contributions, from 1% to 15% of your pay, will be deducted from your paycheck automatically each pay period before taxes are taken out. These contributions are deposited in your 401(k) Plan account. After I become a participant, if I work less than 1000 hours in a year may I still contribute to the plan? Yes, once you are a participant you remain a participant until you terminate employment. You may continue to contribute to the plan and you will continue to receive Company matching contributions. However, for those years when you work less than 1000 hours you will not receive any vesting credit. Can I contribute now and stop contributing later? Yes, you can stop your contributions anytime by calling the Hotline or using the WEB to access your account. The change you make will be effective as soon as administratively possible. Usually the first full pay period after you make a change. Can I make other contributions to the Plan? Yes, this plan allows rollover contributions. The rollover contribution to the plan must be an Eligible Rollover Distribution from a prior qualified retirement plan. If you had previously deposited the Eligible Rollover Distribution into a rollover IRA, and you made no other deposits to the rollover IRA except those distributed from the qualified retirement plan, then you may deposit the money from the rollover IRA into the plan. It is not necessary to complete the eligibility requirements before you deposit a Rollover Contribution, as long as you are a member of an eligible employee classification (an employee who will become eligible to participate once the eligibility requirements have been met). What if I have an emergency and need my money? The plan allows for Hardship Withdrawals from the employee contribution funds as well as any rollover accounts if financial hardship can be demonstrated. Hardships that qualify for a withdrawal include: Substantial medical expenses for the participant or an eligible dependent which are not covered by health insurance; Expenses for higher (post-secondary) education for the next 12 months for the participant or eligible dependent; Purchase of a primary residence other than mortgage payments; or Prevention of eviction of the participant from his/her primary residence. How would distributions be made from the plan? For the following: Retirement Total Disability Death your total account balance will be available for distribution. If you terminate employment for any other reason your vested account balance will be available for distribution. The vested portion of your account is the portion that you own. Remember, you are always 100% vested in your employee contributions. Tell me how to enroll in the plan! The first step is to fill out the Participant Investment Planner questionnaire if you have not already completed it. Remember, Salomon Smith Barney will send, directly to your home, a Personalized Investment Planner to help guide you in making your investment elections. After you have received your planner, or if you are sure of your investment choices now, you will need to complete an enrollment form. The enrollment form has your personal information such as name and address as well as the percent you wish to defer from your pay into your account, your investment choices and your beneficiary information. The following slides provide additional information about the investments available to you in your 401(k) Savings Plan. The International Equity Fund seeks to achieve capital appreciation through investing primarily in equity securities of companies located outside the United States. The portfolio originally invests at least 80% of its assets in common and preferred stock and securities such as bonds, rights and warrants that are convertible into common stock of companies domiciled outside the United States. As of May 31, 2001, the top 10 holdings for this fund are: Total Fina ELF Glaxosmithkline Aventis SA Reed International Vivendi Universal Vodafone Group Suez Unilever NV Nomura SecuritiesNTT Docomo Investment choices continued - The Large Cap Growth Fund seeks substantial capital appreciation by investing primarily in a diversified portfolio of common stocks of established companies which the portfolio’s advisors believe offer favorable growth prospects. The portfolio’s assets will be invested primarily in common stocks of issuers with total market capitalization of $1 billion or greater at the time of purchase. As of May 31, 2001, the top 10 holding for this fund are: General Electric Co. Microsoft Corp Pfizer Inc. AOL Time Warner Inc. Cisco Systems Inc. Home Depot Inc. Progressive Corp. Ohio Intel Corp Amgen Inc. Qualcomm Inc. Investment choices continued - The Small Cap Growth Fund seeks capital appreciation by investing primarily in equity securities (including common and preferred stocks, convertible debt securities and other securities having equity features) of small growth companies with market capitalization of less than $1 billion at the time of initial purchase. As of May 31, 2001, the top 10 holdings of this fund are: Insight Communications Patterson Uti Energy I Key Energy Services, Inc. Invitrogen Corp. Cephalon, Inc. Gene Logic, Inc. Polymedica Corp. Career Education Corp. American Eagle Outfitt Cabletron Systems, Inc. Investment choices continued - The Large Cap Value Fund’s objective is total return by investing in a portfolio of highly liquid common stocks that have above average price appreciation potential at the time of purchase. These securities are characterized as having above average dividend yields and below average price earnings relative to the stock market in general. The portfolio’s assets will be invested primarily in common stocks of issuers with total market capitalization of $1 billion or greater at the time of purchase. As of March 31, 2001, the top 10 holdings for this fund are: Exxon Mobil Corp. AT&T Corp. Chase Manhattan Corp. Bank of American Corp. American Int’l Group Inc. SBC Communications, Inc. Morgan Stanley Dean Witter & Co. Motorola, Inc. Fannie Mae BellSouth Corp. Investment choices continued - The Multi-Sector Fixed Income Fund seeks total return consisting of capital appreciation and income. The Portfolio invests a portion of its assets in high-yield securities. These involve a substantial risk of loss and are less liquid than investment grade debt securities. As of May 31, 2001, the top 10 holdings for this fund were: United States Treasury (6.00%, 2009) FNMA Pass-Thru (6.00%) Federal National Mortgage Association (6.62%, 2030) FHLMC PC (7.00%, 2029) American Health Ppty (7.05%, 2030) Bank of America Corp (7.80%, 2010) FHLMC PC (6.00% , 2029) Residential Accredit (5.65%, 2028) United Dominion Real (8.62%, 2003) Investment choices continued - The Small Cap Value Fund seeks to achieve above average capital appreciation by investing primarily in a diversified portfolio of common stocks of small-capitalization “value” companies. As of May 31, 2001, the top 10 holdings of this fund were: Wallace Computer Servi Landauer, Inc. PSS World Med Inc Artic Cat Inc Schawk Inc Tetra Technologies Inc IPC Hldgs Ltd Compx International In Martin Marietta Matls Federal Signal Corp Investment choices continued - The Standard & Poors Index 500 Fund seeks to provide investment results that, before expenses, correspond to price and yield performance of the S&P 500 Index. As of May 31, 2001, the top 10 holdings of this fund were: General Electric Co Microsoft Corporation Exxon Mobil Corporation Pfizer Inc. Citigroup, Inc. Wal Mart Stores Inc. AOL Time Warner, Inc. International Business American Intl Group In Intel Corporation Investment choices continued - The Global Sciences and Technology Investments Portfolio seeks capital appreciation by investing primarily in equity securities of both domestic and foreign companies. The Portfolio invests primarily in the securities of companies principally engaged in the technology, telecommunications and healthcare sectors. As of March 31, 2001, the top 10 holdings of this fund were: Compaq Computer Corp. Dell Computer Corp. Kla-Tencor Corp. Worldcom, Inc. Microsoft Corp. Solectron Corp. Applied Materials, Inc. Intel Corp. Lam Research Group Comcast Corp. (cl. A) spl Investment choices continued - The Government Money Fund is managed to provide current income consistent with the maintenance of liquidity and the preservation of capital by investing exclusively in short-term securities issued or guaranteed by the United States government, its agencies or instrumentalities and repurchase agreements with respect to those securities. The John Q. Hammons Stock Fund consist of publicly traded shares of common stock of John Q. Hammons, Hotels, Inc.
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