The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was signed into law on June 7, 2001. This tax bill made significant modifications to the rules affecting qualified defined contributions plans and Individual Retirement Accounts (IRAs).

Increased Contribution Limits
*401(k) limit will increase to $11,000 in 2002, with $1,000 increases for each of the following four years (current limit is $10,500)

*Total contribution limit (pre-tax 401(k) and after-tax SIP combined) will increase to the lesser of $40,000 or 100% of compensation, effective 2002 (current limit is the lesser of $35,000 or 25% of compensation)

*IRA contribution limit will increase to $3,000 per year for 2002-2004, $4,000 for 2005-2007, and $5,000 per year for 2008 and thereafter (current limit is $2,000)

*New "catch-up" contributions: Individuals age 50 and older will be permitted to make additional contributions (above the normal limits) to 401(k) plans and IRAs as follows:

401(k) Plans:

2002 - $1,000
2003 - $2,000
2004 - $3,000
2005 - $4,000
2006+ - $5,000

IRAs:

2002 - $500
2003 - $500
2004 - $500
2005 - $500
2006+ - $1,000

Currently, there is no such provision for 401(k) plans or IRAs.

Income Tax Credit
A non-refundable tax credit is now available to individuals who make pre-tax contributions to a 401(k), 403(b) or 457 plan or to an IRA. The credit applies to the first $2,000 contributed and is based upon the individual's adjusted gross income:

50% Credit
Individual: $0 - $15,000
Joint: $0 - $30,000

20% Credit
Individual: $15,001 - $16,250
Joint: $30,001 - $32,500

10% Credit
Individual: $16,251 - $25,000
Joint: $32,501 - $50,000

Cash Balance Plan
The annual limit on compensation in determining contributions will increase to $200,000 (effective 1/1/2002), and will be indexed in $5,000 increments in future years.

Currently, the compensation limit is $170,000.

Rollovers From Non-401(k) Plans
Effective 1/1/2002, distributions from any defined contribution arrangement (401(k), 403(b), 457, etc) may be rolled over into any other defined contribution arrangement.

Currently, plan distributions may only be rolled into the same type of plan (e.g., 403(b) to 403(b) only).

Rollovers From IRAs
Effective 1/1/2002, taxable amounts in an IRA may be rolled over to a defined contribution plan such as a 401(k) plan.

Currently, only an IRA created as a rollover from a qualified 401(k) plan could be rolled over.

Rollover of After-Tax Contributions
Effective 1/1/2002, after-tax contributions in a defined contribution plan may be rolled over to an IRA or another qualified plan, provided the IRA or plan maintains separate accounting of these amounts (including earnings).

Currently, after-tax contributions cannot be rolled over to any IRA or defined contribution plan.

401(k) Hardship Distributions
A participant who receives a "401(k) hardship distribution" will be ineligible to make any contributions for the next 6 months.

Currently, a 401(k) hardship distribution results in a 12-month suspension of contributions.

NEW SELECT FUND ADDED

Effective August 1, 2001, the new Fidelity Select Pharmaceuticals Portfolio (FPHAX) will be available to all plan participants.

The Select Pharmaceuticals Portfolio seeks capital appreciation by investing in common stocks of both foreign and domestic issuers. The fund normally will invest at least 80% of its assets in companies engaged in the research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types. Select Pharmaceuticals Portfolio invests in leading pharmaceutical and drug companies, targeting companies with strong product pipelines and the potential for solid long-term earnings growth.

The sales charge associated with this fund, and all Select Funds, is waived for the Savings Investment Plan.

SAVING FOR COLLEGE: SECTION 529 PLANS

The following excerpts are from an article in the Thursday, June 7, 2001 "Chicago Sun-Times". The opinions of the author, Terry Savage, may or may not reflect those of the SIP Committee.

One of the most positive changes in the new tax law is the benefit for anyone helping to pay for someone's college tuition - parent, grandparent, guardian, mentor. These tax-free plans, called Section 529 plans, are the best way to save for college.

HOW 529 PLANS WORK

These plans allow contributions up to $50,000 a year into an account designed to pay future tuition for a child. In reality, most 529 accounts have been started with far smaller amounts. Many plans have initial minimums of $500 or $1,000, and will arrange for automatic investments of as little as $50 or $100 a month.

Section 529 plans have been organized by individual states in association with investment management companies, which offer a series of mutual fund choices. Most plans have taken the guesswork out of investing by crafting risk-based, age-appropriate mutual funds, depending on the age of the child for whom the account is opened. As the child gets older, the funds automatically invest in lower-risk securities.

Money can be withdrawn to pay for any college tuition or fees at a school in any location. While some state plans give additional breaks for residents, the flexibility of the plans means you could choose any state's plan based on the investment choices and track records of the funds offered within the plan.

Four Advantages
While investments are not deductible, they have been very attractive for several reasons.

First, the person who puts the money into the account retains control over it. Unlike custodial accounts under the Uniform Gifts to Minors Act, the money in a Section 529 plan does not automatically become property of the child at age 18.

Second, the contributor can actually take the money back at any time by paying a small penalty and appropriate taxes on the investment gains upon withdrawal. That feature has been attractive to wealthy grandparents, who've wanted to get assets out of their estates - but feared that economic circumstances or health problems would create a need for the money in the future. With a Section 529 investment plan, they can get the money back if their needs are more pressing than their grandchildren's educational needs.

Third, the assets in a Section 529 plan do not count as an asset of the student in financial-aid formulas. Student assets weigh seven times more heavily against the family in the aid formula. In fact, many schools do not count these assets at all when considering grants of student financial aid.

The fourth advantage has just taken a quantum leap. Previously, withdrawals to pay for educational expenses were taxed at the student's low income tax rate. Now, under the new tax bill, withdrawals from 529 plans will be complete tax free.

What To Do
The Illinois Section 529 investment-type plan is BrightStart. You can find a list of all the existing Section 529 plans - and their investment choices and strategies - at www.collegesavings.org.

For a state-by-state comparison chart of Section 529 plans, please call the SIP Office.

For additional information, see the SIP Internet website at www.sargentlundy.com/sip, in the "Your Family" section.

MAS FUND NAME CHANGES

Effective August 1, 2001, the following funds have been renamed to reflect management by Morgan Stanley Investment Management:

MAS MidCap Growth (a Core fund)
MAS Value
MAS High Yield
MAS Fixed Income
MAS Balanced

The "MAS" has been changed to "MSIFT".

AF WASHINGTON MUTUAL A (AWSHX)

Objective: Seeks to produce current income and provide an opportunity for growth of principal consistent with sound common stock investing. The fund places an emphasis on never investing in alcohol or tobacco stocks.

Strategy: Invests primarily in common stocks or larger, more established companies that meet the listing requirements of the New York Stock Exchange and have a strong record of earnings and dividends.

Risk: In exchange for greater potential rewards, there is the possibility that the fund's income and the value of its investments may fluctuate in response to economic, political or social events in the U.S. or abroad. The likelihood of loss is greater if you invest for a shorter period of time.

Expense ratio: 0.63%

Management Fee: 0.29%

Sales Charge: None if invested through the S&L SIP; Not through SIP - 5.75%

Short-Term Trading Fee: None

Top Five Holdings (as of 3/31/2001):

Bank of America
Texaco
AT&T
Household International
Bank One

Top 3 Stock Sectors (as of 3/31/2001):

Financials - 25.5%
Industrials - 16.2%
Services - 10.0%

Fund Inception: 07/31/1952

MSIF MIDCAP GROWTH (MACGX)

Objective: Seeks long-term capital growth

Strategy: Invests primarily in common stocks of companies with capitalizations in the range of companies included in the S&P MidCap 400 Index, with a focus on companies that demonstrate one or more of the following characteristics: high earnings growth rates, growth stability, rising profitability and the ability to produce earnings that consistently beat market expectations. The fund may invest, to a limited extent, in foreign equity securities..

Risk: In exchange for greater potential rewards, there is the possibility that the fund's income and the value of its investments may fluctuate in response to economic, political or social events in the U.S. or abroad. The purchase of shares issued in IPOs exposes the fund to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these new issuers operate.

Expense ratio: 0.88%

Management Fee: 0.50%

Short-Term Trading Fee: None.

Top Five Holdings (as of 3/31/2001):

Lincare Hldgs
Electronic Arts
Tenet Healthcare
CVS
Health Management Assoc.

Top 3 Stock Sectors (as of 3/31/2001):

Technology - 23.1%
Services - 22.3%
Health - 19.7%

Fund Inception: 01/31/97

RETIREMENT INCOME CONSULTATION

Fidelity Investments has designed a program to assist you in determining how prepared you are to meet your retirement income needs based on your current retirement savings and estimated expenses.

Participants are eligible for this consultation if:

* You expect to retiree in less than two years
* You have been retired less than one year
* You have an SIP account balance of $50,000 or greater

To arrange a complimentary appointment, call 1-800-887-4015. A Retirement Specialist will explain that a workbook will be mailed to your home, detailing your financial information. This will include all sources of retirement income, including IRA and pension & 401(k) plan assets for you and your spouse.

An appointment will be scheduled for you to call the Retirement Specialist, who will enter this data into a retirement calculator. A discussion focusing ways to achieve your retirement goals will follow and include:

* A projection of how many years this money is expected to last, based on your current investment election
* How much money you could withdraw each year without jeopardizing your retirement goals
* Deciding which investments to withdraw from and when

Upon completion of the consultation, the Retirement Specialist will send you the completed income plan (15 pages) including graphs and spreadsheets.

NEW ON-LINE WORKSHOP

Fidelity has created a new on-line workshop that is entirely self-directed, so you can learn at any time and proceed at your own pace. And it can be accessed from any personal computer that has an Internet connection and participation in the Savings Investment Plan is not required.

The Savings Plan Workshop is designed to help you:

* Understand investment concepts, such as time horizon and asset allocation
* Estimate how much you'll need to save in order to reach your retirement goals
* Determine the right investment strategy for your needs
* Take a more active role in your retirement savings plan

This basics workshop can be found at www.click2learn.com/fidelity.

Because this is a self-paced workshop, you can stop at any time and "bookmark" your place. Then you can return later and continue the program.

The current format of the program is very generic and not customized for the Savings Investment Plan. A customized workshop is expected to be available toward the end of the year, along with an advanced Investment Strategy Workshop.

INQUIRING MINDS WANT TO KNOW

Q. Who pays for the Fidelity lunch hour workshops?

A. The plan has an education budget of 12 days each year. These are used for the following events:

Enrollment meetings
Savings Plan Workshops
Investment Strategy Workshops
NetBenefits Training

There were 6 additional days this year, left over from last year. However, there will be no carry-over days allowed in the future. Site visits, such as meetings in the Wilmington or Chattanooga offices, are included in the education budget.

Fidelity does not charge the plan or S&L for these meetings. Nor do they charge for educational supplies. They also pay for the "Stages" magazine which is sent to all participants, as well as printing and postage costs for quarterly statements and postcard reminders.

Q. Why does my Stable Value account balance not change each day, similar to my other investments?

A. Generally, earnings are credited to the Stable Value fund only at the end of each month. However, if you were to request an exchange (transfer) out of the fund in mid-month or request a withdrawal or new loan, the earnings would be credited through that day.

You can verify the amount credited to your account each month by selecting "history" in NetBenefits. You can view the last 90 days, a specific month or quarter, or any date range within the past 15 months.

Q. I didn't get my SIP statement for the 2nd quarter. Can I get another one?

A. Effective mid-June, Fidelity has automatically defaulted to "on-line statements" for anyone who has logged into NetBenefits. This may be the reason you did not receive your latest statement.

You can change back to paper statements by selecting "Mail Preferences" in NetBenefits. It is the last item listed on the left side of your screen. You can also select "on-line statement" to request and print your statement for the 2nd quarter before changing your Mail Preference.

Q. I moved several weeks ago and my quarterly SIP statement was mailed to the correct address. So why is the monthly BrokerageLink statement will going to my previous address?

A. Address changes are electronically sent to Fidelity every few days. But the BrokerageLink is part of the "retail" side of Fidelity and does not share the address files. You will need to contact Fidelity directly to change your address for the brokerage statements.

Q. We have so many investment choices now. How many are actually being used?

A. There are currently 221 investment funds available through the plan (this does not include the brokerage option). Of this total, the plan has money in 182 funds (82%).

Participants have invested in all 22 of the Core Investment Funds and 29 of the 40 new Select Funds.

The Stable Value Fund has the largest amount with $105,395,431 while the Morgan Stanley Active International B Fund has the least with $44.71.

The above data is as of July 31, 2001.

Q. How do most people contact Fidelity?

A. For the 2nd quarter 2001, Fidelity recorded the following number of inquiries:

NetBenefits - 31,726
Voice Response - 4,411
Telephone Representatives - 2,486

INTEREST VS DIVIDENDS

Investments provide both interest and dividends. Although similar, they are not the same. The following information is from Fidelity's NetBenefits:

Interest
Interest is investment income that you may receive from bank accounts, certificates of deposit (CDs), loans you've made to others, tax refunds from the IRS, or bonds.

Interest income can be either preset or variable and is a reflection of current prevailing interest rates. For example, your savings account may promise 2.5% interest, which is the current average interest rate (as of 6/1/01) for savings accounts. But as prevailing interest rates go up or down, so will the interest you receive on the savings account. On the other hand, interest on a certificate of deposit (CD) is fixed when you purchase it and will not change before the maturity date.

Bond prices are directly related to interest rates. When interest rates fall, prices rise on already-issued bonds, because they pay a higher rate than the rates now being offered on new bonds. When interest rates rise, prices fall on already-issued bonds, because newer bonds are paying higher rates.

In most cases, you have to pay ordinary income tax on interest income. There may be exceptions for interest received on obligations or a state or local government.

Dividends
Some individual stocks pay dividends based on the company's success, as a way of distributing profits to shareholders. Corporate dividends are usually paid quarterly, but the amount is not preset and sometimes no dividend is paid at all. Sometimes a company will not pay out the dividend to shareholders but will reinvest profits in the company's growth or will use the profits to pay off debt.

In most cases, you have to pay ordinary income tax on dividends. You won't have to pay tax on dividends if they're considered to be a return of capital (return of your initial investment without interest), or they're in the form of stock or stock rights (rights that allow you to buy stock at a fixed price). However, stock dividends or stock rights distributed by a company are taxable if you're given the choice between stock (or stock rights) and cash or other property, as in a dividend reinvestment plan.

A dividend reinvestment plan uses your quarterly dividends to buy additional shares of the company's stock. The effect is similar to compound interest. As time goes by, you own (and are paid dividends on) more and more shares. But, you must pay ordinary income tax on the reinvested dividends even though you do not get the cash.

Mutual Fund Dividends
Some mutual funds pay dividends based on how well the fund performs.

If you receive a dividend from a mutual fund, you may have to pay either ordinary income tax or capital gains tax on it, depending on the nature of the dividend, unless the fund invests in tax-exempt securities. If the fund invests in tax-exempt securities, part or all of the dividend may be tax exempt.

Many mutual funds offer dividend reinvestment plans. In these plans, you may use your dividends to buy more shares of the fund instead of receiving the dividends as cash. If you reinvest your dividends, you still must report them as income.

Keep in mind that interest and dividends on investments held in an Individual Retirement Account (IRA) or qualified employer's defined contribution plan, are automatically reinvested as tax-deferred income.

IN MEMORIAM

Several former employees and retirees have passed away during recent months:

Beckman, Russell: passed away at age 77 on June 22,2001. Mr. Beckman retired in August 1986 from the Architectural Design Division.

Gelatka, Charles: passed away at age 87on May 23, 2001. Mr. Gelatka retired in December 1983 from the Structural Engineering Division.

Hennessy, Delores: passed away at age 81 on April 18, 2001. Ms. Hennessy retired in 1985 from the Electrical Secretarial Staff.

Klebenow, Bert: passed away at age 76 onJuly 25, 2001. Mr. Klebenow retired in October 1987 from the Mechanical Design & Drafting  Division.

Kramer, Jacob: passed away at age 77 in mid-July 2001. Mr. Kramer retired in December 1993 from the Transmission & Substation Division.

Mayerle, Richard: passed away in April 2001 at age 74. Mr. Mayerle retired in January 1986 from the Architectural Design Division.

Parikh, Ranchhod: passed away at age 64 on May 23, 2001. Mr. Parikh left in April 2001 from the Technical Support Staff.

Patel, Kantilal C: passed away at age 60 on June 19, 2001. Mr. Patel left in January 1988 from the Mechanical Design & Drafting Division.

Szatan, Eugene: passed away at age 84. Mr. Szatan retired in 1984 from the Mechanical Design & Drafting Division.

We send our condolences to their families and friends.