SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FFTW FUNDS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
FFTW FUNDS, INC.
200 Park Avenue, New York, New York 10166
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on November 19, 1999
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To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the U.S. Short-Term Portfolio (the "Portfolio") of FFTW Funds,
Inc. (the "Fund") will be held at the offices of Fischer Francis Trees & Watts,
Inc., 200 Park Avenue, New York, New York 10166, on Friday, November 19, 1999 at
10:00 a.m., Eastern Time. The purpose of the Special Meeting is to consider and
act upon the following proposals, all of which are more fully described in the
accompanying Proxy Statement dated November 4, 1999.
1. To approve a revised Advisory Agreement between the Fund on
behalf of the Portfolio and Fischer Francis Trees & Watts,
Inc. (the "Investment Adviser");
2. To reclassify or revise certain
fundamental investment
restrictions of the Portfolio;
3. To transact such other business as may properly come before
the Special Meeting or any adjournments thereof.
<PAGE>
The Board of Directors has fixed the close of business on October 18,
1999, as the record date for the determination of the shareholders entitled to
notice of and to vote at the Special Meeting or any adjournments thereof. The
enclosed proxy is being solicited on behalf of the Directors.
By order of the Board of Directors,
William E. Vastardis,
Secretary
New York, New York
November 4, 1999
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YOUR VOTE IS IMPORTANT
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD,
SIGN AND DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO
POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO SAVE THE FUND ANY ADDITIONAL
EXPENSE OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY.
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<PAGE>
PROXY STATEMENT
FFTW FUNDS, INC.
200 Park Avenue, New York, New York 10166
SPECIAL MEETING OF SHAREHOLDERS
To Be Held on November 19, 1999
---------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies made by, and on behalf of, the Board of Directors of FFTW Funds,
Inc., a Maryland corporation (the "Fund"), to be used at a Special Meeting of
Shareholders of the U.S. Short-Term Portfolio (the "Portfolio"), a separate
investment Portfolio of the Fund, to be held at the offices of the Fund, 200
Park Avenue, New York, New York 10166 on Friday, November 19, 1999 at 10:00 a.m.
Eastern Time, and at any adjournments thereof (the "Meeting"). The cost of the
solicitation (including printing and mailing this Proxy Statement, Notice of
Meeting and Proxy, as well as any necessary supplementary solicitation) will be
borne by the Portfolio. The Notice of Meeting, Proxy Statement and Proxy are
being mailed to shareholders on or about November 5, 1999.
The presence in person or by proxy of the holders of record of a
majority of the shares of the Portfolio of the Fund entitled to vote thereat
shall constitute a quorum at the Meeting for the Portfolio. If, however, such
quorum shall not be present or represented at the Meeting or if fewer shares are
present in person or by proxy than the minimum required to take action with
respect to any proposal presented at the Meeting, the holders of a majority of
the shares of the Portfolio present in person or by proxy shall have the power
to adjourn the Meeting with respect to the Portfolio, from time to time, without
notice other than announcement at the Meeting, until the requisite amount of
shares entitled to vote at the Meeting shall be present. At any such adjourned
Meeting, if the relevant quorum is subsequently constituted, any business may be
transacted which might have been transacted at the Meeting as originally called.
For purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated as shares that are present but which have not been voted. For
this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval for Proposals One and Two,
for which the required vote is a percentage of the shares either outstanding or
present at the Meeting.
The Board of Directors has fixed the close of business on October 18,
1999 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting and at any adjournments thereof. Each share is
entitled to one vote, and each fraction of a share is entitled to a
proportionate fractional vote. The number of outstanding voting shares of the
Portfolio as of October 18, 1999 is 57,426,557.
Additional information regarding ownership of the Portfolio's shares by
each person who beneficially owns more than five percent of the voting
securities of the Portfolio is set forth as Exhibit A.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked thereon or as
otherwise provided therein. Accordingly, unless instructions to the contrary are
marked, proxies will be voted FOR the matters specified on the proxy card. Any
shareholder may revoke his or her proxy at any time prior to exercise thereof by
giving written notice to the Secretary of the Fund at FFTW Funds, Inc., c/o
Investors Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New
York 10020, or by signing another proxy of a later date or by personally casting
his or her vote at the Meeting.
The most recent annual and semi-annual reports of the Portfolio,
including financial statements, have been previously mailed to shareholders. If
you have not received these reports or would like to receive additional copies
free of charge, please either write to FFTW Funds, Inc., c/o Investors Capital
Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New York 10020 or call
(800) 762-4848 and they will be sent promptly by first-class mail.
To obtain the necessary representation at the Meeting, supplementary
solicitations may be made by mail, telephone, telegraph, facsimile or personal
contact by (i) Directors and officers of the Fund, (ii) Fischer Francis Trees &
Watts, Inc. (the "Investment Adviser"), and/or (iii) Investors Capital Services,
Inc. (the "Administrator").
Votes Required
Approval of the revised Advisory Agreement, as set forth in Proposal
One, will require a majority vote of the outstanding voting securities of the
Portfolio. The reclassification or revision of certain fundamental investment
restrictions of the Portfolio, as set forth in Proposal Two, will require a
majority vote of the outstanding voting securities of the Portfolio. For
purposes of Proposals One and Two, a majority of the outstanding voting
securities of the Portfolio means the lesser of (1) 67% of the shares of the
Portfolio present at a meeting if the holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Portfolio.
<PAGE>
THE PROPOSALS
PROPOSAL 1: APPROVAL OF REVISED ADVISORY AGREEMENT
The Board of Directors of the Fund is seeking shareholder approval of a
revised Advisory Agreement that will incorporate the following changes: a
reduction in the investment advisory fee paid by the Portfolio, the elimination
of a mandatory expense cap and the creation of a separate Advisory Agreement
applicable only to the Portfolio. These changes are discussed in detail below.
Reduction in Advisory Fees
The Board has proposed an amendment to the Advisory Agreement that
significantly reduces the investment advisory fees of the Portfolio and which
represents a significant benefit to shareholders. Under the terms of the current
Advisory Agreement, the Investment Adviser is entitled to receive compensation
in the amount of 0.30% of the Portfolio's average daily net asset value. Since
March 1, 1996, the Investment Adviser, in the interest of lowering the
Portfolio's overall expenses, has voluntarily waived its advisory fees to 0.15%
of the Portfolio's average daily net asset value. Under the proposed Advisory
Agreement, the compensation to the Investment Adviser would be contractually
reduced to 0.15%. The reason for changing the 0.15% investment advisory fee from
a voluntary fee waiver to a contractual fee cap is to set the fees at 0.15% of
average daily net assets officially.
Removal of the Expense Cap
Currently the Advisory Agreement also imposes a mandatory obligation on
the Fund to cap the total annual operating expenses of the Portfolio. The
Advisory Agreement currently states:
If the aggregate annual operating expenses, including the
Advisor's fee, of U.S. Short-Term exceed 0.40% of U.S.
Short-Term's average daily net asset value, then the Advisor
shall reimburse U.S. Short-Term for any such excess.
Subject to shareholder approval, the Fund intends to eliminate this
entire provision. The reason for eliminating this provision is that this
provision becomes unnecessary after the proposed advisory fee reduction
(described above) is approved, since the Portfolio's expenses will be well below
this expense cap. The Investment Adviser has also voluntarily agreed to cap the
total operating expenses at 0.25% for an indefinite period. Adjusting for the
proposed advisory fee reduction (described above), but absent the voluntary
expense cap, total operating expenses for the Portfolio would have been 0.27%
for the year ended December 31, 1998. With this proposed advisory fee structure,
there is no need to continue to impose the contractual total operating expense
cap of 0.40% of average daily net assets.
At the time the contractual expense cap was implemented (August of
1991), the expenses of the Portfolio were substantially higher and the cap was
necessary. However, with the efficiencies that the Investment Adviser has gained
in managing the investments of the Portfolio, the Investment Adviser has agreed
to lower its contractual advisory fees and voluntarily cap the total operating
expenses of the Portfolio at such levels that this contractual expense cap is no
longer meaningful and necessary. Shareholders of the Portfolio may pay higher
fees in the future if the Investment Adviser does not continue to maintain the
voluntary total operating expenses cap and if expenses of the Fund increase.
As shown in the chart below, the advisory fees paid to the Investment
Adviser and the total operating expenses for the Portfolio for the fiscal year
ended December 31, 1998 would decrease as a result of the proposed changes.
ANNUAL EXPENSES
<TABLE>
<S> <C> <C>
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Current Expenses Hypothetical Expenses
for the year ended 12/31/98 for the year ended 12/31/98
(with mandatory (assuming all proposed fee
expense cap) changes are approved)
- ------------------------------------------- ----------------------------------- --------------------------------------
- ------------------------------------------- ----------------------------------- --------------------------------------
Management Fees 0.30% 0.15%
- ------------------------------------------- ----------------------------------- --------------------------------------
- ------------------------------------------- ----------------------------------- --------------------------------------
Distribution and Service Fees None None
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- ------------------------------------------- ----------------------------------- --------------------------------------
Other Expenses 0.12% 0.12%
- ------------------------------------------- ----------------------------------- --------------------------------------
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Total Annual Fund 0.42% 0.27%
Operating Expenses
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- ------------------------------------------- ----------------------------------- --------------------------------------
Waiver due to Mandatory Expense Cap by (0.02%)(1) None(2)
Adviser
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--------- ---------
Net Expenses 0.40% 0.27%
- ------------------------------------------- ----------------------------------- --------------------------------------
</TABLE>
1. Under the current Advisory Agreement, the Investment Adviser has agreed
to cap total annual fund operating expenses at 0.40% of the Portfolio's
average daily net asset value.
2. Under the proposed Advisory Agreement, the
mandatory expense cap of 0.40% of average
daily net asset value would be removed.
However, as of March 1, 1996, the
Investment Adviser has voluntarily agreed
to cap the Portfolio's total annual fund
operating expenses at 0.25% of the
Portfolio's average daily net asset value.
The net advisory fee paid for the fiscal year ended December 31, 1998
was $920,099. Had the proposed changes to the Advisory Agreement been in place,
the net advisory fee paid for the fiscal year ended December 31, 1998 would have
been $958,039 (assuming the voluntary expense cap had not been in effect) or
$920,099 (assuming the voluntary expense cap had been in effect).
Conform Agreement to Standard Advisory Agreement
Currently there is one Advisory Agreement, dated August 31, 1991, that
applies to the U.S. Short-Term Portfolio and two other portfolios of the Fund.
The Fund intends to create a separate Advisory Agreement for the U.S. Short-Term
Portfolio. Having a separate Advisory Agreement for the Portfolio will make it
easier and less costly for the Fund to revise or amend the Advisory Agreement,
should it need to do so in the future. The Advisory Agreement will conform to
the standard advisory agreements utilized by each of the other 20 portfolios in
the Fund. Except as outlined above under "Reduction in Advisory Fees" and
"Removal of the Expense Cap," there are no material changes between the current
Advisory Agreement and the standard advisory agreement utilized by each of the
other portfolios in the Fund. A copy of the proposed Advisory Agreement is
included as Exhibit B.
Information About the Investment Adviser
The Investment Adviser is Fischer Francis Trees & Watts, Inc. The
current Advisory Agreement for the U.S. Short-Term Portfolio was approved by a
majority of shareholders on April 3, 1991. Pursuant to the proposed Advisory
Agreement between the Investment Adviser and the Fund on behalf of the
Portfolio, the Investment Adviser shall manage the investment operations of the
Portfolio and the composition of the Portfolio, including the purchase,
retention and disposition of the Portfolio's assets, in accordance with the
investment objectives, policies and restrictions of the Portfolio.
Organized in 1972, the Investment Adviser is a registered investment
adviser and is a New York corporation that with its affiliates currently manages
over $32.6 billion in assets for numerous fixed income portfolios. The
Investment Adviser and its affiliates currently advise over 128 major
institutional clients including banks, central banks, pension funds and other
institutional clients. The Investment Adviser, whose address is 200 Park Avenue,
New York, New York 10166, is directly wholly-owned by Charter Atlantic
Corporation. Charter Atlantic Corporation is a privately owned corporation, the
shares of which are held by fourteen shareholders, none of whom is deemed to
control the corporation. Additional information regarding the principal
executive officer and directors of the Investment Adviser (i.e., name and
address, position with the Investment Adviser, and principal occupation of the
principal executive officer and each director) is included as Exhibit C.
There are no comparable U.S. registered
mutual funds advised by the Investment Adviser.
Board Consideration
At a meeting held on February 19, 1999, the Board of Directors,
including the Directors who are not interested parties to the Advisory Agreement
or interested parties of such parties, considered the Advisory Agreement in
connection with the proposed revisions as outlined above and determined that it
would be in the best interests of the Portfolio to approve the proposed Advisory
Agreement. In coming to that conclusion, the Directors examined the current and
proposed Advisory Agreement for the Portfolio and found that the 50% reduction
in contractual investment advisory fees would substantially benefit shareholders
of the Portfolio. The Directors also noted that having a separate Advisory
Agreement for the Portfolio will make it easier and less costly for the Fund to
revise or amend the Advisory Agreement, should it need to do so in the future.
Other than the reduction in the investment advisory fee and the elimination of
the mandatory expense cap, there were no material changes between the
agreements.
If approved by a majority vote of the outstanding shares of the
Portfolio, the Advisory Agreement will become effective on the first business
day following shareholder approval and will remain in force for a period of two
years, and from year to year thereafter, subject to approval annually by the
Board of Directors or by a majority vote of the outstanding shares of the
Portfolio, and also, in either event, approval by a majority of those Directors
who are not parties to the Advisory Agreement or interested persons of any such
party at a meeting called for the purpose of voting on such approval.
Accordingly, if the shareholders of the Portfolio should fail to approve the
Advisory Agreement, the proposed Advisory Agreement will not be put into effect
and the current Advisory Agreement, dated August 31, 1991, shall remain in
effect.
THE BOARD OF DIRECTORS OF THE FUND
UNANIMOUSLY RECOMMENDS APPROVAL OF PROPOSAL 1.
PROPOSALS 2A THROUGH 2D: RECLASSIFICATION OR
REVISION OF CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE PORTFOLIO
Pursuant to the Investment Company Act of 1940 (the "1940 Act"), the
Portfolio has historically adopted certain fundamental investment restrictions
("fundamental restrictions"), which are set forth in the Fund's prospectus or
statement of additional information, and which may be changed only with
shareholder approval.
The purpose of these proposals is to remove the requirement of
shareholder approval to change those restrictions that are not required under
the 1940 Act to be fundamental restrictions and to make more uniform the
restrictions that are required to be fundamental. Some of the Portfolio's
current fundamental restrictions that are not required to be such under the 1940
Act are unnecessary because the provisions of the 1940 Act and the disclosure
requirements of the federal securities laws otherwise provide adequate
safeguards for a Portfolio and its shareholders.
Accordingly, the Board has approved revisions to the Portfolio's
fundamental restrictions in order to simplify, modernize and make more uniform
those restrictions that are required to be fundamental, and to reclassify those
restrictions that are not legally required to be fundamental as non-fundamental
restrictions. Non-fundamental restrictions require Board approval to be changed,
but not shareholder approval. By reducing to a minimum those policies that can
be changed only by shareholder vote, the Board believes that the Portfolio would
be able to minimize the costs and delays associated with holding future
shareholder meetings to revise fundamental policies that become outdated or
inappropriate. The Board has approved modifying the Portfolio's fundamental
investment restriction on diversification to permit the Portfolio to have more
concentration in the securities of any one issuer. The Board has also approved
modifying the Portfolio's fundamental investment restriction limiting the
concentration of the Portfolio's investments in a particular industry.
The proposed changes in fundamental restrictions reflect the current
industry custom and practice of placing authority over those investment
restrictions not required by the 1940 Act with the Board rather than with
shareholders. Although the proposed changes will allow the Portfolio greater
investment flexibility to respond to future investment opportunities and to meet
industry changes promptly, the Board does not anticipate that the changes,
individually or in the aggregate, will result at this time in a material change
in the level of investment risk associated with an investment in the Portfolio.
If the shareholders of the Portfolio approve the proposed changes at
the Meeting, the Fund's prospectus and statement of additional information will
be revised to reflect those changes.
The text and a summary description of each proposed change to the
Portfolio's fundamental restrictions are set forth below.
Proposal 2A: Diversification
Under the Portfolio's diversification restriction stated below, the
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer. The Portfolio is classified as a "diversified" investment
portfolio under the 1940 Act, however the Portfolio's diversification
restriction is more stringent than that required under the 1940 Act. The purpose
of this amendment is to conform the Portfolio's diversification restriction to
the 1940 Act. Under the 1940 Act, a diversified investment portfolio may with
respect to 75% of its total assets invest not more than 5% of total assets
invested in securities of one issuer (excluding securities issued by the U.S.
government and its agencies), and not hold more than 10% in voting securities of
any one issuer. In addition, the remaining 25% of the portfolio's total assets
are exempt from these restrictions. The variation of the Portfolio's
diversification restriction from the diversification restriction of the 1940 Act
serves to impose greater constraints on the Fund's Investment Adviser.
The use of a more focused investment strategy may increase the
volatility of the Portfolio's investment performance, as the securities of the
Portfolio may be more sensitive to changes in the market value of a single
issuer or industry. If the securities in which the Portfolio invests perform
poorly, the Portfolio could incur greater losses than it would have had it been
invested in a greater number of securities. However, the Portfolio does not now,
or in the immediate near future, intend to invest more than 5% of its total
assets in the securities of any one issuer. In addition, the Portfolio intends
to limit its investments so as to comply with diversification requirements
imposed by the Internal Revenue Code of 1986, as amended, for qualification as a
"regulated investment company."
Current Text
The Portfolio may not invest more than 5% of its total assets in the
securities of any issuer (other than U.S. Government Securities and
repurchase agreements).
Proposed Text
The Portfolio may not invest more than 5% of its total assets in the
securities of any issuer (other than securities issued by the U.S.
Government, its agencies and instrumentalities, and repurchase
agreements), or purchase more than 10% of the voting securities of any
one issuer, with respect to 75% of the Portfolio's assets.
Proposal 2B: Repurchase Agreements
Under the following fundamental restriction, the Portfolio is
prohibited from holding more than 25% of its total assets in repurchase
agreements. Since the 1940 Act does not require that it be included as a
fundamental restriction, it is proposed that this fundamental restriction be
reclassified as a non-fundamental restriction. A repurchase agreement involves
the purchase by the Portfolio of a security that the seller has agreed to buy
back. The Portfolio will receive as collateral securities with a market value
equal to the amount invested by the Portfolio. If the seller defaults and the
collateral value declines, the Portfolio might incur a loss. If the seller
declares bankruptcy, the Portfolio may not be able to sell the collateral at the
desired time. The Board of the Fund does not intend, in the immediate future, to
change this policy to permit the Portfolio to invest more than 25% of its total
assets in repurchase agreements; however, the reclassification of the
restriction as non-fundamental will give the Board flexibility to change this
policy in the future without seeking shareholder approval. Should the Board
decide to permit such an investment strategy, this investment strategy will be
included in the next Fund registration statement filed with the Securities and
Exchange Commission and will be reflected in the next Fund prospectus or
statement of additional information, as appropriate.
Current Text
The Portfolio may not enter into repurchase agreements if, as a result
thereof, more than 25% of its total assets would be subject to
repurchase agreements.
(Text to remain unchanged following the
proposed reclassification of the
investment restriction.)
Proposal 2C: Industry Concentration
Under the 1940 Act, an investment portfolio must disclose in its
registration statement whether or not it intends to concentrate its investments
in a particular industry. Under the Portfolio's fundamental restriction stated
below, the Portfolio is permitted to concentrate its investments in securities
issued by issuers in the banking industry and by the U.S. government. The Board
proposes to amend this restriction to permit investments in the securities of
issuers in the "finance industry," which is intended to include instruments
issued or sponsored by such institutions as financial services companies,
insurance companies, securities dealers, and investment banks.
The Investment Adviser believes that, over time, the line between the
banking and finance industries has become blurred, with issuers in each industry
performing similar functions. It has become difficult to determine where the
banking industry stops and the finance industry starts. The Investment Adviser
further believes that the risks of concentration in the finance industry are the
same as the risks of concentration in the banking industry. These risks include
interest rate risk, credit risk, and regulatory risk (i.e., the impact of state
or federal legislation and regulations). The Board of Directors believes that
expanding the Portfolio's policies will not increase the overall risk of the
Portfolio, but will clarify that banks and financial services companies should
be treated as being within the same industry.
Current Text
The Portfolio may not invest more than 25% of its total assets in the
securities of any industry (other than U.S. Government Securities and
the banking industry).
Proposed Text
The Portfolio may not invest more than 25% of its total assets in the
securities of any industry (other than U.S. Government Securities, the
banking industry and the finance industry). For purposes of this test,
finance will be deemed to include all asset-backed securities.
Proposal 2D: Purchasing or Selling of Commodities
Under the Portfolio's current fundamental restriction stated below, the
Portfolio is permitted to use up to 5% of total assets as margin and premiums to
purchase and sell futures and options contracts traded on CFTC-regulated
exchanges. In order for all Portfolios of the Fund to have a consistent policy
with respect to commodities and commodity contracts, the proposed text is
identical to the current policy of the other Portfolios of the Fund. The
proposed restriction would eliminate the limitation of utilizing 5% of total
assets as margin and premiums. In addition, the Portfolio would no longer be
limited to purchasing only exchange-traded futures and options. If the Portfolio
were to expand its futures and options trading in this manner, the volatility of
the Portfolio's net asset value might increase. Risks associated with the use of
derivatives include the fact that derivative securities may be hard to sell and
are very sensitive to changes in an underlying security, interest rate or index,
and as a result can be highly volatile. If the Investment Adviser or Sub-Adviser
is wrong about its expectations of changes in interest rates or market
conditions, the use of derivatives could result in a loss. In addition,
non-exchange-traded instruments may be less liquid than futures and options
traded on exchanges. Futures and options instruments would be utilized only if
the Investment Adviser determined that such investments are advisable.
Current Text
[The] Portfolio may not purchase or sell commodities or commodity
contracts, except that [the] Portfolio may utilize up to 5% of its total assets
as margin and premiums to purchase and sell futures and options contracts on
CFTC-regulated exchanges.
Proposed Text
[The] Portfolio may not purchase or sell
physical commodities or related commodity contracts.
THE BOARD OF DIRECTORS OF THE FUND
UNANIMOUSLY RECOMMENDS APPROVAL OF PROPOSALS 2A
THROUGH 2D.
Other Matters
The Fund does not know of any matters to be presented at the Meeting
other than those mentioned in this Proxy Statement. If any other matters
properly come before the Meeting, the shares represented by proxies will be
voted with respect thereto in accordance with the best judgment of the person or
persons voting the proxies.
The Fund does not usually hold annual meetings of its shareholders.
Shareholder proposals to be included in the proxy statement for any subsequent
meeting must be received at the Fund's offices, 200 Park Avenue, New York, New
York 10166, within a reasonable amount of time prior to the mailing of proxy
materials for a meeting of shareholders. The submission of a proposal by a
shareholder for inclusion in the proxy statement does not guarantee that it will
be included. Shareholder proposals are subject to certain regulations under the
federal securities laws. The Directors shall call a special meeting of the Fund
upon written request of shareholders owning at least 10% of the Fund's
outstanding shares.
If the accompanying form of proxy is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. However, if no instructions are specified, shares
will be voted in favor of the proposals.
INFORMATION ABOUT THE FUND
The Independent Auditors. KPMG LLP, 345 Park Avenue, New York, New York 10154,
are the independent auditors to the Fund. Ernst & Young LLP, 787 Seventh Avenue,
New York, New York 10019, served as the independent auditors to the Fund with
respect to its financial statements for the fiscal year ending December 31, 1998
and prior years.
The Investment Adviser. The Investment Adviser of the Fund is Fischer Francis
Trees & Watts, Inc., located at 200 Park Avenue, New York, New York 10166.
Pursuant to an investment advisory agreement, the Investment Adviser manages the
investment and reinvestment of the assets of the Portfolio.
The Administrator. The administrator of the Fund
is Investors Capital Services, Inc. with offices at
600 Fifth Avenue, New York, New York 10020.
Pursuant to an administration agreement, Investors
Capital assists in managing and supervising all
aspects of the general day-to-day business
activities and operations of the Fund other than
the investment advisory activities, including:
custodial, transfer agent, dividend disbursing,
accounting, auditing, compliance and related
services.
The Principal Underwriter. The principal underwriter of the Fund is AMT Capital
Securities, LLC with offices at 600 Fifth Avenue, New York, New York 10020.
Pursuant to a distribution agreement, AMT Capital distributes shares of the
Fund.
By order of the Board of Directors,
William E. Vastardis
Secretary
New York, New York
November 4, 1999
<PAGE>
TABLE OF EXHIBITS
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
Exhibit Description
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
A Share Ownership of the Portfolio
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
B Proposed Advisory Agreement for the Portfolio
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
C Additional Information Regarding Principal Executive
Officer and Directors of the Investment Adviser
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
Share Ownership of the Portfolio
The following table sets forth the information concerning beneficial
ownership, as of September 30, 1999, of the Portfolio's shares by each person
who beneficially owns more than five percent of the voting securities of the
U.S. Short-Term Portfolio:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------- --------------------------- ----------------------
Percentage of
Number of Shares Outstanding Shares
Name and Address of Shareholder Beneficially Owned Owned
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
GENERAL MOTORS EMPLOYEES GLOBAL GROUP PENSION TRUST 16,920,231.025 31.35%
C/O FISCHER FRANCIS TREES & WATTS INC
200 PARK AVENUE 46TH FLOOR
NEW YORK, NY 10166
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
PHILIP MORRIS COMPANIES INC 12,147,727.537 22.51%
ATTN MARK WERNER
(MASTER TRUST)
120 PARK AVENUE
NEW YORK, NY 10017-5523
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
- ----------------------------------------------------------------- --------------------------- ----------------------
BANK OF AMERICA FUND 5,547,786.093 10.28%
C/O FFTW
200 PARK AVENUE 46TH FLOOR
NEW YORK, NY 10166
- ----------------------------------------------------------------- --------------------------- ----------------------
</TABLE>
<PAGE>
EXHIBIT B
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated _______________, 1999, between FFTW
Funds, Inc., a Maryland corporation (the "Fund") and Fischer Francis Trees &
Watts, Inc., a New York corporation (the "Adviser"),
In consideration of the mutual agreements herein made, the
parties hereto agree as follows:
1. Attorney-in-Fact. The Fund appoints the Adviser as its
attorney-in-fact to invest and reinvest the
assets of the U.S. Short-Term Portfolio (the
"Portfolio"), as fully as the Fund itself could
do. The Adviser hereby accepts this appointment.
2. Duties of the Adviser. (a) The Adviser shall be
responsible for managing the investment portfolio of
the Portfolio, including, without limitation,
providing investment research, advice and
supervision, determining which portfolio securities
shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the
Portfolio and determining how voting and other
rights with respect to portfolio securities of the
Portfolio shall be exercised, subject in each case
to the control of the Board of Directors of the
Fund (the "Board") and in accordance with the
objectives, policies and principles of the
Portfolio set forth in the Registration Statement,
as amended, of the Fund, the requirements of the
Investment Company Act of 1940, as amended, (the
"Act") and other applicable law. In performing
such duties, the Adviser shall provide such office
space, and such executive and other personnel as
shall be necessary for the operations of the
Portfolio. In managing the Portfolio in accordance
with the requirements set forth in this paragraph
2, the Adviser shall be entitled to act upon advice
of counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be
liable to the Fund for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the management of
the Portfolio and the performance of its duties under this Agreement except for
losses arising out of the Adviser's bad faith, willful misfeasance or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. It is agreed that
the Adviser shall have no responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information supplied by the Adviser for
inclusion therein about the Adviser. The Fund agrees to indemnify the Adviser
for any claims, losses, costs, damages, or expenses (including fees and
disbursements of counsel, but excluding the ordinary expenses of the Adviser
arising from the performance of its duties and obligations under this Agreement)
whatsoever arising out of the performance of this Agreement except for those
claims, losses, costs, damages and expenses resulting from the Adviser's bad
faith, willful misfeasance or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Adviser and its officers may act and continue to act
as investment advisers and managers for others (including, without limitation,
other investment companies), and nothing in this Agreement will in any way be
deemed to restrict the right of the Adviser to perform investment management or
other services for any other person or entity, and the performance of such
services for others will not be deemed to violate or give rise to any duty or
obligation to the Fund.
(d) Except as provided in Paragraph 5, nothing in this
Agreement will limit or restrict the Adviser or any of its officers, affiliates
or employees from buying, selling or trading in any securities for its or their
own account or accounts. The Fund acknowledges that the Adviser and its
officers, affiliates or employees, and its other clients may at any time have,
acquire, increase, decrease or dispose of positions in investments which are at
the same time being acquired or disposed of for the account of the Portfolio.
The Adviser will have no obligation to acquire for the Portfolio a position in
any investment which the Adviser, its officers, affiliates or employees may
acquire for its or their own accounts or for the account of another client, if
in the sole discretion of the Adviser, it is not feasible or desirable to
acquire a position in such investment for the account of the Portfolio.
3. Expenses. The Adviser shall pay all of its
expenses arising from the performance of its obligations
under this Agreement and shall pay any salaries,
fees and expenses of the Directors and officers of
the Fund who are employees of the Adviser or its
affiliates. Except as provided below, the Adviser
shall not be required to pay any other expenses of
the Fund, including, without limitation,
organization expenses of the Fund (including
out-of-pocket expenses, but not including the
Adviser's overhead or employee costs); brokerage
commissions; maintenance of books and records which
are required to be maintained by the Fund's
custodian or other agents of the Fund; telephone,
telex, facsimile, postage and other communications
expenses; expenses relating to investor and public
relations; freight, insurance and other charges in
connection with the shipment of the Fund's
portfolio securities; indemnification of Directors
and officers of the Fund; travel expenses (or an
appropriate portion thereof) of Directors and
officers of the Fund who are directors, officers or
employees of the Adviser to the extent that such
expenses relate to attendance at meetings of the
Board of Directors of the Fund or any committee
thereof or advisors thereto held outside of New
York, New York; interest, fees and expenses of
independent attorneys, auditors, custodians,
accounting agents, transfer agents, dividend
disbursing agents and registrars; payment for
portfolio pricing or valuation service to pricing
agents, accountants, bankers and other specialists,
if any; taxes and government fees; cost of stock
certificates and any other expenses (including
clerical expenses) of issue, sale, repurchase or
redemption of shares; expenses of registering and
qualifying shares of the Fund under Federal and
state laws and regulations; expenses of printing
and distributing reports, notices, dividends and
proxy materials to existing stockholders; expenses
of printing and filing reports and other documents
filed with governmental agencies, expenses of
printing and distributing prospectuses; expenses of
annual and special stockholders' meetings; costs of
stationery, fees and expenses (specifically
including travel expenses relating to Fund
business) of Directors of the Fund who are not
employees of the Adviser or its affiliates;
membership dues in the Investment Company
Institute; insurance premiums and extraordinary
expenses such as litigation expenses.
4. Compensation. (a) As compensation for the
services performed and the facilities and personnel
provided
by the Adviser pursuant to this Agreement, the Fund
will pay to the Adviser promptly at the end of each
calendar month, a fee, calculated on each day
during such month, at an annual rate of 0.15% of
the Portfolio's average daily net assets. The
Adviser shall be entitled to receive during any
month such interim payments of its fee hereunder as
the Adviser shall request, provided that no such
payment shall exceed 50% of the amount of such fee
then accrued on the books of the Portfolio and
unpaid.
(b) If the Adviser shall serve hereunder for less than the
whole of any month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net
assets" of the Portfolio shall mean the average of the values placed on the
Portfolio's net assets on each day pursuant to the applicable provisions of the
Fund's Registration Statement, as amended.
5. Purchase and Sale of Securities. The Adviser or an agent of the
Adviser shall purchase securities from
or through and sell securities to or through such
persons, brokers or dealers as the Adviser shall
deem appropriate in order to carry out the policy
with respect to the allocation of portfolio
transactions as set forth in the Registration
Statement of the Fund, as amended, or as the Board
may direct from time to time. The Adviser will use
its reasonable best efforts to execute all
purchases and sales with dealers and banks on a
best net price basis.
Neither the Adviser nor any of its officers, affiliates, or
employees will act as principal or receive any compensation from the Portfolio
in connection with the purchase or sale of investments for the Portfolio other
than the fee referred to in Paragraph 4 hereof. 6. Term of Agreement. This
Agreement shall continue in full force and effect until two years from the date
hereof, and will continue in effect from year to year thereafter if such
continuance is approved in the manner required by the Act, provided that this
Agreement is not otherwise terminated. The Adviser may terminate this Agreement
at any time, without payment of penalty, upon 60 days' written notice to the
Fund. The Fund may terminate this Agreement with respect to the Portfolio at any
time, without payment of penalty, on 60 days' written notice to the Adviser by
vote of either the Board or a majority of the outstanding stockholders of the
Portfolio. This Agreement will automatically terminate in the event of its
assignment (as defined by the Act).
7. Right of Adviser In Corporate Name. The
Adviser and the Fund each agree that the phrase "FFTW", which
comprises a component of the Fund's corporate name,
is a property right of the Adviser. The Fund
agrees and consents that: (i) it will only use the
phrase "FFTW" as a component of its corporate name
and for no other purpose; (ii) it will not purport
to grant to any third party the right to use the
phrase "FFTW" for any purpose; (iii) the Adviser or
any corporate affiliate of the Adviser may use or
grant to others the right to use the phrase "FFTW"
or any combination or abbreviation thereof, as all
or a portion of a corporate or business name or for
any commercial purpose, including a grant of such
right to any other investment company, and at the
request of the Adviser, the Fund will take such
action as may be required to provide its consent to
such use or grant; and (iv) upon the termination of
any investment advisory agreement into which the
Adviser and the Fund may enter, the Fund shall,
upon request by the Adviser, promptly take such
action, at its own expense, as may be necessary to
change its corporate name to one not containing the
phrase "FFTW" and following such a change, shall
not use the phrase "FFTW" or any combination
thereof, as part of its corporate name or for any
other commercial purpose, and shall use its best
efforts to cause its officers, directors and
stockholders to take any and all actions which the
Adviser may request to effect the foregoing and
recovery to the Adviser any and all rights to such
phrase.
8. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or to
impose any duty upon either of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed by their duly authorized officers as of the date first
written above.
ATTEST FFTW FUNDS, INC.
By: By:
Eric Nachimovsky William E. Vastardis
Secretary
ATTEST FISCHER FRANCIS TREES & WATTS, INC.
By: By:
Stephen Francis Stephen P. Casper
CFO
<PAGE>
EXHIBIT C
Additional Information Regarding Principal Executive Officer
and Directors of the Investment Adviser
<TABLE>
<S> <C> <C>
- ------------------------------- ------------------------------------------------ ----------------------------
Name and Address Position with the Investment Adviser Principal Occupation
- ------------------------------- ------------------------------------------------ ----------------------------
- ------------------------------- ------------------------------------------------ ----------------------------
Richard G. Fischer Director Vice Chairman
200 Park Avenue
New York, NY 10166
- ------------------------------- ------------------------------------------------ ----------------------------
- ------------------------------- ------------------------------------------------ ----------------------------
Stephen C. Francis Director Vice Chairman
200 Park Avenue
New York, NY 10166
- ------------------------------- ------------------------------------------------ ----------------------------
- ------------------------------- ------------------------------------------------ ----------------------------
John H. Watts Director and Chief Executive Officer Chairman
200 Park Avenue
New York, NY 10166
- ------------------------------- ------------------------------------------------ ----------------------------
</TABLE>
<PAGE>
FFTW FUNDS, INC.
U.S. Short-Term Portfolio
SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 19, 1999
PLEASE VOTE PROMPTLY
This Proxy is Solicited on behalf of the Board of
Directors
The undersigned hereby appoints CARLA E. DEARING and WILLIAM E.
VASTARDIS, and each of them, with full power of substitution, as proxies to vote
for and in the name, place and stead of the undersigned at the Special Meeting
of Shareholders of FFTW Funds, Inc. (the "Fund") to be held at the offices of
Fischer Francis Trees & Watts, Inc., 200 Park Avenue, New York, New York 10166,
on Friday, November 19, 1999 at 10:00 a.m., Eastern Time, and at any adjournment
thereof, according to the number of votes and as fully as if personally present.
Please mark boxes | or x in blue or black ink.
1. Approval of Revised Advisory Agreement between FFTW Funds, Inc. and
Fischer Francis Trees & Watts, Inc.
<TABLE>
<S> <C> <C> <C>
FOR [ ] AGAINST [ ] ABSTAIN [ ]
-----------------------------------------------------------------------
2. Proposal 2A. Revision of the diversification investment restriction so as to
conform the restriction with the provisions of the Investment Company Act of
1940 ("1940 Act").
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 2B. Reclassification of the investment restriction limiting
investments in repurchase agreements to 25% of total Portfolio assets from a
fundamental to a non-fundamental investment restriction.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 2C. Revision of the investment restriction applicable to
industry concentration so as to permit concentration in the finance industry.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 2D. Revision of the investment restriction limiting invests in
commodities or commodity contracts to limit only investments in physical
commodities or commodity contracts.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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</TABLE>
This Proxy when properly executed will be voted in the manner (or not voted) as
specified. If no specification is made, the Proxy will be voted FOR Proposals 1
and 2A through 2D.
Please sign personally and exactly as your name appears on the Proxy. If the
shares are registered in more than one name, each joint owner or each fiduciary
should sign personally. Only authorized officers should sign for corporations.
When signing as an attorney, administrator, trustee, or corporate officer,
please give your full title.
Dated ______________________________ ___________________________________
Signature and Title (if applicable)
-----------------------------------
Signature and Title (if applicable)
<PAGE>
