Statements of Changes in Net Assets Available for Plan Benefits for the Years Ended December 31, 2000 and 1999
 

General-

The Plan is a defined contribution plan covering all hourly employees and truck drivers of the Marathon Electric Manufacturing Corporation and its subsidiary, the Marathon Special Products Corporation (referred to collectively as the "Company").

On May 28, 1999, the hourly employees of the Lincoln Motors division ("Lincoln") of Marathon Electric Manufacturing Corporation were added to the Plan upon acquisition of the division. Prior employees' service with their previous employer counted towards eligibility to participate in the Plan, but not toward vesting. Impact on Plan financial statements was immaterial.

An employee becomes eligible to participate in the Plan on the first day of the month subsequent to the employee obtaining the age of 21 or completion of the qualifying period. The qualifying period is defined as the 12 month period commencing after the date of employment or subsequent to January 1, upon completion of at least 1,000 service hours. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

Contributions-

Participants are allowed to contribute up to a maximum of $10,500 or such higher amount permitted by IRS Code Section 402(a) for employees represented by Local 1791, IBEW, and 15 percent of pretax annual income for employees represented by Teamsters Local 446, Local 1076, IBEW, and for employees at the Lincoln, West Plains, Lebanon and Brownsville facilities as defined by the Plan. The Company currently matches 50 percent of the portion of an employee's contribution up to five percent of pretax income for employees represented by Local 1791, IBEW; four percent for employees represented by Teamsters Local 446; three percent for employees at the West Plains, Lebanon and Lincoln facilities. The Company matches 30 percent of an employee's contribution equal to three and one-half percent of pretax income for employees represented by Local 1076, IBEW. The Company has the option to annually increase the matching contribution for these locations at its discretion. There is no Company matching contribution for Lima participants. Lima employees who are employed on January 1, and who complete their probationary period by that date, receive a Company contribution of $1,000 for one year's service and a prorated amount for less than one year of service.

Overall responsibility for administering the Plan rests with the Plan's administrative committee which is appointed by the Board of Directors of the Company. The Plan's trustee, Marshall & Ilsley Trust Company (the "Trustee"), is responsible for the management and control of the Plan's assets and has certain discretionary authority and control over such assets.

Vesting-

Participants are 100 percent vested in their contributions and the earnings on those contributions. Company contributions and the earnings thereon vest after the earlier of three years of Plan participation or five years of eligible service. One year of eligible service is defined as a year of employment with the Company. Partial years may be vested as defined in the Plan document.

Investment Options-

Participants may direct their contributions and any related earnings thereon into six investment options, in 10% increments. Participants may change their investment elections every thirty days. A description of each investment option is provided below:
 

On termination of service, the participant receives a lump-sum amount equal to the value of the participant's account.

Forfeitures-

Plan forfeitures arise as a result of participants who terminate service with the Company before becoming vested in the Company's contribution. The amount of forfeitures allocable to remaining participants at December 31, 2000 and 1999 were $1,379 and $8,465, respectively.

Plan Termination-

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 provisions of ERISA. In the event of plan termination, participants will become fully vested in their account balances.
 

The accompanying financial statements are presented on the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Contributions are recognized at the time such amounts are received rather than when contributed.

Payment of Benefits-

Benefit payments to participants are recorded upon distribution.

Administrative Expenses-

Substantially all administrative expenses are paid by the Plan. These expenses include investment management and trustee fees.

The assets of each Plan are segregated within the accounts of the Master Trust. The market value of the assets held in the Master Trust as of December 31 are as follows:

Allocations of assets of the Master Trust to participating plans as of December 31 are as follows:

The M&I Stable Principal Fund consists of guaranteed investment contracts and synthetic guaranteed investment contracts. All investment contracts are fully benefit responsive. Fully benefit-responsive investment contracts are valued at contract value, which represents the principal balance of the investment contracts, plus accrued interest at the stated contract rate, less payments received and contract charges by the insurance company. The average crediting interest rates for the years ending December 31, 2000 and 1999 were 6.45% and 6.05%, respectively. The funds average yields for 2000 and 1999 were 6.36% and 5.99%, respectively.

The crediting rates for the contacts are fixed or reset either quarterly or annually. There are no limitations or guarantees.

The assets of the Plan are commingled and are segregated in the accounts of the RBC Master Trust. The market value of the assets held in the RBC Master Trust as of December 31, 2000 and 1999 is as follows: