<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 33-41245
811-6337
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES /X/
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 10 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
AMENDMENT NO. 15 /X/
(Check appropriate box or boxes)
----------
ACCESSOR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1420 Fifth Avenue
Suite 3130
Seattle, Washington 98101
(206) 224-7420
(Address, including zip code, and telephone number, including area code, of
Principal Executive Offices)
----------
J. ANTHONY WHATLEY III
1420 Fifth Avenue
Suite 3130
Seattle, Washington 98101
(Name and Address of Agent for Service)
----------
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE
AGENT FOR SERVICE, SHOULD BE SENT TO:
BETH R. KRAMER, ESQ.
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
----------
<PAGE>
Approximate date of proposed public offering: As soon as practicable
after the effective date of the registration statement. It is proposed that
this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on April 29, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/__/ 75 days after filing pursuant to paragraph (a)(2)
/__/ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/__/ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant has elected, pursuant to Rule 24f-2 under the Investment Company
Act of 1940, to register an indefinite number of shares by this Registration
Statement. Registrant filed the Rule 24f-2 notice for its fiscal year ended
December 31, 1995 on February 29, 1996.
<PAGE>
ACCESSOR FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
- ---------------------------------------------------------------------------
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Summary - Financial
Highlights
Item 4. General Description of Registrant Additional
Information;
Description of the
Portfolios
Item 5. Management of the Fund General Management
of the Portfolios;
The Money Managers;
Money Manager
Profiles;
Additional
Information;
Expenses of the
Portfolios
Item 5A. Management's Discussion of Fund Annual Report for the
Performance Fiscal Year Ended
December 31, 1995
Item 6. Capital Stock and Other Securities Additional
Information;
Dividends and
Distributions; Taxes
Item 7. Purchase of Securities Being Offered Purchase of Portfolio
Shares
Item 8. Redemption or Repurchase Redemption of
Portfolio
Shares
Item 9. Legal Proceedings Not Applicable
<PAGE>
Part B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information
and History
Item 13. Investment Objectives and Policies Investment
Restrictions,
Policies and Risk
Considerations
Item 14. Management of the Registrant Management of the Fund
Item 15. Control Persons and Principal Holders Control Persons and
of Securities Principal Holders of
Securities
Item 16. Investment Advisory and Other Services Investment Advisory
and Other Services;
Money Managers
Item 17. Brokerage Allocation Portfolio
Transaction Policies
Item 18. Capital Stock and Other Securities General Information
and History
Item 19. Purchase, Redemption and Pricing of Valuation of Portfolio
Securities Being Offered Shares
Item 20. Tax Status Taxes
Item 21. Underwriters Plan of Distribution
Item 22. Calculations of Performance Data Performance
Information
Item 23. Financial Statements Financial Statements
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
EQUITY PORTFOLIOS Seattle, WA 98101
PROSPECTUS - April 29, 1996 1-800-759-3504
- ---------------------------------------------------------------------------
New Account Information and Shareholder Services 206-224-7420
- ---------------------------------------------------------------------------
ACCESSOR(R) FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. This Prospectus pertains to the following
four equity portfolios of the Fund (individually, a "Portfolio" and
collectively, the "Portfolios"):
GROWTH PORTFOLIO
VALUE AND INCOME PORTFOLIO
SMALL TO MID CAP PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
and sets forth concisely the information about the Portfolios that a
prospective investor should know before investing. The Fund has filed
a Statement of Additional Information, dated April 29, 1996, with the
Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, containing further information about the
Portfolios and the Fund which may be of interest to investors, is
incorporated herein by reference in its entirety. A free copy may be
obtained by writing or calling the Fund at the address or phone number
shown above.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY...............................................................3
FEES AND PORTFOLIO EXPENSES...........................................4
FINANCIAL HIGHLIGHTS..................................................6
GROWTH PORTFOLIO.............................................6
VALUE AND INCOME PORTFOLIO...................................7
SMALL TO MID CAP PORTFOLIO...................................8
INTERNATIONAL PORTFOLIO......................................9
PORTFOLIO MANAGEMENT.................................................10
DESCRIPTION OF THE PORTFOLIOS........................................10
GENERAL.....................................................10
RISK FACTORS AND SPECIAL CONSIDERATIONS.....................11
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES...............11
INVESTMENT POLICIES.........................................13
INVESTMENT RESTRICTIONS.....................................20
GENERAL MANAGEMENT OF THE PORTFOLIOS.................................20
THE MONEY MANAGERS...................................................23
EXPENSES OF THE PORTFOLIOS...........................................27
PORTFOLIO TRANSACTION POLICIES.......................................27
DIVIDENDS AND DISTRIBUTIONS..........................................28
TAXES................................................................28
CALCULATION OF PORTFOLIO PERFORMANCE.................................30
VALUATION OF PORTFOLIO SHARES........................................30
PURCHASE OF PORTFOLIO SHARES.........................................31
REDEMPTION OF PORTFOLIO SHARES.......................................33
ADDITIONAL INFORMATION...............................................35
SERVICE PROVIDERS...........................................35
SIGNATURE GUARANTEES........................................35
ORGANIZATION, CAPITALIZATION AND VOTING.....................36
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS...........37
GLASS-STEAGALL ACT..........................................37
MONEY MANAGER PROFILES...............................................38
GROWTH PORTFOLIO............................................38
VALUE AND INCOME PORTFOLIO..................................38
SMALL TO MID CAP PORTFOLIO..................................38
INTERNATIONAL PORTFOLIO.....................................39
DESCRIPTION OF INDICES..............................................A-1
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX..........A-1
S&P/BARRA GROWTH INDEX.....................................A-1
S&P/BARRA VALUE INDEX......................................A-1
WILSHIRE 4500 INDEX .......................................A-2
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE(R) + EMF INDEX...A-2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more
detailed information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end, management
investment company, known as a mutual fund. The Fund currently consists of
eight diversified investment portfolios, each with its own investment
objective and policies. This Prospectus pertains to the Fund's Growth
Portfolio, Value and Income Portfolio, Small to Mid Cap Portfolio
(collectively, the "Domestic Equity Portfolios") and the International
Equity Portfolio (the "International Portfolio"). See "DESCRIPTION OF THE
PORTFOLIOS--General" and "--Investment Objectives and Investment Policies."
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from investment
policies and strategies of other portfolios of the Fund. The investment
objective and the name of the investment management organization
(individually, the "Money Manager" and collectively, the "Money Managers")
for each of the Portfolios are described below:
. GROWTH PORTFOLIO -- State Street Bank and Trust Company -- seeks capital
growth through investing primarily in equity securities with greater
than average growth characteristics selected from the 500 U.S. issuers
which make up the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500").
. VALUE AND INCOME PORTFOLIO -- Martingale Asset Management, L.P. -- seeks
generation of current income and capital growth by investing primarily
in income-producing equity securities selected from the 500 U.S. issuers
which make up the S&P 500.
. SMALL TO MID CAP PORTFOLIO(1)<F1> -- Symphony Asset Management, Inc. --
seeks capital growth through investing primarily in equity securities of
small to medium capitalization issuers.
. INTERNATIONAL EQUITY PORTFOLIO -- Nicholas-Applegate Capital Management
-- seeks capital growth by investing primarily in equity securities of
companies domiciled in countries other than the United States and traded
on foreign stock exchanges.
<PAGE>
1 <F1>
Formerly the "Small Cap Portfolio." Prior to September 15, 1995, the
Small Cap Portfolio sought to achieve its investment objective through
investing primarily in small capitalization issuers (selected from the
2,000 U.S. issuers with the next largest market capitalization after
(and excluding) the 1,000 U.S. issuers with the largest market
capitalization). On August 15, 1995, the shareholders of the Small Cap
Portfolio approved a change in the investment objective of the Small
Cap Portfolio effective September 15, 1995, to permit the Small Cap
Portfolio to also invest in medium capitalization issuers. This change
in investment objective coincided with the change of the name of the
Small Cap Portfolio to Small to Mid Cap Portfolio and the commencement
of management by a new Money Manager for the Small to Mid Cap
Portfolio.
</F1>
Management. Bennington Capital Management L.P., a Washington
limited partnership ("Bennington"), is the manager and administrator of the
Fund pursuant to its Management Agreement with the Fund. As such, Bennington
provides or oversees the provision of all general management, administration,
investment advisory and portfolio management services for the Fund. See
"GENERAL MANAGEMENT OF THE PORTFOLIOS."
Purchase and Redemption of Shares. Shares are purchased by
shareholders directly from and are redeemed by the Portfolios at net asset
value next determined after an order for purchase or redemption has been
received, without any sales or redemption charges. See "PURCHASE OF
PORTFOLIO SHARES" and "REDEMPTION OF PORTFOLIO SHARES."
Risk Factors and Special Considerations. The Fund is designed to
provide diverse opportunities in equity and debt securities. There can be no
assurance that the investment objective for any Portfolio will be achieved.
See "DESCRIPTION OF THE PORTFOLIOS--Risk Factors and Special Considerations."
Investing in a mutual fund that purchases securities of companies
and governments of foreign countries, particularly developing countries,
involves risks that go beyond the usual risks inherent in a mutual fund
limiting its holdings to domestic investments. Up to 20% of the net assets
of the Growth, Value and Income and Small to Mid Cap Portfolios and up to
100% of the net assets of the International Portfolio may be held in
securities denominated in one or more foreign currencies, which will result
in that Portfolio bearing the risk that those currencies may lose value in
relation to the U.S. dollar. Certain Portfolios also may be subject to
certain risks in using investment techniques and strategies such as entering
into forward currency contracts and repurchase agreements and trading futures
contracts and options on futures contracts. In particular, emerging markets
are associated with substantial investment risks. These risks include market
volatility, investment illiquidity, currency risk, political instability and
unexpected changes in economic policy including capital controls,
expropriation, taxes and hyper-inflation. Emerging markets may exhibit
substantially greater volatility than the U.S. and more
developed foreign markets. See "DESCRIPTION OF THE PORTFOLIOS--Investment
Objectives and Investment Policies," "Investment Policies--Risks of Investing
in Foreign Securities--Special Risks of Investing in Foreign Securities of
Emerging Countries" and "Investment Restrictions, Policies and Risk
Considerations--Investment Restrictions" in the Statement of Additional
Information.
Dividends and Distributions. Each Portfolio intends to distribute
at least annually to its shareholders substantially all of its net investment
income and its net realized long- and short-term capital gains. Dividends
from the net investment income of the Domestic Equity Portfolios will be
declared and paid quarterly. Dividends from the net investment income of the
International Portfolio will be declared and paid annually. See "DIVIDENDS
AND DISTRIBUTIONS."
Taxation. Each Portfolio has elected to qualify and intends to
remain qualified as a regulated investment company for federal income tax
purposes. As such, the Fund anticipates that no Portfolio will be subject to
federal income tax on income and gains that are distributed to shareholders.
See "TAXES."
Service Providers.
Bennington is the manager and administrator of the Fund, as
described above. Bennington provides or oversees the provision of all general
management, administration, investment advisory and portfolio management
services for the Fund. Bennington provides transfer agent, registrar,
dividend disbursing agent, recordkeeping, administrative and compliance
services to the Fund, pursuant to its Transfer Agency and Administrative
Agreement (the "Transfer Agent Agreement") with the Fund.
PNC Bank, National Association, a national banking association
("PNC") and an indirect, wholly-owned subsidiary of PNC Bank Corp., acts as
custodian of the Portfolios' assets. Through an agreement with Barclays Bank
PLC, a company organized and existing under the laws of England and Wales
("Barclays Bank"), PNC and the Fund, Barclays Bank may employ sub-custodians
outside the United States which have been approved by the Fund's Board of
Directors (the "Board of Directors").
PFPC Inc., a Delaware corporation ("PFPC"), and an
indirect, wholly-owned subsidiary of PNC Bank Corp. is the sub-administrator
to the Fund. PFPC performs accounting, recordkeeping, and other
administrative services for the Fund.
<PAGE>
The Fifth Third Bank, an Ohio banking corporation ("Fifth
Third"), serves as custodian for investors with respect to accounts
established under the Fund's Individual Retirement Custodial Account Plan
("IRA Accounts").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel.
See "ADDITIONAL INFORMATION--Service Providers."
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor
should expect to incur as a shareholder of each of the Portfolios based on
projected annual operating expenses.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
---------------------------------------------
Value Small to
Growth and Income Mid Cap International
<S> <C> <C> <C> <C>
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees (c) None None None None
_____________
<FN>
(a) Shares of the Portfolios are expected to be sold primarily through
registered investment advisers, bank trust departments and financial
planners. See "GENERAL MANAGEMENT OF THE PORTFOLIOS--Distribution."
(b) An annual maintenance fee of $25.00 will be charged by the Transfer Agent
to each IRA Account with an aggregate balance of less than $10,000 on
December 31 of each year.
(c) The Transfer Agent charges a processing fee of $10.00 for each redemption
check requested by a shareholder. See "REDEMPTION OF PORTFOLIO SHARES."
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
(as a percentage of average net assets) -------------------------------------
Value Small to
Growth and Income Mid Cap International
<S> <C> <C> <C> <C>
Management Fees(b) 0.77% 0.75% 0.80% 0.80%
12b-1 Fees(c) None None None None
Other Expenses 0.36% 0.60% 0.40% 0.67%
------- ------- ------- -------
Total Portfolio Operating Expenses 1.13% 1.35% 1.20% 1.47%
====== ======= ======= =======
_________________
<FN>
(a) The actual expense ratios for the fiscal year ended December 31, 1995, were
different than those shown in the table. The table data has been restated
to reflect fees and expenses expected to be incurred during the fiscal year
ended December 31, 1996, not actual expenses. For actual expenses incurred
during the fiscal year ended December 31, 1995, see "FINANCIAL HIGHLIGHTS."
(b) Management fees consist of the management fee paid to Bennington and the
Money Manager fee paid to each Portfolio's Money Manager. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS--Fund Manager Services and Fees" and "THE
MONEY MANAGERS--Money Manager Fees."
(c) The Fund's 12b-1 Plan provides for certain payments to be made to Qualified
Recipients that have rendered assistance in shareholder servicing or in the
distribution and/or retention of a Portfolio's shares and do not involve
payments out of the assets or income of the Portfolios. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS--Distribution Plan."
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
<CAPTION>
Portfolios
--------------------------------------------------------------
Value Small to
Growth and Income Mid Cap International
<S> <C> <C> <C> <C>
One Year $ 12 $ 14 $ 12 $ 15
Three Years $ 36 $ 43 $ 38 $ 47
Five Years $ 62 $ 74 $ 66 $ 80
Ten Years $137 $162 $145 $176
</TABLE>
The example assumes Money Manager and other fees are paid at the
rates provided in the Annual Portfolio Operating Expenses table above.
For a discussion of certain management and Money Manager fees, see footnote
(b) to the Annual Portfolio Operating Expenses table.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding
the various costs and expenses that an investor in the Portfolios will bear
directly or indirectly. For a more complete description of the
various costs and expenses, see "EXPENSES OF THE PORTFOLIOS."
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should
be read in conjunction with the financial statements and notes thereto
and auditors' reports that appear in the Fund's Annual Reports to
Shareholders for those periods. The Annual Report to Shareholders for
the year ended December 31, 1995, is incorporated by reference into
and, unless previously provided, is delivered together with the
Statement of Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
Growth Portfolio
Period from
Year Year Year 8/25/92
ended ended ended to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $14.37 $14.16 $13.06 $12.00
------- -------- -------- --------
Net Investment Income
After Bennington expense subsidy(1) 0.15 0.13 0.14 0.06
Before Bennington expense subsidy 0.15 0.12 (0.03) (0.06)
Realized and Unrealized Gain (Loss) on
Investments 4.76 0.42 1.69 1.14
------- -------- -------- --------
Total from Investment Operations 4.91 0.55 1.83 1.20
------- -------- -------- --------
Dividends from Net Investment Income (0.15) (0.13) (0.14) (0.06)
Capital Gains Distributions (1.14) (0.21) (0.59) (0.08)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00
------- -------- -------- --------
Total Distributions (1.29) (0.34) (0.73) (0.14)
------- -------- -------- --------
Net Asset Value at End of Period $17.99 $14.37 $14.16 $13.06
======= ======== ======== ========
<PAGE>
Total Return(2) 34.32% 3.99% 14.21% 10.01%
Net Assets, End of Period (000 Omitted) $48,532 $23,534 $8,986 $4,253
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.26% 1.76% 1.21% 1.18%*
Before Bennington expense subsidy 1.26% 1.83% 2.64% 3.91%*
Ratio of Net Investment Income to Average
Net Assets
After Bennington expense subsidy(1) 0.97% 1.02% 1.16% 1.26%*
Before Bennington expense subsidy 0.97% 0.95% (0.27%) (1.47%)*
Portfolio Turnover Rate(3) 99.73% 57.71% 60.92% 19.88%
- ----------
<FN>
(1) During the fiscal period ended December 31, 1993, and for the period from
January 1, 1994 to February 28, 1994, Bennington subsidized operating
expenses other than Bennington's and Money Managers' fees ("Other
Expenses") in excess of 0.56% of the average daily net assets of the Growth
Portfolio. Effective March 1, 1994, Bennington discontinued subsidizing
Other Expenses of the Growth Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent charges
a processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES.
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should
be read in conjunction with the financial statements and notes thereto
and auditors' reports that appear in the Fund's Annual Reports to
Shareholders for those periods. The Annual Report to Shareholders for
the year ended December 31, 1995, is incorporated by reference into and,
unless previously provided, is delivered together with the Statement of
Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
Value and Income Portfolio
Period from
Year Year Year 8/25/92
ended ended ended to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $13.01 $13.58 $12.58 $12.00
-------- -------- -------- --------
Net Investment Income
After Bennington expense subsidy(1) 0.33 0.25 0.25 0.12
Before Bennington expense subsidy 0.33 0.24 0.08 (0.03)
Realized and Unrealized Gain (Loss) on 3.96 (0.51) 1.59 0.59
-------- -------- -------- --------
Investments
Total from Investment Operations 4.29 (0.26) 1.84 0.71
-------- -------- -------- --------
Dividends from Net Investment Income (0.33) (0.25) (0.25) (0.12)
Capital Gains Distributions (1.06) (0.05) (0.59) (0.01)
Distributions in Excess of Capital Gains 0.00 (0.01) 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Total Distributions (1.39) (0.31) (0.84) (0.13)
-------- -------- -------- --------
Net Asset Value at End of Period $15.91 $13.01 $13.58 $12.58
======== ======== ======== ========
<PAGE>
Total Return(2) 33.25% (1.93%) 14.69% 5.92%
Net Assets, End of Period (000 Omitted) $24,915 $19,999 $11,225 $3,859
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.40% 1.77% 1.21% 1.18%*
Before Bennington expense subsidy 1.40% 1.85% 2.61% 4.60%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) 2.18% 2.00% 2.02% 2.86%*
Before Bennington expense subsidy 2.18% 1.92% 0.62% (0.56%)*
Portfolio Turnover Rate(3) 100.88% 54.26% 64.56% 7.94%
- ----------
<FN>
(1) During the fiscal period ended December 31, 1993, and for the period from
January 1, 1994 to February 28, 1994, Bennington subsidized Other Expenses
in excess of 0.56% of the average daily net assets of the Value and Income
Portfolio. Effective March 1, 1994, Bennington discontinued subsidizing
Other Expenses of the Value and Income Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent charges
a processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES.
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31,
1995, is incorporated by reference into and, unless previously provided, is
delivered together with the Statement of Additional Information dated
April 29, 1996.
<TABLE>
<CAPTION>
Small to Mid Cap Portfolio
(formerly the "Small Cap Portfolio")(1)
Period from
Year Year Year 8/25/92
ended ended ended to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $14.08 $14.79 $13.56 $12.00
------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(2) 0.06 (0.01) 0.04 0.03
Before Bennington expense subsidy 0.06 (0.04) (0.20) (0.15)
Realized and Unrealized Gain (Loss) 4.42 (0.59) 1.91 1.56
on Investments ---- ----- ---- ----
Total from Investment Operations 4.48 (0.60) 1.95 1.59
---- ----- ---- ----
Dividends from Net Investment Income (0.06) 0.00 (0.04) (0.03)
Capital Gains Distributions (0.90) (0.10) (0.68) 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 (0.01) (0.00) 0.00
---- ----- ----- ----
Total Distributions (0.96) (0.11) (0.72) (0.03)
----- ----- ----- -----
Net Asset Value at End of Period $17.60 $14.08 $14.79 $13.56
====== ====== ====== ======
<PAGE>
Total Return(3) 31.98% (4.07%) 14.39% 13.28%
Net Assets, End of Period (000 Omitted) $49,803 $24,148 $9,791 $4,520
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.31% 1.98% 1.55% 1.51%*
Before Bennington expense subsidy 1.31% 2.38% 3.33% 5.36%*
Ratio of Net Investment Income to Average
Net Assets 1.31%
After Bennington expense subsidy(1) 0.41% (0.18%) 0.30% 0.74%*
Before Bennington expense subsidy 0.41% (0.58%) (1.48%) (3.11%)*
Portfolio Turnover Rate(4) 84.26% 30.14% 59.20% 12.57%
- ----------
<FN>
(1) The financial highlights reflected herein are the financial highlights of
the Small Cap Portfolio which is now referred to as the Small to Mid Cap
Portfolio. See "SUMMARY." Effective September 15, 1995, along with the
change of name, a new Money Manager commenced management of the Small to Mid
Cap Portfolio. See "THE MONEY MANAGERS" and "MONEY MANAGER PROFILES."
(2) During the fiscal periods ended December 31, 1993 and December 31, 1994,
Bennington subsidized Other Expenses above 0.75% of the average daily net
assets of the Small Cap Portfolio. During the period from
January 1, 1995, to September 15, 1995, Bennington subsidized Other Expenses
in excess of 1.20% of the average daily net assets of the Small Cap
Portfolio. Effective September 15, 1995, Bennington discontinued
subsidizing Other Expenses of the Small to Mid Cap Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes of
this calculation, to be reinvested at the net asset value per share on the
respective payment dates of each Portfolio. The Transfer Agent charges a
processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES.
(4) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the International
Portfolio, which commenced investment operations on October 3, 1994, has been
audited by Deloitte & Touche LLP, independent auditors, whose report thereon was
unqualified. This information should be read in conjunction with the financial
statements and notes thereto and auditors' report that appear in the Fund's
Annual Reports to Shareholders. The Annual Report to Shareholders for year ended
December 31, 1995, is incorporated by reference into and, unless previously
provided, is delivered together with the Statement of Additional Information
dated April 29, 1996.
<TABLE>
<CAPTION>
International Portfolio
Year Period
ended from 10/3/94
12/31/95 to 12/31/94
-------- ------------
<S> <C> <C>
Net Asset Value at Beginning of Period $11.67 $12.00
-------- --------
Net Investment Income
After Bennington expense subsidy(1) 0.04 0.01
--------
Before Bennington expense subsidy 0.05 (0.35)
--------
Realized and Unrealized Gain (Loss) on Investments 0.83 (0.34)
--------
Total from Investment Operations 0.88 (0.33)
-------- --------
Dividends from Net Investment Income 0.00 0.00
Capital Gains Distributions 0.00 0.00
Distributions in Excess of Capital Gains 0.00 0.00
Return of Capital Distributions 0.00 0.00
-------- --------
Total Distributions 0.00 0.00
-------- --------
Net Asset Value at End of Period $12.55 $11.67
======== ========
<PAGE>
Total Return(2) 7.63% (2.75%)
Net Assets, End of Period (000 Omitted) $39,102 $7,566
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.83% 1.86%*
Before Bennington expense subsidy 1.93% 4.06%*
Ratio of Net Investment Income to Average Net Assets
After Bennington expense subsidy(1) 0.10% 0.38%*
Before Bennington expense subsidy 0.00% (1.82%)*
Portfolio Turnover Rate(3) 84.85% 0.82%
- ----------
<FN>
(1) During the fiscal period ended December 31, 1993, and December 31, 1994,
Bennington subsidized Other Expenses above 0.85% of the average daily net
assets of the International Portfolio. During the period from January 1,
1995, to September 15, 1995, Bennington subsidized Other Expenses above
0.85% of average daily net assets of the International Portfolio. Effective
September 15, 1995, Bennington discontinued subsidizing Other Expenses for
the International Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes of
this calculation, to be reinvested at the net asset value per share on the
respective payment dates of each Portfolio. The Transfer Agent charges a
processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES.
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
PORTFOLIO MANAGEMENT
Bennington is responsible for evaluating, selecting, and
recommending Money Managers needed to manage all or part of the assets of
the Portfolios. Bennington is also responsible for allocating the assets
within a Portfolio among any Money Managers selected. Pursuant to the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
Money Managers may be added by Bennington only with the approval of the
shareholders of the applicable Portfolio. Bennington, in conjunction with
the Board of Directors, reviews Money Managers' performance. Bennington
may terminate a Money Manager at any time, subject to approval by the Board
of Directors and prompt notification of the applicable Portfolio's
shareholders. A separate Money Manager currently manages the assets of each
Portfolio. See "MONEY MANAGER PROFILES" and "THE MONEY MANAGERS."
Although Bennington's activities are subject to general oversight
by the Board of Directors and the officers of the Fund, neither the Board
nor the officers evaluate the investment merits of Bennington's or any
Money Manager's individual security selections. The Board of Directors will
review regularly the Portfolios' performance compared to the applicable
indices and also will review the Portfolios' compliance with their investment
objectives and policies.
While the investment professionals of Bennington have experience
in asset management and the selection of investment advisers, prior
to the commencement of investment operations of the Fund in April 1992,
they did not have previous experience in providing investment advisory
services to an investment company. See "GENERAL MANAGEMENT OF THE
PORTFOLIOS."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as
a multi-managed, no load, open end management investment company, known
as a mutual fund. The Fund currently consists of eight diversified
investment portfolios, each with its own investment objective and policies.
This Prospectus covers the four equity Portfolios of the Fund. The Fund's
other four portfolios, which are designed for investment in fixed-income
securities, are offered through a separate prospectus. Each
Portfolio's assets are invested by Bennington and/or a Money Manager
that has been analyzed, evaluated and recommended by Bennington.
Bennington also operates and administers the Fund and monitors the
performance of the Money Managers. Each Portfolio's investment objective
and investment restrictions are "fundamental" and may be changed only with
the approval of the holders of a majority of the outstanding voting
securities of that Portfolio, as defined in the Investment Company Act.
Other policies reflect current practices of the Portfolios, and may be
changed by the Portfolios without the approval of shareholders. This section
of the Prospectus describes each Portfolio's investment objective, policies
and restrictions. A more detailed discussion appears in the Statement of
Additional Information and includes a list of the Portfolios' investment
restrictions.
Under normal circumstances, each Portfolio will invest more than 80%
of its total assets in the types of securities identified in its
statement of objective as principal investments. Bennington will
attempt to have each Portfolio managed so that the Portfolio's
investment performance equals or exceeds the total return performance of a
relevant index. See Appendix A for a description of the current indices.
Each Portfolio may have up to 20% of its total assets invested in money
market instruments to provide liquidity. If, in the opinion of Bennington
or a Money Manager, market or economic conditions warrant, any Portfolio
may adopt a temporary defensive strategy. In that event, a Portfolio may
hold assets as cash reserves without limit. See "Investment
Policies--Liquidity Reserves." There can be no assurance that the
investment objective for any Portfolio will be realized.
No Portfolio will invest in fixed-income securities,
including convertible securities, rated less than A by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in
unrated securities judged by Bennington or a Money Manager to be of a
lesser credit quality than those designations. The Portfolios will sell
securities which they have purchased in a prudent and orderly fashion when
ratings drop below these minimum ratings. See Appendix A in the Statement
of Additional Information for a description of securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity
and debt securities. No assurance can be given that the Portfolios will
achieve their investment objectives.
Investing in a mutual fund that purchases securities of companies
and governments of foreign countries, particularly developing countries,
involves risks that go beyond the usual risks inherent in a mutual fund
limiting its holdings to domestic investments. See "Investment
Policies--Risks of Investing in Foreign Securities" and "--Special Risks of
Investing in Foreign Securities of Emerging Countries." Up to 20% of the
net assets of the Domestic Equity Portfolios and up to 100% of the net
assets of the International Portfolio may be held in securities denominated
in one or more foreign currencies, which will result in that Portfolio
bearing the risk that those currencies may lose value in relation to the
U.S. dollar. Certain Portfolios also may be subject to certain risks in
using investment techniques and strategies such as entering into forward
currency contracts and repurchase agreements and trading futures contracts
and options on futures contracts. See "DESCRIPTION OF THE
PORTFOLIOS--Investment Policies." The use of options and futures transactions
by a Portfolio entails certain risks, including the risk that to the
extent the Money Manager's views as to certain market movements are
incorrect, the use of such instruments could result in losses greater than
if they had not been used. Such instruments may also force sales or
purchases of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount the Portfolio could
realize on its investments or cause the Portfolio to hold a security it
might otherwise sell. Also, when used for hedging existing positions,
the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of the
Portfolio could create the possibility that losses on the hedging
instrument will be greater than gains in the value of the Portfolio's
position, thereby reducing the Portfolio's net asset value. See
"DESCRIPTION OF THE PORTFOLIOS--Investment Policies" and "Investment
Restrictions, Policies and Risk Considerations-- Investment Restrictions" in
the Statement of Additional Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Manager may increase a Portfolio's
portfolio turnover rate, realization of gains or losses, and brokerage
commissions. High portfolio turnover may involve correspondingly greater
brokerage commissions and transaction costs, which will be borne by the
Portfolios and may result in increased short-term capital gains which, when
distributed to shareholders, are treated as ordinary income. See "PORTFOLIO
TRANSACTION POLICIES" and "TAXES."
Mr. J. Anthony Whatley, III controls the managing partner
of Bennington. Mr. Whatley has had approximately 20 years of experience
in the securities industry, principally in the areas of sales and marketing
of mutual fund products, and with direct investment of portfolio assets for
an investment company since the commencement of investment operations of
the Fund in April 1992. Bennington and its managing partner were organized in
1991 for the purpose of advising the Fund. See "GENERAL MANAGEMENT OF
THE PORTFOLIOS" for a description of the responsibilities of Bennington.
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot
be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities, as defined in the Statement
of Additional Information. The other investment policies and practices
of each Portfolio, unless otherwise noted, are not fundamental and may
therefore be changed by a vote of the Board of Directors without shareholder
approval.
The GROWTH PORTFOLIO seeks capital growth through investing
primarily in equity securities with greater than average growth
characteristics selected from the S&P 500.
The Portfolio seeks to achieve this objective by investing
principally in common and preferred stocks, securities convertible into
common stocks, and rights and warrants of such issuers. The Money Manager
will attempt to equal or exceed the total return performance of the
S&P/BARRA Growth Index over a market cycle of five years by investing
primarily in stocks of companies that are expected to experience higher
than average growth of earnings or growth of stock price. Current income
will not be a primary objective. Since the prices of growth stocks tend to
be more volatile and more sensitive to economic and market swings than those
of average stocks, Bennington expects that the Portfolio will underperform
the overall U.S. stock market during periods of general market weakness,
although this is not inconsistent with the goal of outperforming the
S&P/BARRA Growth Index over a market cycle. Under normal circumstances, up
to 20% of the Portfolio's net assets may be invested in common stocks of
foreign issuers with large market capitalizations whose securities have
greater than average growth characteristics. The Portfolio may engage in
various portfolio strategies to reduce certain risks of its investments
and may thereby enhance income, but not for speculation. See
"Investment Policies--Options" and "--Futures Contracts."
The VALUE AND INCOME PORTFOLIO seeks generation of current income
and capital growth by investing primarily in income-producing equity
securities selected from the S&P 500.
The Portfolio seeks to achieve this objective by investing
principally in common and preferred stocks, convertible securities, and
rights and warrants of companies whose stocks have higher than average
dividend yield relative to other stocks of issuers in the same industry,
or whose stocks have lower price multiples (either price/earnings or
price/book value) than others in their industries, or which, in the
opinion of the Money Manager, have improving fundamentals (such as growth
of earnings and dividends). The Money Manager will attempt to equal or
exceed the total return performance of the S&P/BARRA Value Index over a
market cycle of five years. Because the prices of value stocks tend to be
less volatile and less sensitive to economic and market swings than those of
average stocks, Bennington expects that the Value and Income Portfolio will
underperform the overall U.S. stock market during periods of general
market strength and will lose less value than the overall U.S. stock
market during times of general market decline, although this is not
inconsistent with the goal of outperforming the S&P/BARRA Value Index over
a market cycle. Under normal circumstances, up to 20% of the Portfolio's
net assets may be invested in income-producing equity securities of
foreign issuers with large market capitalizations. The Portfolio may
engage in various portfolio strategies to reduce certain risks of its
investments and to enhance income, but not for speculation. See
"Investment Policies--Options" and "--Futures Contracts."
The SMALL TO MID CAP PORTFOLIO seeks capital growth through
investing primarily in equity securities of small to medium capitalization
issuers.
Under normal market conditions, the Portfolio seeks to achieve
this objective by investing at least 65% of the value of its total assets
in equity securities of small and medium capitalization issuers. Small
capitalization issuers are issuers which have a capitalization of $1
billion or less at the time of investment whereas medium capitalization
issuers have a capitalization ranging from $1 billion to $5 billion at the
time of investment. The Portfolio invests principally in common and
preferred stocks, securities convertible into common stocks, and rights and
warrants of such issuers. The Money Manager will attempt to equal or exceed
the total return performance of the Wilshire 4500 Index over a market
cycle of five years by investing primarily in stocks of companies that
are expected to experience higher than average growth of earnings or growth
of stock price. Current income will not be a primary objective. Since the
prices of small to medium capitalization growth stocks tend to be more
volatile and more sensitive to economic and market swings than those of
stocks comprising the S&P 500, Bennington expects that the Small to Mid Cap
Portfolio will underperform the S&P 500 during periods of general
market weakness, although this is not inconsistent with the goal of
outperforming the Wilshire 4500 Index over a market cycle. Under normal
circumstances, up to 20% of the Portfolio's net assets may be invested in
common stocks of foreign issuers with small market capitalizations. The
Portfolio may engage in various portfolio strategies to reduce certain
risks of its investments and may thereby enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures
Contracts."
The INTERNATIONAL EQUITY PORTFOLIO seeks capital growth by
investing primarily in equity securities of companies domiciled in
countries other than the United States and traded on foreign stock
exchanges.
The Portfolio seeks to achieve this objective by investing at least
65% of its total assets principally in equity securities issued by
companies domiciled in Europe (including Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom) and the Pacific
Rim (including Australia, Hong Kong, Japan, Malaysia, New Zealand and
Singapore). The Portfolio may also invest in securities of countries
generally considered to be emerging or developing countries by the World
Bank, the International Finance Corporation, the United Nations or its
authorities ("Emerging Countries"). The International Portfolio considers
an issuer to be located in an Emerging Country if (i) the issuer derives
50% or more of its total revenues from either goods produced, sales made
or services performed in Emerging Countries or (ii) the issuer is
organized under the laws of, and has a principal office in, an Emerging
Country. See "Investment Policies--Special Risks of Investing in Foreign
Securities of Emerging Countries." The Portfolio intends to maintain
investments in at least three different countries outside the United
States. The Portfolio will treat securities issued by any one foreign
government, its agencies and instrumentalities as if they are
securities having their principal business activities in the same
industry. The Portfolio will not purchase securities issued by any one
foreign government if as a result 25% or more of the Portfolio's total
assets would be invested in securities issued by that one foreign
government. The Portfolio may invest up to 20% of its net assets in
fixed-income securities, including instruments issued by foreign governments
and their agencies, and in securities of U.S. companies which derive,
or are expected to derive, a significant portion of their revenues from
their foreign operations. The Money Manager will attempt to equal or
exceed the net yield (after withholding taxes) of the Morgan Stanley Capital
International ("MSCI") EAFE(R) + EMF Index. See "THE MONEY
MANAGERS--Benchmark Indices." The Portfolio may invest in securities
denominated in currencies other than U.S. dollars. For more information
regarding the MSCI EAFE(R)+ EMF Index, see Appendix A.
The securities markets of most countries the International
Portfolio can invest in have substantially less trading volume than the
securities markets of the United States and Japan, and the securities traded
in those countries are less liquid and more volatile than securities of
comparable U.S. companies. As a result, these markets may be subject to
greater influence by adverse events generally affecting the market, and
by large investors trading significant blocks of securities, than is the
case in the United States. In addition, these securities markets generally
are not as highly regulated as U.S. markets. Consequently, there may be
limited liquidity for certain securities and the prices at which the
Portfolio may acquire investments may be affected by the trading of others
on material non-public information. Some countries impose substantial
restrictions on investments in their capital markets by foreign entities
such as the Portfolio, but this is not anticipated to limit the Money
Manager's ability to make suitable investments for the Portfolio.
See "Investment Policies--Risks of Investing in Foreign Securities" and
"--Special Risks of Investing in Foreign Securities of Emerging Countries."
The Portfolio may use options on stocks and currencies, forward foreign
currency exchange contracts and financial futures contracts to reduce
certain risks of its investments and may thereby enhance income, but
not for speculation. See "Investment Policies--Forward Foreign Currency
Exchange Contracts," "--Options" and "--Futures Contracts."
Investment Policies
Liquidity Reserves. Each Portfolio is authorized to invest its
cash reserves (funds awaiting investment in the specific types of
securities to be acquired by a Portfolio or cash to provide for payment
of the Portfolio's expenses or to permit the Portfolio to meet redemption
requests) in money market instruments and in debt securities which are at
least comparable in quality to the Portfolio's permitted investments. Under
normal circumstances, no more than 20% of a Portfolio's net assets will be
comprised of these instruments. The Portfolios also may enter into
financial futures contracts in accordance with their investment
objectives to minimize the impact of cash balances. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS" and "Investment Policies--Liquidity
Reserves" in the Statement of Additional Information.
Money Market Instruments. Each Portfolio may invest up to 20% of
its net assets in:
(i) Obligations (including certificates of deposit and
bankers' acceptances) of (a) banks organized under the laws of the
United States or any state thereof (including foreign branches of
such banks) or (b) U.S. branches of foreign banks or (c) foreign
banks and foreign branches thereof; provided that such banks have,
at the time of acquisition by the Portfolio of such obligations,
total assets of not less than $1 billion or its equivalent. The
term "certificates of deposit" includes both Eurodollar
certificates of deposit, for which there is generally a market,
and Eurodollar time deposits, for which there is generally not
a market. "Eurodollars" are dollars deposited in banks outside
the United States; the Portfolios may invest in Eurodollar
instruments of foreign and domestic banks; and
(ii) Commercial paper, variable amount demand master notes,
bills, notes and other obligations issued by a U.S. company, a
foreign company or a foreign government, its agencies or
instrumentalities, maturing in 13 months or less, denominated
in U.S. dollars, and of "eligible quality" as described below.
If such obligations are guaranteed or supported by a letter of
credit issued by a bank, such bank (including a foreign bank) must
meet the requirements set forth in paragraph (i) above. If such
obligations are guaranteed or insured by an insurance company or
other non-bank entity, such insurance company or other non-bank
entity must represent a credit of high quality, as determined by
the Portfolio's Money Manager under the supervision of
Bennington and the Board of Directors.
"Eligible quality," for this purpose, means (i) a security rated
(or issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, that is
comparable in priority and security with the security) in the highest
short-term rating category (e.g., A-1/P-1) or one of the two highest
long-term rating categories (e.g., AAA/Aaa or AA/Aa) by at least two major
rating agencies assigning a rating to the security or issuer (or, if only
one agency assigned a rating, that agency) or (ii) an unrated security
deemed of comparable quality by the Portfolio's Money Manager or
Bennington under the general supervision of the Board of Directors. The
purchase by the Portfolio of a security of eligible quality that is rated
by only one rating agency or is unrated must be approved or ratified by the
Board of Directors.
In selecting commercial paper and other corporate obligations
for investment by a Portfolio, the Money Manager also considers
information concerning the financial history and condition of the issuer and
its revenue and expense prospects. Bennington monitors, and the Board of
Directors reviews on a quarterly basis, the credit quality of securities
purchased for the Portfolio. If commercial paper or another corporate
obligation held by a Portfolio is assigned a lower rating or ceases to be
rated, the Money Manager under the supervision of Bennington and the
Board of Directors will promptly reassess whether that security presents
minimal credit risks and whether the Portfolio should continue to hold the
security in its portfolio. If a portfolio security no longer presents
minimal credit risks or is in default, the Portfolio will dispose of the
security as soon as reasonably practicable unless Bennington and the Board
of Directors determine that to do so is not in the best interests of the
Portfolio and its shareholders. Variable amount demand master notes with
demand periods of greater than seven days will be deemed to be liquid only
if they are determined to be so in compliance with procedures approved by the
Board of Directors.
U.S. Government Securities. Each Portfolio may invest in United
States Treasury securities, including bills, notes, bonds and other debt
securities issued by the United States Treasury. These instruments are
direct obligations of the U.S. Government and, as such, are backed by the
"full faith and credit" of the United States. They differ primarily in their
interest rates, the lengths of their maturities and their issue dates.
The Portfolios may invest in securities issued by agencies
or instrumentalities of the U.S. Government. These obligations, including
those which are guaranteed by federal agencies or instrumentalities, may or
may not be backed by the "full faith and credit" of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the Portfolio must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment and may not
be able to assert a claim against the United States if the agency or
instrumentality does not meet its commitments.
Obligations of the Government National Mortgage Association
("GNMA"), the Farmers Home Administration and the Export-Import Bank are
backed by the full faith and credit of the United States. Securities in
which the Portfolios may invest that are not backed by the full faith and
credit of the United States include obligations issued by (i) the Tennessee
Valley Authority, the Federal National Mortgage Association ("FNMA"),
the Federal Home Loan Mortgage Corporation ("FHLMC") and the United
States Postal Service (each of these issuers has the right to borrow
from the United States Treasury to meet its obligations) and (ii) the
Federal Farm Credit Bank and the Federal Home Loan Bank (each of these
issuers may rely only on the individual credit of the issuing agency to
satisfy its obligations). No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the
U.S. Government may be acquired by a Portfolio in the form of custodial
receipts that evidence ownership of future interest payments, principal
payments or both on certain United States Treasury notes or bonds. These
custodial receipts are commonly referred to as U.S. Treasury STRIPS.
Repurchase Agreements. Each Portfolio may enter into
repurchase agreements with a bank or broker-dealer that agrees to repurchase
the securities at the Portfolio's cost plus interest within a specified time
(ordinarily a week or less). If the party agreeing to repurchase should
default and if the value of the securities held by the Portfolio should fall
below the repurchase price, the Portfolio could incur a loss. Subject to
the limitation on investing no more than 15% of a Portfolio's net assets in
illiquid securities, no Portfolio will invest more than 15% of its net
assets (taken at current market value) in repurchase agreements
maturing in more than seven days. See "Investment Policies--Illiquid
Securities."
Repurchase agreements will at all times be fully collateralized by
U.S. Government obligations or other collateral in an amount at least
equal to the repurchase price, including accrued interest earned on
the underlying securities. Such collateral will be held by the Fund's
custodian, either physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the
other party to the repurchase agreement becomes bankrupt or otherwise fails
to deliver the securities.
A Portfolio will enter into repurchase transactions only with
parties who meet creditworthiness standards approved by the Board of
Directors. Bennington or the Money Managers monitor the creditworthiness
of such parties under the general supervision of the Board of
Directors. See "Investment Policies--Repurchase Agreements" in the
Statement of Additional Information.
Rights and Warrants. Each Portfolio may acquire up to 5% of its
net assets in rights and warrants in securities of issuers that
meet each Portfolio's investment objective and policies. See "Investment
Restrictions" and "Investment Policies--Rights and Warrants" in the
Statement of Additional Information.
Privately-Issued STRIP Securities. The Portfolios may invest
in privately-issued STRIP securities, provided, however, that no
Portfolio will invest more than 5% of its net assets in such privately-issued
STRIP securities. See "Investment Policies--Privately-Issued STRIP
Securities" in the Statement of Additional Information.
Reverse Repurchase Agreements. Each Portfolio's entry into
reverse repurchase agreements, together with its other borrowings, is
limited to 5% of its net assets. See "Investment Policies--Reverse Repurchase
Agreements" in the Statement of Additional Information.
Lending of Portfolio Securities. Each Portfolio may lend
portfolio securities with a value of up to 10% of its total assets. Such
loans may be terminated at any time. The Portfolio will receive cash, U.S.
Government or U.S. Government agency securities as collateral in an amount
equal to at least 100% of the current market value of the loaned securities
plus accrued interest. Cash collateral received by the Portfolio will be
invested in short-term debt securities. A loan may be terminated by the
borrower on one business day's notice or by the Portfolio at any time. As
with any extensions of credit, there are risks of delay in recovery and in
some cases loss of right in the collateral should the borrower of the
securities fail financially. See "Investment Policies--Lending of
Portfolio Securities" in the Statement of Additional Information.
Illiquid Securities. No Portfolio may invest more than 15% of
its net assets in illiquid securities. Securities which are illiquid include
repurchase agreements of more than seven days duration, securities which
lack a readily available market or have legal or contractual restrictions
on resale, certain interest only/principal only strips and
over-the-counter ("OTC") options. Restricted securities issued pursuant
to Rule 144A under the Securities Act of 1933, as amended, that have a
readily available market are not deemed illiquid for purposes of this
limitation, pursuant to liquidity procedures that have been adopted by the
Board of Directors. Investing in Rule 144A securities could result in
increasing the level of a Portfolio's illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing
these securities. The International Portfolio will treat investments
of the International Portfolio that are subject to repatriation
restrictions of more than seven (7) days as illiquid securities. See
"Investment Policies--Special Risks of Investing in Foreign Securities of
Emerging Countries--Political and Economic Factors." Each Money Manager
will monitor the liquidity of such restricted securities under the
supervision of Bennington and the Board of Directors. See "Investment
Policies--Illiquid Securities" in the Statement of Additional Information.
Forward Foreign Currency Exchange Contracts. The International
Portfolio may enter into forward foreign currency exchange contracts for
hedging purposes. A forward contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price
set at the time of the contract. These contracts are traded in the
interbank market directly between currency traders (typically large
commercial banks) and their customers. A forward contract generally has no
deposit requirements and no commissions are charged for such trades.
When the International Portfolio invests in foreign securities, it
may enter into forward foreign currency exchange contracts in several
circumstances to protect its value against a decline in exchange rates, or
to protect against a rise in exchange rates for securities it intends to
purchase, but it will not use such contracts for speculation. The
International Portfolio may not use forward contracts to generate income,
although the use of such contracts may incidentally generate income.
There is no limitation on the value of forward contracts into which the
International Portfolio may enter. When effecting forward foreign
currency contracts, cash or liquid high-grade debt obligations of the
International Portfolio of a dollar amount sufficient to make payment for the
portfolio securities to be purchased will be segregated on the International
Portfolio's records at the trade date and maintained until the transaction
is settled.
Options. Each Portfolio may purchase put and call options and
write (sell) "covered" put and "covered" call options. The Domestic Equity
Portfolios may purchase and write options on stocks and stock indices. These
options may be traded on national securities exchanges or in the OTC market.
Options on a stock index are similar to options on stocks except that there
is no transfer of a security and settlement is in cash. The Domestic
Equity Portfolios may write covered put and call options to generate
additional income through the receipt of premiums, purchase put options
in an effort to protect the value of a security that it owns against a
decline in market value and purchase call options in an effort to protect
against an increase in the price of securities it intends to purchase.
The International Portfolio may purchase and write options
on currencies. Currency options may be either listed on an exchange or
traded OTC. OTC options are privately negotiated with the counterparty to
such contract and are purchased from and sold to dealers, financial
institutions or other counterparties which have entered into direct
agreements with the Portfolios. If the counterparty fails to take delivery
of the securities underlying an option it has written, the Portfolios
must rely on the credit quality of the counterparty. The staff of the
SEC has taken the position that purchased OTC options and the assets
used as cover for written OTC options are illiquid securities subject
to the 15% limitation described above in "Illiquid Securities."
Options on currencies are similar to options on stocks except that there is
no transfer of a security and settlement is in cash. The International
Portfolio may write covered put and call options on currencies to
generate additional income through the receipt of premiums, purchase put
options in an effort to protect the value of a currency that it owns
against a decline in value and purchase call options in an effort to protect
against an increase in the price of currencies it intends to purchase. The
currency options are traded on national currency exchanges, the OTC market
and by large international banks. The International Portfolio may trade
options on international stocks or international stock indices in a manner
similar to that described above.
A call option is a contract whereby a purchaser pays a
premium in exchange for the right to buy the security on which the option
is written at a specified price during the term of the option. A
written call option is "covered" if the Portfolio owns the optioned
securities or the Portfolio maintains in a segregated account with the
Fund's custodian, cash, U.S. Government securities or other liquid
high-grade debt obligations with a value sufficient to meet its obligations
under the call option, or if the Portfolio owns an offsetting call
option. When a Portfolio writes a call option, it receives a premium
and gives the purchaser the right to buy the underlying security at any
time during the call period, at a fixed exercise price regardless of
market price changes during the call period. If the call is exercised,
the Portfolio foregoes any gain from an increase in the market price of the
underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right
to sell the underlying security at a specified price during the term of the
option. The writer of a put option, receives a premium and in
return, has the obligation, upon exercise of the option, to acquire the
securities or currency underlying the option at the exercise price. A
written put option is "covered" if a Portfolio deposits with the Fund's
custodian, cash, U.S. Government securities or other liquid high-grade
debt obligations with a value at least equal to the exercise price of the
put option.
The Portfolios will not write covered put or covered call options
on securities if the obligations underlying the put options and the
securities underlying the call options written by the Portfolio exceed
25% of its net assets other than OTC options and the assets used as cover
for written OTC options. The SEC has taken the position that purchased
OTC options and the assets used as cover for written OTC options are
illiquid securities subject to the 15% limitation described above in
"Illiquid Securities." Furthermore, the Portfolios will not purchase or
write put or call options on securities, stock index futures or financial
futures if the aggregate premiums paid on all such options exceed 20% of
the Portfolio's total net assets, subject to the foregoing limitations.
When a Portfolio writes either a put or call option, the Portfolio
is required to deposit an initial margin with the Fund's custodian for the
benefit of the options broker. The initial margin serves as a "good faith"
deposit that the Portfolio will honor its option commitment. When the
Portfolio writes options and an adverse price movement occurs, the
Portfolio may be called upon to deposit an additional or variation margin.
Both the initial and additional or variation margin must be made in cash
or U.S. Government securities. The required margin amount is subject
to change by the appropriate exchange or regulatory authority.
Futures Contracts. Each Portfolio is permitted to enter into
financial futures contracts, stock index futures contracts and related
options ("futures contracts") in accordance with its investment
objective. The International Portfolio also may purchase and write futures
contracts on foreign currencies. Futures contracts will be limited to
hedging transactions to minimize the impact of cash balances and for return
enhancement and risk management purposes in accordance with regulations of
the Commodity Futures Trading Commission.
A "financial futures contract" is a contract to buy or sell a
specified quantity of financial instruments such as United States Treasury
bonds, notes and bills, commercial paper, bank certificates of deposit, an
agreed amount of currencies, or the cash value of a financial instrument
index at a specified future date at a price agreed upon when the contract is
made. Substantially all futures contracts are closed out before
settlement date or called for cash settlement. A futures contract is
closed out by buying or selling an identical offsetting contract which
cancels the original contract to make or take delivery.
The Portfolios may purchase and write options on futures contracts
as an alternative or in addition to buying or selling futures contracts for
hedging purposes. Options on futures contracts are similar to options on
the security upon which the futures contracts are written except that
options on stock index futures contracts give the purchaser the right to
assume a position at a specified price in a stock index futures contract at
any time during the life of the option.
Upon entering into a futures contract, a Portfolio is
required to deposit in a segregated account with the Fund's custodian in
the name of the futures broker through whom the transaction was
effected, initial margin consisting of cash, U.S. government securities or
other liquid, high-grade debt securities. The initial margin serves as
a "good faith" deposit that the Portfolio will honor its futures
commitment. The initial margin amount is subject to change by the
appropriate exchange or regulatory authority. The Portfolio will also
be required to settle any gains or losses on a daily basis in cash
(variation margin). If the Portfolio is unable to meet an additional
margin requirement, the Portfolio may be forced to close out its position
at a price that may be detrimental to the Portfolio. When trading futures
contracts, a Portfolio will not commit more than 5% of the market value of
its total assets as initial margins. See "Investment Policies--Futures
Contracts" in the Statement of Additional Information.
Special Risks of Hedging and Income Enhancement
Strategies. Participation in the options or futures markets and in
currency exchange transactions involves investment risks and
transaction costs to which a Portfolio would not be subject absent the
use of these strategies. If the Money Manager's predictions of movements in
the direction of the securities, foreign currency and interest rate markets
are inaccurate, the adverse consequences to the Portfolio may leave the
Portfolio in a worse position than if such strategies were not used.
Risks inherent in the use of options, foreign currency and futures contracts
and options on futures contracts include: (1) dependence on the Money
Manager's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities being hedged;
(3) the fact that skills needed to use these strategies are different from
those needed to select portfolio securities; (4) the possible absence of
a liquid secondary market for any particular instrument at any time; (5) the
possible need to raise additional initial margin; (6) in the case of
futures, the need to meet daily margin in cash; and (7) the possible need
to defer closing out certain hedged positions to avoid adverse tax
consequences. See "Taxes" in the Statement of Additional Information.
Risks of Investing in Foreign Securities. The Portfolios may invest
in foreign securities. Foreign securities involve certain risks. These
risks include political or economic instability in the country of the
issuer, the difficulty of predicting international trade patterns, the
possibility of imposition of exchange controls and the risk of currency
fluctuations. Such securities may be subject to greater fluctuations in
price than securities issued by U.S. corporations or issued or guaranteed by
the U.S. Government, its instrumentalities or agencies. Generally,
outside the United States there is less government regulation of securities
exchanges, brokers and listed companies and, with respect to certain
foreign countries, there is a possibility of expropriation, confiscatory
taxation or diplomatic developments which could affect investments within
such countries.
In many instances, foreign debt securities may provide higher
yields than securities of domestic issuers which have similar maturities
and quality. However, under certain market conditions, these investments
may be less liquid than investments in the securities of U.S. corporations
and are certainly less liquid than securities issued or guaranteed by
the U.S. Government, its instrumentalities or agencies.
If a security is denominated in a foreign currency, such security
will be affected by changes in currency exchange rates and in exchange
control regulations, and costs will be incurred in connection with
conversions between currencies. A change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the
U.S. dollar value of the Portfolio's securities denominated in that
currency. Such changes also will affect the Portfolio's income and
distributions to shareholders. In addition, although the Portfolio will
receive income in such currencies, the Portfolio will be required to
compute and distribute its income in U.S. dollars. Therefore, if the
exchange rate for any such currency declines after the Portfolio's
income has been accrued and translated into U.S. dollars, the Portfolio
could be required to liquidate portfolio securities to make such
distributions, particularly when the amount of income the Portfolio is
required to distribute is not immediately reduced by the decline in
such security. Similarly, if an exchange rate declines between the time
the Portfolio incurs expenses in U.S. dollars and the time such expenses are
paid, the amount of such currency which must be converted into U.S. dollars
to pay such expenses in U.S. dollars will be greater than the equivalent
amount in any such currency of such expenses at the time they were incurred.
Special Risks of Investing in Foreign Securities of Emerging
Countries.
Political and Economic Factors. Investing in Emerging
Countries involves potential risks relating to political and economic
developments abroad. Governments of many Emerging Countries have exercised
and continue to exercise substantial influence over many aspects of the
private sector. Accordingly, government actions in the future could have
a significant effect on economic conditions in Emerging Countries, which
could affect the value of securities in the Portfolios. The value of the
investments made by the Portfolios will be affected by commodity prices,
inflation, interest rates, taxation, social instability, and other
political, economic or diplomatic developments in or affecting the
Emerging Countries in which the Portfolios have invested. In addition,
there is a possibility of expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, or
other similar developments which could affect investments in those
countries. While the Money Managers intend to manage the Portfolios
in a manner that will minimize the exposure to such risks, there can be
no assurance that adverse political changes will not cause the Portfolios
to suffer a loss of interest or principal on any of its holdings. The
Portfolios will treat investments of the Portfolios that are subject to
repatriation restrictions of more than seven (7) days as illiquid
securities.
Foreign Exchange Risk. The value of non-U.S. dollar
denominated securities of issuers in Emerging Countries is affected by
changes in currency exchange rates or exchange control regulations. Foreign
currency exchange rates are determined by forces of supply and demand on the
foreign exchange markets. These forces are affected by the international
balance of payments, economic and financial conditions, government
intervention, speculation and other factors. Many of the currencies of
Emerging Countries have experienced significant devaluations relative to
the U.S. dollar and major adjustments have been made in certain of them at
times.
Investing in Securities Markets of Emerging Countries. Certain of
the risks associated with investments generally are heightened for
investments in Emerging Countries. For example, securities markets in
Emerging Countries may be less liquid, more volatile and less subject to
governmental regulation than U.S. securities markets. There may be less
publicly available information about issuers in Emerging Countries than
about domestic issuers. Emerging Country issuers are not generally
subject to accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers. Markets in Emerging
Countries also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolios are
uninvested and no return is earned thereon. Inability to dispose of
securities due to settlement problems could result in losses to the
Portfolios due to subsequent declines in value of securities or, if the
Portfolios have entered into a contract to sell securities, could result in
possible liability to the purchaser.
Certain Emerging Countries require prior governmental approval
of investments by foreign persons, limit the amount of investment by
foreign persons in a particular company, limit the investment by foreign
persons only to a specific class of securities of a company that may have
less advantageous rights than the classes available for purchase by
domiciliaries of the countries and/or impose additional taxes on foreign
investors. Certain Emerging Countries may also restrict investment
opportunities in issuers in industries deemed important to national
interests.
Certain Emerging Countries may require governmental approval for
the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a deterioration
occurs in an Emerging Country's balance of payments or for other reasons,
a country could impose temporary restrictions on foreign capital
remittances. The Portfolios could be adversely affected by delays in, or
a refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Portfolios of any restrictions
on investments.
Costs associated with transactions in securities of companies
in Emerging Countries are generally higher than costs associated with
transactions in U.S. securities. There are three basic components to such
transaction costs, which include brokerage fees, market impact costs
(i.e., the increase or decrease in market prices which may result when a
Portfolio purchases or sells thinly traded securities), and the difference
between the bid-ask spread. Each one of these components may be
significantly more expensive in Emerging Countries than in the U.S.
or other developed markets because of less competition among brokers,
lower utilization of technology by exchanges and brokers, the lack of
derivative instruments and less liquid markets. In addition to these
transaction costs, the cost of maintaining custody of foreign
securities generally exceeds custodian costs for U.S. securities.
Throughout the last decade many Emerging Countries have experienced
and continue to experience high rates of inflation. In certain countries,
inflation has at times accelerated rapidly to hyperinflationary levels,
creating a negative interest rate environment and sharply eroding the value
of outstanding financial assets in those countries. See "REDEMPTION OF
PORTFOLIO SHARES."
Investment Restrictions
Each Portfolio is subject to investment restrictions which,
as described in more detail in the Statement of Additional Information,
have been adopted by the Fund on behalf of the Portfolios as fundamental
policies that cannot be changed with respect to a Portfolio without the
approval of the holders of a majority of such Portfolio's outstanding
voting securities, as defined in the Investment Company Act. Among other
restrictions, the Portfolios will not purchase any security (other than
obligations of the U.S. Government, its agencies or instrumentalities) if
as a result (i) with respect to 75% of a Portfolio's total assets, more than
5% of a Portfolio's total assets would then be invested in securities of
a single issuer, or (ii) 25% or more of a Portfolio's total assets
would be invested in one or more issuers having their principal business
activities in the same industry. See "Investment Restrictions,
Policies and Risk Considerations--Investment Restrictions" in the Statement
of Additional Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally
the operation of the Fund, including reviewing and approving the Fund's
service contracts with Bennington and the Money Managers. The Fund's
officers, all of whom are employed by Bennington, are responsible for the
day-to-day management and administration of the Fund's operations. The
Money Managers are responsible for the selection of individual portfolio
securities for the assets assigned to them by Bennington.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, serves as
the manager to the Fund. Bennington was organized as a Washington
general partnership on April 25, 1991, for the purpose of acting as the
Fund's manager. Bennington was restructured into a Washington limited
partnership on August 17, 1993. Bennington's general partners are Northwest
Advisors, Inc., Bennington Management Associates, Inc. and Bennington
Capital Management Investment Corp., all of which are Washington
corporations. The sole limited partner is Zions Investment Management,
Inc., a wholly-owned subsidiary of Zions First National Bank, N.A.
Bennington Management Associates, Inc., which is controlled by J. Anthony
Whatley, III, is the managing general partner of Bennington. Mr. Whatley has
had approximately 20 years of experience in the securities industry,
principally in the areas of sales and marketing of mutual fund products and
with direct investment of portfolio assets for an investment company
since the commencement of investment operations of the Fund in April 1992.
Bennington and its partners were organized in 1991 for the purpose of
providing investment advisory services to the Fund. Ravindra A. Deo,
Vice President and Chief Investment Officer of Bennington, is primarily
responsible for the day-to-day management of the Portfolios through
interaction with each Portfolio's Money Manager and Mr. Deo is responsible
for managing the liquidity reserves of each Portfolio. Mr. Deo has served
Bennington in such capacity since January 1992. Prior thereto, he was
Senior Vice President at Leland O'Brien Rubenstein Associates
Incorporated, an investment manager, where he was employed from 1986 to
1991.
Fund Manager Services and Fees. Pursuant to the Management
Agreement with the Fund, Bennington provides the following services:
(i) provides or oversees the provision of all general management,
investment advisory and portfolio management services for the Fund,
including the transfer agent, custodian, portfolio accounting and
shareholder recordkeeping services for the Fund; (ii) provides the Fund
with office space, equipment and personnel necessary to operate and
administer the Fund's business; (iii) develops the investment programs,
selects Money Managers, allocates assets among Money Managers, and
monitors the Money Managers' investment programs and results; and (iv)
invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' other assets. For providing these services (other than
transfer agent, shareholder recordkeeping, custodian and portfolio
accounting and sub-administration services), as well as preparing and
distributing explanatory materials concerning the Portfolios, Bennington is
paid by each Portfolio a fee equal on an annual basis to the following
percentage of the Portfolio's average daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
--------------- --------------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Pursuant to the Transfer Agent Agreement effective December 1,
1995, between Bennington and the Fund, Bennington provides transfer agent,
registrar and dividend disbursing agent services as well as certain other
administrative, compliance and recordkeeping services to the Fund. For
providing these services, Bennington receives (i) a fee equal to 0.12% of
the average daily net assets of each Portfolio of the Fund, subject to a
minimum annual fee of $40,000 per Portfolio and (ii) a transaction fee of
$.50 per transaction.
Bennington may, out of its own resources, provide marketing
and promotional support on behalf of the Portfolios.
The Fund and PFPC entered into a Sub-Administration Agreement on
August 20, 1994, for PFPC to provide certain sub-administrative services;
for example, portfolio accounting and maintenance of the books and records
of the Portfolios required under the Investment Company Act. As compensation
for these services, the Fund pays PFPC an annual fee as follows:
for the Domestic Equity Portfolios: .10% of the first $250 million of
average daily net assets; .075% of
the next $250 million of average
daily net assets, .050% of the next
$250 million of average daily net
assets and .030% of the average
daily net assets over $750
million, subject to a minimum
monthly fee of $5,750, exclusive of
out-of-pocket expenses.
for the International Portfolio: .12% of the first $250 million of
average daily net assets, .10% of the
next $250 million of average daily net
assets, .075% of the next $250 million
of average daily net assets and .05%
of the average daily net assets over
$750 million, subject to a minimum
monthly fee of $7,500, exclusive of
out-of-pocket expenses.
The total costs for these administrative fees are borne by each Portfolio
based on the proportionate net assets of each Portfolio. For the first two
years of the Sub-Administration Agreement (or, in the case of the
International Portfolio, from the inception of operations of the
International Portfolio in October, 1994) PFPC has agreed to waive a portion
of its minimum monthly fee.
The Fund and PNC entered into a Custodian Agreement on August 20,
1994, under which PNC acts as custodian of the Fund's assets. As
compensation for its services rendered, the Fund pays PNC an annual
custody fee of: .0125% of the first $500 million of average gross assets;
.0100% of the next $500 million of average gross assets; and .0080% of the
average gross assets in excess of $1 billion, subject to a monthly minimum
fee of $750 for each Portfolio, exclusive of out-of-pocket expenses and
transaction charges. The total costs for the custodial fees are borne by
each Portfolio based on the proportionate net assets of each Portfolio. For
the first two years of the Custodian Agreement (or, in the case of the
International Portfolio, from the inception of operations of the
International Portfolio in October, 1994), PNC has agreed to waive a portion
of its monthly minimum fee.
Distribution. Investment advisors, banks, insurance companies and
other entities that sell shares of the Fund may enter into a license
agreement with Bennington which permits them to use Bennington's
proprietary asset allocation software program, Alloset(R), pursuant to
which such entities may recommend an allocation of their clients' assets
over a broad range of asset classes, which may include the various
portfolios of the Fund. The Alloset(R) Model was developed by Bennington.
Investment advisors, banks, insurance companies and other licensed
entities may charge a fee, not for providing access to the Fund, but for
providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive
any portion of such fees and has no control over whether and in what
amount such fees are charged. Investors also may purchase shares of the
Fund directly if they do not wish to use any of the above services, in which
case no service fees or additional fees, beyond those borne by the
shareholders of the Fund generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R).
Using Alloset(R), assets may be allocated among the Fund's portfolios in
a manner intended to achieve the investment objectives and desired
investment returns of such entities' clients based upon the individual
client's situation and tolerance for risk and desire for return on
investment. There can be no assurance that the allocation recommended by
the entities that use Alloset(R) will meet any of the clients' investment
objectives. The Money Managers engaged by the Fund do not use Alloset(R)
in investing any of the Portfolio's assets under management.
Distribution Plan. The Fund has adopted a Distribution Plan
(the "Distribution Plan") under Rule 12b-1 ("Rule 12b-1") under the
Investment Company Act. No payments are made by the Portfolios under the
Distribution Plan. Rule 12b-1 provides in substance that an investment
company may not engage directly or indirectly in financing any activity which
is primarily intended to result in the sale of its shares except pursuant
to a plan adopted under that rule. The Distribution Plan is a defensive
plan that is (i) designed to protect against any claim against or involving
a Portfolio that some of the expenses a Portfolio pays or may pay come
within the purview of Rule 12b-1 and (ii) authorizes Bennington to
make certain payments to Qualified Recipients (as defined in the
Distribution Plan), which payments shall not be subject to reimbursement
by the Fund to Bennington, that have rendered assistance in shareholder
servicing or in the distribution and/or retention of a Portfolio's shares.
These payments may not exceed, for any fiscal year of the Fund, the
following amounts:
Maximum Permitted Payments
(as a percentage of
Portfolio average daily net assets)
--------- -------------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
The Distribution Plan provides that the Board of Directors may remove any
person from the list of Qualified Recipients.
See "Investment Advisory and Other Services--Service
Providers--Plan of Distribution" in the Statement of Additional Information.
THE MONEY MANAGERS
Bennington is responsible for evaluating, selecting, and
recommending Money Managers needed to manage all or part of the assets of
the portfolios of the Fund. Bennington is also responsible for allocating
the assets within a portfolio among any Money Managers selected. Such
allocation is reflected in the Money Manager Agreement among the Fund,
Bennington and any Money Manager, and can be changed at any time by
Bennington. The Board of Directors reviews and approves selections of
Money Managers and allocations of assets among any Money Managers. Pursuant
to the Investment Company Act, Money Managers may be added by Bennington
only with the approval of the shareholders of the applicable
portfolio of the Fund.
Money Managers are selected based on such factors as their
experience, the continuity of their portfolio management team, their
security selection process, the consistency and rigor with which they apply
that process and their demonstrated ability to add value to investment
decisions. Short-term investment performance is not a controlling factor
in selecting or terminating Money Managers. Bennington, in conjunction
with the Board of Directors, reviews Money Managers' performance.
Bennington may terminate a Money Manager at any time, subject to approval
by the Board of Directors and prompt notification of the applicable
portfolio's shareholders. A separate Money Manager currently manages the
assets of each Portfolio. See "MONEY MANAGER PROFILES."
The Fund intends to file an exemptive order application
(the "Application") with the SEC seeking an exemption from Section
15(a)(1) of the Investment Company Act to the extent necessary to permit the
Fund and Bennington to enter into Money Manager Agreements with Money
Managers without such agreements being approved by the shareholders of the
applicable Portfolio except for Money Manager Agreements with an affiliated
person of the Fund or Bennington other than by reason of such affiliated
person serving as an existing Money Manager to the Fund. Applicable
orders granted by the SEC to other investment companies seeking similar
exemptions have required as a condition to granting the order that the
investment company obtain shareholder approval for such a policy. The Fund
expects that the SEC will impose the same condition on the Fund and
accordingly on August 15, 1995, at a Special Meeting of the shareholders of
the Fund, the shareholders approved a proposal to allow the Fund and
Bennington to enter into Money Manager agreements with Money Managers
without such agreements being approved by the shareholders of the
applicable Portfolio. In addition, the Fund's Application will likely
include the condition that within 60 days of the hiring of any new Money
Manager and executing a new Money Manager Agreement, Bennington will furnish
shareholders with an information statement about the new Money Manager and
Money Manager Agreement. There is no guarantee that the SEC will grant the
Fund's application for exemptive relief.
Neither the Board of Directors nor the officers evaluate the
investment merits of any Money Manager's individual security selections.
However, the Board of Directors will review regularly each Portfolio's
performance compared to the applicable indices and also will review each
Portfolio's compliance with its investment objective and policies.
Money Manager Fees. The fees paid to the Money Manager of a
Portfolio are based on the assets of the Portfolio and on the number of
complete calendar quarters of management by the Money Manager. During
the first five calendar quarters, the Money Manager fee has two
components, the basic fee (the "Basic Fee") and the portfolio management
fee (the "Portfolio Management Fee"). The Money Manager for the Small to
Mid Cap Portfolio has not completed five calendar quarters of managing the
Small to Mid Cap Portfolio. For the first five calendar quarters of
management, the Money Manager of the Small to Mid Cap Portfolio will earn a
Basic Fee of .10% and a Portfolio Management Fee of .10%.
Commencing with the sixth calendar quarter of management by a
Money Manager of an operating Portfolio, such Portfolio will pay its
Money Manager based on the "Money Manager Fee Schedule For A Manager From
the Sixth Calendar Quarter of Management Forward." The Money Manager Fee
commencing with the sixth quarter consists of two components, the Basic Fee
and the performance fee (the "Performance Fee"), which varies with a
Portfolio's performance. The Money Managers for the Growth Portfolio,
the Value and Income Portfolio and the International Portfolio have
completed the first five calendar quarters of management of their
respective Accounts, as defined below, and the Performance Fee is in
effect. If at any time a Money Manager should be replaced, the new Money
Manager for the applicable Portfolio will receive the fee set forth in the
table "Money Manager Fee Schedule For a Manager's First Five Calendar
Quarters of Management" during the first five calendar quarters of
such new Money Manager's management of the relevant Portfolio. See "Money
Manager Fees--Money Manager Fee Schedule For a Manager's First Five Calendar
Quarters of Management" in the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
MONEY MANAGER FEE SCHEDULE FOR A MANAGER FROM THE
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average Annualized
Performance Differential Annualized
Portfolio Basic Fee vs. The Applicable Index Performance Fee
- ---------- --------- ------------------------- ----------------
<S> <C> <C> <C>
Domestic Equity Portfolios 0.10% =>2.00% 0.22%
=>1.00% and <2.00% 0.20%
=>0.50% and <1.00% 0.15%
=>0.00% and <0.50% 0.10%
=>-0.50% and <0.00% 0.05%
<-0.50% 0%
International Portfolio 0.20% =>4.00% 0.40%
=>2.00% and <4.00% 0.30%
=>0.00% and <2.00% 0.20%
=>-2.00% and <0.00% 0.10%
<-2.00% 0%
</TABLE>
The Performance Fee component will be adjusted each quarter and paid monthly
based on the annualized investment performance of each Money Manager relative
to the annualized investment performance of the "Benchmark Indices" set forth
below. A description of each benchmark index is contained in Appendix A. A
change in an index may be effected with the approval of only the Board of
Directors and does not require the approval of shareholders. As long as a
Domestic Equity Portfolio's performance either exceeds the index, or trails the
index by no more than .50%, a Performance Fee will be paid to the Money Manager.
As long as the International Portfolio's performance either exceeds the index,
or trails the index by no more than 2%, a Performance Fee will be paid to the
Money Manager. A Money Manager's performance is measured on the portion of the
assets of its respective Portfolio managed by it (the "Account"), which excludes
assets held by Bennington for circumstances such as redemptions or other
administrative purposes.
<PAGE>
<TABLE>
<CAPTION>
BENCHMARK INDICES
Portfolio Index
--------- -------
<S> <C>
Growth S&P/BARRA Growth Index
Value and Income S&P/BARRA Value Index
Small to Mid Cap Wilshire 4500 Index(1)
International Morgan Stanley Capital International
EAFE(R) + EMF Index(2)
<FN>
1 Prior to October 1, 1995, the benchmark index used for the Small Cap
Portfolio was the BARRA Institutional Small Index.
2 Through the close of business on April 30, 1996, the benchmark index
used for the International Portfolio was the Morgan Stanley Capital
International EAFE(R) Index. Effective May 1, 1996, the benchmark
index is the Morgan Stanley Capital International EAFE (R)+ EMF Index.
See Appendix A for additional information.
</TABLE>
From the sixth to the 14th calendar quarter of investment
operations, each Money Manager's performance differential versus the
applicable index is recalculated at the end of each calendar quarter based
on the Money Manager's performance during all calendar quarters since
commencement of investment operations except that of the immediately
preceding quarter. Commencing with the 14th calendar quarter of investment
operations, the Money Manager's average annual performance differential
will be recalculated based on the Money Manager's performance during
the preceding 12 calendar quarters (other than the immediately preceding
quarter) on a rolling basis. A Money Manager's performance will be
calculated by Bennington in the same manner in which the total return
performance of the Portfolio's index is calculated, which is not the same
method used for calculating the Portfolios' performance for advertising
purposes as described under "Calculation of Portfolio Performance." See
Appendix B to the Statement of Additional Information for a discussion of how
performance fees are calculated.
The "performance differential" is the percentage amount by which
the Account's performance is greater or less than that of the relevant
index. For example, if an index has an average annual performance of 10%, a
Domestic Equity Portfolio Account's average annual performance would
have to be equal to or greater than 12% for the Money Manager to receive an
annual Performance Fee of 0.22% (i.e., the difference in performance
between the Account and the index must be equal to or greater than 2% for
the Portfolios' Money Managers to receive the maximum Performance Fee.)
Because the maximum Performance Fee for the Domestic Equity Portfolios
applies whenever a Money Manager's performance exceeds the index by 2.00%
or more, the Money Managers for those Portfolios could receive a maximum
Performance Fee even if the performance of the Account is negative. Also,
because the maximum Performance Fee for the International Portfolio
applies whenever a Money Manager's performance exceeds the index by 4.00%
or more, the Money Manager for the International Portfolio could receive a
maximum Performance Fee even if the performance of the Account is negative.
In April 1972, the SEC issued Release No. 7113 under the Investment
Company Act (the "Release") to call the attention of directors and
investment advisers to certain factors which must be considered in
connection with investment company incentive fee arrangements. One of these
factors is to "avoid basing significant fee adjustments upon random or
insignificant differences" between the investment performance of a fund and
that of the particular index with which it is being compared. The Release
provides that "preliminary studies (of the SEC staff) indicate that as a
'rule of thumb' the performance difference should be at least +/-10
percentage points" annually before the maximum performance adjustment may be
made. However, the Release also states that "because of the preliminary
nature of these studies, the SEC is not recommending, at this time, that
any particular performance difference exist before the maximum fee adjustment
may be made." The Release concludes that the directors of a fund
"should satisfy themselves that the maximum performance adjustment
will be made only for performance differences that can reasonably be
considered significant." The Board of Directors has fully considered
the Release and believes that the performance adjustments are entirely
appropriate although not within the +/-10 percentage points per year range
suggested by the Release. A more detailed description of the operation of
each Performance Fee is contained in Appendix B to the Statement of
Additional Information.
The Money Managers have agreed to the foregoing fees, which
are generally lower than they charge to institutional accounts for which
they serve as investment adviser and perform all administrative functions
associated with serving in that capacity. These lower fees are in
recognition of the reduced administrative and client service
responsibilities the Money Managers have undertaken with respect to the
Portfolios.
The combined fees payable to Bennington and the Money Managers
for the Small to Mid Cap Portfolio and the International Portfolio may
at times be higher than those paid by other mutual funds. The Board of
Directors believes that the fees payable by the Small to Mid Cap
Portfolio and International Portfolio are appropriate, in light of their
investment objective and policies and the nature of the securities in which
they invest. The following table lists the fees earned by the Money Managers
of the Portfolios for the current period.
<PAGE>
<TABLE>
<CAPTION>
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
Number Of Performance
Quarters Portfolio Fee
Managed By Basic Fee Management (6th
Money (All Fee (1st 5 Quarter Total
Portfolio Manager Period Quarters) Quarters) Forward) Fee
- --------- ---------- --------------- --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Growth 10 1st Quarter 1995 0.10% N/A 0.22% 0.32%
11 2nd Quarter 1995 0.10% N/A 0.22% 0.32%
12 3rd Quarter 1995 0.10% N/A 0.22% 0.32%
13 4th Quarter 1995 0.10% N/A 0.22% 0.32%
14 1st Quarter 1996 0.10% N/A 0.22% 0.32%
Value and
Income 10 1st Quarter 1995 0.10% N/A 0.20% 0.30%
11 2nd Quarter 1995 0.10% N/A 0.20% 0.30%
12 3rd Quarter 1995 0.10% N/A 0.20% 0.30%
13 4th Quarter 1995 0.10% N/A 0.20% 0.30%
14 1st Quarter 1996 0.10% N/A 0.20% 0.30%
Small to Mid 1 3rd Quarter 1995 0.10% 0.10% N/A 0.20%
Cap(1) 2 4th Quarter 1995 0.10% 0.10% N/A 0.20%
3 1st Quarter 1996 0.10% 0.10% N/A 0.20%
International(2) 1 1st Quarter 1995 0.20% 0.20% N/A 0.40%
2 2nd Quarter 1995 0.20% 0.20% N/A 0.40%
3 3rd Quarter 1995 0.20% 0.20% N/A 0.40%
4 4th Quarter 1995 0.20% 0.20% N/A 0.40%
5 1st Quarter 1996 0.20% 0.20% N/A 0.40%
_______________
<FN>
(1) On June 15, 1995, the Money Manager of the Small to Mid Cap Portfolio (at
that time, the Small Cap Portfolio) resigned, effective September 15, 1995.
The new Money Manager for the Small to Mid Cap Portfolio receives the fees
set forth in the Statement of Additional Information, "Money Mangers
Fees--Money Manager Fee Schedule for a Manager's First Five Calendar
Quarters of Management."
(2) The International Portfolio commenced investment operations on October 3,
1994. No performance fees were paid in 1994 or 1995.
</TABLE>
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for
those expressly assumed by Bennington. Fees and other expenses
payable by the Portfolios include: (i) management fees of Bennington;
(ii) Money Manager fees; (iii) the fees and expenses of unaffiliated
Directors; (iv) the fees of the Fund's custodians, administrator,
sub-administrator and transfer agent, registrar and dividend
disbursing agent; (v) the fees of the Fund's legal counsel and
independent accountants; (vi) brokerage commissions incurred in
connection with portfolio transactions; (vii) all taxes and charges
of governmental agencies, including those for registration at the federal and
state level; (viii) the reimbursement of organizational expenses
advanced by Bennington; and (ix) expenses related to shareholder
communications, including costs incurred in the preparation and mailing of
prospectuses, proxy statements and reports to shareholders. The Board of
Directors has determined that it is appropriate to allocate certain expenses
attributable to more than one Portfolio among the Portfolios affected based
on their relative net assets. See "GENERAL MANAGEMENT OF THE PORTFOLIOS."
Bennington has agreed to reimburse the Fund for the amount, if any,
by which the total operating and management expenses (including
Bennington's fee, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level
of expenses which the Portfolios are permitted to bear under the most
restrictive expense limitation (which has not been waived) imposed on
mutual funds by any state in which shares of the Portfolios are qualified
for sale (or Bennington will make other arrangements to limit the Portfolios'
expenses to the extent required by applicable state law expense
limitations).
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers
for the assets assigned to them and by Bennington for assets not assigned to
a Money Manager. Currently, each Portfolio has one Money Manager. Bennington
invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' assets not assigned to a Money Manager.
Each Money Manager makes decisions to buy or sell
securities independently from other Money Managers. Thus, if there is more
than one Money Manager for a Portfolio, one Money Manager could be
selling a security when another Money Manager for the same Portfolio is
purchasing the same security. In addition, when a Money Manager's services
are terminated and another retained, the new Money Manager may
significantly restructure the Portfolio. These practices may increase the
Portfolios' portfolio turnover rates, realization of gains or losses, and
brokerage commissions. The portfolio turnover rates for the Portfolios may
vary greatly from year to year as well as within a year and may be affected
by sales of investments necessary to meet cash requirements for
redemptions of shares. Historical portfolio turnover rates for the
Portfolios are listed under "Financial Highlights." It is expected
that the annual portfolio turnover rate for each Portfolio, under normal
market conditions, will not exceed 100%. These rates should not be
considered as limiting factors. A high rate of turnover involves
correspondingly greater expenses, increased brokerage commissions and
other transaction costs, which must be borne by the Portfolios and their
shareholders. See "Investment Advisory and Other Services--Portfolio
Transaction Policies" in the Statement of Additional Information. In
addition, high portfolio turnover may result in increased short-term
capital gains, which, when distributed to shareholders, are treated as
ordinary income. See "TAXES."
Each Portfolio may effect portfolio transactions with or
through affiliates of Bennington or any Money Manager or its affiliates, when
Bennington or the Money Manager, as appropriate, determines that the
Portfolio will receive the best net price and execution. This standard
would allow affiliates of Bennington and the Money Managers to receive no
more than the remuneration that would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to
declare dividends from net investment income for payment on the following
schedule:
Portfolio Declared Payable
---------- -------- ---------
Growth Quarterly, on last 1st business day following
Value and Income business day of quarter end of calendar quarter
Small to Mid Cap
International Annually, mid-December Mid-December
The Portfolios determine net investment income immediately prior to
the determination of a Portfolio's net asset value on the dividend
declaration day. The income will be credited to the shareholders of record
prior to the net asset value calculation and paid on the next business day.
Capital Gains Distribution. The Board of Directors intends to
declare distributions from net capital gains annually, generally in
mid-December. In addition, in order to satisfy certain distribution
requirements, a Portfolio may declare special year-end dividend and
capital gains distributions during October, November or December. Such
distributions, if received by shareholders by January 31, are deemed to
have been paid by a Portfolio and received by shareholders on December 31
of the prior year.
Automatic Reinvestment. All dividends and distributions will
be automatically reinvested, at the net asset value per share at the
close of business on the record date, in additional shares of the Portfolio
paying the dividend or making the distribution unless a shareholder
elects to have dividends or distributions paid in cash. Any election
may be changed by electronic instruction if received by Bennington no
later than the close of the New York Stock Exchange, normally 4:00 p.m.
Eastern time on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for
federal income tax purposes and shareholders of each Portfolio will be
entitled to the amount of net investment income and net realized capital
gains (if any) earned by their Portfolio. The Board of Directors intends
to distribute each year substantially all of each Portfolio's net
investment income and net realized capital gains (if any), thereby
eliminating virtually all federal income taxes to each Portfolio (but not to
its investors). The Portfolios may be subject to nominal, if any, state and
local taxes.
Dividends out of net investment income, together with distributions
of net short-term capital gains, will be taxable as ordinary income
to the shareholders, whether or not reinvested, and paid in cash or in
additional shares. Capital gain distributions declared by the Board of
Directors and distributed to the shareholders are taxed as long-term
capital gains regardless of the length of time a shareholder has held
such shares. Dividends and distributions may otherwise also be
subject to state or local taxes. Shareholders should be aware that any
loss realized upon the sale, exchange or redemption of shares held for six
months or less will be treated as a long-term capital loss to the extent
any capital gain dividends have been paid with respect to such shares.
The International Portfolio will receive dividends and interest paid
by non-U.S. issuers which will frequently be subject to withholding
taxes by non-U.S. governments. Bennington expects that at the end of each
taxable year the International Portfolio will hold more than 50% of the
value of its total assets in non-U.S. securities and will file
specified elections with the Internal Revenue Service which will permit
its shareholders either to deduct such foreign taxes in computing taxable
income, or to use these withheld foreign taxes as credits against U.S.
income taxes. If the International Portfolio elects to "pass-through"
the foreign taxes, shareholders will be required to: (i) include in gross
income (in addition to taxable dividends actually received) their pro rata
share of the foreign income taxes paid by the International Portfolio;
and (ii) treat their pro rata share of foreign income taxes as paid by them.
However, shareholders may be able to treat their pro rata share of
foreign taxes as either an itemized deduction or a foreign tax credit
against U.S. income taxes (but not both) on their federal income tax return.
The sale of shares of a Portfolio is a taxable event and may result
in capital gain or loss. A capital gain or loss may be realized from an
ordinary redemption of shares or an exchange of shares between two mutual
funds (or two series or portfolios of a mutual fund). Any gain or loss
realized upon a sale, exchange or redemption of shares of a Portfolio by a
shareholder who is not a dealer in securities will be treated generally as
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as short-term capital gain or loss. Any such loss,
however, on shares that are held for six months or less will be treated as
long-term capital loss to the extent of any capital gain distributions
received by the shareholder.
However, all or a portion of this capital gain will be
recharacterized as ordinary income if the shareholder enters into a
"conversion transaction." A conversion transaction is a transaction,
generally consisting of two or more positions taken with regard to the same
or similar property, where substantially all of the taxpayer's return is
attributable to the time value of the taxpayer's net investment in the
transaction and certain other criteria are satisfied. A conversion
transaction also includes a transaction which is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected
return from the transaction is "attributable to the time value of the
taxpayer's net investment in such transaction." The Secretary of the
Treasury also is authorized to promulgate regulations (which would
apply only after they are issued) which specify other transactions to be
included in the definition of a conversion transaction. Section 1258 of the
Internal Revenue Code of 1986, as amended (the "Code") contains many
ambiguities and its scope is unclear; it may be clarified or refined in
future regulations or other official pronouncements. Until further
guidance is issued, it is unclear whether a purchase and subsequent
disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own
tax advisors concerning whether or not Section 1258 may apply to their
transactions in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will
be treated as long-term capital gains or losses if the securities have been
held by it for more than one year except in certain cases where the Portfolio
acquires a put or writes a call thereon or the transaction is treated as
a "conversion transaction." Other gains or losses on the sale of securities
generally will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will generally
be treated as gains and losses from the sale of securities (assuming they
do not qualify as "Section 1256 contracts" defined below). If an option
written by a Portfolio on securities lapses or is terminated through a
closing transaction, such as a repurchase by the Portfolio of the option
from its holder, the Portfolio will generally realize a capital gain or
loss. If securities are sold by the Portfolio pursuant to the exercise of
a call option written by it, the Portfolio will include the premium
received in the sale proceeds of the securities delivered in determining
the amount of gain or loss on the sale. Certain of the Portfolios'
transactions may be subject to wash sale and short sale provisions of the
Code. In addition, debt securities acquired by the Portfolios may be
subject to original issue discount and market discount rules.
Under the Code, special rules apply to the treatment of certain
options and future contracts (Section 1256 contracts). At the end of each
year, such investments held by the Portfolio will be required to be "marked
to market" for federal income tax purposes; that is, treated as having
been sold at market value. Sixty percent of any gain or loss recognized on
these "deemed sales" and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss. See "Taxes" in the Statement of Additional
Information.
Shareholders of the appropriate Portfolios will be notified after
each calendar year of the amounts of ordinary income and long-term
capital gains distributions, including any amounts which are deemed paid on
December 31 of the prior year; of the dividends which qualify for the
70% dividends-received deduction available to corporations and of the
foreign taxes withheld and foreign source income per country of the
International Portfolio.
Under United States Treasury Regulations, a Portfolio currently
is required to withhold and remit to the United States Treasury 31% of all
taxable dividends, distributions and redemption proceeds payable to any
non-corporate shareholder which does not provide the Fund with the
shareholder's taxpayer identification number on IRS Form W-9 (or IRS Form
W-8 in the case of certain foreign shareholders) or required
certification or which is subject to backup withholding.
The tax discussion set forth above is included for general
information only and is based upon the current law as of the date of
this Prospectus. Shareholders are urged to consult their tax advisers for
further information regarding the federal, state and local tax consequences
of an investment in the shares of the Fund. See "Taxes" in the Statement of
Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time, the Portfolios may advertise their performance
in terms of average annual total return, which is computed by finding the
average annual compounded rates of return over a period that would equate
the initial amount invested to the ending redeemable value. The calculation
assumes that all dividends and distributions are reinvested on the
reinvestment dates during the relevant time period and accounts for all
recurring fees.
It is important to note that total return figures are based
on historical earnings and are not intended to indicate future
performance. The Statement of Additional Information describes the
method used to determine a Portfolio's total return. In reports or other
communications to shareholders or in advertising material, a Portfolio may
quote total return figures that do not reflect recurring fees (provided
that these figures are accompanied by standardized total return figures
calculated as described above), as well as compare its performance with
that of other mutual funds as listed in the rankings prepared by
Morningstar or similar independent services that monitor the performance of
mutual funds or with other appropriate indices of investment securities.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share is
calculated for each Portfolio on each business day on which shares are
offered or orders to redeem are tendered. A business day is one on which the
New York Stock Exchange, PFPC and Bennington are open for business.
Non-business days in 1996 will be: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per share is computed for a Portfolio by
dividing the current value of the Portfolio's assets, less its
liabilities, by the number of shares of the Portfolio outstanding,
and rounding to the nearest cent. All Portfolios determine net asset
value as of the close of the New York Stock Exchange, normally 4:00 p.m.
Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below,
the Portfolios value portfolio securities at "fair market value." This
generally means that equity securities and fixed-income securities
listed and traded principally on any national securities exchange are
valued on the basis of the last sale price or, lacking any sales, at the
closing bid price on the exchange on which the security is primarily traded.
United States equity and fixed-income securities traded principally OTC,
options and futures contracts are valued on the basis of the closing bid
price.
Because many fixed-income securities do not trade each day, last
sale or bid prices are frequently not available. Fixed-income securities
therefore may be valued based on prices provided by a pricing service when
such prices are believed to reflect the fair market value of such securities.
International equity securities traded on a securities exchange
are valued on the basis of the last sale price. International securities
traded over-the-counter are valued on the basis of the mean of bid and asked
prices. In the absence of a last sale or mean bid and asked price,
respectively, such securities may be valued on the basis of prices provided
by a pricing service if those prices are believed to reflect the fair value
of such securities. The risk also exists that an emergency situation may
arise in one or more Emerging Countries as a result of which trading of
securities may cease or may be substantially curtailed and prices for the
International Portfolio's securities in such markets may not be readily
available. The Fund may suspend or postpone redemption of the shares of the
International Portfolio for any period during which an emergency exists,
as determined by the SEC. Accordingly, if the International Portfolio
believes that appropriate circumstances exist, the Board of Directors or
Bennington will promptly apply to the SEC for a determination that an
emergency is present. During the period commencing from the
International Portfolio's identification of such condition until the date of
the SEC action, the International Portfolio's securities in the affected
markets will be valued at fair value determined in good faith by or under
the direction of the Board of Directors. See "Investment Policies--Special
Risks of Investing in Foreign Securities of Emerging Countries."
Money market instruments maturing within 60 days of the valuation
date held by Portfolios are valued at "amortized cost" unless the Board of
Directors determines that amortized cost does not represent fair value.
The "amortized cost" valuation procedure initially prices an instrument
at its cost and thereafter assumes a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price
the Portfolio would receive if it sold the instrument.
The Portfolios value securities for which market quotations are
not readily available at "fair value," as determined in good faith
pursuant to procedures established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the
Portfolios with no sales charge or commission. Investors may also purchase
shares of the Portfolios from intermediaries, such as a broker-dealer, bank
or other financial institution. Such intermediaries may be required to
register as a dealer pursuant to certain states' securities laws and
may charge the investor a reasonable service fee, no part of which will be
paid to the Portfolios. Shares of the Portfolios will be sold at the net
asset value next determined after an order is received and accepted,
provided that payment has been received by 12:00 p.m. Eastern Time on the
following business day. Net asset value is determined as set forth above
under "Valuation of Portfolio Shares." All purchases must be made in U.S.
dollars. The minimum and subsequent investment requirements for each
Portfolio are $1,000. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $1,000 in the Portfolios. The
subsequent investment requirement for an IRA Account is an aggregate amount
of $100 in the Portfolios. The Fund reserves the right to accept smaller
purchases or reject any purchase order in its sole discretion.
Orders are accepted on each business day. Orders to purchase
Portfolio shares must be received by Bennington prior to close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time, on the day shares
of those Portfolios are offered and orders accepted, or the orders will not
be accepted and invested in the particular Portfolio until the next day on
which shares of that Portfolio are offered. Payment must be received by
12:00 noon Eastern time the next business day. Purchases by telephone
may only be made as described in the telephone transaction procedures
set forth in "Purchase of Portfolio Shares--Telephone Transactions."
No fees are currently charged shareholders by the Fund directly in
connection with purchases.
Order and Payment Procedures. Investments in the Portfolios may
be made as follows:
Federal Funds Wire. Purchases may be made on any
business day by wiring federal funds to Seattle First National
Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check
drawn on a foreign bank will not be accepted) only in amounts
greater than $1,000; except that checks will be accepted for IRA
Accounts in any amount. If an investor has purchased Portfolio
shares by check and subsequently submits a redemption request,
the redemption request will be honored at the net asset value next
calculated after receipt of the request, however, the redemption
proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days.
See REDEMPTION OF PORTFOLIO SHARES.
Please call the Fund for further information at (800) 759-3504.
Purchases in Kind. The Portfolios may accept certain types
of securities in lieu of wired funds as consideration for
Portfolio shares. Under no circumstances will a Portfolio accept
any securities the holding or acquisition of which conflicts
with the Portfolio's investment objective, policies and
restrictions or which Bennington or the applicable Money Manager
believes should not be included in the applicable Portfolio's
portfolio on an indefinite basis. Securities accepted in
consideration for a Portfolio's shares will be valued in
the same manner as the Portfolio's portfolio securities in
connection with its determination of net asset value. A transfer
of securities to a Portfolio in consideration for Portfolio shares
will be treated as a sale or exchange of such securities for
federal income tax purposes. A shareholder will recognize gain
or loss on the transfer in an amount equal to the difference
between the value of the securities and the shareholder's tax
basis in such securities. Shareholders who transfer
securities in consideration for a Portfolio's shares should
consult their tax advisers as to the federal, state and local tax
consequences of such transfers. See "Purchases in Kind" in
the Statement of Additional Information.
Automatic Investment Plan. An Automatic Investment Plan may
be established at any time. By participating in the Automatic
Investment Plan, a shareholder may automatically make purchases
of shares of the Portfolios on a regular, convenient basis.
Shareholders may choose to make contributions on the 15th (or
the first business day before the 15th) and/or the last business
day of each month in amounts of $500.00 in the aggregate. Since
the Automatic Investment Plan involves the continuous
investment in the Portfolios regardless of the price levels
of the Portfolio shares, investors should consider their
financial ability to continue to purchase through periods of low
price levels.
IRA Accounts. The Fund has established an Individual
Retirement Custodial Account Plan under which investors may set up
IRA Accounts that invest in the Fund. Fifth Third serves as
custodian for the IRA Accounts. The Transfer Agent charges an
annual account fee of $25 to each IRA Account with an aggregate
balance of less than $10,000 on December 31. The minimum initial
investment requirement for an IRA Account is an aggregate
amount of $1,000 in the Portfolios. The subsequent investment
requirement for an IRA Account is an aggregate amount of $100 in
the Portfolios. Please refer to the IRA Account plan
documents: the IRA Disclosure Statement, IRA Custodial
Account Agreement and IRA Application and Adoption Agreement
Form for additional information, copies of which may be obtained
from Bennington free of charge at 1-800-759-3504.
Exchange Privilege. Shares of any Portfolio of the Fund, may
be exchanged for shares of the other portfolios offered by the Fund to the
extent such shares are offered for sale in the investor's state of
residence, on the basis of current net asset values per share at the time of
the exchange. Other than the Portfolios offered by this Prospectus, the
portfolios of the Fund also include the Intermediate Fixed-Income Portfolio,
Short-Intermediate Fixed-Income Portfolio, Mortgage Securities Portfolio and
the U.S. Government Money Portfolio.
If the exchanging shareholder does not currently own shares of
the portfolio whose shares are being acquired, a new account will be
established with the same registration, dividend and capital gain options
and authorized dealer of record as the account from which shares are
exchanged, unless otherwise specified in writing by the shareholder with all
signatures guaranteed by an eligible guarantor institution as defined
below under "REDEMPTION OF PORTFOLIO SHARES" and in "ADDITIONAL
INFORMATION--Signature Guarantees." To establish an automatic withdrawal
for the new account, however, an exchanging shareholder must file a
specific written request. For additional information, contact the Fund. A
shareholder should obtain and read the prospectus relating to any other
portfolio of the Fund before making an exchange.
An exchange is a redemption of the shares and is treated as a sale
for federal income tax purposes, and a short- or long-term capital gain or
loss may be realized. The exchange privilege may be modified or terminated at
any time on 60 days' notice to shareholders. Exchanges are available only
in states where exchanges may legally be made. Exchanges may be made by
faxing instructions to Bennington at (206) 224-4274 or by mailing
instructions to Bennington at P. O. Box 1748, Seattle, WA 98111-9865.
Exchanges may only be made by telephone as set out in the telephone
transaction procedures set forth in "PURCHASE OF PORTFOLIO SHARES--Telephone
Transactions" and "ADDITIONAL INFORMATION--Signature Guarantees." No fees are
currently charged shareholders by the Fund directly in connection with
exchanges.
Telephone Transactions. A shareholder of the Fund with an
aggregate account balance of $1 million or more may request purchases,
redemptions or exchanges of shares of a Portfolio by telephone at the
appropriate toll free number provided in this Prospectus. It may be
difficult to implement redemptions or exchanges by telephone in times of
drastic economic or market changes. In an effort to prevent unauthorized or
fraudulent redemption or exchange requests by telephone, the Fund employs
reasonable procedures specified by the Board of Directors to confirm that
such instructions are genuine. Telephone transaction procedures include the
following measures: requiring the appropriate telephone transaction
election be made on the telephone transaction authorization form sent to
shareholders upon request; requiring the caller to provide the names of the
account owners, the account owner's social security number or tax
identification number and name of Portfolio, all of which must match the
Fund's records; requiring that a service representative of Bennington,
acting as Transfer Agent complete a telephone transaction form listing all
of the above caller identification information; requiring that redemption
proceeds be sent by wire only to the owners of record at the bank account
of record or by check to the address of record; sending a written
confirmation for each telephone transaction to the owners of record at the
address of record within five (5) business days of the call; and
maintaining tapes of telephone transactions for six months, if the Fund
elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian
or an attorney-in-fact (under a power of attorney), additional
documentation or information regarding the scope of a caller's authority is
required. Finally, for telephone transactions in accounts held jointly,
additional information regarding other account holders is required. The
Fund may implement other procedures from time to time. If reasonable
procedures are not implemented, the Fund may be liable for any loss due to
unauthorized or fraudulent transactions. In all other cases, neither the
Fund, the Portfolio nor Bennington will be responsible for authenticity
of redemption or exchange instructions received by telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net
asset value next determined after the receipt of a redemption request in
proper form. Payment will ordinarily be made within seven days and will be
wire-transferred by automatic clearing house funds or other bank wire to the
account designated for the shareholder at a domestic commercial bank
that is a member of the Federal Reserve System. If requested in writing,
payment will be made by check to the account owners of record at the address
of record. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which processing fee
may be waived by the Transfer Agent at its discretion. If an investor
has purchased Portfolio shares by check and subsequently submits a
redemption request, the redemption request will be honored at the net
asset value next calculated after receipt of the request, however, the
redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire transfer.
If a shareholder requests a redemption check made payable to
someone other than the registered owner of the shares and/or mailed to an
address other than the address of record, the request to redeem must (1) be
made in writing; (2) include an instruction to make the check payable to
someone other than the registered owner of the shares and/or mail it to
an address other than the address of record; and (3) be signed by all
registered owners with their signatures guaranteed. See "ADDITIONAL
INFORMATION--Signature Guarantees."
Portfolio shares may be redeemed by faxing instructions to
Bennington at (206) 224-4274 or by mailing instructions to Bennington at
P. O. Box 1748, Seattle, WA 98111-9865. Redemptions of the Portfolios' shares
may be effected on any business day on which the New York Stock Exchange,
PFPC and Bennington are open, as long as instructions are received by
Bennington by the close of business of the New York Stock Exchange,
normally 4:00 p.m. Eastern time. In periods of severe market or economic
conditions, the electronic redemption of shares may be difficult due
to an increase in the amount of electronic transmissions. Use of the
mail may result in the redemption request being processed at a later
time than it would have been if instructions had been sent by facsimile
transmission. During the delay, the Portfolios' net asset value may
fluctuate.
Portfolio shares also may be redeemed through registered
broker-dealers who have made arrangements with the Fund permitting them to
redeem such shares by telephone or facsimile transmission and who may
charge a fee for this service.
If the Board of Directors determines that it would be detrimental
to the best interests of the remaining shareholders of a Portfolio to make
payment wholly or partly in cash, the Portfolio may pay the redemption price
in whole or in part by a distribution in kind of securities from the
investment portfolio of the Portfolio, in lieu of cash, in conformity with
any applicable rules of the SEC. Securities will be readily marketable and
will be valued in the same manner as in a regular redemption. See
"VALUATION OF PORTFOLIO SHARES." If shares are redeemed in kind, the
redeeming shareholders would incur transaction costs in converting the
assets into cash. The Fund, however, has elected to be governed by Rule
18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1%
of the net asset value of the Portfolio during any 90-day period for
any one shareholder.
The Fund reserves the right to redeem the shares of any
shareholder whose account balance is less than $500 per portfolio or whose
aggregate account is less than $2,000, and who is not part of an Automatic
Investment Plan. The Fund, however, will not redeem shares based solely on
market reductions in net asset value. The Fund will give sixty (60)
days prior written notice to shareholders whose shares are being
redeemed to allow them to purchase sufficient additional shares of the
Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption
or postpone the date of payment for the Portfolios if the unlikely
emergency conditions which are specified in the Investment Company Act or
determined by the SEC should exist.
Shareholders uncertain of requirements for redemption
should telephone the Fund at (206) 224-7420 or (800) 759-3504. Redemptions by
telephone may only be made as set out in the telephone transaction procedures
set forth in "Purchase of Portfolio Shares--Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly
withdrawal on the Systematic Withdrawal Plan is $500.00 in aggregate) on a
monthly basis on the 15th (or the first business day before the 15th) and/or
on the last business day of each month. An application for automatic
withdrawal can be obtained from Bennington or the Fund and must be received
by Bennington ten calendar days before the first scheduled withdrawal date.
Automatic withdrawal may be ended at any time by the investor or the Fund.
The Systematic Withdrawal Plan may be discontinued at any time by the Fund
or Bennington. The Fund reserves the right to reject any Systematic
Withdrawal Plan application. Purchases of additional shares concurrently
with withdrawals generally are undesirable. Funds will be disbursed according
to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager and Administrator.
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, WA 98101, is
the manager and administrator of the Fund pursuant to a Management
Agreement with the Fund.
Transfer Agent, Registrar and Dividend Disbursing Agent.
Bennington, P. O. Box 1748, Seattle, WA 98111-9865, is the
transfer agent, registrar and dividend disbursing agent for the Portfolios
and provides other administrative, recordkeeping and compliance services to
the Fund pursuant to a Transfer Agent Agreement between Bennington and the
Fund.
Custodians.
PNC, Broad & Chestnut Streets, Philadelphia, PA 19101, acts
as custodian of the Portfolios' assets and may employ sub-custodians
outside the United States, which have been approved by the Board of
Directors. PNC holds all portfolio securities and cash assets of the
Portfolios and is authorized to deposit securities in securities
depositories or to use the services of sub-custodians.
Barclays Bank, 54 Lombard Street, London EC3P3AH, England, may
employ sub-custodians outside the United States, which have been approved by
the Board of Directors, pursuant to an agreement among Barclays, PNC and the
Fund.
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45264, acts
as custodian for investors of the Portfolios with respect to IRA Accounts.
Sub-Administrator.
PFPC, 103 Bellevue Parkway, Wilmington, DE 19809, is
the sub-administrator to the Fund, providing portfolio accounting and
recordkeeping services to the Fund.
Auditors.
Deloitte & Touche LLP, Two World Financial Center, New York, New
York 10291 are the Fund's independent auditors. Shareholders will receive
semi-annual and annual financial statements; the annual statement is
audited by Deloitte & Touche LLP.
Fund Counsel.
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019
serves as the Fund's outside counsel.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and
the Portfolios against fraudulent transactions by unauthorized persons. In
certain instances, such as transfer of ownership or when the registered
shareholder(s) requests that redemption proceeds be sent to a different
name or address than the registered name and address of record on the
shareholder account, the Fund will require that the shareholder's
signature be guaranteed. When a signature guarantee is required, each
signature must be guaranteed by a domestic bank or trust company, credit
union, broker, dealer, national securities exchange, registered
securities association, clearing agency or savings association as defined
by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and
be signed in the name of the guarantor by an authorized person with that
person's title and the date. The Fund may reject a signature guarantee if
the guarantor is not a member of or participant in a signature guarantee
program. Please note that a notary public stamp or seal is not
acceptable. The Fund reserves the right to amend or discontinue its
signature guarantee policy at any time and, with regard to a particular
redemption transaction, to require a signature guarantee at its
discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The
Fund is authorized to issue 15 billion shares of common stock of $0.001
par value per share, currently divided into eight Portfolios. The Board
of Directors may increase or decrease the number of authorized shares
without approval by shareholders. Shares of the Fund, when issued, are
fully paid, nonassessable, fully transferable and redeemable at the option
of the holder. Shares are also redeemable at the option of the Fund under
certain circumstances. All shares of a Portfolio are equal as to earnings,
assets and voting privileges. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share
of common stock of a Portfolio is entitled to its portion of all of the
Portfolio's assets after all debts and expenses of the Portfolio have been
paid. The Portfolios' shares do not have cumulative voting rights for the
election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of
additional series of common stock and classes within such series, with such
preferences, privileges, limitations and voting and dividend rights as the
Board of Directors may determine.
The Fund does not intend to hold annual meetings of shareholders
unless otherwise required by law. The Fund will not be required to hold
annual meetings of shareholders unless the election of Directors is
required to be acted on by shareholders under the Investment Company Act.
Shareholders have certain rights, including the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of
voting on the removal of one or more Directors or to transact any other
business. Any proposals by shareholders to be presented at an annual meeting
must be received by the Fund for inclusion in its proxy statement and form of
proxy relating to that meeting at least 120 calendar days in advance of the
date of the Fund's proxy statement released in connection with the previous
year's annual meeting, if any. If there was no annual meeting held in the
previous year or the date of the annual meeting has changed by more than 30
days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made.
As of March 31, 1996, the following persons were owners
of record of 25% or more of the shares of the Portfolios of the Fund:
<TABLE>
<CAPTION>
Value and Small to
Beneficial Owner Growth Income Mid Cap International
- ---------------- ------ ------ ------- -------------
<S> <C> <C> <C> <C>
Charles Schwab & Company
101 Montgomery St.
San Francisco, CA 94104 28.0%
Rocco Trust & Co., account nominee
for Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202 26.8%
Stap & Company, account nominee for
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302 40.5% 55.2%
</TABLE>
As of March 31, 1996, J. Anthony Whatley III beneficially owned
1.14% of the shares of the Value and Income Portfolio. The other
directors and officers of the Fund, as a group, beneficially owned less
than 1% of the shares of each Portfolio.
The fiscal year end for each Portfolio is December 31.
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing
further information about performance, is available without charge
from the Fund. Inquiries regarding the Portfolios and requests for Annual
Reports should be addressed to the Fund at 1420 Fifth Avenue, Suite 3130,
Seattle, Washington 98101, or by telephone at (206) 224-7420 or (800)
759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally
prohibit banks that are members of the Federal Reserve System from
engaging in the business of underwriting, selling, distributing
securities or engaging in investment advisory activities. The Fund
believes that its Money Managers that are banks or subsidiaries of banks
may perform the services for the Portfolios contemplated by the Money
Manager Agreements without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. However, it is possible that
future changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well
as further judicial or administrative decisions and interpretations of
present and future statutes and regulations, might prevent such Money
Managers from continuing to perform such services for the Portfolios.
If such Money Managers were prohibited from acting as Money Manager to the
Portfolios, it is expected that the Board of Directors would recommend to
the shareholders of those Portfolios that they approve these Portfolios'
entering into new Money Manager Agreements with other qualified Money
Managers to be selected by Bennington.
It is the position of the Board of Directors that the
investment advisory and custodian services to be performed by PNC and its
affiliates are consistent with the requirements of the Glass-Steagall
Act. In addition, the Fund believes that this combination of individually
permissible activities is consistent with the Glass-Steagall Act and
federal legal and regulatory precedent thereunder. There is presently no
controlling precedent regarding the performance of a combination of
investment advisory and custodian services by banks of the sort
contemplated to be performed by PNC and its affiliates and described
herein. State laws on this issue may differ from the interpretations of
relevant federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities law. Future changes in
either federal statutes or regulations relating to the permissible activities
of banks, as well as future judicial or administrative decisions and
interpretations of present and future statutes and regulations, could
prevent PNC or its affiliates from continuing to perform all or part of
their investment management and custodian services. If PNC or its
affiliates were prohibited from so acting, shareholders would be permitted
to remain shareholders of the Portfolios and alternative means for
continuing such services would be sought. In such event, changes in the
operation of the Fund might occur and a shareholder serviced by PNC or its
affiliates might no longer be able to avail himself of any services then
being provided. The Board of Directors does not expect that shareholders of
the Fund would suffer any adverse financial consequences as a result of
these occurrences.
MONEY MANAGER PROFILES
The following information as to each Money Manager has been supplied
by the respective Money Managers. The Statement of Additional Information
contains further information concerning each Money Manager, including a
description of its business history and identification of its controlling
persons.
Growth Portfolio
State Street, Two International Place, Boston, MA 02110, is the
Money Manager of the Growth Portfolio. State Street is a Massachusetts
trust company and wholly-owned subsidiary of State Street Boston
Corporation, 225 Franklin Street, Boston, MA 02110, a publicly held bank
holding company. State Street is one of the largest providers of securities
processing and recordkeeping services for US mutual funds and pension
funds. Douglas T. Holmes, CFA, is primarily responsible for the
day-to-day management and investment decisions for the Growth Portfolio
and is supported by a group of other investment professionals that assist
in the management of the Growth Portfolio. Mr. Holmes joined State Street
in 1984.
Value and Income Portfolio
Martingale Asset Management, L.P., 222 Berkeley Street, Boston,
MA 02108 ("Martingale"), is the Money Manager of the Value and Income
Portfolio. Martingale is a Delaware limited partnership, which consists
of two general partners, Martingale Asset Management Corp. ("Martingale
Corp."), a Massachusetts corporation, and Commerz Asset Management USA
Corporation ("CAM"), a Delaware corporation, and four limited partners.
Arnold S. Wood and William E. Jacques each own 32.26% of Martingale Corp.
CAM is a wholly-owned subsidiary of Commerz International Capital
Management GmbH ("CICM") headquartered in Frankfurt, Germany.
Commerzbank AG is the parent company of CICM. William E. Jacques, CFA,
Executive Vice President and Chief Investment Officer of Martingale,
is primarily responsible for the investment decisions for the Value and
Income Portfolio. Mr. Jacques joined Martingale in 1987. Douglas E. Stark,
CFA, Vice President and Director of US Equity Management and Research
is primarily responsible for the day-to-day management of the Value and
Income Portfolio. Mr. Stark joined Martingale in 1996. Prior to joining
Martingale, Mr. Stark was Senior Vice President and Portfolio Manager at
InterCoast Capital Company from 1994 to 1996. Prior to that, he was Vice
President and managed international stock portfolios at State Street Global
Advisors, an area of State Street Bank and Trust Company, from 1990 until
1994.
Small to Mid Cap Portfolio
Symphony Asset Management, Inc., 555 California Street, San
Francisco, CA 94104 ("Symphony"), is the Money Manager of the Small to Mid
Cap Portfolio. Symphony is a California corporation founded in March,
1994. Symphony is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), and the
California Department of Corporations. Symphony is a wholly-owned
subsidiary of BARRA, Inc. ("BARRA"), a California corporation, which is
registered as an investment adviser under the Investment Advisers Act and
with the California Department of Corporations, and as a publicly traded
corporation under Section 12(g) of the Securities Exchange Act of 1934, as
amended. BARRA is one of the world's leading suppliers of analytical
financial software and has pioneered many of the techniques used in
systematic investment management, including active management based on
so-called factor return predictions. Praveen K. Gottipalli, Director of
Investments of Symphony, is primarily responsible for the day-to-day
management and investment decisions for the Small to Mid Cap Portfolio. Mr.
Gottipalli has been Director of Investments with Symphony since March,
1994. From 1985 to 1994, he was with BARRA, Inc., where, prior to joining
Symphony, he was Director of the Active Strategies Group for BARRA, Inc.
Mr. Gottipalli has worked on a number of different investment management
strategies including valuation models for global equities, global tilt
funds and aggressive market neutral strategies that combine
quantitative and qualitative analysis. He has been actively involved with
design, analysis, implementation and enhancement of these strategies.
International Portfolio
Nicholas-Applegate Capital Management, ("Nicholas-Applegate"),
600 West Broadway, 29th Floor, San Diego, CA 92101, is the Money Manager
for the International Portfolio. Nicholas-Applegate is a California limited
partnership and registered investment adviser whose sole general
partner is Nicholas-Applegate Capital Management Holdings L.P., a
California limited partnership controlled by Arthur E. Nicholas.
Nicholas-Applegate is organized such that a team, consisting of Arthur E.
Nicholas, Lawrence S. Speidell and Loretta J. Morris, is primarily
responsible for making the day-to-day management and investment decisions for
the International Portfolio. Mr. Nicholas, Managing Partner and Chief
Investment Officer, founded Nicholas-Applegate in 1984. Mr. Speidell,
Partner and Director of Global and Systematic Portfolio Management, joined
Nicholas-Applegate in 1994. From 1983 to 1994, Mr. Speidell was a
portfolio manager for Batterymarch Financial Management. Ms. Morris,
Vice President, Global Portfolio Management/Research, joined
Nicholas-Applegate in 1990. From 1981 to 1989, Ms. Morris was responsible for
research, client service and operations at Collins Associates, a pension
consulting firm.
APPENDIX A
DESCRIPTION OF INDICES
The following information as to each index has been supplied by
the respective preparer of the index or has been obtained from
other publicly-available information.
Standard & Poor's 500 Composite Stock Price Index (2)<F2>
The purpose of the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500") is to portray the pattern of common stock price
movement. Construction of the index proceeds from industry groups to the
whole. Currently there are four groups: 400 Industrials, 40 Utilities, 20
Transportation and 40 Financial. Since some industries are characterized
by companies of relatively small stock capitalization, the index does
not comprise the 500 largest companies listed on the New York Stock
Exchange.
Component stocks are chosen solely with the aim of achieving
a distribution by broad industry groupings that approximates the
distribution of these groupings in the New York Stock Exchange common stock
population, taken as the assumed model for the composition of the total
market. Each stock added to the index must represent a viable enterprise
and must be representative of the industry group to which it is assigned.
Its market price movements must in general be responsive to changes in
industry affairs.
The formula adopted by S&P is generally defined as a
"base-weighted aggregative" expressed in relatives with the average value
for the base period (1941-1943) equal to 10. Each component stock is
weighted so that it will influence the index in proportion to its respective
market importance. The most suitable weighting factor for this purpose is
the number of shares outstanding. The price of any stock multiplied by
number of shares outstanding gives the current market value for that
particular issue. This market value determines the relative importance of the
security.
Market values for individual stocks are added together to obtain
their particular group market value. These group values are expressed as a
relative, or index number, to the base period (1941-1943) market value. As
the base period market value is relatively constant, the index number
reflects only fluctuations in current market values.
S&P/BARRA Growth Index
S&P/BARRA Value Index
BARRA, in collaboration with Standard and Poor's Corporation,
has constructed the S&P/BARRA Growth Index (the "Growth Index") and
S&P/BARRA Value Index (the "Value Index") to separate the S&P 500 into
value stocks and growth stocks.
The Growth and Value Indices are constructed by dividing the stocks
in the S&P 500 according to their price-to-book ratios. The Value Index
contains firms with lower price-to-book ratios and has 50 percent of the
capitalization of the S&P 500. The Growth Index contains the remaining
members of the S&P 500. Each of the indices is capitalization-weighted and
is rebalanced semi-annually on January 1 and July 1 of each year.
Although the Value Index is created based on price-to-book ratios,
the companies in the index generally have other characteristics
associated with "value" stocks: low price-to-earnings ratios, high
dividend yields, and low historical and predicted earnings growth. Because
of these characteristics, the Value Index historically has had higher
weights in the Energy, Utility, and Financial sectors than the S&P 500.
For the five-year period between January 1990 and December 1995, the
Value Index had an annualized yield ranging within that period from a low of
2.96 to a high of 4.71.
Companies in the Growth Index tend to have opposite
characteristics from those in the Value Index: high earnings-to-price
ratios, low dividend yields, and high earnings growth. Historically, the
Growth Index has been more concentrated in Electronics, Computers, Health
Care and Drugs than the S&P 500.
As of December 31, 1994 there were 337 companies in the Value
Index; consequently there are 163 companies in the Growth Index.
Wilshire 4500 Index (3)<F3>
While the S&P 500 Index includes the preponderance of large
market capitalization stocks, it excludes most of the medium and small size
companies which comprise the remaining 33% of the capitalization of the U.S.
stock market. The Wilshire 4500 Index (an unmanaged index) consists of all
U.S. stocks that are not in the S&P 500 and that trade regularly on the
New York and American Stock Exchanges as well as in the NASDAQ
over-the-counter market. The Wilshire 4500 Index is constructed from the
Wilshire 5000 Equity Index, which measures the performance of all U.S.
headquartered equity securities with readily available price data.
Approximately 6500 capitalization weighted security returns are used to
adjust the Wilshire 5000 Equity Index. The Wilshire 5000 Equity Index was
created by Wilshire Associates in 1974 to aid in performance measurement.
The Wilshire 4500 Index consists of the Wilshire 5000 Equity Index after
excluding the companies in the S&P 500.
Wilshire Associates view the performance of the Wilshire
5000's securities several ways. Price and total return indices using both
capital and equal weightings are computed. The unit value of these four
indices was set to 1.0 on December 31, 1970.
Morgan Stanley Capital International EAFE(R) + EMF Index(4)<F4>
The Morgan Stanley Capital International ("MSCI") EAFE(R) + EMF
Index is a market capitalization weighted index composed of companies
representative of the market structure of 41 Developed and Emerging Market
countries. The index is calculated without dividends or with gross dividends
reinvested, in both U.S. Dollars and local currencies.
MSCI EAFE(R) Index is a market capitalization weighted index
composed of companies representative of the market structure of 19
Developed Market countries in Europe, Australasia and the Far East. The
index is calculated without dividends, with net or with gross dividends
reinvested, in both U.S. Dollars and local currencies.
MSCI Emerging Markets Free ("EMF") Index is a market
capitalization weighted index composed of companies representative of the
market structure of 22 Emerging Market countries in Europe, Latin America and
the Pacific Basin. The MSCI EMF Index excludes closed markets and those
shares in otherwise free markets which are not purchasable by foreigners.
The MSCI indices reflect stock market trends by representing
the evolution of an unmanaged portfolio containing a broad selection of
domestically listed companies. A dynamic optimization process which involves
maximizing float and liquidity, reflecting accurately the market's size and
industry profiles, and minimizing cross ownership is used to determine
index constituents. Stock selection also takes into consideration the
trading capabilities of foreigners in emerging market countries.
As of March 31, 1996, the MSCI EAFE(R) + EMF Index consisted of
1,905 companies traded on stock markets in 41 countries. The weighting of
the MSCI EAFE(R) + EMF Index by country was as follows: Developed Markets:
Australia 2.37%, Austria 0.40%, Belgium 1.01%, Denmark 0.71%, Finland 0.44%,
France 5.92%, Germany 6.29%, Hong Kong 3.03%, Ireland 0.26%, Italy 1.94%,
Japan 35.92%, Netherlands 3.70%, New Zealand 0.36%, Norway 0.41%, Singapore
1.07%, Spain 1.66%, Sweden 1.94%, Switzerland 5.56%, United Kingdom
14.63%.
Emerging Markets: Argentina 0.43%, Brazil 1.41%, Chile 0.56%, Colombia
0.09%, Greece 0.19%, India 0.89%, Indonesia 0.71%, Israel 0.30%, Jordan
0.02%, Korea Free 0.37%, Malaysia 2.20%, Mexico Free 1.04%, Pakistan
0.09%, Peru 0.14%, Philippines Free 0.37%, Poland 0.06%, Portugal 0.26%,
South Africa 1.85%, Sri Lanka 0.01%, Thailand 1.14%, Turkey 0.20%, Venezuela
Free 0.05%.
Unlike other broad-based indices, the number of stocks included in
MSCI EAFE(R) + EMF Index is not fixed and may vary to enable the Index to
continue to reflect the primary home markets of the constituent countries.
Changes in the Index will be announced when made. MSCI EAFE(R) +
EMF Index is a capitalization-weighted index calculated by Morgan Stanley
Capital International based on the official closing prices for each stock in
its primary local or home market. The base value of the MSCI EAFE(R) + EMF
Index was equal to 100.0 on January 1, 1988. As of March month-end 1996,
the current value of the MSCI EAFE(R) + EMF Index was 183.9 (with gross
dividends reinvested).
<F2>2 "Standard & Poor's," "S&P" and "S&P 500" are trademarks of Standard and
Poor's Corporation. The Growth and Value and Income Portfolios are not
sponsored, endorsed, sold or promoted by Standard & Poor's Corporation.
</F2>
<F3>3 "Wilshire 4500" and "Wilshire 5000" are registered trademarks of
Wilshire Associates. The Small to Mid Cap Portfolio is not sponsored,
endorsed, sold or promoted by Wilshire Associates.
</F3>
<F4>4 "EAFE" is a registered trademark of Morgan Stanley Capital
International. The International Portfolio is not sponsored, endorsed,
sold or promoted by Morgan Stanley Capital International.
</F4>
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information and representations must not be relied
upon. This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any person
to whom it is unlawful to make such an offer. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Portfolios,
Bennington or the Money Managers since the date hereof; however, if any material
change occurs while this Prospectus is required by law to be delivered, this
Prospectus will be amended or supplemented accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington
Capital Management L.P.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
FIXED-INCOME PORTFOLIOS Seattle, WA 98101
PROSPECTUS - April 29, 1996 1-800-759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services 206-224-7420
- --------------------------------------------------------------------------------
ACCESSOR(R) FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. This Prospectus pertains to the following
four fixed-income portfolios of the Fund (individually, a "Portfolio" and
collectively, the "Portfolios"):
INTERMEDIATE FIXED-INCOME PORTFOLIO
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
U.S. GOVERNMENT MONEY PORTFOLIO
and sets forth concisely the information about the Portfolios that a prospective
investor should know before investing. The Fund has filed a Statement of
Additional Information, dated April 29, 1996, with the Securities and Exchange
Commission (the "SEC"). The Statement of Additional Information, containing
further information about the Portfolios and the Fund which may be of interest
to investors, is incorporated herein by reference in its entirety. A free copy
may be obtained by writing or calling the Fund at the address or phone number
shown above.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE U.S. GOVERNMENT MONEY PORTFOLIO ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE U.S. GOVERNMENT MONEY PORTFOLIO
INTENDS TO MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO DO SO. SEE "VALUATION OF PORTFOLIO
SHARES."
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY.......................................................................3
FEES AND PORTFOLIO EXPENSES...................................................5
FINANCIAL HIGHLIGHTS..........................................................6
INTERMEDIATE FIXED-INCOME PORTFOLIO..................................6
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO............................7
MORTGAGE SECURITIES PORTFOLIO........................................8
U.S. GOVERNMENT MONEY PORTFOLIO......................................9
PORTFOLIO MANAGEMENT.........................................................10
DESCRIPTION OF THE PORTFOLIOS................................................10
GENERAL.............................................................10
RISK FACTORS AND SPECIAL CONSIDERATIONS.............................11
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES.......................12
INVESTMENT POLICIES.................................................14
INVESTMENT RESTRICTIONS.............................................21
GENERAL MANAGEMENT OF THE PORTFOLIOS.........................................22
THE MONEY MANAGERS...........................................................24
EXPENSES OF THE PORTFOLIOS...................................................27
PORTFOLIO TRANSACTION POLICIES...............................................28
DIVIDENDS AND DISTRIBUTIONS..................................................28
TAXES........................................................................29
CALCULATION OF PORTFOLIO PERFORMANCE.........................................30
VALUATION OF PORTFOLIO SHARES................................................31
PURCHASE OF PORTFOLIO SHARES.................................................32
REDEMPTION OF PORTFOLIO SHARES...............................................34
ADDITIONAL INFORMATION.......................................................35
SERVICE PROVIDERS...................................................35
SIGNATURE GUARANTEES................................................36
ORGANIZATION, CAPITALIZATION AND VOTING.............................36
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS...................37
GLASS-STEAGALL ACT..................................................38
MONEY MANAGER PROFILES.......................................................38
INTERMEDIATE FIXED-INCOME PORTFOLIO.................................38
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO...........................39
MORTGAGE SECURITIES PORTFOLIO.......................................39
DESCRIPTION OF INDICES......................................................A-1
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX;........................A-1
LEHMAN BROTHERS GOVERNMENT/CORPORATE 1-5 YEAR INDEX;...............A-1
LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX...................A-1
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end management
investment company, known as a mutual fund. The Fund currently consists of eight
diversified investment portfolios, each with its own investment objective and
policies. This Prospectus pertains to the Fund's Intermediate Fixed-Income
Portfolio, Short-Intermediate Fixed-Income Portfolio, Mortgage Securities
Portfolio (collectively, the "Bond Portfolios") and the U.S. Government Money
Portfolio. See "DESCRIPTION OF THE PORTFOLIOS--General" and "--Investment
Objectives and Investment Policies."
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from investment policies
and strategies of other portfolios of the Fund. The investment objective and the
name of the investment management organization (individually, the "Money
Manager" and collectively, the "Money Managers") for each of the Portfolios are
described below:
. INTERMEDIATE FIXED-INCOME PORTFOLIO -- Smith Barney Capital Management --
seeks generation of current income by investing primarily in fixed-income
securities with durations of between three and ten years. Under normal
market conditions, the Portfolio will have a dollar weighted average
duration of not less than three years nor more than ten years.
. SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO -- Bankers Trust Company -- seeks
preservation of capital and generation of current income by investing
primarily in fixed-income securities with durations of between one and five
years. Under normal market conditions, the Portfolio will have a dollar
weighted average duration of not less than two years nor more than five
years.
. MORTGAGE SECURITIES PORTFOLIO -- BlackRock Financial Management, Inc. --
seeks generation of current income by investing primarily in
mortgage-related securities.
. U. S. GOVERNMENT MONEY PORTFOLIO -- Bennington Capital Management L.P. --
seeks maximum current income consistent with the preservation of principal
and liquidity by investing primarily in short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Management. Bennington Capital Management L.P., a Washington limited
partnership ("Bennington"), is the manager and administrator of the Fund
pursuant to its Management Agreement with the Fund. As such, Bennington provides
or oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. See "GENERAL MANAGEMENT
OF THE PORTFOLIOS."
Purchase and Redemption of Shares. Shares are purchased by shareholders
directly from and are redeemed by the Portfolios at net asset value next
determined after an order for purchase or redemption has been received, without
any sales or redemption charges. See "PURCHASE OF PORTFOLIO SHARES" and
"REDEMPTION OF PORTFOLIO SHARES."
Risk Factors and Special Considerations. The Fund is designed to provide
diverse opportunities in equity and debt securities. There can be no assurance
that the investment objective for any Portfolio will be achieved. See
"DESCRIPTION OF THE PORTFOLIOS--Risk Factors and Special Considerations."
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, involves risks that go beyond the usual risks
inherent in a mutual fund limiting its holdings to domestic investments. Certain
Portfolios also may be subject to certain risks in using investment techniques
and strategies such as entering into repurchase agreements and trading futures
contracts and options on futures contracts. DESCRIPTION OF THE
PORTFOLIOS--Investment Objectives and Investment Policies" and "Investment
Restrictions, Policies and Risk Considerations--Investment Restrictions" in the
Statement of Additional Information. With respect to the Intermediate
Fixed-Income and the Short-Intermediate Fixed Income Portfolios, Bennington or
a Money Manager may adopt a temporary defensive strategy under abnormal market
or economic conditions. During these times, one or more Portfolios may make
investments which result in the Portfolios' average dollar weighted duration
rising above their designated ranges. Such a strategy differs from other
defensive strategies in that it involves greater rather than less risk to the
Portfolios. See "DESCRIPTION OF THE PORTFOLIOS--Investment Objectives and
Investment Policies--Intermediate Fixed-Income Portfolio," and
"--Short-Intermediate Fixed-Income Portfolio."
Dividends and Distributions. Each Portfolio intends to distribute at least
annually to its shareholders substantially all of its net investment income and
its net realized long- and short-term capital gains. Dividends from the net
investment income of the U.S. Government Money Portfolio will be declared daily
and paid monthly. Dividends from the net investment income of the Bond
Portfolios will be declared and paid monthly. See "DIVIDENDS AND
DISTRIBUTIONS."
Taxation. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company for federal income tax purposes. As
such, the Fund anticipates that no Portfolio will be subject to federal income
tax on income and gains that are distributed to shareholders. See "TAXES."
Service Providers.
Bennington is the manager and administrator of the Fund, as described
above. Bennington provides or oversees the provision of all general management,
administration, investment advisory and portfolio management services for the
Fund. Bennington also provides transfer agent, registrar, dividend disbursing
agent, recordkeeping, administrative and compliance services to the Fund,
pursuant to its Transfer Agency and Administrative Agreement (the "Transfer
Agent Agreement") with the Fund.
PNC Bank, National Association, a national banking association ("PNC") and
an indirect, wholly-owned subsidiary of PNC Bank Corp., acts as custodian of the
Portfolios' assets. Through an agreement with Barclays Bank PLC, a company
organized and existing under the laws of England and Wales ("Barclays Bank"),
PNC and the Fund, Barclays Bank may employ sub-custodians outside the United
States which have been approved by the Fund's Board of Directors ("Board of
Directors").
PFPC Inc., a Delaware corporation ("PFPC"), and an indirect, wholly-owned
subsidiary of PNC Bank Corp. is the sub-administrator to the Fund. PFPC performs
accounting, recordkeeping, and other administrative services for the Fund.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"),
serves as custodian for investors with respect to accounts established under the
Fund's Individual Retirement Custodial Account Plan (the "IRA Accounts").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel. See
"ADDITIONAL INFORMATION--Service Providers."
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor should
expect to incur as a shareholder of each of the Portfolios based on projected
annual operating expenses.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
---------------------------------------------
Short-
Intermediate Intermediate U.S.
Fixed- Fixed- Mortgage Government
Income Income Securities Money
------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees(c) None None None None
____________
<FN>
(a) Shares of the Portfolios are expected to be sold primarily through
registered investment advisers, bank trust departments and financial
planners. See "GENERAL MANAGEMENT OF THE PORTFOLIOS--Distribution."
(b) An annual maintenance fee of $25.00 will be charged by the Transfer
Agent to each IRA Account with an aggregate balance of less than
$10,000 on December 31 of each year.
(c) The Transfer Agent charges a processing fee of $10.00 for each
redemption check requested by a shareholder. See "REDEMPTION OF PORTFOLIO
SHARES."
<PAGE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
--------------------------
(as a percentage of average
net assets) Short- U.S.
Intermediate Intermediate Mortgage Government
Fixed-Income Fixed-Income Securities Money
Portfolio Portfolio Portfolio Portfolio
----------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Management Fees (b) 0.51% 0.51% 0.59% 0.25%
12b-1 Fees(c) None None None None
Other Expenses 0.45% 0.46% 0.38% 0.52%
----- ----- ----- -----
Total Portfolio Operating Expenses 0.96% 0.97% 0.97% 0.77%
===== ===== ===== =====
------------------
<FN>
(a) The actual expense ratios for the fiscal year ended December 31, 1995, were
different from those shown in the table. The table data has been restated
to reflect fees and expenses expected to be incurred during the fiscal year
ended December 31, 1996, not actual expenses. For actual expenses incurred
during the fiscal year ended December 31, 1995, see "FINANCIAL HIGHLIGHTS."
(b) Management fees consist of the management fee paid to Bennington and the
Money Manager fee paid to each Portfolio's Money Manager. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS--Fund Manager Services and Fees" and "THE
MONEY MANAGERS--Money Manager Fees."
(c) The Fund's 12b-1 Plan provides for certain payments to be made to Qualified
Recipients that have rendered assistance in shareholder servicing or in the
distribution and/or retention of a Portfolio's shares and do not involve
payments out of the assets or income of the Portfolios. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS--Distribution Plan."
EXAMPLE: You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
<CAPTION>
Portfolios
Intermediate Short- U.S.
Fixed- Intermediate Mortgage Government
Income Fixed-Income Securities Money
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
One Year $ 10 $ 10 $ 10 $ 8
Three Years $ 31 $ 31 $ 31 $ 25
Five Years $ 53 $ 54 $ 54 $ 43
Ten Years $118 $119 $119 $ 95
</TABLE>
The example assumes Money Manager and other fees are paid at the rates
provided in the Annual Portfolio Operating Expenses table above. For a
discussion of certain management and Money Manager fees, see footnote (b) to
the Annual Portfolio Operating Expenses table.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Portfolios will bear directly
or indirectly. For a more complete description of the various costs and
expenses, see "EXPENSES OF THE PORTFOLIOS."
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods presented
below have been audited by Deloitte & Touche LLP, independent auditors, whose
report thereon was unqualified. This information should be read in conjunction
with the financial statements and notes thereto and auditors' reports that
appear in the Fund's Annual Reports to Shareholders for those periods. The
Annual Report to Shareholders for the year ended December 31, 1995, is
incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
Intermediate Fixed-Income Portfolio
Period
Year Year Year from
ended ended ended 6/16/92 to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $ 11.04 $ 12.34 $ 12.00 $ 12.00
-------- -------- -------- --------
Net Investment Income
After Bennington expense subsidy(1) 0.71 0.65 0.56 0.36
Before Bennington expense subsidy 0.71 0.64 0.52 0.30
Realized and Unrealized Gain (Loss) on 1.25 (1.28) 0.57 0.15
Investments ----- ------ ---- ----
Total from Investment Operations 1.96 (0.63) 1.13 0.51
----- ------ ---- ----
Dividends from Net Investment Income (0.71) (0.65) (0.56) (0.36)
Capital Gains Distributions 0.00 (0.02) (0.23) (0.15)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00
---- ---- ---- ----
Total Distributions (0.71) (0.67) (0.79) (0.51)
------ ------ ------ ------
Net Asset Value at End of Period $ 12.29 $ 11.04 $ 12.34 $ 12.00
========= ======== ======== ========
<PAGE>
Total Return(2) 18.26% (5.24%) 9.53% 4.26%
Net Assets, End of Period (000 Omitted) $36,878 $31,405 $26,642 $10,901
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 0.96% 1.24% 1.06% 0.85%*
Before Bennington expense subsidy 0.96% 1.28% 1.35% 1.50%*
Ratio of Net Investment
Income to Average Net Assets
After Bennington expense subsidy(1) 6.07% 5.65% 4.62% 5.33%*
Before Bennington expense subsidy 6.07% 5.61% 4.33% 4.68%*
Portfolio Turnover Rate(3) 187.62% 255.11% 265.06% 100.57%
<FN>
(1) During the fiscal period ended December 31, 1993, and for the period from
January 1, 1994 to February 28, 1994, Bennington subsidized operating
expenses other than Bennington's and the Money Managers' fees ("Other
Expenses") in excess of 0.54% of the average daily net assets of the
Intermediate Fixed-Income Portfolio. Effective March 1, 1994, Bennington
discontinued subsidizing Other Expenses of the Intermediate Fixed-Income
Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent charges
a processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES."
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1995,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
Short-Intermediate Fixed-Income Portfolio
Period
Year Year Year from
ended ended ended 5/18/92 to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 11.62 $ 12.29 $ 12.16 $ 12.00
-------- -------- -------- --------
Net Investment Income
After Bennington expense
subsidy(1) 0.60 0.50 0.46 0.33
Before Bennington expense
subsidy 0.60 0.49 0.45 0.29
Realized and Unrealized
Gain (Loss) on
Investments 0.70 (0.67) 0.22 0.16
-------- -------- -------- --------
Total from Investment
Operations 1.30 (0.17) 0.68 0.49
-------- -------- -------- --------
Dividends from Net Investment
Income (0.60) (0.50) (0.46) (0.33)
Capital Gains Distributions 0.00 0.00 (0.07) 0.00
Distributions in Excess of
Capital Gains 0.00 0.00 (0.02) 0.00
-------- -------- -------- --------
Total Distributions (0.60) (0.50) (0.55) (0.33)
-------- -------- -------- --------
Net Asset Value at End of Period $ 12.32 $ 11.62 $ 12.29 $ 12.16
======== ======== ======== ========
<PAGE>
Total Return(2) 11.42% (1.42%) 5.62% 4.12%
Net Assets, End of Period
(000 Omitted) $ 35,272 $ 32,233 $ 32,568 $ 13,365
Ratio of Expenses to Average
Net Assets
After Bennington expense subsidy(1) 0.94% 1.18% 1.05% 0.83%*
Before Bennington expense subsidy 0.94% 1.22% 1.12% 1.42%*
Ratio of Net Investment
Income to Average Net Assets
After Bennington expense subsidy(1) 4.99% 4.17% 3.78% 4.40%*
Before Bennington expense subsidy 4.99% 4.13% 3.71% 3.81%*
Portfolio Turnover Rate(3) 41.93% 36.54% 88.28% 107.26%
________________
<FN>
(1) During the fiscal period ended December 31, 1993, and for the period from
January 1, 1994 to February 28, 1994, Bennington subsidized Other Expenses
in excess of 0.54% of the average daily net assets of the
Short-Intermediate Fixed-Income Portfolio. Effective March 1, 1994,
Bennington discontinued subsidizing Other Expenses of the
Short-Intermediate Fixed-Income Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent charges
a processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES."
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods presented
below have been audited by Deloitte & Touche LLP, independent auditors, whose
report thereon was unqualified. This information should be read in conjunction
with the financial statements and notes thereto and auditors' reports that
appear in the Fund's Annual Reports to Shareholders for those periods. The
Annual Report to Shareholders for the year ended December 31, 1995, is
incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
Mortgage Securities Portfolio
Period
Year Year Year from
ended ended ended 5/18/92 to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $11.36 $12.17 $12.02 $12.00
Net Investment Income
After Bennington expense
subsidy(1) 0.76 0.60 0.55 0.34
Before Bennington expense
subsidy 0.76 0.60 0.53 0.30
Realized and Unrealized
Gain on Investments 1.02 (0.80) 0.31 0.13
------ ------ ------ ------
Total from Investment Operations 1.78 (0.20) 0.86 0.47
------ ------ ------ ------
Dividends from Net Investment
Income (0.76) (0.60) (0.55) (0.34)
Capital Gains Distributions 0.00 (0.01) (0.16) (0.03)
Distributions in Excess of
Capital Gains 0.00 0.00 0.00 (0.08)
------ ------ ------ ------
Total Distributions (0.76) (0.61) (0.71) (0.45)
------ ------ ------ ------
Net Asset Value at End of Period $12.38 $11.36 $12.17 $12.02
====== ====== ====== ======
<PAGE>
Total Return(2) 16.03% (1.65%) 7.26% 3.93%
Net Assets, End of Period
(000 Omitted) $ 49,830 $ 32,975 $ 29,731 $ 15,356
Ratio of Expenses to Average
Net Assets
After Bennington expense
subsidy(1) 1.03% 1.31% 1.03% 0.84%*
Before Bennington expense
subsidy 1.03% 1.35% 1.18% 1.40%*
Ratio of Net Investment
Income to Average Net Assets
After Bennington expense
subsidy(1) 6.41% 5.18% 4.55% 4.68%*
Before Bennington expense
subsidy 6.41% 5.14% 4.40% 4.12%*
Portfolio Turnover Rate (3) 422.56% 603.51% 399.19% 114.04%*
__________________________
<FN>
(1) During the fiscal period ended December 31, 1993 and for the period from
January 1, 1994 to February 28, 1994, Bennington subsidized Other Expenses
in excess of 0.54% of the average daily net assets of the Mortgage
Portfolio. Effective March 1, 1994, Bennington discontinued subsidizing
Other Expenses of the Mortgage Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent will
charge a processing fee of $10.00 for redemptions made by check, which are
not reflected in the total return. See "REDEMPTION OF PORTFOLIO SHARES."
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
* Annualized.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1995,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 29, 1996.
<TABLE>
<CAPTION>
U.S. Government Money Portfolio
Period
Year Year Year from
ended ended (1) ended 4/9/92 to
12/31/95 12/31/94 12/31/93 12/31/92
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value at
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- --------
Net Investment Income
After Bennington expense
subsidy(2) 0.05 0.04 0.03 0.02
Before Bennington expense
subsidy 0.05 0.03 0.03 0.02
Realized and Unrealized Gain
on Investments 0.00 0.00 0.00 0.00
------- ------- ------- --------
Total from Investment Operations 0.05 0.04 0.03 0.02
------- ------- ------- --------
Dividends from Net Investment
Income (0.05) (0.04) (0.03) (0.02)
Capital Gains Distributions 0.00 0.00 0.00 0.00
Distributions in Excess of
Capital Gains 0.00 0.00 0.00 0.00
------- ------- ------- --------
Total Distributions (0.05) (0.04) (0.03) (0.02)
------- ------- ------- --------
Net Asset Value at End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ========
<PAGE>
Total Return(3) 5.33% 3.70% 2.81% 2.40%
Net Assets, End of Period
(000 Omitted) $41,882 $12,008 $26,693 $ 51,145
Ratio of Expenses to Average
Net Assets
After Bennington expense subsidy(2) 0.53%* 0.45% 0.45% 0.32%*
Before Bennington expense subsidy 0.78%* 1.27% 0.77% 0.39%*
Ratio of Net Investment Income to
Average Net
Assets
After Bennington expense
subsidy(2) 5.14%* 3.51% 2.71% 3.25%*
Before Bennington expense
subsidy 4.89%* 2.69% 2.39% 3.18%*
Portfolio Turnover Rate -- -- -- --
________________
<FN>
(1) For the period January 1, 1994, through September 6, 1994, State Street
Bank and Trust Company ("State Street") was the Money Manager for the U.S.
Government Money Portfolio pursuant to a Money Manager Agreement among the
Fund, Bennington and State Street. Effective September 7, 1994, the Money
Manager Agreement with State Street was terminated. Bennington has invested
the total assets of the U.S. Government Money Portfolio since September 7,
1994.
(2) During the fiscal periods ended December 31, 1993, and December 31, 1994,
Bennington subsidized Other Expenses above 0.20% of the average daily net
assets for the U.S. Government Money Portfolio. For the period from January
1, 1995, to September 15, 1995, Bennington subsidized Other Expenses for
the U. S. Government Money Portfolio. Effective September 15, 1995,
Bennington discontinued subsidizing Other Expenses for the U.S. Government
Money Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset value
per share on the first day and a sale at net asset value per share on the
last day of each period reported. Distributions are assumed, for purposes
of this calculation, to be reinvested at the net asset value per share on
the respective payment dates of each Portfolio. The Transfer Agent charges
a processing fee of $10.00 for each redemption check requested by a
shareholder, which is not reflected in the total return. See "REDEMPTION OF
PORTFOLIO SHARES."
* Annualized.
</TABLE>
<PAGE>
PORTFOLIO MANAGEMENT
Bennington is responsible for evaluating, selecting, and recommending Money
Managers needed to manage all or part of the assets of the Portfolios.
Bennington is also responsible for allocating the assets within a Portfolio
among any Money Managers selected. Pursuant to the Investment Company Act of
1940, as amended (the "Investment Company Act"), Money Managers may be added by
Bennington only with the approval of the shareholders of the applicable
Portfolio. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance. Bennington may terminate a Money Manager at any time,
subject to approval by the Board of Directors and prompt notification of the
applicable Portfolio's shareholders. Bennington is responsible for the selection
of individual portfolio securities for all of the assets of the U.S. Government
Money Portfolio. A separate Money Manager currently manages the assets of each
other Portfolio. See "MONEY MANAGER PROFILES" and "THE MONEY MANAGERS."
Although Bennington's activities are subject to general oversight by the
Board of Directors and the officers of the Fund, neither the Board nor the
officers evaluate the investment merits of Bennington's or any Money Manager's
individual security selections. The Board of Directors will review regularly the
Portfolios' performance compared to the applicable indices and also will review
the Portfolios' compliance with their investment objectives and policies.
While the investment professionals of Bennington have experience in asset
management and the selection of investment advisers, prior to the commencement
of investment operations of the Fund in April 1992, they did not have previous
experience in providing investment advisory services to an investment company.
See "GENERAL MANAGEMENT OF THE PORTFOLIOS."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as a
multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. This Prospectus
covers the four fixed-income Portfolios of the Fund. The Fund's other four
portfolios, which are designed for investment in equity securities, are offered
through a separate prospectus. Each Portfolio's assets are invested by
Bennington and/or a Money Manager that has been analyzed, evaluated and
recommended by Bennington. Bennington also operates and administers the Fund and
monitors the performance of the Money Managers. Each Portfolio's investment
objective and investment restrictions are "fundamental" and may be changed only
with the approval of the holders of a majority of the outstanding voting
securities of that Portfolio, as defined in the Investment Company Act. Other
policies reflect current practices of the Portfolios, and may be changed by the
Portfolios without the approval of shareholders. This section of the Prospectus
describes each Portfolio's investment objective, policies and restrictions. A
more detailed discussion appears in the Statement of Additional Information and
includes a list of the Portfolios' investment restrictions.
Under normal circumstances, each Portfolio will invest at least 65% and
generally more than 80% of its total assets in the types of securities
identified in its statement of objective as principal investments. Bennington
will attempt to have each Portfolio (other than the U.S. Government Money
Portfolio) managed so that the Portfolio's investment performance equals or
exceeds the total return performance of a relevant index. See Appendix A for a
description of the current indices. Each Portfolio (other than the U.S.
Government Money Portfolio) may have up to 20% of its total assets invested in
money market instruments to provide liquidity. If, in the opinion of Bennington
or a Money Manager, market or economic conditions warrant, the Portfolio may
adopt a temporary defensive strategy. In that event, the Portfolio may hold
assets as cash reserves without limit. See "Investment Policies--Liquidity
Reserves." Also, under these economic or market conditions, the Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio may deviate
from their designated average dollar weighted duration ranges. "Investment
Objectives and Investment Policies--Intermediate Fixed-Income Portfolio," and
"--Short-Intermediate Fixed-Income Portfolio." There can be no assurance that
the investment objective for any Portfolio will be realized.
No Portfolio will invest in fixed-income securities, including convertible
securities, rated less than A by Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"), or in unrated securities judged by
Bennington or a Money Manager to be of a lesser credit quality than those
designations. The Portfolios will sell securities which they have purchased in
A prudent and orderly fashion when ratings drop below these minimum ratings. See
Appendix A in the Statement of Additional Information for a description of
securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity and debt
securities. No assurance can be given that the Portfolios will achieve their
investment objectives.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. See "Investment Policies--Risks of Investing
in Foreign Securities." Certain Portfolios also may be subject to certain risks
in using investment techniques and strategies such as entering into repurchase
agreements and trading futures contracts and options on futures contracts. See
"DESCRIPTION OF THE PORTFOLIOS--Investment Policies." The use of options and
futures by a Portfolio entails certain risks, including the risk that to the
extent the Money Manager's views as to certain market movements are incorrect,
the use of such instruments could result in losses greater than if they had not
been used. Such instruments may also force sales or purchases of Portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount the Portfolio could realize on its investments or cause the
Portfolio to hold a security it might otherwise sell. Also, when used for
hedging existing positions, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Portfolio could create the possibility that losses on the
hedging instrument will be greater than gains in the value of the Portfolio's
position, thereby reducing the Portfolio's net asset value. In addition, the
Bond Portfolios will invest in U.S. Government stripped mortgage-related
securities which, due to changes in interest rates, may be more speculative and
subject to greater fluctuations in value than securities that pay interest
currently. See "DESCRIPTION OF THE PORTFOLIOS--Investment Policies" and
"Investment Restrictions, Policies and Risk Considerations--Investment
Restrictions" in the Statement of Additional Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Managers may increase a Portfolio's portfolio
turnover rate, realization of gains or losses, and brokerage commissions. High
portfolio turnover may involve correspondingly greater brokerage commissions and
transaction costs, which will be borne by the Portfolios and may result in
increased short-term capital gains which, when distributed to shareholders, are
treated as ordinary income. See "PORTFOLIO TRANSACTION POLICIES" and "TAXES."
Mr. J. Anthony Whatley, III controls the managing partner of Bennington.
Mr. Whatley has had approximately 20 years of experience in the securities
industry, principally in the areas of sales and marketing of mutual fund
products, and in the direct investment of portfolio assets for an investment
company since the commencement of investment operations of the Fund in April
1992. Bennington and its managing partner were organized in 1991 for the purpose
of advising the Fund. See "GENERAL MANAGEMENT OF THE PORTFOLIOS" for a
description of the responsibilities of Bennington.
With respect to the Intermediate Fixed-Income and Short-Intermediate
Fixed-Income Portfolios, Bennington or a Money Manager may adopt a temporary
defensive strategy under abnormal market or economic conditions. During these
times, one or more Portfolios may make investments which result in the
Portfolios' average dollar weighted duration rising above their designated
ranges. Such a strategy differs from other defensive strategies in that it
involves greater rather than less risk to the Portfolios. See "Investment
Objectives and Investment Policies --Intermediate Fixed-Income Portfolio," and
"--Short-Intermediate Fixed-Income Portfolio."
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot be
changed without the approval of the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Statement of Additional
Information. The other investment policies and practices of each Portfolio,
unless otherwise noted, are not fundamental and may therefore be changed by a
vote of the Board of Directors without shareholder approval.
The INTERMEDIATE FIXED-INCOME PORTFOLIO seeks generation of current income
by investing primarily in fixed-income securities with durations of between
three and ten years and a dollar weighted average portfolio duration that does
not vary more or less than 20% from that of the Lehman Brothers
Government/Corporate Index or another relevant index approved by the Board of
Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of between three and ten years. The Portfolio invests principally in
bonds, debentures and other fixed-income securities with durations of between
three and ten years, including: obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; U.S. dollar-denominated corporate
debt securities of domestic or foreign issuers; mortgage- and other asset-backed
securities including stripped mortgage-backed securities; variable and floating
rate debt securities; U.S. dollar-denominated obligations of foreign governments
and foreign governmental agencies; and convertible securities. See "Investment
Policies--Risks of Investing in Foreign Securities."
Investment selections will be based on fundamental economic, market and
other factors leading to variation by sector, maturity, quality and such other
criteria as are appropriate to meet the stated objectives. Bennington and/or the
Money Manager will attempt to equal or exceed the total return performance of
the Lehman Brothers Government/Corporate Index (the "LBGC Index"). In approving
the LBGC Index, the Board of Directors took into consideration the substantial
similarity between the securities expected to be held by the Portfolio and the
LBGC Index securities with respect to the following factors, among others: the
duration, credit ratings and volatility risk. The Portfolio may utilize options
on U.S. Government securities, interest rate futures contracts and options on
interest rate futures contracts to reduce certain risks of its investments and
to attempt to enhance income, but not for speculation. See "Investment
Policies--Options" and "--Futures Contracts."
The SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO seeks preservation of capital
and generation of current income by investing primarily in fixed-income
securities with durations of between one and five years and a dollar weighted
average portfolio duration that does not vary more or less than 20% from that of
the Lehman Brothers 1-5 Year Government/Corporate Index or another relevant
index approved by the Board of Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of not less than two years nor more than five years.
The Portfolio invests principally in fixed-income securities of the type
permitted for investment by the Intermediate Fixed-Income Portfolio but with a
shorter dollar weighted average portfolio duration. Bennington and/or the Money
Manager will attempt to equal or exceed the total return performance of the
Lehman Brothers Government/Corporate 1-5 Year Index (the "LBGC5 Index"). In
approving the LBGC5 Index, the Board of Directors took into consideration the
substantial similarities between the securities expected to be held by the
Portfolio and the LBGC5 Index securities, among others: the duration, credit
ratings and volatility risk. The Portfolio may utilize options on U.S.
Government securities, interest rate futures contracts and options on interest
rate futures contracts to reduce certain risks of its investments and to attempt
to enhance income, but not for speculation. See "Investment Policies--Options"
and "--Futures Contracts."
The MORTGAGE SECURITIES PORTFOLIO seeks generation of current income by
investing primarily in mortgage-related securities with an aggregate dollar
weighted average portfolio duration that does not vary outside of a band of plus
or minus 20% from that of the Lehman Brothers Mortgage-Backed Securities Index
(the "LBM Index") or another relevant index approved by the Board of Directors.
The market value of these securities can and will fluctuate as interest
rates and market conditions change. Fixed-rate mortgages decline in value during
periods of rising interest rates. Adjustable rate mortgage securities allow the
Portfolio to participate in increases in interest rates through periodic
adjustments in the coupons of the underlying mortgages. See "Investment
Policies--Mortgage-Related Securities." Under normal market conditions, the
Portfolio seeks to achieve this objective by investing at least 65% and
generally more than 80% of its total assets in mortgage related securities, and
the Portfolio's principal investments will be mortgage-related securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. Up to
50% of the Portfolio's net assets may be invested in collateralized mortgage
obligations ("CMOs"), real estate mortgage investment conduits ("REMICs") or
asset-backed securities. See "Investment Policies--Asset-Backed Securities" and
"--Risks of Investing in Asset-Backed and Mortgage-Related Securities" in this
Prospectus and "Investment Restrictions, Policies and Risk
Considerations--Investment Policies--Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs")" in the
Statement of Additional Information. Bennington and/or the Money Manager will
attempt to equal or exceed the total return performance of the LBM Index. In
approving the LBM Index, the Board of Directors took into consideration factors
such as the substantial similarity between the securities expected to be held by
the Portfolio and those in the LBM Index and that the index would have a risk
level appropriate to the objective of this Portfolio. The Portfolio also may
utilize options on U.S. Government securities, interest rate futures and options
thereon for hedging purposes and to attempt to enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures Contracts."
The U.S. GOVERNMENT MONEY PORTFOLIO seeks maximum current income consistent
with the preservation of principal and liquidity by investing primarily in
short-term obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. See "Investment Policies--U.S. Government Securities."
The dollar weighted average portfolio maturity of the Portfolio will not
exceed 90 days. Under normal market conditions, the Portfolio seeks to achieve
this objective by investing at least 65% and generally more than 80% of a
Portfolio's total assets in fixed-income securities. The Portfolio limits its
Portfolio investments to those which mature in 13 months or less from the date
of purchase, present minimal credit risks and are of "eligible quality" as
determined by the Portfolio's manager under the supervision of the Board of
Directors. See "Investment Policies--Money Market Instruments." The Portfolio
may enter into repurchase agreements collateralized by U.S. Government
securities. See "Investment Policies--Repurchase Agreements." While the U.S.
Government Money Portfolio intends to maintain its net asset value at $1.00 per
share, an investment in this Portfolio is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share. See "VALUATION OF
PORTFOLIO SHARES."
Investment Policies
Duration. Duration is used by Bennington and/or the Money Manager of the
Bond Portfolios in security selection. Duration, which is one of the fundamental
tools used by Money Managers in security selection, is a measure of the price
sensitivity of a security or a portfolio to relative changes in interest rates.
For instance, a duration of "one" means that a portfolio's or security's price
would be expected to change by approximately one percent with a one percent
change in interest rates. Assumptions generally accepted by the industry
concerning the probability of early payment and other factors may be used in the
calculation of duration for debt securities that contain put or call provisions,
sometimes resulting in a duration different from the stated maturity of the
security.
With respect to certain mortgage-backed securities, duration is likely to
be substantially less than the stated maturity of the mortgages in the
underlying pools. The maturity of a security measures only the time until final
payment is due and, in the case of a mortgage-backed security, does not take
into account the factors included in duration. Under normal market conditions
(in the opinion of Bennington or the Money Manager of the applicable Portfolio),
the average dollar-weighted maturity of the Intermediate Fixed-Income Portfolio
will be between three and 10 years and the average dollar-weighted maturity of
the Short-Intermediate Fixed-Income Portfolio will be between two and five
years.
A Portfolio's duration directly impacts the degree to which asset values
fluctuate with changes in interest rates. For every one percent change in
interest rate, a Portfolio's net asset value is expected to change inversely by
approximately one percent for each year of duration. For example, a one percent
increase in interest rate would be expected to cause a fixed-income portfolio
with an average dollar weighted duration of five years, to decrease in value by
approximately five percent (one percent interest rate increase multiplied by the
five year duration). Since the Portfolios' objective is to provide high current
income, the Portfolios will invest in obligations with an emphasis on income
rather than stability of the Portfolios' net asset value.
If, in the opinion of Bennington and/or the Money Manager, market or
economic conditions warrant, these Portfolios may adopt a temporary defensive
strategy. During these times, the average dollar weighted duration of the
Intermediate Fixed-Income Portfolio may fall below three years, or rise to as
high as fifteen years and the Short-Intermediate Fixed-Income Portfolio may fall
below one year, or rise to as high as fifteen years. In such event, the
Portfolios will be subject to greater or less risk depending on whether average
dollar weighted duration is increased or decreased. At any time that these
Portfolios' average dollar weighted duration is increased, the Portfolios are
subject to greater risk, since at higher durations a Portfolio's asset value is
more significantly impacted by changes in prevailing interest rates than at
lower durations. Likewise, when the Portfolio's average dollar weighted duration
is decreased, the Portfolio is subject to less risk, since at lower durations a
Portfolio's asset value is less significantly impacted by changes in prevailing
interest rates than at higher durations. When Bennington and/or the Money
Manager determines that a temporary defensive strategy is no longer needed,
investments will be reallocated to return the Portfolios to their designated
average dollar weighted duration. Such reallocations are not expected to be
sudden, but will be made gradually over time.
Liquidity Reserves. Each Portfolio (other than the U.S. Government Money
Portfolio) is authorized to invest its cash reserves (funds awaiting investment
in the specific types of securities to be acquired by a Portfolio or cash to
provide for payment of the Portfolio's expenses or to permit the Portfolio to
meet redemption requests) in money market instruments and in debt securities
which are at least comparable in quality to the Portfolio's permitted
investments. Under normal circumstances, no more than 20% of a Portfolio's net
assets will be comprised of these instruments. The Portfolios (other than the
U.S. Government Money Portfolio) also may enter into financial futures
contracts in accordance with their investment objectives to minimize the
impact of cash balances. "GENERAL MANAGEMENT OF THE PORTFOLIOS" and
"Investment Policies--Liquidity Reserves" in the Statement of Additional
Information.
Money Market Instruments. Each Portfolio (other than the U. S. Government
Money Portfolio) may invest up to 20% of its net assets in:
(i) Obligations (including certificates of deposit and bankers'
acceptances) of (a) banks organized under the laws of the United States or
any state thereof (including foreign branches of such banks) or (b) U.S.
branches of foreign banks or (c) foreign banks and foreign branches
thereof; provided that such banks have, at the time of acquisition by the
Portfolio of such obligations, total assets of not less than $1 billion or
its equivalent. The term "certificates of deposit" includes both Eurodollar
certificates of deposit, for which there is generally a market, and
Eurodollar time deposits, for which there is generally not a market.
"Eurodollars" are dollars deposited in banks outside the United States; the
Portfolios may invest in Eurodollar instruments of foreign and domestic
banks; and
(ii) Commercial paper, variable amount demand master notes, bills,
notes and other obligations issued by a U.S. company, a foreign company or
a foreign government, its agencies or instrumentalities, maturing in 13
months or less, denominated in U.S. dollars, and of "eligible quality" as
described below. If such obligations are guaranteed or supported by a
letter of credit issued by a bank, such bank (including a foreign bank)
must meet the requirements set forth in paragraph (i) above. If such
obligations are guaranteed or insured by an insurance company or other
non-bank entity, such insurance company or other non-bank entity must
represent a credit of high quality, as determined by the Portfolio's Money
Manager under the supervision of Bennington and the Board of Directors.
"Eligible quality," for this purpose, means (i) a security rated (or issued
by an issuer that is rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security) in the highest short-term rating category (e.g.,
A-1/P-1) or one of the two highest long-term rating categories (e.g., AAA/Aaa or
AA/Aa) by at least two major rating agencies assigning a rating to the security
or issuer (or, if only one agency assigned a rating, that agency) or (ii) an
unrated security deemed of comparable quality by the Portfolio's Money Manager
or Bennington under the general supervision of the Board of Directors. The
purchase by the Portfolio of a security of eligible quality that is rated by
only one rating agency or is unrated must be approved or ratified by the Board
of Directors.
In selecting commercial paper and other corporate obligations for
investment by a Portfolio, the Money Manager also considers information
concerning the financial history and condition of the issuer and its revenue and
expense prospects. Bennington monitors, and the Board of Directors reviews on
A quarterly basis, the credit quality of securities purchased for the Portfolio.
If commercial paper or another corporate obligation held by a Portfolio is
assigned a lower rating or ceases to be rated, the Money Manager under the
supervision of Bennington and the Board of Directors will promptly reassess
whether that security presents minimal credit risks and whether the Portfolio
should continue to hold the security in its portfolio. If a portfolio security
no longer presents minimal credit risks or is in default, the Portfolio will
dispose of the security as soon as reasonably practicable unless Bennington and
the Board of Directors determine that to do so is not in the best interests of
the Portfolio and its shareholders. Variable amount demand master notes with
demand periods of greater than seven days will be deemed to be liquid only if
they are determined to be so in compliance with procedures approved by the Board
of Directors.
U.S. Government Securities. Each Portfolio (including, in particular, the
U. S. Government Money Portfolio) may invest in United States Treasury
securities, including bills, notes, bonds and other debt securities issued by
the United States Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and their issue dates.
The Portfolios may invest in securities issued by agencies or
instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
Obligations of the Government National Mortgage Association ("GNMA"), the
Farmers Home Administration and the Export-Import Bank are backed by the full
faith and credit of the United States. Securities in which the Portfolios may
invest that are not backed by the full faith and credit of the United States
include obligations issued by (i) the Tennessee Valley Authority, the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service (each of these
issuers has the right to borrow from the United States Treasury to meet its
obligations) and (ii) the Federal Farm Credit Bank and the Federal Home Loan
Bank (each of these issuers may rely only on the individual credit of the
issuing agency to satisfy its obligations). No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the U. S.
Government may be acquired by a Portfolio in the form of custodial receipts that
evidence ownership of future interest payments, principal payments or both on
certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
The U. S. Government Money Portfolio utilizes the amortized cost method of
valuation in accordance with regulations issued by the SEC. See "VALUATION OF
PORTFOLIO SHARES--Valuation of Portfolio Securities." Accordingly, the U. S.
Government Money Portfolio will limit its Portfolio investments to those
instruments with a maturity of 397 days or less, and which are issued by the
U.S. Government, its agencies and instrumentalities.
Types of Corporate Obligations. Debt obligations of corporations in which
the Portfolios may invest include (i) corporate debt securities, including
bonds, debentures, and notes; (ii) commercial paper (including variable-amount
master demand notes); (iii) repurchase agreements involving investment-grade
debt obligations; and (iv) convertible securities-debt obligations of
corporations convertible into or exchangeable for equity securities.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements
with a bank or broker-dealer that agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified time (ordinarily a week or
less). If the party agreeing to repurchase should default and if the value of
the securities held by the Portfolio should fall below the repurchase price, the
Portfolio could incur a loss. Subject to the limitation on investing no more
than 15% of a Portfolio's net assets in illiquid securities, no Portfolio will
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days; provided, however, the
U.S. Government Money Portfolio will not invest more than 10% of its net assets
in illiquid securities (including repurchase agreements maturing in more than
seven days). See "Investment Policies--Illiquid Securities."
Repurchase agreements will at all times be fully collateralized by U.S.
Government obligations or other collateral in an amount at least equal to the
repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's custodian, either
physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the other
party to the repurchase agreement becomes bankrupt or otherwise fails to deliver
the securities.
A Portfolio will enter into repurchase transactions only with parties who
meet creditworthiness standards approved by the Board of Directors. Bennington
or the Money Managers monitor the creditworthiness of such parties under the
general supervision of the Board of Directors. See "Investment
Policies--Repurchase Agreements" in the Statement of Additional Information.
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio's entry into
reverse repurchase agreements and dollar rolls (except the U.S. Government Money
Portfolio), together with its other borrowings, is limited to 5% of its net
assets. See "Investment Policies--Reverse Repurchase Agreements and Dollar
Rolls" in the Statement of Additional Information.
Rights and Warrants. Each Portfolio (except the U.S. Government Money
Portfolio) may acquire up to 5% of its net assets in rights and warrants in
securities of issuers that meet the Portfolio's investment objective and
policies. See "Investment Restrictions" and "Investment Policies--Rights and
Warrants" in the Statement of Additional Information.
Privately-Issued STRIP Securities. The Portfolios may invest in
privately-issued STRIP securities, provided, however, that no Portfolio will
invest more than 5% of its net assets in such privately-issued STRIP securities.
See "Investment Policies--Privately-Issued STRIP Securities" in the Statement of
Additional Information.
Mortgage-Related Securities. The Bond Portfolios may invest in
mortgage-related securities. Mortgage loans made by banks, savings and loan
institutions and other lenders are often assembled into pools, the interests in
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Interests in such pools are called "mortgage-related
securities" or "mortgage-backed securities."
Most mortgage-related securities are pass-through securities, which means
that they provide investors with payments consisting of both principal and
interest as mortgages in the underlying mortgage pool are paid off by the
borrower. The dominant issuers or guarantors of mortgage-related securities
today are GNMA, FNMA and FHLMC. GNMA creates mortgage-related securities from
pools of Government-guaranteed or insured (Federal Housing Authority or Veterans
Administration) mortgages originated by mortgage bankers, commercial banks and
savings and loan associations. FNMA and FHLMC issue mortgage-related securities
from pools of conventional and federally insured or guaranteed residential
mortgages obtained from various entities, including savings and loan
associations, savings banks, commercial banks, credit unions and mortgage
bankers.
The mortgage-related securities either issued or guaranteed by GNMA, FHLMC
or FNMA ("Certificates") are called pass-through Certificates because a pro rata
share of both regular interest and principal payments (less GNMA's, FHLMC's or
FNMA's fees and any applicable loan servicing fees), as well as unscheduled
early prepayments on the underlying mortgage pool, are passed through monthly to
the holder of the Certificate (i.e., the Portfolio). The principal and interest
on GNMA securities are guaranteed by GNMA and backed by the full faith and
credit of the U.S. Government. FNMA guarantees full and timely payment of all
interest and principal, while FHLMC guarantees timely payment of interest and
ultimate collection of principal. Mortgage-related securities from FNMA and
FHLMC are not backed by the full faith and credit of the United States; however,
in the Fund's opinion, their close relationship with the U.S. Government makes
them high quality securities with minimal credit risks. The yields provided by
these mortgage-related securities have historically exceeded the yields on other
types of U.S. Government securities with comparable maturities; however, these
securities generally have the potential for greater fluctuations in yields as
their prices will not generally fluctuate as much as more traditional fixed-rate
debt securities.
The Bond Portfolios may invest in pass-through mortgage-related securities,
such as fixed-rate mortgage-related securities ("FRMs") and adjustable rate
mortgage-related securities ("ARMs"), which are collateralized by fixed rate
mortgages and adjustable rate mortgages, respectively. ARMs have a specified
maturity date and amortize principal much in the fashion of a fixed-rate
mortgage. As a result, in periods of declining interest rates there is a
reasonable likelihood that ARMs will behave like FRMs in that current levels of
prepayments of principal on the underlying mortgages could accelerate. One
difference between ARMs and FRMs is that, for certain types of ARMs, the rate of
amortization of principal, as well as interest payments, can and does change in
accordance with movements in a particular, pre-specified, published interest
rate index. The amount of interest due to an ARM security holder is calculated
by adding a specified additional amount, the "margin," to the index, subject to
limitations or "caps" on the maximum and minimum interest that is charged to the
mortgagor during the life of the mortgage or to maximum and minimum changes to
that interest rate during a given period.
In addition to GNMA, FNMA or FHLMC Certificates, through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the Certificate, the Bond Portfolios also may invest in pass-through
mortgage-related securities where all interest payments go to one class of
holders ("Interest Only Securities" or "IOs") and all principal payments go to
a second class of holders ("Principal Only Securities" or "POs"). These
securities are commonly referred to as mortgage-backed security strips or MBS
strips. Stripped mortgage-related securities have greater market volatility
than other types of mortgage-related securities in which the Bond Portfolios
may invest. The yields to maturity on IOs and POs are sensitive to the rate
of principal payments (including prepayments) on the related underlying
mortgage assets and principal payments may have a material effect on yield to
maturity. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Portfolio may not fully recoup
its initial investment in IOs. Conversely, if the underlying mortgage
assets experience less than anticipated prepayments of principal, the
yield on POs could be materially adversely affected. The Bond
Portfolios will treat IOs and POs as illiquid securities except for
(i) IOs and POs issued by U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by Bennington and the Money Managers for these Portfolios subject to the
supervision of the Board of Directors or (ii) where such securities can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share. See
"Investment Policies--Illiquid Securities."
Asset-Backed Securities. Each Portfolio (other than the U. S. Government
Money Portfolio) may invest in asset-backed securities offered through trusts
and special purpose subsidiaries in which various types of assets, primarily
home equity loans and automobile and credit card receivables, are securitized in
pass-through structures, which means that they provide investors with payments
consisting of both principal and interest as the loans in the underlying asset
pool are paid off by the borrowers. The Bond Portfolios may invest in these and
other types of asset-backed securities which may be developed in the future.
Risks of Investing in Asset-Backed and Mortgage-Related Securities. The
yield characteristics of mortgage-related securities (including CMOs and REMICs)
and asset-backed securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if a Portfolio purchases such a security at a premium,
a prepayment rate that is faster than expected will reduce yield to maturity,
while a prepayment rate that is slower than expected will have the opposite
effect of increasing yield to maturity. Alternatively, if the Portfolio
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Although the extent of prepayments in a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed-rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Portfolio are likely to be greater during a
period of declining interest rates and, as a result, likely to be reinvested at
lower interest rates than during a period of rising interest rates. Asset-backed
securities, although less likely to experience the same prepayment rates as
mortgage-related securities, may respond to certain of the same factors
influencing prepayments, while at other times different factors will
predominate. Mortgage-related securities and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
the risk of prepayment.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, because asset-backed securities do not usually have
the type of security interest in the related collateral that mortgage-related
securities have. For example, credit card receivables generally are unsecured
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, some of which may reduce a creditor's ability to realize
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
Municipal Securities. The Portfolios may invest up to 5% of their net
assets in fixed-income securities issued by states, counties and other local
governmental jurisdictions, including agencies of such governmental
jurisdictions, within the United States. See "Investment Policies--Municipal
Securities" in the Statement of Additional Information.
Lending of Portfolio Securities. Each Portfolio may lend portfolio
securities with a value of up to 10% of its total assets. Such loans may be
terminated at any time. The Portfolio will receive cash, U.S. Government or U.S.
Government agency securities as collateral in an amount equal to at least 100%
of the current market value of the loaned securities plus accrued interest. Cash
collateral received by the Portfolio will be invested in short-term debt
securities. A loan may be terminated by the borrower on one business day's
notice or by the Portfolio at any time. As with any extensions of credit, there
are risks of delay in recovery and in some cases loss of right in the collateral
should the borrower of the securities fail financially. See "Investment
Policies--Lending of Portfolio Securities" in the Statement of Additional
Information.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities; provided, however, the U.S. Government Money
Portfolio will not invest more than 10% of its net assets in illiquid
securities. Securities which are illiquid include repurchase agreements of more
than seven days duration, securities which lack a readily available market or
have legal or contractual restrictions on resale, certain IO/PO strips and
over-the-counter ("OTC") options. Restricted securities issued pursuant to Rule
144A under the Securities Act of 1933, as amended, that have a readily available
market are not deemed illiquid for purposes of this limitation, pursuant to
liquidity procedures that have been adopted by the Board of Directors. Investing
in Rule 144A securities could result in increasing the level of a Portfolio's
illiquidity if qualified institutional buyers become, for a time, uninterested
in purchasing these securities. Each Money Manager will monitor the liquidity of
such restricted securities under the supervision of Bennington and the Board of
Directors. See "Investment Policies--Illiquid Securities" in the Statement of
Additional Information.
Options. Each Portfolio (other than the U.S. Government Money Portfolio)
may purchase put and call options and may write (sell) "covered" put and
"covered" call options. The Bond Portfolios may purchase and write options on
U.S. Government securities. The Bond Portfolios may write covered put and call
options to generate additional income through the receipt of premiums, may
purchase put options in an effort to protect the value of securities in their
portfolios against a decline in market value and purchase call options in an
effort to protect against an increase in the price of securities they intend to
purchase. All options on U.S. Government securities purchased or sold by the
Bond Portfolios will be traded on U.S. securities exchanges or will result from
separate, privately negotiated transactions with a primary government securities
dealer recognized by the Board of Governors of the Federal Reserve System.
OTC options are privately negotiated with the counterparty to such contract
and are purchased from and sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Portfolios. If
the counterparty fails to take delivery of the securities underlying an option
it has written, the Portfolios would lose the premium paid for the option as
well as any anticipated benefit of the transaction. Consequently, the Portfolios
must rely on the credit quality of the counterparty. The staff of the SEC has
taken the position that purchased OTC options and the assets used as cover for
written OTC options are illiquid securities subject to the 15% limitation
described above in "Illiquid Securities." Options on currencies are similar to
options on stocks except that there is no transfer of a security and settlement
is in cash.
A call option is a contract whereby a purchaser pays a premium in exchange
for the right to buy the security on which the option is written at a specified
price during the term of the option. A written call option is "covered" if the
Portfolio owns the optioned securities or the Portfolio maintains in a
segregated account with the Fund's custodian, cash, U.S. Government securities
or other liquid high-grade debt obligations with a value sufficient to meet its
obligations under the call option, or if the Portfolio owns an offsetting call
option. When a Portfolio writes a call option, it receives a premium and gives
the purchaser the right to buy the underlying security at any time during the
call period, at a fixed exercise price regardless of market price changes during
the call period. If the call is exercised, the Portfolio forgoes any gain from
an increase in the market price of the underlying security over the exercise
price.
The purchaser of a put option pays a premium and receives the right to sell
the underlying security at a specified price during the term of the option. The
writer of a put option, receives a premium and in return, has the obligation,
upon exercise of the option, to acquire the securities underlying the option at
the exercise price. A written put option is "covered" if a Portfolio deposits
with the Fund's custodian, cash, U.S. Government securities or other liquid
high-grade debt obligations with a value at least equal to the exercise price of
the put option.
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and the assets used as cover for written OTC
options. The SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities subject to
the 15% limitation described above in "Illiquid Securities." The U.S. Government
Money Portfolio will not invest more than 10% of its net assets in illiquid
securities. Furthermore, a Portfolio will not purchase or write put or call
options on securities or financial futures if the aggregate premiums paid on all
such options exceed 20% of the Portfolio's total net assets, subject to the
foregoing limitations.
When a Portfolio writes either a put or call option, the Portfolio is
required to deposit an initial margin with the Fund's custodian for the benefit
of the options broker. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its option commitment. When the Portfolio writes
options and an adverse price movement occurs, the Portfolio may be called upon
to deposit an additional or variation margin. Both the initial and additional or
variation margin must be made in cash or U.S. Government securities. The
required margin amount is subject to change by the appropriate exchange or
regulatory authority.
Futures Contracts. Each Portfolio (other than the U. S. Government Money
Portfolio) is permitted to enter into financial futures contracts and related
options ("futures contracts") in accordance with its investment objective.
Futures contracts will be limited to hedging transactions to minimize the impact
of cash balances and for return enhancement and risk management purposes in
accordance with regulations of the Commodity Futures Trading Commission.
A "financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as United States Treasury bonds, notes
and bills, commercial paper, bank certificates of deposit, an agreed amount of
currencies, or the cash value of a financial instrument index at a specified
future date at a price agreed upon when the contract is made. Substantially all
futures contracts are closed out before settlement date or called for cash
settlement. A futures contract is closed out by buying or selling an identical
offsetting contract which cancels the original contract to make or take
delivery.
The Portfolios may purchase and write options on futures contracts as an
alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures contracts are similar to options on the security
upon which the futures contracts are written except that options on financial
futures contracts give the purchaser the right to assume a position at a
specified price in a financial futures contract at any time during the life of
the option.
Upon entering into a futures contract, a Portfolio is required to deposit
in a segregated account with the Fund's custodian in the name of the futures
broker through whom the transaction was effected, initial margin consisting of
cash, U.S. government securities or other liquid, high-grade debt securities.
The initial margin serves as a "good faith" deposit that the Portfolio will
honor its futures commitment. The initial margin amount is subject to change by
the appropriate exchange or regulatory authority. The Portfolio will also be
required to settle any gains or losses on a daily basis in cash (variation
margin). If the Portfolio is unable to meet an additional margin requirement,
the Portfolio may be forced to close out its position at a price that may be
detrimental to the Portfolio. When trading futures contracts, a Portfolio will
not commit more than 5% of the market value of its total assets as initial
margins. See "Investment Policies--Futures Contracts" in the Statement of
Additional Information.
Special Risks of Hedging and Income Enhancement Strategies. Participation
in the options or futures markets involves investment risks and transaction
costs to which a Portfolio would not be subject absent the use of these
strategies. If the Money Manager's predictions of movements in the direction of
the securities and interest rate markets are inaccurate, the adverse
consequences to the Portfolio may leave the Portfolio in a worse position than
if such strategies were not used. Risks inherent in the use of options and
futures contracts and options on futures contracts include: (1) dependence on
the Money Manager's ability to predict correctly movements in the direction of
interest rates and securities prices; (2) imperfect correlation between the
price of options and futures contracts and options thereon and movements in the
prices of the securities being hedged; (3) the fact that skills needed to use
these strategies are different from those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument at any time; (5) the possible need to raise additional initial
margin; (6) in the case of futures, the need to meet daily margin in cash; and
(7) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences. See "Taxes" in the Statement of Additional
Information.
Risks of Investing in Foreign Securities. The Bond Portfolios may invest in
foreign securities. Foreign securities involve certain risks. These risks
include political or economic instability in the country of the issuer, the
difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. Generally,
outside the United States there is less government regulation of securities
exchanges, brokers and listed companies and, with respect to certain foreign
countries, there is a possibility of expropriation, confiscatory taxation or
diplomatic developments which could affect investments within such countries.
In many instances, foreign debt securities may provide higher yields than
securities of domestic issuers which have similar maturities and quality.
However, under certain market conditions, these investments may be less liquid
than investments in the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
Investment Restrictions
Each Portfolio is subject to investment restrictions which, as described in
more detail in the Statement of Additional Information, have been adopted by the
Fund on behalf of the Portfolios as fundamental policies that cannot be changed
with respect to a Portfolio without the approval of the holders of a majority of
such Portfolio's outstanding voting securities, as defined in the Investment
Company Act. Among other restrictions, the Portfolios will not purchase any
security (other than obligations of the U.S. Government, its agencies or
instrumentalities) if as a result (i) with respect to 75% of a Portfolio's total
assets, more than 5% of a Portfolio's total assets would then be invested in
securities of a single issuer, or (ii) 25% or more of a Portfolio's total assets
would be invested in one or more issuers having their principal business
activities in the same industry. See "Investment Restrictions, Policies and Risk
Considerations--Investment Restrictions" in the Statement of Additional
Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally the
operation of the Fund, including reviewing and approving the Fund's service
contracts with Bennington and the Money Managers. The Fund's officers, all of
whom are employed by Bennington, are responsible for the day-to-day management
and administration of the Fund's operations. The Money Managers are responsible
for the selection of individual portfolio securities for the assets assigned to
them by Bennington.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, serves as the
manager to the Fund. Bennington was organized as a Washington general
partnership on April 25, 1991, for the purpose of acting as the Fund's manager.
Bennington was restructured into a Washington limited partnership on August 17,
1993. Bennington's general partners are Northwest Advisors, Inc., Bennington
Management Associates, Inc. and Bennington Capital Management Investment Corp.,
all of which are Washington corporations. The sole limited partner is Zions
Investment Management, Inc., a wholly-owned subsidiary of Zions First National
Bank, N.A. Bennington Management Associates, Inc., which is controlled by J.
Anthony Whatley, III, is the managing general partner of Bennington. Mr. Whatley
has had approximately 20 years of experience in the securities industry,
principally in the areas of sales and marketing of mutual fund products and with
direct investment of portfolio assets for an investment company since the
commencement of investment operations of the Fund in April 1992. Bennington and
its partners were organized in 1991 for the purpose of providing investment
advisory services to the Fund. Ravindra A. Deo, Vice President and Chief
Investment Officer of Bennington, is primarily responsible for the day-to-day
management of the Portfolios through interaction with all Portfolio Money
Managers, and Mr. Deo is responsible for managing the liquidity reserves of each
Portfolio. Mr. Deo has served Bennington in such capacity since January 1992.
Prior thereto, he was Senior Vice President at Leland O'Brien Rubenstein
Associates Incorporated, an investment manager, where he was employed from 1986
to 1991.
Fund Manager Services and Fees. Pursuant to the Management Agreement with
the Fund, Bennington provides the following services: (i) provides or oversees
the provision of all general management, investment advisory and portfolio
management services for the Fund, including the transfer agent, custodian,
portfolio accounting and shareholder recordkeeping services for the Fund; (ii)
provides the Fund with office space, equipment and personnel necessary to
operate and administer the Fund's business; (iii) develops the investment
programs, selects Money Managers, allocates assets among Money Managers, and
monitors the Money Managers' investment programs and results; and (iv) invests
the Portfolios' liquidity reserves and all or any portion of the Portfolios'
other assets. For providing these services (other than transfer agent,
shareholder recordkeeping, custodian and portfolio accounting and
sub-administration services), as well as preparing and distributing explanatory
materials concerning the Portfolios, Bennington is paid by each Portfolio a fee
equal on an annual basis to the following percentage of the Portfolio's average
daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Pursuant to the Transfer Agent Agreement effective December 1, 1995,
between Bennington and the Fund, Bennington provides transfer agent, registrar
and dividend disbursing agent services as well as certain other administrative,
compliance and recordkeeping services to the Fund. For providing these services,
Bennington receives (i) a fee equal to 0.12% of the average daily net assets of
each Portfolio of the Fund, subject to a minimum annual fee of $40,000 per
Portfolio and (ii) a transaction fee of $.50 per transaction.
Bennington may, out of its own resources, provide marketing and promotional
support on behalf of the Portfolios.
The Fund and PFPC entered into a Sub-Administration Agreement on August 20,
1994, for PFPC to provide certain sub-administrative services; for example,
Portfolio accounting and maintenance of the books and records of the Portfolios
required under the Investment Company Act. As compensation for these services,
the Fund pays PFPC an annual of .10% of the first $250 million of average daily
net assets; .075% of the next $250 million of average daily net assets, .050% of
the next $250 million of average daily net assets and .030% of the average daily
net assets over $750 million, subject to a minimum monthly fee of $5,750,
exclusive of out-of-pocket expenses. The total costs for these administrative
fees are borne by each Portfolio based on the proportionate net assets of each
Portfolio. For the first two years of the Sub-Administration Agreement, PFPC has
agreed to waive a portion its minimum monthly fee.
The Fund and PNC entered into a Custodian Agreement on August 20, 1994,
under which PNC acts as custodian of the Fund's assets. As compensation for its
services rendered, the Fund pays PNC an annual custody fee of: .0125% of the
first $500 million of average gross assets; .0100% of the next $500 million of
average gross assets; and .0080% of the average gross assets in excess of $1
billion, subject to a monthly minimum fee of $750 for each Portfolio, exclusive
of out-of-pocket expenses and transaction charges. The total costs for the
custodial fees are borne by each Portfolio based on the proportionate net assets
of each Portfolio. For the first two years of the Custodian Agreement, PNC has
agreed to waive a portion of its monthly minimum fee.
Distribution. Investment advisers, banks, insurance companies and other
entities that sell shares of the Fund may enter into a license agreement with
Bennington which permits them to use Bennington's proprietary asset allocation
software program, Alloset(R), pursuant to which such entities may recommend an
allocation of their clients' assets over a broad range of asset classes which
may include the various portfolios of the Fund. The Alloset(R) Model was
developed by Bennington. Investment advisers, banks, insurance companies and
other licensed entities may charge a fee, not for providing access to the Fund,
but for providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive any
portion of such fees and has no control over whether and in what amount such
fees are charged. Investors also may purchase shares of the Fund directly if
they do not wish to use any of the above services, in which case no service fees
or additional fees, beyond those borne by the shareholders of the Fund
generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R). Using
Alloset(R), assets may be allocated among the Fund's portfolios in a manner
intended to achieve the investment objectives and desired investment returns of
such entities' clients based upon the individual client's situation and
tolerance for risk and desire for return on investment. There can be no
assurance that the allocation recommended by the entities that use Alloset(R)
will meet any of the clients' investment objectives. The Money Managers engaged
by the Fund do not use Alloset(R) in investing any of the Portfolios' assets
under management.
Distribution Plan. The Fund has adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") under the Investment
Company Act. No payments are made by the Portfolios under the Distribution Plan.
Rule 12b-1 provides in substance that an investment company may not engage
directly or indirectly in financing any activity which is primarily intended to
result in the sale of its shares except pursuant to a plan adopted under that
rule. The Distribution Plan is a defensive plan that is (i) designed to protect
against any claim against or involving a Portfolio that some of the expenses a
Portfolio pays or may pay come within the purview of Rule 12b-1 and (ii)
authorizes Bennington to make certain payments to Qualified Recipients (as
defined in the Distribution Plan), which payments shall not be the subject of
reimbursement by the Fund to Bennington, that have rendered assistance in
shareholder servicing or in the distribution and/or retention of a Portfolio's
shares. These payments may not exceed, for any fiscal year of the Fund, the
following amounts:
Maximum Permitted Payments
As A Percentage Of
Portfolio Average Daily Net Assets
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
The Distribution Plan provides that the Board of Directors may remove any
person from the list of Qualified Recipients. See "Investment Advisory and Other
Services--Service Providers--Plan of Distribution" in the Statement of
Additional Information.
<PAGE>
THE MONEY MANAGERS
Bennington is responsible for evaluating, selecting, and recommending Money
Managers needed to manage all or part of the assets of the Portfolios of the
Fund. Bennington is also responsible for allocating the assets within a
Portfolio among any Money Managers selected. Such allocation is reflected in the
Money Manager Agreement among the Fund, Bennington and any Money Manager, and
can be changed at any time by Bennington. The Board of Directors reviews and
approves selections of Money Managers and allocations of assets among any Money
Managers. Pursuant to the Investment Company Act, Money Managers may be added by
Bennington only with the approval of the shareholders of the applicable
portfolio of the Fund.
Money Managers are selected based on such factors as their experience, the
continuity of their portfolio management team, their security selection process,
the consistency and rigor with which they apply that process and their
demonstrated ability to add value to investment decisions. Short-term investment
performance is not a controlling factor in selecting or terminating Money
Managers. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance. Bennington may terminate a Money Manager at any time,
subject to approval by the Board of Directors and prompt notification of the
applicable portfolio's shareholders.
Bennington is responsible for the selection of individual portfolio
securities for all of the assets of the U.S. Government Money Portfolio. A
separate Money Manager currently manages the assets of each other Portfolio. See
"MONEY MANAGER PROFILES."
The Fund intends to file an exemptive order application (the "Application")
with the SEC seeking an exemption from Section 15(a)(1) of the Investment
Company Act to the extent necessary to permit the Fund and Bennington to enter
into Money Manager Agreements with Money Managers without such agreements being
approved by the shareholders of the applicable Portfolio except for Money
Manager Agreements with an affiliated person of the Fund or Bennington other
than by reason of such affiliated person serving as an existing Money Manager to
the Fund. Applicable orders granted by the SEC to other investment companies
seeking similar exemptions have required as a condition to granting the order
that the investment company obtain shareholder approval for such a policy. The
Fund expects that the SEC will impose the same condition on the Fund and
accordingly on August 15, 1995, at a Special Meeting of the shareholders of the
Fund, the shareholders approved a proposal to allow the Fund and Bennington to
enter into Money Manager agreements with Money Managers without such agreements
being approved by the shareholders of the applicable Portfolio. In addition, the
Fund's Application will likely include the condition that within 60 days of the
hiring of any new Money Manager and executing a new Money Manager Agreement,
Bennington will furnish shareholders with an information statement about the new
Money Manager and Money Manager Agreement. There is no guarantee that the SEC
will grant the Fund's application for exemptive relief.
Neither the Board of Directors nor the officers evaluate the investment
merits of any Money Manager's individual security selections. However, the Board
of Directors will review regularly each Portfolio's performance compared to the
applicable indices and also will review each Portfolio's compliance with its
investment objective and policies.
Money Manager Fees. The fees paid to the Money Manager of a Portfolio are
based on the assets of the Portfolio and on the number of complete calendar
quarters of management by the Money Manager. During the first five calendar
quarters, the Money Manager fee has two components, the basic fee (the "Basic
Fee") and the portfolio management fee (the "Portfolio Management Fee").
Commencing with the sixth calendar quarter of management by a Money Manager
of an operating Portfolio, such Portfolio will pay its Money Manager based on
the "Money Manager Fee Schedule For a Manager From the Sixth Calendar Quarter of
Management Forward." The Money Manager Fee commencing with the sixth quarter
consists of two components, the Basic Fee and the performance fee (the
"Performance Fee"), which varies with a Portfolio's performance. Currently, the
Money Managers for all Portfolios have completed the first five calendar
quarters of management of their respective Accounts, as defined below, and the
Performance Fee is in effect. If at any time a Money Manager should be replaced,
the new Money Manager for the applicable Portfolio will receive the fee set
forth in "Money Manager Fee Schedule For a Manager's First Five Calendar
Quarters of Management" (see "Money Managers Fees--Money Manager Fee Schedule
For a Manager's First Five Calendar Quarters of Management" in the Statement of
Additional Information) during the first five calendar quarters of such new
Money Manager's management of the relevant Portfolio.
<TABLE>
<CAPTION>
MONEY MANAGER FEE SCHEDULE FOR A MANAGER
FROM THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average
Annualized
Performance
Differential Annualized
vs. The Applicable Performance
Basic Fee Index Fee
--------- ------------------- -----------
<S> <C> <C> <C>
Bond Portfolios 0.07% >=2.00% 0.18%
>=0.50% and < 2.00% 0.16%
>=0.25% and < 0.50% 0.12%
>=-0.25% and < 0.25% 0.08%
>=-0.50% and <-0.25% 0.04%
<-0.50% 0%
</TABLE>
The Performance Fee component will be adjusted each quarter and paid monthly
based on the annualized investment performance of each Money Manager relative to
the annualized investment performance of the "Benchmark Indices" set forth
below. A description of each benchmark index is contained in Appendix A. A
change in an index may be effected with the approval of only the Board of
Directors and does not require the approval of shareholders. As long as the Bond
Portfolios' performance either exceeds the index, or trails the index by no more
than .50%, a Performance Fee will be paid to the Money Manager. A Money
Manager's performance is measured on the portion of the assets of its respective
Portfolio managed by it (the "Account"), which excludes assets held by
Bennington for circumstances such as redemptions or other administrative
purposes.
BENCHMARK INDICES
Portfolio Index
Intermediate
Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate
Fixed-Income Lehman Brothers Government/Corporate 1-5 Year Index
Mortgage Securities Lehman Brothers Mortgage-Backed Securities Index
From the sixth to the 14th calendar quarter of investment operations, each
Money Manager's performance differential versus the applicable index is
recalculated at the end of each calendar quarter based on the Money Manager's
performance during all calendar quarters since commencement of investment
operations except that of the immediately preceding quarter. Commencing with the
14th calendar quarter of investment operations, the Money Manager's average
annual performance differential will be recalculated based on the Money
Manager's performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. A Money Manager's performance
will be calculated by Bennington in the same manner in which the total return
performance of the Portfolio's index is calculated, which is not the same method
used for calculating the Portfolios' performance for advertising purposes as
described under "Calculation of Portfolio Performance." See Appendix B to the
Statement of Additional Information for a discussion of how performance fees are
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
example, if an index has an average annual performance of 10%, a Bond Portfolio
Account's average annual performance would have to be equal to or greater than
12% for the Money Manager to receive an annual Performance Fee of 0.18% (i.e.,
the difference in performance between the Account and the index must be equal to
or greater than 2% for the Money Manager to receive the maximum performance
fee.) Because the maximum Performance Fee for the Portfolios applies whenever a
Money Manager's performance exceeds the index by 2.00%, the Money Managers for
the Portfolios could receive a maximum Performance Fee even if the performance
of the Account is negative. In April 1972, the SEC issued Release No. 7113 under
the Investment Company Act (the "Release") to call the attention of directors
and investment advisers to certain factors which must be considered in
connection with investment company incentive fee arrangements. One of these
factors is to "avoid basing significant fee adjustments upon random or
insignificant differences" between the investment performance of a fund and that
of the particular index with which it is being compared. The Release provides
that "preliminary studies (of the SEC staff) indicate that as a 'rule of thumb'
the performance difference should be at least +/-10 percentage points" annually
before the maximum performance adjustment may be made. However, the Release also
states that "because of the preliminary nature of these studies, the Commission
is not recommending, at this time, that any particular performance difference
exist before the maximum fee adjustment may be made." The Release concludes that
the directors of a fund "should satisfy themselves that the maximum performance
adjustment will be made only for performance differences that can reasonably be
considered significant." The Board of Directors has fully considered the Release
and believes that the performance adjustments are entirely appropriate although
not within the +/-10 percentage points per year range suggested by the Release.
A more detailed description of the operation of each Performance Fee is
contained in Appendix B to the Statement of Additional Information.
The Money Managers have agreed to the foregoing fees, which are generally
lower than they charge to institutional accounts for which they serve as
investment adviser and perform all administrative functions associated with
serving in that capacity. These lower fees are in recognition of the reduced
administrative and client service responsibilities the Money Managers have
undertaken with respect to the Portfolios.
The following table lists the fees earned by the Money Managers of the
Portfolios for the current
<TABLE>
<CAPTION>
MONEY MANAGER FEES EARNED FOR CURRENT PERIOD
Number Of
Quarters Basic Performance
Managed By Fee Fee
Money (All (6th Quarter Total
Portfolio Manager Period Quarters) (Forward) Fee
--------- ------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C>
Intermediate 11 1st Quarter 1995 0.07% 0.08% 0.15%
Fixed-Income 12 2nd Quarter 1995 0.07% 0.08% 0.15%
13 3rd Quarter 1995 0.07% 0.08% 0.15%
14 4th Quarter 1995 0.07% 0.08% 0.15%
15 1st Quarter 1996 0.07% 0.08% 0.15%
Short-Intermediate
Fixed-Income 11 1st Quarter 1995 0.07% 0.08% 0.15%
12 2nd Quarter 1995 0.07% 0.08% 0.15%
13 3rd Quarter 1995 0.07% 0.08% 0.15%
14 4th Quarter 1995 0.07% 0.08% 0.15%
15 1st Quarter 1996 0.07% 0.08% 0.15%
Mortgage 11 1st Quarter 1995 0.07% 0.16% 0.23%
Securities 12 2nd Quarter 1995 0.07% 0.16% 0.23%
13 3rd Quarter 1995 0.07% 0.16% 0.23%
14 4th Quarter 1995 0.07% 0.16% 0.23%
15 1st Quarter 1996 0.07% 0.16% 0.23%
</TABLE>
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those expressly
assumed by Bennington. Fees and other expenses payable by the Portfolios
include: (i) management fees of Bennington; (ii) Money Manager ; (iii) the fees
and expenses of unaffiliated Directors; (iv) the fees of the Fund's custodians,
administrator, sub-administrator and transfer agent, registrar and dividend
disbursing agent; (v) the fees of the Fund's legal counsel and independent
accountants; (vi) brokerage commissions incurred in connection with portfolio
transactions; (vii) all taxes and charges of governmental agencies, including
those for registration at the federal and state level; (viii) the reimbursement
of organizational expenses advanced by Bennington; and (ix) expenses related to
shareholder communications, including costs incurred in the preparation and
mailing of prospectuses, proxy statements and reports to shareholders. The Board
of Directors has determined that it is appropriate to allocate certain expenses
attributable to more than one Portfolio among the Portfolios affected based on
their relative net assets. See "GENERAL MANAGEMENT OF THE PORTFOLIOS."
Bennington has also agreed to reimburse the Fund for the amount, if any, by
which the total operating and management expenses (including Bennington's fee,
but excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) for any fiscal year exceed the level of expenses which the Portfolios
are permitted to bear under the most restrictive expense limitation (which has
not been waived) imposed on mutual funds by any state in which shares of the
Portfolios are qualified for sale (or Bennington will make other arrangements to
limit the Portfolios' expenses to the extent required by applicable state law
expense limitations).
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers for the
assets assigned to them, and by Bennington for assets not assigned to a Money
Manager. Currently, Bennington invests all of the assets of the U.S. Government
Money Portfolio, invests each Portfolio's liquidity reserves, and all or any
portion of the Portfolios' other assets not assigned to a Money Manager. Each
Portfolio, other than the U.S. Government Money Portfolio, currently has one
Money Manager investing all or part of its assets.
Each Money Manager makes decisions to buy or sell securities independently
from other Money Managers. Thus, if there is more than one Money Manager for a
Portfolio, one Money Manager could be selling a security when another Money
Manager for the same Portfolio is purchasing the same security. In addition,
when a Money Manager's services are terminated and another retained, the new
Money Manager may significantly restructure the Portfolio. These practices may
increase the Portfolios' portfolio turnover rates, realization of gains or
losses, and brokerage commissions. The portfolio turnover rates for the
Portfolios may vary greatly from year to year as well as within a year and may
be affected by sales of investments necessary to meet cash requirements for
redemptions of shares. Historical portfolio turnover rates for each Portfolio is
listed under "Financial Highlights." These rates should not be considered as
limiting factors. A high rate of turnover involves correspondingly greater
expenses, increased brokerage commissions and other transaction costs, which
must be borne by the Portfolios and their shareholders. See "Investment Advisory
and Other Services--Portfolio Transaction Policies" in the Statement of
Additional Information. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income. See "TAXES."
Each Portfolio may effect portfolio transactions with or through affiliates
of Bennington or any Money Manager or its affiliates, when Bennington or the
Money Manager, as appropriate, determines that the Portfolio will receive the
best net price and execution. This standard would allow affiliates of Bennington
and the Money Managers to receive no more than the remuneration that would be
expected to be received by an unaffiliated broker in a commensurate arm's-length
transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to declare
dividends from net investment income for payment on the following schedule:
Portfolio Declared Payable
- --------- -------- -------
U. S. Government Money Daily 1st business day of
following month
Intermediate Fixed-Income Monthly, on last 1st business day of
Short-Intermediate business day of following month
Fixed-Income month
Mortgage Securities
The U. S. Government Money Portfolio determines net investment income
immediately prior to the daily determination of the Portfolio's net asset value
(currently close of New York Stock Exchange, normally 4:00 p.m. Eastern time).
Net investment income will be credited daily to the accounts of shareholders of
record prior to the net asset value calculation and paid monthly. Each other
Portfolio determines net investment income immediately prior to the
determination of the Portfolio's net asset value on the dividend declaration
day. The income will be credited to the shareholders of record prior to the net
asset value calculation and paid on the next business day.
Capital Gains Distribution. The Board of Directors intends to declare
distributions from net capital gains annually, generally in mid-December. In
addition, in order to satisfy certain distribution requirements, a Portfolio may
declare special year-end dividend and capital gains distributions during
October, November or December. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on December 31 of the prior year.
Automatic Reinvestment. All dividends and distributions will be
automatically reinvested, at the net asset value per share at the close of
business on the record date, in additional shares of the Portfolio paying the
dividend or making the distribution unless a shareholder elects to have
dividends or distributions paid in cash. Any election may be changed by
electronic instruction if received by Bennington no later than the close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time, on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for federal income
tax purposes and shareholders of each Portfolio will be entitled to the amount
of net investment income and net realized capital gains (if any) earned by their
Portfolio. The Board of Directors intends to distribute each year substantially
all of each Portfolio's net investment income and net realized capital gains (if
any), thereby eliminating virtually all federal income taxes to each Portfolio
(but not to its investors). The Portfolios may be subject to nominal, if any,
state and local taxes.
Dividends out of net investment income, together with distributions of net
short-term capital gains, will be taxable as ordinary income to the
shareholders, whether or not reinvested, and paid in cash or in additional
shares. However, depending upon the state tax rules pertaining to a shareholder,
a portion of the dividends paid by the Intermediate Fixed-Income Portfolio, the
Short-Intermediate Fixed-Income Portfolio, the U. S. Government Money Portfolio
and the Mortgage Securities Portfolio attributable to direct obligations of the
United States Treasury, U.S. governmental agencies or instrumentalities, states,
counties and other local jurisdictions may be exempt from state and local taxes.
Capital gain distributions declared by the Board of Directors and distributed to
the shareholders are taxed as long-term capital gains regardless of the length
of time a shareholder has held such shares. Dividends and distributions may
otherwise also be subject to state or local taxes. Shareholders should be aware
that any loss realized upon the sale, exchange or redemption of shares held for
six months or less will be treated as a long-term capital loss to the extent any
capital gain dividends have been paid with respect to such shares.
The sale of shares of a Portfolio is a taxable event and may result in
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series or portfolios of a mutual fund). Any gain or loss realized upon a sale,
exchange or redemption of shares of a Portfolio by a shareholder who is not a
dealer in securities will be treated generally as long-term capital gain or loss
if the shares have been held for more than one year and otherwise as short-term
capital gain or loss. Any such loss, however, on shares that are held for six
months or less will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder.
However, all or a portion of this capital gain will be recharacterized as
ordinary income if the shareholder enters into a "conversion transaction." A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction and certain other criteria are satisfied. A
conversion transaction also includes a transaction that is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected return
from the transaction is "attributable to the time value of the taxpayer's net
investment in such transaction." The Secretary of the Treasury also is
authorized to promulgate regulations (which would apply only after they are
issued) which specify other transactions to be included in the definition of a
conversion transaction. Section 1258 of the Internal Revenue Code of 1986, as
amended (the "Code") contains many ambiguities and its scope is unclear; it may
be clarified or refined in future regulations or other official pronouncements.
Until further guidance is issued, it is unclear whether a purchase and
subsequent disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own tax
advisors concerning whether or not Section 1258 may apply to their transactions
in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will be
treated as long-term capital gains or losses if the securities have been held by
it for more than one year except in certain cases where the Portfolio acquires
a put or writes a call thereon or the transaction is treated as a "conversion
transaction." Other gains or losses on the sale of securities generally will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will generally be treated as gains and
losses from the sale of securities (assuming they do not qualify as "Section
1256 contracts" defined below). If an option written by a Portfolio on
securities lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
generally realize a capital gain or loss. If securities are sold by the
Portfolio pursuant to the exercise of a call option written by it, the Portfolio
will include the premium received in the sale proceeds of the securities
delivered in determining the amount of gain or loss on the sale. Certain of the
Portfolios' transactions may be subject to wash sale and short sale provisions
of the Code. In addition, debt securities acquired by the Portfolios may be
subject to original issue discount and market discount rules.
Under the Code, special rules apply to the treatment of certain options and
future contracts (Section 1256 contracts). At the end of each year, such
investments held by the Portfolio will be required to be "marked to market" for
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales" and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Shareholders of the appropriate Portfolios will be notified after each
calendar year of the amounts of ordinary income and long-term capital gains
distributions, including any amounts which are deemed paid on December 31 of the
prior year; of the dividends which qualify for the 70% dividends-received
deduction available to corporations; and the percentages of income attributable
to U.S. Government securities in the case of the Intermediate Fixed-Income,
Short-Intermediate Fixed-Income, Mortgage Securities and U. S. Government Money
Portfolios.
Under United States Treasury Regulations, a Portfolio currently is required
to withhold and remit to the United States Treasury 31% of all taxable
dividends, distributions and redemption proceeds payable to any non-corporate
shareholder which does not provide the Fund with the shareholder's taxpayer
identification number on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) or required certification or which is subject to backup
withholding.
The tax discussion set forth above is included for general information only
and is based upon the current law as of the date of this Prospectus.
Shareholders are urged to consult their tax advisers for further information
regarding the federal, state and local tax consequences of an investment in the
shares of the Fund. See "Taxes" in the Statement of Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time, the Portfolios (except for the U. S. Government Money
Portfolio) may advertise their performance in terms of average annual total
return, which is computed by finding the average annual compounded rates of
return over a period that would equate the initial amount invested to the ending
redeemable value. The calculation assumes that all dividends and distributions
are reinvested on the reinvestment dates during the relevant time period and
accounts for all recurring fees.
The Bond Portfolios also may from time to time advertise their yields. The
yields are based on historical earnings. Yield for the Bond Portfolios is
calculated by dividing the net investment income per share earned during the
most recent 30-day (or one month) period by the maximum offering price per share
on the last day of the period. This income is then annualized. That is, the
amount of income generated by the investment during that calendar quarter is
assumed to be generated each month over a twelve-month period and is shown as a
percentage of the investment. For purposes of the yield calculation, interest
income is computed based on the yield to maturity of each debt obligation and
dividend income is computed based upon the stated dividend rate of each security
in a Portfolio's portfolio.
The U. S. Government Money Portfolio may advertise its "yield" and
"effective yield." Both yield figures are based on historical earnings. The
"yield" of the U. S. Government Money Portfolio refers to the income generated
by an investment in the Portfolio over a seven-day period (which period will be
stated in the advertisement). This yield is calculated by determining the net
change, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base return. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but when annualized,
the income earned by an investment in the U.S. Government Money Portfolio is
assumed to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
It is important to note that yield and total return figures are based on
historical earnings and are not intended to indicate future performance. The
Statement of Additional Information describes the method used to determine a
Portfolio's yield and total return. In reports or other communications to
shareholders or in advertising material, a Portfolio may quote yield and total
return figures that do not reflect recurring fees (provided that these figures
are accompanied by standardized yield and total return figures calculated as
described above), as well as compare its performance with that of other mutual
funds as listed in the rankings prepared by Morningstar or similar independent
services that monitor the performance of mutual funds or with other appropriate
indices of investment securities.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share is calculated for
each Portfolio on each business day on which shares are offered or orders to
redeem are tendered. A business day is one on which the New York Stock Exchange,
PFPC and Bennington are open for business. Non-business days in 1996 will be:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. Net asset value per share is
computed for a Portfolio by dividing the current value of the Portfolio's
assets, less its liabilities, by the number of shares of the Portfolio
outstanding, and rounding to the nearest cent. All Portfolios determine net
asset value as of the close of the New York Stock Exchange, normally 4:00 p.m.
Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below, the
Portfolios value portfolio securities at "fair market value." This generally
means that equity securities and fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of the
last sale price or, lacking any sales, at the closing bid price on the exchange
on which the security is primarily traded. United States equity and fixed-income
securities traded principally OTC, options and futures contracts are valued on
the basis of the closing bid price.
Because many fixed-income securities do not trade each day, last sale or
bid prices are frequently not available. Fixed-income securities therefore may
be valued based on prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
International securities traded over-the-counter are valued on the basis of
the mean of bid and asked prices. In the absence of a last sale or mean bid and
asked price, respectively, such securities may be valued on the basis of prices
provided by a pricing service if those prices are believed to reflect the fair
value of such securities.
Securities held by the U. S. Government Money Portfolio and money market
instruments maturing within 60 days of the valuation date held by Portfolios
other than the U. S. Government Money Portfolio are valued at "amortized cost"
unless the Board of Directors determines that amortized cost does not represent
fair value. The U. S. Government Money Portfolio uses its best efforts to
maintain a $1.00 per share net asset value. The "amortized cost" valuation
procedure initially prices an instrument at its cost and thereafter assumes a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Portfolio would receive if it sold the instrument.
The Portfolios value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to procedures
established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the Portfolios with
no sales charge or commission. Investors may also purchase shares of the
Portfolios from intermediaries, such as a broker-dealer, bank or other financial
institution. Such intermediaries may be required to register as a dealer
pursuant to certain states' securities laws and may charge the investor a
reasonable service fee, no part of which will be paid to the Portfolios. Shares
of the Portfolios will be sold at the net asset value next determined after an
order is received and accepted, provided that payment has been received by 12:00
p.m. Eastern Time on the following business day. Net asset value is determined
as set forth above under "Valuation of Portfolio Shares." All purchases must be
made in U.S. dollars. The minimum and subsequent investment requirements for
each Portfolio are $1,000. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $1,000 in the Portfolios. The subsequent
investment requirement for an IRA Account is an aggregate amount of $100 in the
Portfolios. The Fund reserves the right to accept smaller purchases or reject
any purchase order in its sole discretion.
Orders are accepted on each business day. Orders to purchase Portfolio
shares must be received by Bennington prior to close of the New York Stock
Exchange, normally 4:00 p.m. Eastern time, on the day shares of those Portfolios
are offered and orders accepted, or the orders will not be accepted and invested
in the particular Portfolio until the next day on which shares of that Portfolio
are offered. Payment must be received by 12:00 noon Eastern time on the next
business day. Purchases by telephone may only be made as set out in the
telephone transaction procedures set forth in "Purchase of Portfolio
Shares--Telephone Transactions." No fees are currently charged shareholders by
the Fund directly in connection with purchases.
Order and Payment Procedures. Investments in the Portfolios may be made as
follows:
Federal Funds Wire. Purchases may be made on any business day by
wiring federal funds to Seattle First National Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check drawn on
a foreign bank will not be accepted) only in amounts greater than $1,000;
except that checks will be accepted for I A Accounts subject to the
investment requirements for IRA Accounts. See "PURCHASE OF PORTFOLIO
SHARES--IRA Accounts." If an investor has purchased Portfolio shares by
check and subsequently submits a redemption request, the redemption request
will be honored at the net asset value next calculated after receipt of the
request, however, the redemption proceeds will not be transmitted until the
check used for investment has cleared, which may take up to 15 days. See
"REDEMPTION OF PORTFOLIO SHARES."
Please call the Fund for further information at (800) 759-3504.
Purchases in Kind. The Portfolios may accept certain types of
securities in lieu of wired funds as consideration for Portfolio shares.
Under no circumstances will a Portfolio accept any securities the holding
or acquisition of which conflicts with the Portfolio's investment
objective, policies and restrictions or which Bennington or the applicable
Money Manager believes should not be included in the applicable Portfolio's
portfolio on an indefinite basis. Securities accepted in consideration for
a Portfolio's shares will be valued in the same manner as the Portfolio's
portfolio securities in connection with its determination of net asset
value. A transfer of securities to a Portfolio in consideration for
Portfolio shares will be treated as a sale or exchange of such securities
for federal income tax purposes. A shareholder will recognize gain or loss
on the transfer in an amount equal to the difference between the value of
the securities and the shareholder's tax basis in such securities.
Shareholders who transfer securities in consideration for a Portfolio's
shares should consult their tax advisers as to the federal, state and local
tax consequences of such transfers. See "Purchases in Kind" in the
Statement of Additional Information.
Automatic Investment Plan. An Automatic Investment Plan may be
established at any time. By participating in the Automatic Investment Plan,
a shareholder may automatically make purchases of shares of the Portfolios
on a regular, convenient basis. Shareholders may choose to make
contributions on the 15th (or the first business day before the 15th)
and/or the last business day of each month in amounts of $500.00 in the
aggregate. Since the Automatic Investment Plan involves the continuous
investment in the Portfolios regardless of the price levels of the
Portfolio shares, investors should consider their financial ability to
continue to purchase through periods of low price levels.
IRA Accounts. The Fund has established an Individual Retirement
Custodial Account Plan under which investors may set up IRA Accounts that
invest in the Fund. Fifth Third serves as custodian for the IRA Accounts.
The Transfer Agent charges an annual account fee of $25 to each IRA Account
with an aggregate balance of less than $10,000 on December 31. The minimum
initial investment requirement for an IRA Account is an aggregate amount of
$1,000 in the Portfolios. The subsequent investment requirement for an IRA
Account is an aggregate amount of $100 in the Portfolios. Please refer to
the IRA Account plan documents: the IRA Disclosure Statement, IRA Custodial
Account Agreement and IRA Application and Adoption Agreement Form for
additional information, copies of which may be obtained from Bennington
free of charge at 1-800-759-3504.
Exchange Privilege. Shares of any Portfolio of the Fund may be exchanged
for shares of the other portfolios offered by the Fund to the extent such shares
are offered for sale in the investor's state of residence, on the basis of
current net asset values per share at the time of the exchange. Other than the
Portfolios offered by this Prospectus, the portfolios of the Fund also include
the Growth Portfolio, Value and Income Portfolio, Small to Mid Cap Portfolio and
the International Equity Portfolio.
If the exchanging shareholder does not currently own shares of the
portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and authorized
dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures guaranteed
by an eligible guarantor institution as defined below under "REDEMPTION OF
PORTFOLIO SHARES" and "ADDITIONAL INFORMATION--Signature Guarantees." To
establish an automatic withdrawal for the new account, however, an exchanging
shareholder must file a specific written request. For additional information,
contact the Fund. A shareholder should obtain and read the prospectus relating
to any other portfolios of the Fund before making an exchange.
An exchange is a redemption of the shares and is treated as a sale for
federal income tax purposes, and a short- or long-term capital gain or loss may
be realized. The exchange privilege may be modified or terminated at any time on
60 days' notice to shareholders. Exchanges are available only in states where
exchanges may legally be made. Exchanges may be made by faxing instructions to
Bennington at (206) 224-4274 or mailing instructions to Bennington at 1420 Fifth
Avenue, Suite 3130, Seattle, WA 98101. Exchanges may only be made by telephone
as set out in the telephone transaction procedures set forth in "PURCHASE OF
PORTFOLIO SHARES--Telephone Transactions" and "ADDITIONAL INFORMATION--Signature
Guarantees." No fees are currently charged shareholders by the Fund directly in
connection with exchanges.
Telephone Transactions. A shareholder of the Fund with an aggregate account
balance of $1 million or more may request purchases, redemptions or exchanges of
shares of a Portfolio by telephone at the appropriate toll free number provided
in this Prospectus. It may be difficult to implement redemptions or exchanges by
telephone in times of drastic economic or market changes. In an effort to
prevent unauthorized or fraudulent redemption or exchange requests by telephone,
the Fund employs reasonable procedures specified by the Board of Directors to
confirm that such instructions are genuine. Telephone transaction procedures
include the following measures: requiring the appropriate telephone transaction
election be made on the telephone transaction authorization form sent to
shareholders upon request; requiring the caller to provide the names of the
account owners, the account owner's social security number or tax identification
number and name of Portfolio, all of which must match the Fund's records;
requiring that a service representative of Bennington, acting as Transfer Agent,
complete a telephone transaction form listing all of the above caller
identification information; requiring that redemption proceeds be sent by wire
only to the owners of record at the bank account of record or by check to the
address of record; sending a written confirmation for each telephone transaction
to the owners of record at the address of record within five (5) business days
of the call; and maintaining tapes of telephone transactions for six months, if
the Fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or an
attorney-in-fact (under a power of attorney), additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. The Fund may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund may be liable for any loss due to unauthorized or fraudulent transactions.
In all other cases, neither the Fund, the Portfolio nor Bennington will be
responsible for authenticity of redemption or exchange instructions received by
telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net asset value
next determined after the receipt of a redemption request in proper form.
Payment will ordinarily be made within seven days and will be wire-transferred
by automatic clearing house funds or other bank wire to the account designated
for the shareholder at a domestic commercial bank that is a member of the
Federal Reserve System . If requested in writing, payment will be made by check
to the account owners of record at the address of record. The Transfer Agent
charges a processing fee of $10.00 for each redemption check requested by a
shareholder, which processing fee may be waived by the Transfer Agent at its
discretion. If an investor has purchased Portfolio shares by check and
subsequently submits a redemption request, the redemption request will be
honored at the net asset value next calculated after receipt of the request,
however, the redemption proceeds will not be transmitted until the check used
for investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire payment.
If a shareholder requests a redemption check made payable to someone other
than the registered owner of the shares and/or mailed to an address other than
the address of record, the request to redeem must (1) be made in writing; (2)
include an instruction to make the check payable to someone other than the
registered owner of the shares and/or mail it to an address other than the
address of record; and (3) be signed by all registered owners with their
signatures guaranteed. See "ADDITIONAL INFORMATION--Signature Guarantees."
Portfolio shares may be redeemed by faxing instructions to Bennington at
(206) 224-4274, or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 981011-9865. Redemptions of the Portfolios' shares may be effected
on any business day on which the New York Stock Exchange, PFPC and Bennington
are open, as long as instructions are received by Bennington by close of
business of the New York Stock Exchange, normally 4:00 p.m. Eastern Time. In
periods of severe market or economic conditions, the electronic redemption of
shares may be difficult due to an increase in the amount of electronic
transmissions. Use of the mail may result in the redemption request being
processed at a later time than it would have been if a instructions had been
sent by facsimile transmission. During the delay, the Portfolios' net asset
value may fluctuate.
Portfolio shares also may be redeemed through registered broker-dealers who
have made arrangements with the Fund permitting them to redeem such shares by
telephone or facsimile transmission and who may charge a fee for this service.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole or
in part by a distribution in kind of securities from the investment portfolio of
the Portfolio, in lieu of cash, in conformity with any applicable rules of the
SEC. Securities will be readily marketable and will be valued in the same manner
as in a regular redemption. See "VALUATION OF PORTFOLIO SHARES." If shares are
redeemed in kind, the redeeming shareholders would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Portfolio during any 90-day period for any one
shareholder.
The Fund reserves the right to redeem the shares of any shareholder whose
account balance is less than $500 per portfolio or whose aggregate account is
less than $2,000, and who is not part of an Automatic Investment Plan. The Fund,
however, will not redeem shares based solely on market reductions in net asset
value. The Fund will give sixty (60) days prior written notice to shareholders
whose shares are being redeemed to allow them to purchase sufficient additional
shares of the Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption or postpone
the date of payment for the Portfolios if the unlikely emergency conditions that
are specified in the Investment Company Act or determined by the SEC should
exist.
Shareholders uncertain of requirements for redemption should telephone the
Fund at (206) 224-7420 or (800) 759-3504. Redemptions by telephone may only be
made as set out in the telephone transaction procedures set forth in "Purchase
of Portfolio Shares--Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly withdrawal
on the Systematic Withdrawal Plan is $500.00 in aggregate) on a monthly basis on
the 15th (or first business day before the 15th) and/or on the last business day
of each month. An application for automatic withdrawal can be obtained from
Bennington or the Fund and must be received by Bennington ten calendar days
before the first scheduled withdrawal date. Automatic withdrawal may be ended at
any time by the investor or the Fund. The Systematic Withdrawal Plan may be
discontinued at any time by the Fund or Bennington. The Fund reserves the right
to reject any Systematic Withdrawal Plan application. Purchases of additional
shares concurrently with withdrawals generally are undesirable. Funds will be
disbursed according to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager and Administrator.
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, WA 98101, is the
manager and administrator of the Fund pursuant to a Management Agreement with
the Fund.
Transfer Agent, Registrar and Dividend Disbursing Agent.
Bennington, P. O. Box 1748, Seattle, WA 98111-9865 is the transfer agent,
registrar and dividend disbursing agent for the Portfolios, and provides other
administrative, recordkeeping and compliance services to the Fund pursuant to a
Transfer Agent Agreement with the Fund.
Custodians.
PNC, Broad & Chestnut Streets, Philadelphia, PA 19101, acts as custodian of
the Portfolios' assets and may employ sub-custodians outside the United States
which have been approved by the Board of Directors. PNC holds all portfolio
securities and cash assets of the Portfolio and is authorized to deposit
securities in securities depositories or to use the services of sub-custodians.
Barclays Bank, 54 Lombard Street, London EC3P3AH, England, may employ
sub-custodians outside the United States, which have been approved by the Board
of Directors, pursuant to an agreement among Barclays, PNC and the Fund.
Fifth Third, 38 Fountain Square Plaza, Cincinnati, OH 45263 acts as
custodian for investors of the Portfolios with respect to the Fund's IRA
Accounts.
Sub-Administrator.
PFPC, 103 Bellevue Parkway, Wilmington, DE 19809, is the sub-administrator
to the Fund, providing portfolio accounting and recordkeeping services to the
Fund.
Auditors.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281
are the Fund's independent auditors. Shareholders will receive semi-annual and
annual financial statements; the annual statement is audited by Deloitte &
Touche LLP.
Fund Counsel.
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 serves as the
Fund's outside counsel.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and the
Portfolios against fraudulent transactions by unauthorized persons. In certain
instances, such as transfer of ownership or when the registered shareholder(s)
requests that redemption proceeds be sent to a different name or address than
the registered name and address of record on the shareholder account, the Fund
will require that the shareholder's signature be guaranteed. When a signature
guarantee is required, each signature must be guaranteed by a domestic bank or
trust company, credit union, broker, dealer, national securities exchange,
registered securities association, clearing agency or savings association as
defined by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and be
signed in the name of the guarantor by an authorized person with that person's
title and the date. The Fund may reject a signature guarantee if the guarantor
is not a member of or participant in a signature guarantee program. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular redemption transaction, to require a signature
guarantee at its discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The Fund is
authorized to issue 15 billion shares of common stock of $0.001 par value per
share, currently divided into eight Portfolios. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Fund's
outstanding shares for the purpose of voting on the removal of one or more
Directors or to transact any other business. Any proposals by shareholders to be
presented at an annual meeting must be received by the Fund for inclusion in its
proxy statement and form of proxy relating to that meeting at least 120 calendar
days in advance of the date of the Fund's proxy statement released in connection
with the previous year's annual meeting, if any. If there was no annual meeting
held in the previous year or the date of the annual meeting has changed by more
than 30 days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made.
As of March 31, 1996, the following persons were the owners of record of
25% or more of the Portfolios of the Fund:
<TABLE>
<CAPTION>
Short- U.S.
Intermediate Intermediate Mortgage Government
Beneficial Owner Fixed-Income Fixed-Income Securities Money
- ------------------ ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C>
North Carolina Trust Company
301 North Elm Street
Greensboro, NC 27402-1108 27.8%
Zions First National Bank
One South Main Street
Salt Lake City, UT 84130 59.2% 83.8% 57.8% 95.5%
</TABLE>
As of March 31, 1996, the Directors and officers of the Fund, as a group,
beneficially owned less than 1% of the shares of each Portfolio.
The fiscal year end for each Portfolio is December 31.
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing further information
about performance, is available without charge from the Fund. Inquiries
regarding the Portfolios and requests for Annual Reports should be addressed to
the Fund at P. O. Box 1748, Seattle, Washington 98111-9865, or by telephone at
(206) 224-7420 or (800) 759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally prohibit banks
that are members of the Federal Reserve System from engaging in the business of
underwriting, selling, distributing securities or engaging in investment
advisory activities. The Fund believes that its Money Managers that are banks or
subsidiaries of banks may perform the services for the Portfolios contemplated
by the Money Manager Agreements without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. However, it is possible that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as further
judicial or administrative decisions and interpretations of present and future
statues and regulations, might prevent such Money Managers from continuing to
perform such services for the Portfolios. If such Money Managers were prohibited
from acting as Money Manager to the Portfolios, it is expected that the Board of
Directors would recommend to the shareholders of those Portfolios that they
approve these Portfolios' entering into new Money Manager Agreements with other
qualified Money Managers to be selected by Bennington.
It is the position of the Board of Directors that the investment advisory
and custodian services to be performed by PNC and its affiliates are consistent
with the requirements of the Glass-Steagall Act. In addition, the Fund believes
that this combination of individually permissible activities is consistent with
the Glass-Steagall Act and federal legal and regulatory precedent thereunder.
There is presently no controlling precedent regarding the performance of a
combination of investment advisory and custodian services by banks of the sort
contemplated to be performed by PNC and its affiliates and described herein.
State laws on this issue may differ from the interpretations of relevant federal
law and banks and financial institutions may be required to register as dealers
pursuant to state securities law. Future changes in either federal statues or
regulations relating to the permissible activities of banks, as well as future
judicial or administrative decisions and interpretations of present and future
statutes and regulations, could prevent PNC or its affiliates from continuing to
perform all or part of their investment management and custodian services. If
PNC or its affiliates were prohibited from so acting, shareholders would be
permitted to remain shareholders of the Portfolios and alternative means for
continuing such services would be sought. In such event, changes in the
operation of the Fund might occur and a shareholder serviced by PNC or its
affiliates might no longer be able to avail himself of any services then being
provided. The Board of Directors does not expect that shareholders of the Fund
would suffer any adverse financial consequences as a result of these
occurrences.
MONEY MANAGER PROFILES
The following information as to each Money Manager has been supplied by the
respective Money Managers. The Statement of Additional Information contains
further information concerning each Money Manager, including a description of
its business history and identification of its controlling persons.
Intermediate Fixed-Income Portfolio
Smith Barney Capital Management, 388 Greenwich Street, 25th Floor, New
York, NY 10013, is the Money Manager of the Intermediate Fixed-Income Portfolio.
During the period from April 9, 1992 to September 6, 1994, State Street acted as
Money Manager to the U.S. Government Money Portfolio pursuant to a Money Manager
Agreement among the Fund, Bennington and State Street. Effective September 7,
1994, Bennington terminated the Money Manager Agreement with State Street, and
began investing all the assets of that Portfolio. Smith Barney Capital
Management is a division of Smith Barney, an indirect wholly-owned subsidiary of
Travelers Incorporated, a public company (of which there are no controlling
persons, as defined under the Investment Company Act), 65 East 55th Street, New
York, NY 10022. Smith Barney Capital Management is organized such that a team,
consisting of Joshua SH. Lane and Patrick Sheehan, is primarily responsible for
the day-to-day management and investment decisions for the Intermediate
Fixed-Income Portfolio. Mr. Lane, Managing Director, joined Smith Barney Capital
Management in 1990. From 1981 through 1990, Mr. Lane was employed by the Exxon
Corporation Pension Fund. Mr. Sheehan, Managing Director, joined Smith Barney
Capital Management in 1992. From 1990 until 1992, Mr. Sheehan was a Vice
President of Value Line Asset Management. Prior to that, from 1989 to 1990, Mr.
Sheehan was a Senior Vice President of Seaman's Bank for Savings.
Short-Intermediate Fixed-Income Portfolio
Bankers Trust Company, 130 Liberty Street, New York, NY 10006 ("Bankers
Trust"), is the Money Manager of the Short-Intermediate Fixed-Income Portfolio.
Bankers Trust is a wholly-owned subsidiary of Bankers Trust New York
Corporation, a public company, 130 Liberty Street, New York, NY 10006. Bankers
Trust is organized such that day-to-day management and investment decisions are
made by a committee and no one person is primarily responsible for making
recommendations to that committee.
Mortgage Securities Portfolio
BlackRock Financial Management, Inc., 345 Park Avenue, 30th Floor, New
York, NY 10154 ("BlackRock"), is the Money Manager of the Mortgage Securities
Portfolio. BlackRock (formerly BlackRock Financial Management L.P.) is a
Delaware corporation, which is a wholly-owned subsidiary of PNC Asset Management
Group, Inc., which is a wholly-owned indirect subsidiary of PNC, the Custodian
of the Fund. PNC is a commercial bank whose principal office is in Pittsburgh,
PA and is wholly-owned by PNC Bank Corp., a bank holding company. BlackRock is a
registered investment adviser and is organized such that day-to-day management
and investment decisions are made by a committee and no one person is primarily
responsible for making recommendations to that committee. BlackRock serves as
investment adviser to fixed-income investors in the United States and overseas
through funds and institutional accounts.
APPENDIX A
DESCRIPTION OF INDICES
The following information as to each index has been supplied by the
respective preparer of the index or has been obtained from other
publicly-available information.
Lehman Brothers Government/Corporate Index;
Lehman Brothers Government/Corporate 1-5 Year Index;
Lehman Brothers Mortgage-Backed Securities Index.
The Lehman Brothers Bond Indices include fixed-rate debt issues rated
investment grade or higher by Moody's, S&P, or Fitch Investors Service, Inc. All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for U.S. Government issues and $25 million for all others.
Price, coupon and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value weighted inclusive of accrued
interest.
The Lehman Brothers Government/Corporate Index is made up of the Government
and Corporate Bond Indices.
The Government Bond Index is made up of the Treasury Bond Index (all public
obligations of the United States Treasury, excluding flower bonds and foreign
targeted issues) and the Agency Bond Index (all publicly issued debt of U.S.
Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government). The Government Bond Index also includes the
1-3 Year Government Index, composed of Agency and Treasury securities with
maturities of one to three years, and the 20 Year Treasury Index, comprising
Treasury issues with 20 years or more to maturity.
The Corporate Bond Index includes all publicly issued, fixed-rate,
nonconvertible investment grade domestic corporate debt. Also included are
Yankee bonds, which are dollar-denominated SEC registered public, nonconvertible
debt issued or guaranteed by foreign sovereign governments, municipalities or
governmental agencies, or international agencies.
The 1-5 Year Government/Corporate Index is composed of Agency and Treasury
securities and corporate securities of the type referred to in the preceding
paragraph, all with maturities of one to five years.
The Mortgage-Backed Securities Index covers all fixed-rate securities
backed by mortgage pools of the Government National Mortgage Association (GNMA),
Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage
Association (FNMA). Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not. For the five-year period between
October 1988 and December 1993, the Mortgage-Backed Securities Index had an
annualized yield ranging within that period from a low of 6.46 to a high of
10.50.
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information and representations must not be relied
upon. This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any person
to whom it is unlawful to make such an offer. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Portfolios,
Bennington or the Money Managers since the date hereof; however, if any material
change occurs while this Prospectus is required by law to be delivered, this
Prospectus will be amended or supplemented accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington Capital
Management L.P.
<PAGE>
ACCESSOR(R) FUNDS, INC.
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
(206) 224-7420/(800) 759-3504
Statement of Additional Information
Dated April 29, 1996
ACCESSOR(R) FUNDS, INC. (the "Fund") is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios (individually, a "Portfolio"
and collectively, the "Portfolios"), each with its own investment objective and
policies.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the equity portfolios (the "Equity
Portfolios' Prospectus") (which includes the Growth, Value and Income, Small to
Mid Cap and International Equity Portfolios (the "Equity Portfolios")) and the
Prospectus for the fixed-income portfolios (the "Fixed-Income Portfolios'
Prospectus") (which includes the Intermediate Fixed-Income, Short-Intermediate
Fixed-Income, Mortgage Securities and U.S. Government Money Portfolios (the
"Fixed-Income Portfolios")), each dated April 29, 1996, copies of which may be
obtained from the Fund without charge by writing or calling the Fund at the
address or phone number shown above.
The Fund currently includes the following Portfolios:
GROWTH PORTFOLIO -- seeks capital growth through investing primarily in equity
securities with greater than average growth characteristics selected from the
500 U.S. issuers which make up the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500").
VALUE AND INCOME PORTFOLIO -- seeks generation of current income and capital
growth by investing primarily in income-producing equity securities selected
from the 500 U.S. issuers which make up the S&P 500.
SMALL TO MID CAP PORTFOLIO(1)<F5> -- seeks capital growth through investing
primarily in equity securities of small to medium capitalization issuers.
INTERNATIONAL EQUITY PORTFOLIO -- seeks capital growth by investing primarily in
equity securities of companies domiciled in countries other than the United
States and traded on foreign stock exchanges.
INTERMEDIATE FIXED-INCOME PORTFOLIO -- seeks generation of current income by
investing primarily in fixed-income securities with durations of between three
and ten years and, under normal market conditions, will have a dollar weighted
average duration of not less than three years nor more than ten years which does
not vary more or less than 20% from that of the Lehman Brothers
Government/Corporate Index or another relevant index approved by the Fund's
Board of Directors (the "Board of Directors").
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO -- seeks preservation of capital and
generation of current income by investing primarily in fixed-income securities
with durations of between one and five years and, under normal market
conditions, will have a dollar weighted average duration of not less than two
years nor more than five years which does not vary more or less than 20% from
that of the Lehman Brothers 1-5 Year Government/Corporate Index or another
relevant index approved by the Board of Directors.
MORTGAGE SECURITIES PORTFOLIO -- seeks generation of current income by investing
primarily in mortgage-related securities with an aggregate dollar weighted
average duration that does not vary outside of a band of plus or minus 20% from
the Lehman Brothers Mortgage-Backed Securities Index or another relevant index
approved by the Board of Directors.
U.S. GOVERNMENT MONEY PORTFOLIO -- seeks maximum current income consistent with
the preservation of principal and liquidity by investing primarily in short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
- ----------
<F5> (1) Formerly the "Small Cap Portfolio." Prior to September 15, 1995, the
Small Cap Portfolio sought to achieve its investment objective through
investing primarily in small capitalization issuers (selected from the
2,000 U.S. issuers with the next largest market capitalization after (and
excluding) the 1,000 U.S. issuers with the largest market capitalization).
On August 15, 1995, the shareholders of the Small Cap Portfolio approved a
change in the investment objective of the Small Cap Portfolio effective
September 15, 1995, to permit the Small Cap Portfolio to also invest in
medium capitalization issuers. This change in investment objective
coincided with the change of the name of the Small Cap Portfolio to Small
to Mid Cap Portfolio and the commencement of management by a new Money
Manager for the Small to Mid Cap Portfolio.
</F5>
<PAGE>
TABLE OF CONTENTS
Form N-1A
Item No.
- --------
CROSS
CROSS REFERENCE
REFERENCE TO PAGE
TO PAGE IN FIXED-
IN EQUITY INCOME
PORTFOLIOS' PORTFOLIOS'
PAGE PROSPECTUS PROSPECTUS
---- ---------- ----------
10. Cover Page B-1 1 1
11. Table of Contents B-3 2 2
12. General Information and History B-4 3, 20 3, 21
13. Investment Restrictions, Policies and
Risk Considerations B-4 11 10
Investment Restrictions B-4 20 21
Investment Policies B-5 13 13
14. Management of the Fund B-17 20 21
15. Control Persons and Principal Holders
of Securities B-19 37 37
16. Investment Advisory and Other Services B-21
Service Providers B-21 4, 34 4, 34
Valuation of Portfolio Shares B-34 30 30
Portfolio Transaction Policies B-35 27 27
17. Brokerage Allocation and Other
Practices B-35 -- --
18. Capital Stock and Other Securities B-4 36 35
19. Purchase, Redemption and Pricing of
Securities Being Offered B-34 31-33 31-33
20. Code of Ethics B-38 -- --
21. Taxes B-39 28 28
22. Underwriters B-32 -- --
23. Calculation of Performance Data B-36 30 29
24. Financial Statements B-42 -- --
Appendix A - Ratings of Debt
Instruments A-1 -- --
Appendix B - Calculation of
Performance Fees B-1 -- --
<PAGE>
GENERAL INFORMATION AND HISTORY
The Fund was incorporated in Maryland on June 10, 1991, as World
Investment Network Fund, Inc. On August 27, 1991, the Fund amended its Articles
of Incorporation to change its name to Accessor Funds, Inc. The Fund is
authorized to issue 15 billion shares of common stock, $.001 par value per
share, and is currently divided into eight Portfolios. The Board of Directors
may increase or decrease the number of authorized shares without the approval of
shareholders. Shares of the Fund, when issued, are fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. Shares also are
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board of Directors
may determine.
Bennington Capital Management L.P. ("Bennington"), a Washington limited
partnership, is the manager and administrator of the Fund, pursuant to a
Management Agreement with the Fund. Bennington is also the transfer agent,
registrar, dividend disbursing agent and provides recordkeeping, administrative
and compliance services pursuant to its Transfer Agency and Administrative
Agreement ("Transfer Agent Agreement") with the Fund.
INVESTMENT RESTRICTIONS, POLICIES AND RISK CONSIDERATIONS
Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio. As defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
a majority of the outstanding voting securities of a Portfolio means the lesser
of (i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by proxy or (ii) more
than 50% of the outstanding shares.
INVESTMENT RESTRICTIONS
Each Portfolio is subject to the following "fundamental" investment
restrictions. Unless otherwise noted, these restrictions apply on a
Portfolio-by-Portfolio basis at the time an investment is being made. No
Portfolio will:
1. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result (i) with respect
to 75% of the Portfolio's total assets, more than 5% of the Portfolio's total
assets would then be invested in securities of a single issuer, or (ii) 25% or
more of the Portfolio's total assets would be invested in one or more issuers
having their principal business activities in the same industry. The U.S.
Government Money Portfolio may not purchase any security (other than obligations
of the U.S. Government, its agencies or instrumentalities) if as a result: (a)
more than 5% of the Portfolio's total assets would then be invested in
securities of a single issuer, or (b) 25% or more of the Portfolio's total
assets would be invested in one or more issuers having their principal business
activities in the same industry.
2. Issue senior securities, borrow money or pledge its assets, except
that a Portfolio may borrow up to 5% of the value of its total assets from banks
for temporary, extraordinary or emergency purposes and may pledge up to 10% of
the value of its total assets to secure such borrowings. In the event that the
asset coverage for the Portfolio's borrowings falls below 300%, the Portfolio
will reduce within three days the amount of its borrowings in order to provide
for 300% asset coverage. (For the purpose of this restriction, collateral
arrangements with respect to the writing of options, and, if applicable, futures
contracts, and collateral arrangements with respect to initial or variation
margin are not deemed to be a pledge of assets and neither such arrangements nor
the purchase or sale of futures is deemed to be the issuance of a senior
security).
3. Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, although it may purchase and sell financial futures
contracts, stock index futures contracts and related options, securities which
are secured by real estate, securities of companies which invest or deal in real
estate and publicly traded securities of real estate investment trusts. No
Portfolio may purchase interests in real estate limited partnerships. The U.S.
Government Money Portfolio may not buy or sell commodities or commodity
contracts, or real estate or interests in real estate, except that the Portfolio
may purchase and sell securities which are secured by real estate and securities
of companies which invest or deal in real estate, other than securities of real
estate investment trusts and real estate limited partnerships.
4. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal and state securities laws.
5. Invest in interests in oil, gas or other mineral exploration or
development programs.
6. Make loans, except through repurchase agreements (repurchase
agreements with a maturity of longer than seven days together with other
illiquid securities being limited to 15% of the net assets of the Portfolio) and
except through the lending of its portfolio securities as described below under
"Investment Policies--Lending of Portfolio Securities."
7. Make investments for the purpose of exercising control of
management.
8. Acquire more than 5% of the outstanding voting securities, or 10% of
all of the securities, of any one issuer. The U.S. Government Money Portfolio
may not purchase common stock or other voting securities, preferred stock,
warrants or other equity securities, except as may be permitted by restriction
number 11.
9. Effect short sales (other than short sales against-the-box) or
purchase securities on margin (except that a Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases or sales
of securities, may trade in futures and related options, and may make margin
payments in connection with transactions in futures contracts and related
options).
10. Invest in securities, other than mortgage-related securities,
asset-backed securities or obligations of any U.S. Government agency or
instrumentality, of an issuer which, together with any predecessor, has been in
operation for less than three years if, as a result, more than 5% of the
Portfolio's total assets would then be invested in such securities.
11. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of its total assets would
be invested in such securities, or as part of a merger, consolidation or other
acquisition, or as set forth under "Investment Policies -- Collateralized
Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits
("REMICs")."
12. Purchase warrants if as a result the Portfolio would have more than
5% of its total assets invested in warrants or more than 2% of its total assets
invested in warrants not listed on the New York or American Stock Exchanges.
Warrants attached to other securities are not subject to this limitation. The
U.S. Government Money Portfolio may not purchase warrants.
INVESTMENT POLICIES
Liquidity Reserves. Each Portfolio (other than the U.S. Government
Money Portfolio) may have up to 20% of its assets in cash or cash equivalents to
meet redemption requests, and each Portfolio may hold cash reserves in an
unlimited amount for temporary defensive purposes when its Money Manager
believes that a more conservative approach is desirable. In addition, Bennington
or a Money Manager may create an equity or fixed-income exposure for cash
reserves through the use of options or futures contracts. This will enable the
Portfolios to hold cash while receiving a return on the cash which is similar to
holding equity or fixed-income securities.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a seller who agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified time (ordinarily a week or
less). The securities purchased by the Portfolio have a total value in excess of
the value of the repurchase agreement and are held by PNC Bank, N.A., the
Portfolios' custodian (the "Custodian") until repurchased. The Portfolios'
repurchase agreements will at all times be fully collateralized by U.S.
Government securities or other collateral, such as cash, and the securities held
as collateral will be valued daily, and as the value of the securities declines,
the Portfolio will require additional collateral. If the seller defaults and the
value of the collateral securing the repurchase agreements declines, the
Portfolio may incur a loss. Repurchase agreements assist a Portfolio in being
invested fully while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. Each Portfolio will limit repurchase transactions to
commercial banks having at least $1 billion in total assets and broker-dealers
having a net worth of at least $5 million or total assets of at least $50
million, and will limit repurchase transactions to entities whose
creditworthiness is continually monitored and found satisfactory by Bennington
or the Portfolio's Money Manager under the supervision of the Board of
Directors. Subject to the limitation on investing not more than 15% of a
Portfolio's net assets in illiquid securities, no Portfolio will invest more
than 15% of its net assets (taken at current market value) in repurchase
agreements maturing in more than seven days; provided, however, the U.S.
Government Money Portfolio will not invest more than 10% of its net assets in
illiquid securities (including repurchase agreements maturing in more than seven
days). See "Investment Restrictions, Policies and Risk Considerations - Illiquid
Securities."
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio may
enter into reverse repurchase agreements to meet redemption requests where the
liquidation of portfolio securities is deemed by the Portfolio's Money Manager
to be inconvenient or disadvantageous. A reverse repurchase agreement has the
characteristics of borrowing and is a transaction whereby a Portfolio transfers
possession of a portfolio security to a bank or a broker-dealer in return for a
percentage of the portfolio security's market value. The Portfolio retains
record ownership of the security involved, including the right to receive
interest and principal payments. At an agreed upon future date, the Portfolio
repurchases the security by paying an agreed upon purchase price plus interest.
The Intermediate Fixed-Income Portfolio, the Short-Intermediate Fixed-Income
Portfolio and the Mortgage Securities Portfolio (collectively, the "Bond
Portfolios"), may also enter into dollar rolls in which the Portfolios sell
securities for delivery in the current month and simultaneously contract to
repurchase substantially similar (same type and coupon) securities on a
specified future date from the same party. During the roll period, the
Portfolios forego principal and interest paid on the securities. The Portfolios
are compensated by the difference between the current sales price and the
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale.
At the time a Portfolio enters into reverse repurchase agreements or
dollar rolls, the Portfolio will establish or maintain a segregated account with
a custodian approved by the Board of Directors, containing cash or liquid
high-grade debt obligations of the Portfolio equal in value to the repurchase
price including any accrued interest. Each Portfolio's entry into reverse
repurchase agreements and dollar rolls, together with its other borrowings, is
limited to 5% of its net assets. Reverse repurchase agreements and dollar rolls
involve the risk that the market value of securities retained in lieu of sale
may decline below the price of the securities the Portfolio has sold but is
obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Portfolio's obligation to repurchase the securities, and the
Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decisions.
Reverse repurchase agreements and dollar rolls are considered
borrowings by the Portfolios for purposes of the percentage limitations
applicable to borrowings.
Real Estate-Related Securities. Each Portfolio may invest up to 5% of
its net assets in publicly-traded real estate investment trusts. Publicly-traded
real estate investment trusts generally engage in acquisition, development,
marketing, operating and long-term ownership of real property. Publicly-traded
real estate investment trust meeting certain asset income and distribution
requirements will generally not be subject to federal taxation on income
distributed to its shareholders.
Short Sales Against-the-Box. Although to date the Portfolios have made
no short sales against the box, and no Money Manager anticipates making short
sales against the box in the future, each Portfolio (other than the U.S.
Government Money Portfolio) may make short sales of securities against-the-box
or maintain a short position, provided that at all times when a short position
is open, the Portfolio owns an equal amount of such securities or securities
convertible or exchangeable for such securities without the payment of any
further consideration for the securities sold short. Not more than 25% of a
Portfolio's net assets (determined at the time of the short sale) may be subject
to such sales. Short sales against-the-box will be made primarily to defer
realization of gain or loss for federal income tax purposes.
Rights and Warrants. The Portfolios (except for the U.S. Government
Money Portfolio) may acquire up to 5% of their net assets in rights and warrants
in securities of issuers that meet the Portfolios' investment objective and
policies. Warrants are instruments which give the holder the right to purchase
the issuer's securities at a stated price during a stated term. Rights are
short-term warrants issued to shareholders in conjunction with new stock issues.
The prices of warrants do not necessarily move parallel to the prices of the
underlying securities. No Portfolio may purchase warrants (other than warrants
attached to other securities) if as a result the Portfolio would have more than
5% of its total assets invested in warrants or more than 2% of its total assets
invested in warrants not listed on the New York or American Stock Exchanges.
Warrants involve a risk of loss if the market price of the underlying securities
subject to the warrants never exceeds the exercise price of the warrants. See
"Investment Restrictions."
Mortgage-Related Securities. The Bond Portfolios may invest in
mortgage-related securities, and, in particular, mortgage pass-through
securities, Government National Mortgage Association ("GNMA") Certificates,
Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") mortgage-backed obligations and mortgage-backed securities
of other issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers, and other secondary
market issuers). Some mortgage-related securities may be guaranteed by the U.S.
Government or an agency or instrumentality thereof; others are issued by
financial institutions such as commercial banks, savings and loan associations,
mortgage banks and securities broker-dealers (or affiliates of such institutions
established to issue these securities) in the form of mortgage-backed bonds and
are not guaranteed. Thus, credit risk among these instruments may vary. Payments
of principal and interest on Certificates issued by GNMA (but not the market
value of the Certificates themselves) are guaranteed by the full faith and
credit of the U.S. Government. Securities guaranteed by agencies or
instrumentalities of the U.S. Government, such as the FNMA or FHLMC, are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations. Mortgage-backed bonds are not guaranteed, although the
mortgage-related securities securing these obligations may be subject to U.S.
Government guarantee or third-party support. If the collateral securing the
privately issued obligation is insufficient to make payment on the obligation,
a
holder could sustain a loss.
In the case of mortgage pass-through securities, such as GNMA
Certificates or FNMA and FHLMC mortgage-backed obligations, early repayment of
principal arising from prepayments of principal on the underlying mortgage loans
(due to the sale of the underlying property, the refinancing of the loan, or
foreclosure) may expose a Portfolio to a lower rate of return upon reinvestment
of the principal. For example, with respect to GNMA Certificates, although
mortgage loans in the pool will have maturities of up to 30 years, the actual
average life of a GNMA Certificate typically will be substantially less because
the mortgages will be subject to normal principal amortization and may be
prepaid prior to maturity. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
mortgage-backed security. Reinvestment of prepayments may occur at higher or
lower rates than the original yield on the Certificates.
In addition, tracking the "pass-through" payments on GNMA Certificates
and other mortgage-related and asset-backed securities may, at times, be
difficult. Expected payments may be delayed due to the delays in registering
newly traded paper securities. The Portfolios' Custodian's policies for
crediting missed payments while errant receipts are tracked down may vary. Some
mortgage-backed securities such as those of FHLMC and FNMA trade in book-entry
form and should not be subject to this risk of delays in timely payment of
income.
Asset-Backed Securities. The Bond Portfolios may invest in asset-backed
securities offered through trusts and special purpose subsidiaries in which
various types of assets, primarily home equity loans and automobile and credit
card receivables, are securitized in pass-through structures similar to the
mortgage pass-through structures described above or in a pay-through structure
similar to the collateralized mortgage structure. The Bond Portfolios may invest
in these and other types of asset-backed securities which may be developed in
the future.
Risks of Investing in Asset-Backed and Mortgage-Related Securities. The
yield characteristics of mortgage-related securities (including CMOs and REMICs)
and asset-backed securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if the Bond Portfolios purchase such a security at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Alternatively, if the Bond
Portfolios purchase these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.
Although the extent of prepayments in a pool of mortgage loans depends
on various economic and other factors, as a general rule prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the Bond Portfolios are likely to be
greater during a period of declining interest rates and, as a result, likely to
be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-related securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors
will predominate. Mortgage-related securities and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
the risk of prepayment.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, because asset-backed securities do not usually have
the type of security interest in the related collateral that mortgage-related
securities have. For example, credit card receivables generally are unsecured
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, some of which may reduce a creditor's ability to realize
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs"). The Bond Portfolios may invest in CMOs and
REMICs. A CMO is a debt security that is backed by a portfolio of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. CMOs generally are partitioned into several classes
with a ranked priority as to the time that principal payments will be made with
respect to each of the classes. These Portfolios may invest only in
privately-issued CMOs that are collateralized by mortgage-backed securities
issued or guaranteed by GNMA, FHLMC or FNMA and in CMOs issued by FHLMC.
Currently, approximately 95% of all CMOs are issued by FHLMC.
The Bond Portfolios also may invest in REMICs. An issuer of REMICs may
be a trust, partnership, corporation, association or a segregated pool of
mortgages, or may be an agency of the U.S. Government and, in each case, must
qualify and elect treatment as such under the Internal Revenue Code of 1986, as
amended (the "Code"). A REMIC must consist of one or more classes of "regular
interests," some of which may be adjustable rate, and a single class of
"residual interests." To qualify as a REMIC, substantially all the assets of the
entity must be in assets directly or indirectly secured, principally by real
property. These Portfolios do not intend to invest in residual interests. The
United States Congress intended for REMICs to ultimately become the exclusive
vehicle for the issuance of multi-class securities backed by real estate
mortgages. If a trust or partnership that issues CMOs does not elect or qualify
for REMIC status, it will be taxed at the entity level as a corporation.
In reliance on a Securities and Exchange Commission (the "SEC") rule,
the Bond Portfolios' investments in certain qualifying CMOs, including CMOs that
have elected to be treated as REMICs, are not subject to the Investment Company
Act's limitation on acquiring interests in other investment companies. In
addition, in reliance on an earlier SEC interpretation, the Fund's investments
in certain other CMOs which cannot or do not rely on the rule, are also not
subject to the Investment Company Act's limitation on acquiring interests in
other investment companies. In order to be able to rely on the SEC's
interpretation, the CMOs and REMICs must be unmanaged, fixed-asset issuers that
(a) invest primarily in mortgage-backed securities, (b) do not issue redeemable
securities, (c) operate under general exemptive orders exempting them from all
provisions of the Investment Company Act, and (d) are not registered or
regulated under the Investment Company Act as investment companies. To the
extent that these Portfolios select CMOs or REMICs that do not satisfy the
requirements of the rule or meet the above requirements, the Portfolio may not
invest more than 10% of its assets in all such entities and may not acquire more
than 3% of the voting securities of any single such entity.
Municipal Securities. The Portfolios may invest in fixed-income
securities issued by states, counties and other local governmental
jurisdictions, including agencies of such governmental jurisdictions, within the
United States. Investments in municipal securities entail certain risks,
including adverse income and principal value fluctuation associated with general
economic conditions affecting the municipal securities markets, the issuers and
guarantors of municipal securities and the facilities financed by municipal
securities. The yields of municipal securities depend on, among other things,
conditions in the municipal bond market and fixed income markets generally, the
size of a particular offering, the maturity of the obligation, and the rating of
the issue. A general decline in interest rates will increase their market value
while a rise in interest rates tends to have the opposite effect.
A reduction in the federal income tax rates would reduce the tax
equivalent yield received by shareholders and would tend to reduce the value of
municipal securities. In addition, changes in federal law could adversely affect
the tax-exempt status of income derived from municipal securities which could
significantly affect the ability to acquire and dispose of municipal securities
at desirable yield and price levels. The value of municipal securities will
change in response to fluctuations in interest rates.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities; provided, however, the U.S. Government Money
Portfolio will not invest more than 10% of its net assets in illiquid
securities. Securities which are illiquid include securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable, repurchase agreements
having a maturity of longer than seven days, certain interest only
("IO")/principal only ("PO") strips and over-the-counter ("OTC") options.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the notice period. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public by establishing a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers (as such term is defined under Rule 144A).
Bennington anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc. (the "NASD"). An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the Portfolios, however, could affect adversely the marketability of such
Portfolios' securities and, consequently, the Portfolios might be unable to
dispose of such securities promptly or at favorable prices. Bennington will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors.
Restricted securities issued pursuant to Rule 144A are not deemed to be
illiquid. The Money Manager will monitor the liquidity of such restricted
securities subject to the supervision of Bennington and the Board of Directors.
In reaching liquidity decisions, the Money Manager will consider, among other
things, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; (4) the number of other potential purchasers; and (5)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio may lend its portfolio securities to brokers,
dealers and financial institutions, provided that outstanding loans do not
exceed in the aggregate 10% of the value of the Portfolio's net assets and
provided that such loans are callable at any time by the Portfolio and are at
all times secured by cash or equivalent collateral that is at least equal to the
market value, determined daily, of the loaned securities. The advantage of such
loans is that the Portfolio continues to receive interest and dividends on the
loaned securities, while at the same time earning interest either directly from
the borrower or on the collateral which will be invested in short-term
obligations.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors. On
termination of the loan, the borrower is required to return the securities to
the Portfolio, and any gain or loss in the market price during the loan would be
borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower.
Forward Commitments. A Portfolio may make contracts to purchase
securities for a fixed price at a future date beyond customary settlement time
("forward commitments") consistent with the Portfolio's ability to manage its
investment portfolio and meet redemption requests. The Portfolio may dispose of
a commitment prior to settlement if it is appropriate to do so and realize
short-term profits or losses upon such sale. When effecting such transactions,
cash or liquid high-grade debt obligations of the Portfolio of a dollar amount
sufficient to make payment for the portfolio securities to be purchased will be
segregated on the Portfolio's records at the trade date and maintained until the
transaction is settled, so that the purchase of securities on a forward
commitment basis is not deemed to be the issuance of a senior security. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date.
Options. The Portfolios' investment policies permit the Portfolios
(other than the U.S. Government Money Portfolio) to purchase put and call
options and write (sell) "covered" put and "covered" call options.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's custodian, cash, U.S.
Government securities or other liquid high-grade debt obligations with a value
sufficient to meet its obligations under the call option, or if the Portfolio
owns an offsetting call option. When a Portfolio writes a call option, it
receives a premium and gives the purchaser the right to buy the underlying
security at any time during the call period, at a fixed exercise price
regardless of market price changes during the call period. If the call is
exercised, the Portfolio forgoes any gain from an increase in the market price
of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. A written put option is "covered"
if a Portfolio deposits with the Fund's custodian, cash, U.S. Government
securities or other liquid high-grade debt obligations with a value at least
equal to the exercised price of the put option.
The Portfolios may purchase and write covered put and covered call
options that are traded on United States or foreign securities exchanges or that
are listed on NASDAQ. Currency options may be either listed on an exchange or
traded OTC. Options on financial futures and stock indices are generally settled
in cash as opposed to the underlying securities.
Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are privately negotiated with the counterparty to such contract and
are purchased from and sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Portfolios.
OTC options differ from exchange-traded options in that OTC options are
transacted with the counterparty directly and not through a clearing corporation
(which guarantees performance). If the counterparty fails to take delivery of
the securities underlying an option it has written, the Portfolios would lose
the premium paid for the option as well as any anticipated benefit of the
transaction. Consequently, the Portfolios must rely on the credit quality of the
counterparty and there can be no assurance that a liquid secondary market will
exist for any particular OTC options at any specific time. The SEC has taken the
position that purchased OTC options and the assets used as cover for written OTC
options are illiquid securities subject to the 15% limitation described in
"Illiquid Securities."
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and assets used as cover for written OTC options.
Furthermore, the Portfolios will not purchase or write put or call options on
securities, stock index futures or financial futures if the aggregate premiums
paid on all such options exceed 20% of the Portfolio's total net assets, subject
to the foregoing limitations.
If the writer of an option wishes to terminate the obligation, he or
she may effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. Each Portfolio
will realize a profit from a closing transaction if the price of the transaction
is less than the premium received from writing the option or is more than the
premium paid to purchase the option; the Portfolio will realize a loss from a
closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option.
There is no guarantee that either a closing purchase or a closing sale
transaction can be effected. To secure the obligation to deliver the underlying
security in the case of a call option, the writer of the option is generally
required to pledge for the benefit of the broker the underlying security or
other assets in accordance with the rules of the relevant exchange or
clearinghouse, such as The Options Clearing Corporation, an institution created
to interpose itself between buyers and sellers of options in the United States.
Technically, the clearinghouse assumes the other side of every purchase and sale
transaction on an exchange and, by doing so, guarantees the transaction.
Risks of Transactions in Options. An option position may be closed out
only on an exchange, board of trade or other trading facility which provides a
secondary market for an option of the same series. Although the Portfolios will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Portfolio would have to exercise its options
in order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If the Portfolio as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. The Portfolios intend to purchase and sell only those options which are
cleared by clearinghouses whose facilities are considered to be adequate to
handle the volume of options transactions.
Futures Contracts. Each Portfolio (other than the U.S. Government Money
Portfolio) is permitted to enter into financial futures contracts, stock index
futures contracts and related options thereon ("futures contracts") in
accordance with its investment objective.
A futures contract is the contractual obligation to acquire or sell the
securities called for by the contract at a specified price on a specified date.
Futures contracts are traded on "contract markets" designated by the Commodity
Futures Trading Commission. Trading is similar to the manner stock is traded on
an exchange, except that all contracts are cleared through and guaranteed to be
performed by a clearing corporation associated with the commodity exchange on
which the futures contract is traded.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid, high-grade debt
securities. The initial margin is in the amount of cash or short-term securities
equal to a specified percentage of the futures amount (approximately 5% or more
of the futures contract amount). Subsequent daily payments are made between the
Portfolio and futures broker to maintain the initial margin at the specified
percentage. The purchase and sale of futures contracts and collateral
arrangements with respect thereto are not deemed to be a pledge of assets and
such arrangements are not deemed to be a senior security.
A "short hedge" is taking a short position in the futures market (that
is, selling a financial instrument or a stock index futures contract for future
delivery on the contract market) as a temporary substitute for sale of the
financial instrument or common stock, respectively, in the cash market, when a
Portfolio holds and continues to hold the financial instrument necessary to make
delivery under the financial futures contract or holds common stocks in an
amount at least equal in value to the stock index futures contract.
A "long hedge" is taking a long position in the futures market (that
is, purchasing a financial instrument or a stock index futures contract for
future delivery on a contract market) as a temporary substitute for purchase of
the financial instrument or common stock, respectively, in the cash market when
the Portfolio holds and continues to hold segregated liquid assets sufficient to
take delivery of the financial instrument under the futures contract.
A "stock index futures contract" is a contract to buy or sell specified
units of a stock index at a specified future date at a price agreed upon when
the contract is made. A unit is the current value of the contract index. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Upon the termination of the contract,
settlement is the difference between the contract price and the actual level of
the stock index at the contract expiration and is paid in cash.
A "financial futures contract" (or an "interest rate futures contract")
is a contract to buy or sell a specified quantity of financial instruments such
as United States Treasury bonds, notes, bills, commercial paper and bank
certificates of deposit, an agreed amount of currencies, or the cash value of a
financial instrument index at a specified future date at a price agreed upon
when the contract is made. Substantially all futures contracts are closed out
before settlement date or call for cash settlement. A futures contract is closed
out by buying or selling an identical offsetting futures contract which cancels
the original contract to make or take delivery.
It is anticipated that the primary use of stock index futures contracts
will be for a long hedge in order to minimize the impact of cash balances. For
example, a Portfolio may sell stock when a Money Manager determines that it no
longer is a favorable investment, anticipating to invest the proceeds in
different stocks. Until the proceeds are reinvested in stocks, the Portfolio may
purchase a long position in a stock index futures contract.
The Portfolios may purchase options on futures contracts as an
alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures are similar to options on the security upon which
the futures contracts are written except that options on stock index futures
contracts give the purchaser the right, in return for a premium paid, to assume
a position in a stock index futures contract at any time during the life of the
option at a specified price and options on financial futures contracts give the
purchaser the right, in return for a premium paid, to assume a position in a
financial futures contract at any time during the life of the option at a
specified price.
Stock index futures contracts may be used by the Equity Portfolios as a
hedge during or in anticipation of market decline. For example, if the market
was anticipated to decline, stock index futures contracts in a stock index with
a value that correlates with the declining stock value would be sold (short
hedge) which would have a similar effect as selling the stock. As the market
value declines, the stock index future's value decreases, partly offsetting the
loss in value on the stock by enabling the Portfolio to repurchase the futures
contract at a lower price to close out the position.
Financial futures contracts may be used by the Bond Portfolios as a
hedge during or in anticipation of interest rate changes. For example, if
interest rates were anticipated to rise, financial futures contracts would be
sold (short hedge) which have a similar effect as selling bonds. Once interest
rates increase, fixed-income securities held in a Portfolio's portfolio would
decline, but the futures contract value decreases, partly offsetting the loss in
value of the fixed-income security by enabling the Portfolio to repurchase the
futures contract at a lower price to close out the position.
The Portfolios may purchase a put option on a stock index futures
contract instead of selling a futures contract in anticipation of market
decline. Purchasing a call option on a stock index futures contract is used
instead of buying a futures contract in anticipation of a market advance, or to
temporarily create an equity exposure for cash balances until those balances are
invested in equities. Options on financial futures are used in similar manner in
order to hedge portfolio securities against anticipated changes in interest
rates.
There are certain investment risks in using futures contracts as a
hedging technique. One risk is the imperfect correlation between the price
movement of the futures contracts and the price movement of the portfolio
securities that are the subject of the hedge. The degree of imperfection of
correlation depends upon circumstances such as: variations in speculative market
demand for futures and for debt securities and currencies, and differences
between the financial instruments being hedged and the instruments underlying
the futures contracts available for trading with respect to interest rate levels
and maturities. Another risk is that a liquid secondary market may not exist for
a futures contract, causing a Portfolio to be unable to close out the futures
contract and thereby affecting a Portfolio's hedging strategy.
Limitations on Futures and Options Transactions. The Fund has filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association, which regulate trading in the futures markets.
Pursuant to Section 4.5 of the regulations under the Commodity Exchange Act, the
notice of eligibility includes the following representations:
(a) The Fund will use commodity futures contracts and options solely
for bona fide hedging purposes within the meaning of CFTC regulations; provided
that the Fund may hold long positions in commodity futures contracts or options
that do not fall within the definition of bona fide hedging transactions if the
positions are used as part of the Fund management strategy and are incidental to
the Fund's activities in the underlying cash market, and the underlying
commodity value of the positions at all times will not exceed the sum of (i)
cash or U.S. dollar-denominated high quality short-term money market instruments
set aside in an identifiable manner, plus margin deposits, (ii) cash proceeds
from existing investments due in 30 days, and (iii) accrued profits on the
positions held by a futures commission merchant; and
(b) The Fund will not enter into any commodity futures contract or
options if, as a result, the sum of initial margin deposits on commodity futures
contracts or options the Fund has purchased, after taking into account
unrealized profits and losses on such contracts, would exceed 5% of the Fund's
total assets.
Foreign Currency Transactions. The International Equity Portfolio (the
"International Portfolio") may enter into foreign currency transactions. The
value of the assets of the International Portfolio as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the International Portfolio may
incur costs in connection with conversions between various currencies. The
International Portfolio will conduct foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days ("term") from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers.
The International Portfolio may enter into forward foreign currency
exchange contracts when the Money Manager determines that the best interests of
the International Portfolio will be served. When the International Portfolio
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to establish the U.S. dollar costs or proceeds.
By entering into a forward contract in U.S. dollars for the purchase or sale of
the amount of foreign currency involved in an underlying security transaction,
the International Portfolio will be able to protect against possible losses
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. Such contracts
may limit potential gains which might result from a possible change in the
relationship between the U.S. dollar and such foreign currency.
When a Money Manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the International Portfolio's portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and the successful execution of a
short-term hedging strategy is highly uncertain. The International Portfolio
will not enter into such forward contracts on a regular basis or continuous
basis if the International Portfolio would have more than 25% of its gross
assets denominated in the currency of the contract or 10% of the value of its
total assets committed to such contracts, where the International Portfolio
would be obligated to deliver an amount of foreign currency in excess of the
value of the International Portfolio's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies. The
International Portfolio's Custodian will segregate cash, equity or debt
securities in an amount not less than the value of the International Portfolio's
total assets committed to foreign currency exchange contracts entered into under
this second type of transaction.
It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the International Portfolio to purchase additional foreign
currency on the spot market (and bear the expense of such purchases) if the
market value of the security is less than the amount of foreign currency the
International Portfolio are obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the amount
of foreign currency the International Portfolio are obligated to deliver.
This method of protecting the value of the International Portfolio's
portfolio securities against a decline in the value of the currency does not
eliminate fluctuations in the underlying prices of the securities. It
establishes a rate of exchange which one can achieve at some future point in
time. Although such contracts tend to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
U.S. Government Obligations. The types of U.S. Government obligations
in which the Portfolios may at times invest include: (1) a variety of United
States Treasury obligations, which differ only in their interest rates,
maturities and times of issuance, i.e., United States Treasury bills having a
maturity of one year or less, United States Treasury notes having maturities of
one to ten years, and United States Treasury bonds generally having maturities
of greater than ten years; (2) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the United States Treasury (such as
GNMA Participation Certificates), (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the United States Treasury, (c)
discretionary authority of the U.S. Government agency or instrumentality, or (d)
the credit of the instrumentality (examples of agencies and instrumentalities
are: Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks and
FNMA). No assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(2)(b), (2)(c) and (2)(d) in the future, other than as set forth above, since it
is not obligated to do so by law. The Portfolios may purchase U.S. Government
obligations on a forward commitment basis.
Obligations issued or guaranteed as to principal and interest by the
U.S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
Variable and Floating Rate Securities. A floating rate security is one
whose terms provide for the automatic adjustment of interest rate whenever a
specified interest rate changes. A variable rate security is one whose terms
provide for the automatic establishment of a new interest rate on set dates. The
interest rate on floating rate securities is ordinarily tied to and is a
percentage of the prime rate of a specified bank or some similar objective
standard, such as the 90-day United States Treasury bill rate, and may change as
often as twice daily. Generally, changes in interest rates on floating rate
securities will reduce changes in the security's market value from the original
purchase price, resulting in the potential for capital appreciation or capital
depreciation being less than for fixed-income obligations with a fixed interest
rate.
The U.S. Government Money Portfolio may purchase variable rate U.S.
Government obligations which are instruments issued or guaranteed by the U.S.
Government, or any agency or instrumentality thereof, which have a rate of
interest subject to adjustment at regular intervals but less frequently than
annually. Variable rate U.S. Government obligations on which interest is
readjusted no less frequently than annually will be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
The Portfolios may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 397 days, in each case upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit a Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Portfolio, as lender, and the borrower. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations normally has
a corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, such obligations are
collateralized by letters of credit or other credit support arrangements
provided by banks. Because these obligations are direct lending arrangements
between the lender and borrower it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary market
for these obligations, although they are redeemable at face value. Accordingly,
where these obligations are not secured by letters of credit or other credit
support arrangements, a Portfolio's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies and a portfolio may invest in
obligations which are not so rated only if its Money Manager determines that at
the time of investment the obligations are of comparable quality to the other
obligations in which the Portfolio may invest. The Money Manager of a Portfolio
will consider on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations held by the Portfolio.
Inverse Floaters. Although to date the Portfolios have not invested in
inverse floaters, and no investment manager anticipates investing in inverse
floaters, the Bond Portfolios and the International Portfolio may invest up to
5% of their net assets in inverse floaters. Inverse floaters are securities with
a variable interest rate that varies in inverse proportion to the direction of
an interest rate, or interest rate index. Inverse floaters have significantly
greater risk than conventional fixed-income instruments. When interest rates are
declining, coupon payments will rise at periodic intervals. This rise in coupon
payments causes rapid dramatic increases in prices compared to those expected
from conventional fixed-income instruments of similar maturity. Conversely,
during times of rising interest rates, the coupon payments will fall at periodic
intervals. This fall in coupon payments causes rapid dramatic decreases in
prices compared to those expected from conventional fixed-income instruments of
similar maturity. If the Bond Portfolios or the International Portfolio invest
in inverse floaters, they will treat inverse floaters as illiquid securities
except for (i) inverse floaters issued by U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by Bennington and the Money Managers for the Portfolios subject to the
supervision of the Board of Directors or (ii) where such securities can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share.
Privately-Issued STRIP Securities. The Portfolios may invest in
principal portions or coupon portions of U.S. Government Securities that have
been separated (stripped) by banks, brokerage firms, or other entities
("privately-issued STRIPS"). Stripped securities are usually sold separately in
the form of receipts or certificates representing undivided interests in the
stripped portion and are not considered to be issued or guaranteed by the U.S.
Government. Stripped securities may be more volatile than non-stripped
securities. No Portfolio will invest more than 5% of its net assets in
privately-issued STRIPS.
MANAGEMENT OF THE FUND
The Board of Directors is responsible for overseeing generally the
operation of the Fund. The officers are responsible for the day-to-day
management and administration of the Fund's operations.
<TABLE>
<CAPTION>
Name and Position with Principal Occupations
Address Age the Fund During Past Five Years
------- --- -------- ----------------------
<S> <C> <C> <C>
* J. Anthony 53 Director, Executive Director, Bennington
Whatley, III** President Capital Management L. P. since
1420 Fifth Avenue and Principal April 1991; President, Bennington
Seattle, WA Executive Management Associates, Inc. since
Officer April 1991; President, Northwest
Advisors, Inc. since 1990; Senior
Vice President and Director of
Sales and Marketing, Frank Russell
Company (asset strategy consultant)
from 1986 to 1990.
George G. 58 Director Partner, Martinson, Cobean &
Cobean, III Associates, P.S. (certified public
1607 South 341st Place accountants) since 1973.
Federal Way, WA
Geoffrey C. Cross 56 Director President, Geoffrey C. Cross P.S.,
252 Broadway Inc., (general practice of law)
Tacoma, WA since 1970.
*James A. Kraft 45 Director and Vice President, Bennington Capital
1420 Fifth Avenue Vice Management L.P. since April 1991;
Seattle, WA President Systems Analyst, Frank Russell
Investment Management Company
(investment adviser) from 1985 to
1991.
Ravindra A. Deo 33 Vice President, Director and Vice President,
1420 Fifth Avenue Treasurer and Northwest Advisors, Inc. since July
Seattle, WA Principal 1993; Vice President and Chief
Financial Investment Officer, Bennington
and Accounting Capital Management L.P. since
Officer January 1992; Senior Vice
President, Leland O'Brien
Rubenstein Associates Incorporated
(investment adviser) from 1986 to
1991.
Linda V. Whatley** 38 Vice President Director, Secretary and Treasurer
1420 Fifth Avenue and Secretary of Northwest Advisors, Inc. since
Seattle, WA July 1993; Vice President,
Bennington Capital Management L. P.
since April 1991; Secretary since
April 1991 and Director and
Treasurer since June 1992 of
Bennington Management Associates,
Inc.; Student, University of
Washington MBA Program from 1987 to
1990; Vice President, Russell
Analytical Services, Frank Russell
Company (asset strategy consultant)
from 1984 to 1987.
Robert J. Harper 52 Vice President Director and Vice President,
Northwest Advisers, Inc. since
November 1995; Director of Sales
and Client Service, Bennington
Capital Management L.P. since
October 1993; President, National
Training Program since January
1980.
Bruce Joel King 39 Assistant Vice President, Bennington Capital
Secretary Management L.P. since April 1994;
and Chief Securities and Exchange Commission
Compliance from 1984 to 1994.
Officer
- ----------
<FN>
* These Directors are "Interested Persons" by virtue of their employment by
and/or indirect interest in Bennington.
** J. Anthony Whatley, III and Linda V. Whatley are husband and wife.
The following table shows the compensation paid by the Fund to the
Directors during the fiscal year ended December 31, 1995:
<CAPTION>
COMPENSATION TABLE
Pension or
Retirement Estimated
Benefits Annual Total
Aggregate Accrued as Benefits Compensation
Compensation part of Fund upon from Fund Paid
Director from the Fund Expenses Retirement to Board Members
-------- ------------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
J. Anthony Whatley III None None None None
James A. Kraft None None None None
George G. Cobean III $ 5,000.00 None None $5,000.00
Geoffrey C. Cross $ 5,000.00 None None $5,000.00
Directors who are not "interested persons" of the Fund are paid fees of
$2,000 per meeting plus out-of-pocket costs associated with attending Board
meetings. Directors employed by Bennington have agreed that, if their employment
with Bennington is terminated for any reason, and a majority of the remaining
Directors of the Fund so request, they will be deemed to have resigned from the
Board of Directors upon being informed of such vote. The Fund's officers and
employees are paid by Bennington and receive no compensation from the Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1996, the following persons were the owners of
record of 5% or more of the shares of the Portfolios of the Fund:
<CAPTION>
Equity Portfolios
Small Inter-
Value and to Mid national
Beneficial Owner Growth Income Cap Equity
- ---------------- ------ ------ --- --------
<S> <C> <C> <C> <C>
Anbee & Company, account nominee for 7.3% 7.5%
GreatBanc Trust Company,
105 East Galena Blvd.
Aurora, IL 60505
Charles Schwab & Company 15.1% 28.0% 15.4%
101 Montgomery St.
San Francisco, CA 94104
KEITHCO, account nominee for 5.5% 14.2%
Regions Bank
1807 Tower Drive
Monroe, LA 71211-7232
Lighthouse & Co., account nominee for 13.29%
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
OneDun, account nominee for 8.3% 9.3%
First American Bank
218 West Main Street
Dundee, IL 60118
Rocco Trust & Co., account nominee for 26.8% 8.6% 9.3%
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Stap & Company, account nominee for 7.7% 11.3% 40.5% 55.2%
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
Zions First National Bank 8.1%
One South Main Street
Salt Lake City, UT 84130
<CAPTION>
Fixed-Income Portfolios
Short-
Intermediate Intermediate U.S.
Fixed- Fixed- Mortgage Government
Beneficial Owner Income Income Securities Money
- ---------------- ------ ------ ---------- -----
<S> <C> <C> <C> <C>
Anbee & Company, account nominee for 5.5%
GreatBanc Trust Company
105 East Galena Blvd.
Aurora, IL 60505
KEITHCO, account nominee for 8.0%
Regions Bank
1807 Tower Drive
Monroe, LA 71211-7232
North Carolina Trust Company 27.8%
301 North Elm Street
Greensboro, NC 27402-1108
OneDun, account nominee for 7.1% 6.0%
First American Bank
218 West Main Street
Dundee, IL 60118
Stap & Company, account nominee for 6.5%
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
Zions First National Bank 59.2% 83.8% 57.8% 95.5%
One South Main Street
Salt Lake City, UT 84130
</TABLE>
As of March 31, 1996, the J. Anthony Whatley III beneficially owned
1.14% of the shares of the Value and Income Portfolio. The other Directors and
officers of the Fund, as a group, beneficially owned less than 1% of the shares
of each Portfolio.
If a meeting of the shareholders were called, the above-listed
shareholders, if voting together, may, as a practical matter, have sufficient
voting power to exercise control over the business, policies and affairs of the
Fund and, in general, determine certain corporate or other matters submitted to
the shareholders for approval, such as a change in the Portfolios' investment
policies or Money Manager, all of which may adversely affect the net asset value
of the Fund. As with any mutual fund, certain shareholders of a Portfolio could
control the results of voting in certain instances. For example, a vote by
certain majority shareholders changing the Portfolio's investment objective
could result in dissenting minority shareholders withdrawing their investments
and a corresponding increase in costs and expenses for the remaining
shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
SERVICE PROVIDERS
The Portfolios' necessary day-to-day operations are performed by
separate business organizations under contract to the Fund. The principal
service providers are:
Manager, Administrator, Transfer Agent, Bennington Capital Management L. P.
Registrar and Dividend Disbursing Agent
Custodians PNC Bank, N.A. and The
Fifth Third Bank
Sub-Administrator PFPC, Inc.
Money Managers Seven professional discretionary
investment management organizations
and Bennington Capital Management
L.P.
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent. Bennington is the manager and administrator of the Fund,
pursuant to a Management Agreement with the Fund. Bennington provides or
oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. Bennington provides the
Fund with office space and equipment, and the personnel necessary to operate and
administer the Portfolios' business and to supervise the provision of services
by third parties such as the Money Managers, PFPC, Inc. ("PFPC") and PNC Bank
N.A. ("PNC") that serve as the sub-administrator and custodian. Bennington also
develops the investment programs for the Portfolios, selects Money Managers for
certain Portfolios (subject to approval by the Board of Directors), allocates
assets among Money Managers, monitors the Money Managers' investment programs
and results, and may exercise investment discretion over Portfolios and assets
invested in the Portfolios' liquidity reserves, or other assets not assigned to
a Money Manager. Bennington currently invests all the assets of the U.S.
Government Money Portfolio. Bennington also acts as the Transfer Agent,
Registrar and Dividend Disbursing Agent for the Fund and provides certain
administrative and compliance services to the Fund. See "Investment
Restrictions, Policies and Risk Considerations -- Investment Policies --
Liquidity Reserves."
Under the Management Agreement, Bennington has agreed not to withdraw
from the Fund the use of the Fund's name. In addition, Bennington may not grant
the use of a name similar to that of the Fund to another investment company or
business enterprise without, among other things, first obtaining the approval of
the Fund's shareholders.
A Management Agreement containing the same provisions as the initial
contract but also providing for payment to Bennington by the Portfolios of a
management fee was approved by the Board of Directors including all of the
Directors who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the Management Agreement on June 17, 1992, by the
shareholder of the Growth, Value and Income, Small to Mid Cap (formerly referred
to as the Small Cap Portfolio) and International Equity Portfolios on June 17,
1992, and by the shareholders of the Short-Intermediate Fixed-Income,
Intermediate Fixed-Income, Mortgage Securities and U.S. Government Money
Portfolios on August 3, 1992. The Management Agreement was renewed by the Board
of Directors including all of the Directors who are not "interested persons" of
the Fund and who have no direct or indirect financial interest in the Management
Agreement on May 24, 1994 and on May 16, 1995.
The general partners of Bennington are Northwest Advisors, Inc.,
Bennington Management Associates, Inc. and Bennington Capital Management
Investment Corp., all of which are Washington corporations. The sole limited
partner of Bennington Capital Management L.P. is Zions Investment Management,
Inc., a wholly-owned subsidiary of Zions First National Bank, N.A. The managing
general partner of Bennington Capital Management L.P. is Bennington Management
Associates, Inc., which is controlled by J. Anthony Whatley, III. The mailing
address of Bennington is 1420 Fifth Avenue, Suite 3130, Seattle, Washington
98101.
Bennington's Fees. The schedule below shows fees payable to Bennington
as manager and administrator of the Fund, pursuant to a Management Agreement
between Bennington and the Fund. Each Portfolio pays Bennington a fee equal on
an annual basis to the following percentage of the Portfolio's average daily net
assets.
FEE SCHEDULE FOR PAYMENTS TO BENNINGTON UNDER MANAGEMENT AGREEMENT
Management Fee (as a
percentage of average
Portfolio daily net assets)
----------- ---------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Bennington has received the following fees under its Management
Agreement with the Fund, since inception:
<TABLE>
<CAPTION>
FEES PAID TO DATE TO BENNINGTON UNDER MANAGEMENT AGREEMENT
1/1/93- 1/1/94 - 1/1/95 -
Portfolio 12/31/93 12/31/94 12/31/95
---------- -------- -------- ---------
<S> <C> <C> <C>
Equity Market(1) $29,995 $10,377 $0
Growth $26,932 $80,459 $143,280
Value and Income $32,181 $81,349 $105,099
Small to Mid Cap(2) $39,167 $90,212 $222,426
International (3) $0 $7,035 $132,843
Intermediate Fixed-Income $65,846 $107,493 $124,073
Short-Intermediate Fixed-Income $109,035 $117,591 $120,579
Mortgage Securities $94,747 $116,704 $133,615
Municipal Intermediate Fixed-Income(4) $0 $46,495 $43,032
U.S. Government Money $75,297 $42,682 $60,535
Institutional Investor Fixed-Income(5) $0 $113,412 $61,473
_____________________
<FN>
1 Equity Market Portfolio was closed on April 15, 1994.
2 Until September 15, 1995, referred to as the Small Cap Portfolio.
3 Investment operations commenced October 3, 1994.
4 Municipal Portfolio was closed on December 4, 1995.
5 Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995.
</TABLE>
From September 7, 1994, through November 30, 1995, Bennington performed
certain subtransfer agent and compliance functions for the Portfolios pursuant
to a Sub-Administration Agreement between Bennington and the Fund for which
Bennington was paid at an annual rate of $30,000 or 0.08% of the average daily
net assets of the Portfolios, whichever was higher. Bennington waived its
sub-administration fees for the International Equity Portfolio until September
15, 1995, and waived its sub-administration fees for the U.S. Government Money
Portfolio and the International Fixed-Income Portfolio during the term of the
Sub-Administration Agreement. The Sub-Administration Agreement was terminated
November 30, 1995.
<TABLE>
<CAPTION>
FEES PAID TO BENNINGTON UNDER
SUB-ADMINISTRATION AGREEMENT
Period from Period from
Inception 9/7/94 - 1/1/95 -
Portfolio 9/6/94 12/31/94 11/30/95
--------------- ------- ------------ ------------
<S> <C> <C> <C>
Growth $0 $9,518.17 $27,530
Value and Income $0 $9,518.17 $27,452
Small to Mid Cap(1) $0 $9,518.17 $29,108
International Equity(2) $0 $0 $9,946
Intermediate Fixed-Income $0 $9,518.17 $27,452
Short-Intermediate Fixed-Income $0 $9,518.17 $27,452
Mortgage Securities $0 $9,518.17 $27,920
Municipal Intermediate Fixed-Income(3) $0 $9,518.17 $27,452
U.S. Government Money(4) $0 $0 $0
Institutional Investor Fixed-Income(5) $0 $9,518.17 $19,726
____________________
<FN>
1 Until September 15, 1995, referred to as the Small Cap Portfolio.
2 Fee waived by Bennington through September 15, 1995.
3 Municipal Portfolio was closed on December 4, 1995.
4 Fee waived by Bennington during term of Sub-Administration Agreement.
5 Institutional Investor Fixed-Income Portfolio was closed on August 28, 1995.
</TABLE>
Beginning on December 1, 1995, Bennington provides transfer agent,
registrar and dividend disbursing agent services to the Fund pursuant to a
Transfer Agency and Administration Agreement between Bennington and the Fund
(the "Transfer Agency Agreement"). Sub-transfer agent and compliance services
previously provided by Bennington under the Sub-Administration Agreement are
provided to the Fund under the Transfer Agency Agreement. Bennington also
provides certain administrative and recordkeeping services under the Transfer
Agency Agreement. For providing these services, Bennington receives (i) a fee
equal to 0.12% of the average daily net assets of each Portfolio of the Fund,
subject to a minimum annual fee of $40,000 per Portfolio and (ii) a transaction
fee of $0.50 per transaction. Bennington is also reimbursed by the Fund for
certain out-of-pocket expenses including postage, taxes, wire transfer fees,
stationery and telephone expenses.
FEES PAID TO BENNINGTON UNDER
TRANSFER AGENT AGREEMENT
Period from
Portfolio 12/1/95 - 12/31/95
--------- -------------------
Growth $4,251
Value and Income $3,397
Small to Mid Cap $4,743
International $3,505
Intermediate Fixed-Income $3,733
Short-Intermediate Fixed-Income $3,552
Mortgage Securities $4,868
U.S. Government Money $4,252
Custodians. PNC, Broad & Chestnut Streets, Philadelphia, PA 19101, has
acted as custodian of the Portfolios' assets since August of 1994, and through
an agreement among PNC, Barclays Bank PLC, 75 Wall Street, New York, NY 10265,
and the Fund may employ sub-custodians outside the United States which have been
approved by the Board of Directors. PNC holds all portfolio securities and cash
assets of the Portfolio and is authorized to deposit securities in securities
depositories or to use the services of sub-custodians. PNC is paid by the
Portfolios an annual fee and also is reimbursed by the Fund for certain
out-of-pocket expenses including postage, taxes, wires, stationery and
telephone. For the first two years of service (or the first two years following
commencement of investment operations), PNC has agreed to waive a portion of its
minimum monthly fee for each Portfolio.
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, OH 45263, a
banking company organized under the laws of the State of Ohio, acts as custodian
for investors of the Portfolios with respect to the individual retirement
accounts ("IRA Accounts").
Sub-Administrator. PFPC, a Delaware corporation, and an indirect,
wholly-owned subsidiary of PNC, 103 Bellevue Parkway, Wilmington, DE 19809, is
the Fund's sub-administrator. PFPC has provided the basic portfolio
record-keeping required by each of the Portfolios for regulatory and financial
reporting purposes since August of 1994. PFPC is paid by the Portfolios an
annual fee plus specified transaction costs per Portfolio for these portfolio
record-keeping services. PFPC also is reimbursed by the Fund for certain
out-of-pocket expenses including postage, taxes, wires, stationery and
telephone. For the first two years of service (or the first two years following
commencement of investment operations) PFPC has agreed to waive a portion of its
minimum monthly fee in each Portfolio.
Independent Auditors. Deloitte & Touche LLP, Two World Financial
Center, New York, NY 10281, serves as the Fund's independent auditors and in
that capacity audits the Fund's annual financial statements.
Fund Counsel. Mayer, Brown & Platt, 1675 Broadway, New York, New York
10019, serves as the Fund's outside legal counsel.
Money Managers. The Money Manager for the U.S. Government Money
Portfolio was terminated on September 7, 1994. Currently, Bennington invests all
of the assets of the U.S. Government Money Portfolio. Each other Portfolio of
the Fund currently has one Money Manager investing all or part of its assets.
Bennington also invests each Portfolio's liquidity reserves, and all or any
portion of the Portfolio's other assets not assigned to a Money Manager.
The Money Managers selected by Bennington have no affiliation with or
relationship to the Fund or Bennington other than as discretionary managers for
each Portfolio's assets, except as described below. Also, BlackRock, Money
Manager of the Mortgage Securities Portfolio, was acquired by PNC effective
February 28, 1995. PNC acts as the custodian to the Fund and is affiliated with
PFPC, which acts as a sub-administrator to the Fund. In addition, some Money
Managers and their affiliates may effect brokerage transactions for the
Portfolios. See "Portfolio Transaction Policies--Brokerage Allocations."
Revised Money Manager agreements for the Equity Market(1)<F6>, Growth,
Value and Income, Small to Mid Cap(2)<F7>, Intermediate Fixed-Income,
Short-Intermediate Fixed-Income and Mortgage Securities Portfolios containing
the same terms and conditions as the former agreements for those portfolios,
except for a change in the method of calculating the fees paid to the Money
Managers, were approved by the Board of Directors, including all the Directors
who are not "interested persons" of the Fund and who have no direct or indirect
interest in the Money Manager Agreements, on May 17, 1993 and by the
shareholders of those portfolios on September 1, 1993. The Money Manager
Agreements for the International Fixed-Income Portfolio(3)<F8>, Municipal
Portfolio(4)<F9> and Institutional Investor Fixed-Income Portfolio(5)<F10> and
the Revised Money Manager Agreement for the International Portfolio were
approved by the Board of Directors, including all Directors who are not
"interested persons" and who have no direct or indirect interest in the Money
Manager Agreements, on May 17, 1993. The Money Manager Agreement for the
Municipal Portfolio was approved by the shareholders as of January 13, 1994. The
Municipal Portfolio was closed on December 4, 1995, by a vote of the Board of
Directors of the Fund. Notice was provided to the shareholders of the Municipal
Portfolio on November 3, 1995, and all assets of the Portfolio were liquidated
on December 4, 1995. The Money Manager Agreement for the Institutional Investor
Fixed-Income Portfolio was approved by the sole shareholder as of January 7,
1994. The Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995, by a vote of the Board of Directors of the Fund. The sole shareholder and
the Fund entered into a Plan of Liquidation on August 28, 1995. The Money
Manager Agreement for the International Portfolio was approved by the sole
shareholder as of September 30, 1994. The International Fixed-Income Portfolio
never commenced investment operations and was closed on April 29, 1996, by a
vote of the Board of Directors of the Fund. The Money Manager Agreements for the
Growth, Value and Income, Intermediate Fixed-Income, Short-Intermediate
Fixed-Income and International Portfolios were reviewed by the Board of
Directors at a meeting on August 10, 1995, and renewed for the forthcoming year.
A new Money Manager Agreement for the Mortgage Securities Portfolio providing
for the change of ownership of BlackRock was approved by the Board of Directors,
including all the Directors who are not "interested persons" of the Fund and who
have no direct or indirect interest in the Money Manager Agreement, on November
10, 1994, and by the shareholders of the Mortgage Securities Portfolio at a
Special Meeting of Shareholders held on January 27, 1995. A new Money Manager
Agreement for the Small to Mid Cap Portfolio in connection with a change in
Money Manager to Symphony Asset Management, Inc. was approved by the Board of
Directors, including all the Directors who are not "interested persons" of the
Fund and who have no direct or indirect interest in the Money Manager Agreement,
on June 15, 1995, and by the shareholders of the Small to Mid Cap Portfolio at
a Special Meeting of Shareholders held on August 15, 1995. A new Money Manager
Agreement for the Value and Income Portfolio in connection with the proposed
change of ownership of Martingale Asset Management L.P. ("Martingale") was
approved by the Board of Directors, including all the Directors who are not
"interested persons" of the Fund and who have no direct or indirect interest in
the Money Manager Agreement, on June 15, 1995, and by the shareholders of the
Value and Income Portfolio at a Special Meeting of Shareholders held on
August 15, 1995.
1 <F6> The Equity Market Portfolio was closed on April 14, 1994.</F6>
2 <F7 Prior to September 15, 1995, the Small to Mid Cap Portfolio was
referred to as the Small Cap Portfolio.</F6>
3 <F8> The International Fixed-Income Portfolio was closed on April 29,
1996. </F8>
4 <F9> The Municipal Portfolio was closed on December 4, 1995.</F9>
5 <F10> The Institutional Investor Fixed-Income Portfolio was closed on
August 28, 1995.</F10>
Listed below are the Money Managers selected by Bennington to invest
certain of the Portfolios' assets:
. State Street Global Advisors, an area of State Street, is the Money
Manager for the Growth Portfolio and was the Money Manager of the U.S.
Government Money Portfolio until September 7, 1994. State Street is a
Massachusetts trust company and a wholly-owned subsidiary of State
Street Boston Corporation, a publicly held bank holding company. State
Street will use its matrix equity strategy for the Growth Portfolio,
which it has applied to investments since 1984. The strategy involves
taking a universe of approximately 1,200 securities and systematically
ranking each according to two criteria: fundamental value and earnings
estimate revisions. Rising earnings estimates imply improving
expectations for a company's performance. Fundamental value analyzes
each company's future growth expectations relative to its current
stock price. Issues that appear relatively undervalued with improving
earnings estimates are selected for the portfolio. The Money Manager
expects to maintain a well-diversified portfolio of stocks in the
Growth Portfolio, holding market representation in all major economic
sectors. As of December 31 , 1995, State Street managed assets of
approximately $ 194.5 billion, providing complete global investment
management services from offices in the United States, London, Sydney,
Hong Kong, Tokyo, Toronto, Luxembourg, Melbourne, Montreal and Paris.
. Martingale Asset Management, L.P. ("Martingale") is the Money Manager
for the Value and Income Portfolio. Martingale is a Delaware limited
partnership which consists of two general partners, Martingale Asset
Management Corporation ("MAMC"), a Massachusetts corporation and
Commerz Asset Management USA Corporation ("CAM"), and four limited
partners. CAM, a Delaware Corporation, is a wholly-owned subsidiary of
Commerz International Capital Management GmbH ("CICM") headquartered
in Frankfurt, Germany. Commerzbank AG ("Commerzbank") is the parent
company of CICM. Arnold S. Wood and William E. Jacques each own 32.26
% of MAMC and are active in the management of the firm. Martingale
emphasizes diversified individual stocks which it believes will
eventually produce smooth results, rather than focusing on certain
investment characteristics or industries. The firm uses a proprietary
pricing model which appraises stocks based on each stock's earnings,
dividends, assets, growth and risk. In seeking to derive a theoretical
value of each individual issue, Martingale utilizes a cross-sectional
regression model. Industry and risk characteristics are controlled
through rigorous portfolio construction. As of December 31, 1995,
Martingale managed assets of approximately $454 million.
. Smith Barney Capital Management is the Money Manager for the
Intermediate Fixed-Income Portfolio. Smith Barney Capital Management
is a division of Smith Barney, a wholly-owned subsidiary of Travelers
Incorporated, a publicly-held company of which there are no
controlling persons, as defined under the Investment Company Act.
Smith Barney Capital Management has adopted a fixed-income management
philosophy which emphasizes adding value through active sector and
security selection while eliminating interest rate risk by matching
the duration of the benchmark. The firm's philosophy incorporates
three objectives: 1) to be active core managers; 2) to provide a
stable source of value over index returns; and 3) to base its
techniques on theoretical disciplines of stratified sampling. Smith
Barney Capital Management believes that it can add value by
neutralizing interest rate risk and concentrating on exploiting
inefficiencies and anomalies that arise between different sectors and
securities. The first step in its active structured fixed-income
process is to assist in determining the most appropriate index which
will serve as the benchmark for the portfolio. Smith Barney Capital
Management then ascertains the critical characteristics of the index
such as duration, convexity, quality, sector breakdown, etc. The
portfolio is constructed to match the duration of the index, thereby
attempting to eliminate interest rate risk. Smith Barney Capital
Management then quantitatively identifies the undervalued sectors of
the market, weighting portfolios in those areas. The next step is to
find and invest in the undervalued securities within the sectors.
Value is added via curve analysis, inter-sector and intra-sector
rotation, and security swaps. As of December 31, 1995, Smith Barney
Capital Management managed assets of approximately $15 billion.
. Symphony Asset Management, Inc. ("Symphony") is the Money Manager of
the Small to Mid Cap Portfolio. Until September 15, 1995, Wells Fargo
Nikko Investment Advisors ("WFNIA") was the Money Manager for the
Small Cap Portfolio. On June 15, 1995, WFNIA resigned as Money Manager
for the Small Cap Portfolio. The Board of Directors approved the
appointment of Symphony Asset Management, Inc. ("Symphony") as the new
Money Manager for the Small to Mid Cap Portfolio and the shareholders
of the Small Cap Portfolio approved the Money Manager Agreement among
the Fund, Bennington and Symphony at a Special Meeting of Shareholders
held on August 15, 1995. Symphony began management of the Small to Mid
Cap Portfolio on September 15, 1995. Symphony is a California
corporation founded in March, 1994. Symphony is registered as an
investment adviser under the Investment Advisers Act of 1940, as
amended, and is registered with the State of California. Symphony is
a wholly-owned subsidiary of BARRA, Inc. ("BARRA"), a California
corporation, which is registered as an investment adviser with the
Securities and Exchange Commission and the California Department of
Corporations, and as a publicly traded corporation under Section 12(g)
of the Securities Exchange Act of 1934, as amended. BARRA is one of
the world's leading suppliers of analytical financial software and has
pioneered many of the techniques used in systematic investment
management, including active management based on so-called factor
return predictions. Symphony is an investment management firm
dedicated to exploiting information inefficiencies in global financial
markets. Symphony has developed an approach to investing that combines
the qualities of both systematic and traditional investment
management. Symphony's process begins with a factor-return-based
valuation model identifying securities that are relatively under- or
over-valued. Symphony's factor model is the product of a decade of
work by BARRA's active strategies group and has been used as the basis
for much of BARRA's successful subadvisory business. As of December
31, 1995, Symphony managed assets of approximately $ 425 million and
subadvised assets of approximately $ 145 million.
. Nicholas-Applegate Capital Management ("Nicholas-Applegate") is the
Money Manager for the International Portfolio. Nicholas-Applegate is
a California limited partnership and is a registered investment
adviser whose sole general partner is Nicholas-Applegate Capital
Management Holdings, L.P., a California limited partnership
controlled by Arthur E. Nicholas. Nicholas-Applegate uses growth
stock selection disciplines, focusing on earnings acceleration,
sustainable growth, and positive relative price strength.
Its systems driven process is designed to add substantial value
over individual country returns. As of December 31, 1995,
Nicholas-Applegate managed assets of approximately $29 billion.
. Bankers Trust Company ("Bankers Trust") is the Money Manager of the
Short-Intermediate Fixed-Income Portfolio. Bankers Trust, through its
Investment Group, is a wholly-owned subsidiary of Bankers Trust New
York Corporation, a public company. The organization has achieved
recognition for its broad array of investment products which embrace
traditional active strategies as well as state-of-the-art passive and
quantitative techniques and are applied to capital markets on a
worldwide basis. Through principal investment management units located
in New York, London, Tokyo and Sydney, as well as satellite groups in
Hong Kong and Zurich, Bankers Trust Company managed as of December 31,
1995 over approximately $201 billion of assets for a wide variety of
clients.
. BlackRock Financial Management, Inc. ("BlackRock") is the Money
Manager of the Mortgage Securities Portfolio. BlackRock (formerly
BlackRock Financial Management L.P.) is a Delaware corporation which
is a wholly-owned subsidiary of PNC Asset Management Group, Inc.,
which is a wholly-owned indirect subsidiary of PNC Bank, N.A. ("PNC").
PNC is a commercial bank whose principal office is in Pittsburgh, PA
and is wholly-owned by PNC Bank Corp., a bank holding company.
BlackRock's philosophy is centered around two fundamental concepts:
(i) duration targeting and (ii) relative value sector and security
selection. Portfolios are managed in a narrow band around a duration
target determined by the client. Specific investment decisions are
made using a relative value approach that encompasses both fundamental
and technical analysis. In implementing its strategy, BlackRock
utilizes macroeconomic trends, supply/demand analysis, yield curve
structure and trends, volatility analysis, and security specific
option-adjusted spreads (OAS). BlackRock's Investment Strategy
Committee has primary responsibility for setting the broad investment
strategy and for overseeing the ongoing management of all client
portfolios. BlackRock serves as investment adviser to fixed-income
investors in the United States and overseas through funds and
institutional accounts with combined total assets at December 31,
1995, of approximately $34 billion.
<PAGE>
MONEY MANAGERS' FEES
The Money Managers have received the following fees pursuant to their
Money Manager Agreements, since inception:
<TABLE>
<CAPTION>
FEES PAID TO MONEY MANAGERS SINCE INCEPTION
1/1/93- 1/1/94- 1/1/95-
Portfolio Money Manager 12/31/93 12/31/94 12/31/95
- ------------- -------------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity Market(1) Parametric $13,499 $2,286 $0
Growth State Street $12,123 $57,313 $101,767
Value and Income Martingale $14,578 $57,935 $70,037
Small to Mid Cap(2) WFNIA/Symphony $13,247 $36,198 $78,335
International(3) Nicholas Applegate $0 $5,116 $96,625
Intermediate Fixed-Income Smith Barney $30,510 $53,272 $51,705
Short-Intermediate Fixed-Income Bankers Trust $45,976 $48,991 $50,323
Mortgage Securities BlackRock $42,971 $74,580 $85,091
Municipal Intermediate
Fixed-Income(4) Lazard Freres $0 $19,378 $14,370
Institutional Investor
Fixed-Income(5) Smith Barney $0 $47,252 $0
U.S. Government Money State Street(6) $0 $0 $0
_____________________
<FN>
1 Equity Market Portfolio was closed on April 15, 1994.
2 Until September 15, 1995, referred to as the Small Cap Portfolio, whose
money manager, WFNIA, was paid fees through that date. Beginning September
15, 1996, Symphony received fees as the money manager.
3 Investment operations commenced on October 3, 1994.
4 The Municipal Portfolio was closed on December 4, 1995.
5 Institutional Investor Fixed-Income Money Manager was terminated on
January 1, 1995, and the Portfolio was closed on August 28, 1995.
6 State Street was terminated as the money manager of the U.S. Government
Money Portfolio on September 7, 1994. Prior to that, the money manager fee
was paid by Bennington.
</TABLE>
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are based on the assets of the Portfolio and the number of complete calendar
quarters of management by the Money Manager. For the first five complete
calendar quarters managed by a Money Manager of an operating Portfolio (other
than the U.S. Government Money Portfolio), such Portfolio will pay its
respective Money Manager on a monthly basis the following annual fee set forth
below in "Money Manager Fee Schedule For A Manager's First Five Calendar
Quarters of Management" based on the average daily net assets of the Portfolio
managed by such Money Manager. The Money Managers for the Growth, Value and
Income, Intermediate Fixed-Income, Short-Intermediate Fixed-Income and Mortgage
Securities Portfolios have completed five calendar quarters. During the first
five calendar quarters of management, the Money Manager Fee has two components,
the Basic Fee and Portfolio Management Fee.
MONEY MANAGER FEE SCHEDULE FOR PORTFOLIOS
MANAGED LESS THAN FIVE COMPLETE CALENDAR QUARTERS BY MANAGER
Portfolio
Management
Portfolio Basic Fee Fee Total
---------- --------- ----------- ------
Growth 0.10% 0.10% 0.20%
Value and Income 0.10% 0.10% 0.20%
International 0.20% 0.20% 0.40%
Small to Mid Cap 0.10% 0.10% 0.20%
Intermediate Fixed-Income 0.07% 0.08% 0.15%
Short-Intermediate Fixed-Income 0.07% 0.08% 0.15%
Mortgage Securities 0.07% 0.08% 0.15%
Commencing with the sixth calendar quarter of management by a Money
Manager of an operating Portfolio, such Portfolio will pay its Money Manager
based on the "Money Manager Fee Schedule For A Money Manager From The Sixth
Calendar Quarter Of Management Forward." The Money Manager Fee commencing with
the sixth quarter consists of two components, the "Basic Fee" and "Performance
Fee."
<PAGE>
MONEY MANAGER FEE SCHEDULE FROM A MANAGER'S
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average Annualized Annualized
Basic Performance Differential Performance
Portfolio Fee vs. The Applicable Index Fee
Equity Portfolios 0.10% =>2.00% 0.22%
=>1.00% and <2.00% 0.20%
=>0.50% and <1.00% 0.15%
=>0.00% and <0.50% 0.10%
=>-0.50% and <0.00% 0.05%
<-0.50% 0%
International Portfolio 0.20% =>4.00% 0.40%
=>2.00% and <4.00% 0.30%
=>0.00% and <2.00% 0.20%
=>-2.00% and <0.00% 0.10%
<-2.00% 0%
Bond Portfolios 0.07% =>2.00% 0.18%
=>0.50% and <2.00% 0.16%
=>0.25% and <0.50% 0.12%
=>-0.25% and <0.25% 0.08%
=>-0.50% and <-0.25% 0.04%
<-0.50% 0%
The fee based on annualized performance will be adjusted each quarter and paid
monthly based on the annualized investment performance of each Money Manager
relative to the annualized investment performance of the "Benchmark Indices" set
forth below, which may be changed only with the approval of the Board of
Directors (shareholder approval is not required). A description of each
benchmark index is contained in Appendix A to the Equity Portfolios' Prospectus
and the Fixed-Income Portfolios' Prospectus. As long as the Domestic Equity and
Bond Portfolios' performance either exceeds the index, or trails the index by no
more than .50%, a Performance Fee will be paid to the applicable Money Manager.
As long as the International Portfolio's performance either exceeds the index,
or trails the index by no more than 2%, a Performance Fee will be paid to the
Money Manager. A Money Manager's performance is measured on the portion of the
assets of its respective Portfolio managed by it (the "Account"), which excludes
assets held by Bennington for circumstances such as redemptions or other
administrative purposes.
<PAGE>
BENCHMARK INDICES
Portfolio Index
Growth S&P/BARRA Growth Index
Value and Income S&P/BARRA Value Index
Small to Mid Cap Wilshire 4500 Index(1) <F11>
International Morgan Stanley Capital International
EAFE(R) + EMF Index(2) <F12>
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate
Fixed-Income Lehman Brothers Government/Corporate 1-5 Year Index
Mortgage Securities Lehman Brothers Mortgage-Backed Securities Index
___________________
1<F11> Effective October 1, 1995, the benchmark index was changed from the
BARRA Institutional Small Index to the Wilshire 4500 Index. </F11>
2<F12> Through the close of business on April 30, 1996, the benchmark
index used for the International Portfolio was the Morgan
Stanley Capital International EAFE(R) Index. Effective May 1, 1996,
the benchmark index is the Morgan Stanley Capital International
EAFE (R)+ EMF Index. See Appendix A to the Equity Portfolios
Prospectus for additional information. </F12>
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable index is
recalculated at the end of each calendar quarter based on the Money Manager's
performance during all calendar quarters since commencement of investment
operations except that of the immediately preceding quarter. Commencing with the
14th calendar quarter of investment operations, a Money Manager's average annual
performance differential will be recalculated based on the Money Manager's
performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. A Money Manager's performance
will be calculated by Bennington in the same manner that the total return
performance of the Portfolio's index is calculated, which is not the same method
used for calculating the Portfolio's performance for advertising purposes as
described under "Calculation of Portfolio Performance." See Appendix B to this
Statement of Additional Information for a discussion of how performance fees are
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater than or less than that of the relevant index.
For example, if an index has an average annual performance of 10%, an Equity
Portfolio Account's average annual performance would have to be equal to or
greater than 12% for the Money Manager to receive an annual performance fee of
.22% (i.e., the difference in performance between the Account and the index must
be equal to or greater than 2% for an equity portfolio Money Manager to receive
the maximum performance fee.) Because the maximum Performance Fee for the
Domestic Equity and Bond Portfolios applies whenever a Money Manager's
performance exceeds the index by 2.00% or more, the Money Managers for those
Portfolios could receive a maximum Performance Fee even if the performance of
the Account is negative. Also, because the maximum Performance Fee for the
International Portfolio applies whenever a Money Manager's performance exceeds
the index by 4.00% or more, the Money Manager for the International Portfolio
could receive a maximum Performance Fee even if the performance of the Account
is negative. In April 1972, the SEC issued Release No. 7113 under the Investment
Company Act (the "Release") to call the attention of directors and investment
advisers to certain factors which must be considered in connection with
investment company incentive fee arrangements. One of these factors is to "avoid
basing significant fee adjustments upon random or insignificant differences"
between the investment performance of a fund and that of the particular index
with which it is being compared. The Release provides that "preliminary studies
(of the SEC staff) indicate that as a 'rule of thumb' the performance difference
should be at least +/-10 percentage points" annually before the maximum
performance adjustment may be made. However, the Release also states that
"because of the preliminary nature of these studies, the Commission is not
recommending, at this time, that any particular performance difference exist
before the maximum fee adjustment may be made." The Release concludes that the
directors of a fund "should satisfy themselves that the maximum performance
adjustment will be made only for performance differences that can reasonably be
considered significant." The Board of Directors has fully considered the Release
and believes that the performance adjustments are entirely appropriate although
not within the +/-10 percentage points per year range suggested by the Release.
PORTFOLIO EXPENSES
The Portfolios will pay all their expenses other than those expressly
assumed by Bennington. Fund expenses include: (a) expenses of all audits and
other services by independent public accountants; (b) expenses of the transfer
agent, registrar and dividend disbursing agent; (c) expenses of the custodian,
administrator and sub-administrator; (d) expenses of obtaining quotations for
calculating the value of the Portfolios' net assets; (e) expenses of obtaining
Portfolio activity reports and analyses for each Portfolio; (f) expenses of
maintaining each Portfolio's tax records; (g) salaries and other compensation of
any of the Fund's executive officers and employees, if any, who are not
officers, directors, shareholders or employees of Bennington or any of its
partners; (h) taxes levied against the Portfolios; (i) brokerage fees and
commissions in connection with the purchase and sale of portfolio securities for
the Portfolios; (j) costs, including the interest expense, of borrowing money;
(k) costs and/or fees incident to meetings of the Portfolios, the preparation
and mailings of prospectuses and reports of the Portfolios to their
shareholders, the filing of reports with regulatory bodies, the maintenance of
the Fund's existence, and the registration of shares with federal and state
securities authorities; (l) legal fees, including the legal fees related to the
registration and continued qualification of the Portfolios' shares for sale; (m)
costs of printing stock certificates representing shares of the Portfolios; (n)
Directors' fees and expenses of Directors who are not officers, employees or
shareholders of Bennington or any of its partners; (o) the fidelity bond
required by Section 17(g) of the Investment Company Act, and other insurance
premiums; (p) association membership dues; (q) organizational expenses; and (r)
extraordinary expenses as may arise, including expenses incurred in connection
with litigation, proceedings, other claims, and the legal obligations of the
Fund to indemnify its Directors, officers, employees and agents with respect
thereto. The Portfolios are also responsible for paying a management fee to
Bennington. Additionally, they pay a Basic Fee and Portfolio Management Fee in
the first five quarters of investment operations to the applicable Money
Managers, and a Basic Fee and Performance Fee in the sixth quarter of investment
operations to the applicable Money Managers, as described below. Certain
expenses attributable to particular Portfolios are charged to those Portfolios,
and other expenses are allocated among the Portfolios affected based upon their
relative net assets.
Bennington has agreed to reimburse the Fund for the amount, if any, by
which the total operating and management expenses (including Bennington's fee,
but excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) for any fiscal year exceed the level of expenses which the Portfolios
are permitted to bear under the most restrictive expense limitation (which has
not been waived) imposed on mutual funds by any state in which shares of the
Portfolios are qualified for sale (or Bennington will make other arrangements to
limit the Portfolios' expense to the extent required by applicable state law
expense limitations).
Bennington has subsidized operating expenses other than Bennington's
and Money Managers' fees ("Other Expenses") above certain levels set forth in
the Prospectuses for certain of the Portfolios. For the fiscal year ended
December 31, 1995, Bennington had agreed to continue subsidizing Other Expenses
for the International Fixed-Income and the Municipal Portfolios, provided that
Bennington could discontinue the expense subsidy at its sole discretion at any
time upon 30 days' written notice to the Fund. These subsidies caused the yield
and total return of the Portfolios to be higher than would otherwise be the
case. The Municipal Portfolio was closed on December 4, 1995 and the
International Fixed-Income Portfolio was closed on April 29, 1996.
<PAGE>
<TABLE>
<CAPTION>
EXPENSES SUBSIDIZED BY BENNINGTON
Inception to 1/1/93- 1/1/94- 1/1/95 -
Portfolio 12/31/92 12/31/93 12/31/94 12/31/95
- ----------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity Market(1) $44,396 $107,752 $18,273 $0
Growth $38,513 $85,593 $13,345 $0
Value and Income $43,553 $100,108 $15,523 $0
Small to Mid Cap(2) $55,116 $115,933 $60,093 $18
International(3) $0 $0 $27,257 $23,738
Intermediate Fixed-Income $37,025 $53,046 $10,351 $0
Short-Intermediate Fixed-Income $43,998 $22,156 $12,152 $0
Mortgage Securities $42,555 $40,223 $12,956 $0
U.S. Government Money $27,899 $96,348 $142,836 $60,112
Municipal Intermediate Fixed-Income(4) $0 $0 $110,224 $56,252
Institutional Investor Fixed-Income(5) $0 $0 $3,275 $0
________________
<FN>
1 Equity Market Portfolio was closed on April 15, 1994.
2 Until September 15, 1995, referred to as the Small Cap Portfolio.
3 Investment operations commenced on October 3, 1994.
4 Municipal Portfolio was closed on December 4, 1995.
5 Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995.
</TABLE>
PLAN OF DISTRIBUTION
The Fund has adopted a distribution plan (the "Distribution Plan")
pursuant to Rule 12b-1 ("Rule 12b-1") under the Investment Company Act. Rule
12b-1 provides in substance that an investment company may not engage directly
or indirectly in financing any activity which is primarily intended to result in
the sale of its shares except pursuant to a plan adopted under Rule 12b-1. The
Distribution Plan is designed to protect against any claim involving the Fund
that any portion of the management fee and some of the expenses which the Fund
pays or may pay come within the purview of Rule 12b-1. The Fund believes it is
not financing any such activity and does not consider such fee or any payment
enumerated in the Distribution Plan as financing any such activity. However, it
might be claimed that a portion of such fee and some of the expenses the Fund
pays come within the purview of Rule 12b-1. If and to the extent that any
payments (including fees) specifically listed in the Distribution Plan are
considered to be primarily intended to result in or are indirect financing of
any activity which is primarily intended to result in the sale of Fund shares,
these payments are authorized under the Distribution Plan.
As used in the Distribution Plan, "Qualified Recipients" means
broker-dealers or others selected by Bennington, including but not limited to
any principal underwriter or underwriters of the Fund (other than a principal
underwriter which is an affiliated person, or an affiliated person of an
affiliated person, of Bennington) with which it has entered into written
agreements ("Related Agreements") contemplated by Rule 12b-1 and which have
rendered assistance (whether direct, administrative or both) in the distribution
and/or retention of the Fund's shares or servicing of shareholder accounts.
"Qualified Holdings" means, as to any Qualified Recipient, all Fund shares
beneficially owned by such Qualified Recipient, or beneficially owned by its
customers (brokerage or other) or other contacts and/or its investment advisory
or other clients, if the Qualified Recipient was, in the sole judgment of
Bennington, instrumental in the purchase and/or retention of such Fund shares
and/or in providing administrative assistance in relation thereto.
The Distribution Plan permits Bennington to make payments ("Permitted
Payments") to Qualified Recipients. These Permitted Payments are made by
Bennington and are not reimbursed by the Fund to Bennington. Permitted Payments
may not exceed, for any fiscal year of the Fund (pro-rated for any fiscal year
which is not a full fiscal year), the following amounts:
Maximum Permitted Payments
(as a percentage of
Portfolio average daily net assets)
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Bennington shall have sole authority (i) as to the selection of any
Qualified Recipient or Recipients; (ii) not to select any Qualified Recipient;
and (iii) to determine the amount of Permitted Payments, if any, to each
Qualified Recipient, provided that the total Permitted Payments to all Qualified
Recipients do not exceed the amount set forth above. Bennington is authorized,
but not directed, to take into account, in addition to any other factors deemed
relevant by it, the following: (a) the amount of the Qualified Holdings of the
Qualified Recipient; (b) the extent to which the Qualified Recipient has, at its
expense, taken steps in the shareholder servicing area, including without
limitation, any or all of the following activities: answering customer inquiries
regarding account status and history, and the manner in which purchases and
redemptions of shares of the Fund may be effected; assisting shareholders in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with customer orders to purchase or redeem shares;
verifying and guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder designated accounts; furnishing
(either alone or together with other reports sent to a shareholder by such
person) monthly and year end statements and confirmations of purchases and
redemptions; transmitting, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the Fund to its
shareholders; receiving, tabulating and transmitting to the Fund proxies
executed by shareholders with respect to meetings of shareholders of the Fund;
and providing such other related services as Bennington or a shareholder may
request from time to time; and (c) the possibility that the Qualified Holdings
of the Qualified Recipient would be redeemed in the absence of its selection or
continuance as a Qualified Recipient. Notwithstanding the foregoing two
sentences, a majority of the Independent Directors (as defined below) may remove
any person as a Qualified Recipient.
The Distribution Plan recognizes that, in view of the Permitted
Payments and bearing by Bennington of certain distribution expenses, the
profits, if any, of Bennington are dependent primarily on the management fees
paid by the Fund to Bennington and that its profits, if any, would be less, or
losses, if any, would be increased due to such Permitted Payments and the
bearing by it of such expenses. If and to the extent that any such management
fees paid by the Fund might, in view of the foregoing, be considered as
indirectly financing any activity which is primarily intended to result in the
sale of shares issued by the Fund, the payment of such fees is authorized by the
Distribution Plan.
The Distribution Plan also states that if and to the extent that any of
the payments listed below are considered to be "primarily intended to result in
the sale of" shares issued by the Fund within the meaning of Rule 12b-1, such
payments are authorized under the Distribution Plan: (i) the costs of the
preparation of all reports and notices to shareholders and the costs of printing
and mailing such reports and notices to existing shareholders, irrespective of
whether such reports or notices contain or are accompanied by material intended
to result in the sale of shares of the Fund or other funds or other investments;
(ii) the costs of the preparation and setting in type of all prospectuses and
statements of additional information and the costs of printing and mailing all
prospectuses and statements of additional information to existing shareholders;
(iii) the costs of preparation, printing and mailing of any proxy statements and
proxies, irrespective of whether any such proxy statement includes any item
relating to, or directed toward, the sale of the Fund's shares; (iv) all legal
and accounting fees relating to the preparation of any such reports,
prospectuses, statements of additional information, proxies and proxy
statements; (v) all fees and expenses relating to the registration or
qualification of the Fund and/or its shares under the securities or "Blue Sky"
laws of any jurisdiction; (vi) all fees under the Securities Act and the
Investment Company Act, including fees in connection with any application for
exemption relating to or directed toward the sale of the Fund's shares; (vii)
all fees and assessments of the Investment Company Institute or any successor
organization, irrespective of whether some of its activities are designed to
provide sales assistance; (viii) all costs of the preparation and mailing of
confirmations of shares sold or redeemed or stock certificates, and reports of
share balances; and (ix) all costs of responding to telephone or mail inquiries
of investors or prospective investors.
The Distribution Plan states that while it is in effect, the selection
and nomination of those Directors of the Fund who are not "interested persons"
of the Fund shall be committed to the discretion of such disinterested Directors
but that nothing in the Distribution Plan shall prevent the involvement of
others in such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such disinterested
Directors.
The Distribution Plan states that while it is in effect, Bennington
shall report at least quarterly to the Board of Directors in writing for its
review on the following matters: (i) all Permitted Payments made to Qualified
Recipients, the identity of the Qualified Recipient of each Payment and the
purpose for which the amounts were expended; (ii) all costs of each item
specified in the second preceding paragraph (making estimates of such costs
where necessary or desirable) during the preceding calendar or fiscal quarter;
and (iii) all fees of the Fund to Bennington paid or accrued during such
quarter. In addition if any such Qualified Recipient is an affiliate as that
term is defined in the Investment Company Act, of the Fund, Bennington or a
Money Manager, such person shall agree to furnish to Bennington for transmission
to the Board of Directors an accounting, in form and detail satisfactory to the
Board of Directors, to enable the Board of Directors to make the determinations
of the fairness of the compensation paid to such affiliated person, not less
often than annually.
The Distribution Plan defines as the Fund's Independent Directors those
Directors who are not "interested persons" of the Fund as defined in the
Investment Company Act and who have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreements related to the
Distribution Plan. The Distribution Plan, unless terminated as hereinafter
provided, continues in effect from year to year only so long as such continuance
is specifically approved at least annually by the Board of Directors and its
Independent Directors with votes cast in person at a meeting called for the
purpose of voting on such continuance. In voting on the implementation or
continuance of the Distribution Plan, those Directors who vote in favor of such
implementation or continuance must conclude that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of
a majority of the Independent Directors or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding voting
securities of the Fund. The Distribution Plan may not be amended to increase
materially the amount of payments to be made without shareholder approval, and
all amendments must be approved in the manner set forth above as to continuance
of the Distribution Plan.
VALUATION OF PORTFOLIO SHARES
The net asset value per share is calculated for each Portfolio on each
business day on which shares are offered or orders to redeem may be tendered.
A business day is one on which the New York Stock Exchange, PFPC and Bennington
are open for business. Non-business days for 1996 will be New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The International Portfolio's portfolio securities trade primarily on
foreign exchanges which may trade on Saturdays and on days that the Portfolio
does not offer or redeem shares. The trading of portfolio securities on foreign
exchanges on such days may significantly increase or decrease the net asset
value of the Portfolio's shares when the shareholder is not able to purchase or
redeem Portfolio shares.
PORTFOLIO TRANSACTION POLICIES
Generally, securities are purchased for the Portfolios (other than the
U.S. Government Money Portfolio) for investment income and/or capital
appreciation and not for short-term trading profits. However, the Portfolios may
dispose of securities without regard to the time they have been held when such
action, for defensive or other purposes, appears advisable to their Money
Managers.
If a Portfolio changes Money Managers, it may result in a significant
number of portfolio sales and purchases as the new Money Manager restructures
the former Money Manager's portfolio.
Portfolio Turnover Rate. The portfolio turnover rate for each Portfolio
is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular year, by the monthly average value of the
portfolio securities owned by the Portfolio during the year. For purposes of
determining the rate, all short-term securities are excluded.
Brokerage Allocations. Transactions on United States stock exchanges
involve the payment of negotiated brokerage commissions; on non-United States
exchanges, commissions are generally fixed. There is generally no stated
commission in the case of securities traded in the over-the-counter markets,
including most debt securities and money market instruments, but the price
includes an undisclosed "commission" in the form of a mark-up or mark-down. The
cost of securities purchased from underwriters includes an underwriting
commission or concession.
Subject to the arrangements and provisions described below, the
selection of a broker or dealer to execute portfolio transactions is usually
made by the Money Manager. The Management Agreement and the Money Manager
Agreements provide, in substance and subject to specific directions from the
Board of Directors and officers of Bennington, that in executing portfolio
transactions and selecting brokers or dealers, the principal objective is to
seek the best net price and execution for the Portfolios. Securities will
ordinarily be purchased from the markets where they are primarily traded, and
the Money Manager will consider all factors it deems relevant in assessing the
best net price and execution for any transaction, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis).
In addition, the Money Manager Agreements authorize Bennington while
exercising investment discretion and the Money Managers, respectively, in
selecting brokers to execute a particular transaction and in evaluating the best
net price and execution, to consider the "brokerage and research services" (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended) provided to the Portfolios, Bennington and/or to the Money Manager
(or their affiliates). Bennington while exercising investment discretion and
Money Managers are authorized to cause the Portfolios to pay a commission to a
broker who provides such brokerage and research services for executing a
portfolio transaction which is in excess of the amount of commission another
broker would have charged for effecting that transaction. Bennington, when
exercising investment discretion, or the Money Manager must determine in good
faith that the commission was reasonable in relation to the value of the
brokerage and research services provided in terms of that particular transaction
or in terms of all the accounts over which Bennington or the Money Manager
exercises investment discretion.
In addition, if requested by the Fund, Bennington, when exercising
investment discretion, and the Money Managers may enter into transactions giving
rise to brokerage commissions with brokers who provide brokerage, research or
other services to the Fund or Bennington so long as the Money Manager believes
in good faith that the broker can be expected to obtain the best price on a
particular transaction and the Fund determines that the commission cost is
reasonable in relation to the total quality and reliability of the brokerage and
research services made available to the Fund, or to Bennington for the benefit
of the Fund for which it exercises investment discretion, notwithstanding that
another account may be a beneficiary of such service or that another broker may
be willing to charge the Fund a lower commission on the particular transaction.
Bennington does not expect the Portfolios ordinarily to effect a
significant portion of the Portfolios' total brokerage business with brokers
affiliated with Bennington or their Money Managers. However, a Money Manager may
effect portfolio transactions for the Portfolio assigned to the Money Manager
with a broker affiliated with the Money Manager, as well as with brokers
affiliated with other Money Managers, subject to the above considerations
regarding obtaining the best net price and execution. Any transactions will
comply with Rule 17e-1 of the Investment Company Act.
Brokerage Commissions. The Board of Directors will review, at least
annually, the allocation of orders among brokers and the commissions paid by the
Portfolios to evaluate whether the commissions paid over representative periods
of time were reasonable in relation to commissions being charged by other
brokers and the benefits to the Portfolios. Certain services received by
Bennington or Money Managers attributable to a particular transaction may
benefit one or more other accounts for which investment discretion is exercised
by the Money Manager, or a Portfolio other than that for which the particular
portfolio transaction was effected. The fees of the Money Managers are not
reduced by reason of their receipt of such brokerage and research services.
The Bond Portfolios and the U.S. Government Money Portfolio do not pay
a stated brokerage commission.
<PAGE>
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS PAID BY EQUITY PORTFOLIOS
1/1/93- 1/1/94- 1/1/95 -
Portfolio 12/31/93 12/31/94 12/31/95
- ---------- --------- --------- ---------
<S> <C> <C> <C>
Equity Market(1) $6,515 $15,898 $0
Growth $14,890 $20,960 $66,971
Value and Income $16,570 $34,411 $52,424
Small to Mid Cap(2) $10,980 $18,095 $90,974
International(3) $0 $20,997 $131,316
____________
<FN>
1 Equity Market Portfolio was closed on April 15, 1994.
2 Until September 15, 1995, referred to as the Small Cap Portfolio.
3 Investment operations commenced on October 3, 1994.
</TABLE>
PERFORMANCE INFORMATION
Yield and Total Return Quotations. The Portfolios (other than the U.S.
Government Money Portfolio) compute their average annual total return by using
a standardized method of calculation required by the SEC. Average annual total
return is computed by finding the average annual compounded rates of return on
a hypothetical initial investment of $1,000 over the one, five and ten year
periods (or life of the Portfolios, as appropriate), that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P*(1+T)^n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
one, five or ten year period at the end of
the one, five or ten year period (or
fractional portion thereof)
The calculation assumes that all dividends and distributions of each
Portfolio are reinvested at the price stated in the prospectuses on the
reinvestment dates during the period, and includes all recurring fees.
<PAGE>
<TABLE>
<CAPTION>
The average annual total returns, calculated using the above method:
1/1/93- 1/1/94- 1/1/95 -
Portfolio 12/31/93 12/31/94 12/31/95
--------- -------- -------- --------
<S> <C> <C> <C>
Equity Market(1) 3.44% N/A N/A
Growth 14.21% 3.99% 34.32%
Value and Income 14.69% -1.93% 33.25%
Small to Mid Cap(2) 14.39% -4.07% 31.98%
International(3) N/A N/A 7.63%
Intermediate Fixed-Income 9.53% -5.24% 18.26%
Short-Intermediate Fixed-Income 5.62% -1.42% 11.42%
Mortgage Securities 7.26% -1.65% 16.03%
Municipal Intermediate Fixed-Income(4) N/A N/A N/A
__________________
<FN>
1 The Equity Market Portfolio was closed on April 15, 1994.
2 Until September 15, 1995, referred to as the Small Cap Portfolio.
3 Investment operations commenced on October 3, 1994.
4 The Municipal Portfolio was closed on December 4, 1995.
</TABLE>
Yields are computed by using standardized methods of calculation
required by the SEC. Yields for the Bond Portfolios are calculated by dividing
the net investment income per share earned during a 30-day (or one month) period
by the maximum offering price per share on the last day of the period, according
to the following formula:
YIELD =2*(((a-b)/(c*d)+1)^6-1)
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
<PAGE>
The annualized yields for the Bond Portfolios, calculated using the above
method:
<TABLE>
<CAPTION>
As of As of As of
Portfolio 12/31/93 12/31/94 12/31/95
---------- -------- -------- --------
<S> <C> <C> <C>
Intermediate Fixed-Income 4.73% 6.81% 5.36%
Short-Intermediate Fixed-Income 3.22% 5.96% 4.74%
Mortgage Securities 4.16% 6.17% 5.77%
Municipal Intermediate Fixed-Income(1) N/A 5.10% N/A
Institutional Investor Fixed-Income(2) N/A 6.26% N/A
________________
<FN>
1 Municipal Portfolio was closed on December 4, 1995.
2 Institutional Investor Fixed-Income Portfolio was closed on
August 28, 1995.
</TABLE>
The U.S. Government Money Portfolio computes its current annualized and
compound effective yields using standardized methods required by the SEC. The
annualized yield for this Portfolio is computed by (a) determining the net
change, exclusive of capital changes, in the value of a hypothetical account
having a balance of one share at the beginning of a seven calendar day period;
(b) dividing the difference by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends from
the original share and dividends declared on both the original share and any
such additional shares, and all fees, other than nonrecurring account or sales
charges, that are charged to all shareholder accounts in proportion to the
length of the base period, but does not include realized gains and losses from
the sale of securities or unrealized appreciation and depreciation. Compound
effective yields are computed by adding 1 to the base period return (calculated
as described above), raising that sum to a power equal to 365/7 and
subtracting 1.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the U.S. Government Money Portfolio's yield fluctuates,
its yield cannot be compared with yields on savings accounts or other investment
alternatives that provide an agreed-to or guaranteed fixed yield for a stated
period of time. However, yield information may be useful to an investor
considering temporary investments in money market instruments. In comparing the
yield of one money market fund to another, consideration should be given to each
fund's investment policies, including the types of investments made, length of
maturities of portfolio securities, the methods used by each fund to compute the
yield (methods may differ) and whether there are any special account charges
which may reduce effective yield.
The annualized yield for the U.S. Government Money Portfolio:
7-day Compounded
As of December 31 Annualized Yield Effective Yield
----------------- ---------------- ---------------
1993 2.77% 2.81%
1994 4.91% 5.03%
1995 4.86% 4.90%
CODE OF ETHICS
The Fund, on behalf of the Portfolios, has adopted a second amended and
restated Code of Ethics (the "Code of Ethics"), which established standards by
which certain covered persons of the Fund must abide relating to personal
securities trading conduct. Under the Code of Ethics, covered persons which
include, among others, directors and officers of the Fund and employees of the
Fund and Bennington, are prohibited from engaging in certain conduct, including
(1) the purchase or sale of any security being purchased or sold, or being
considered for purchase or sale, by a Portfolio, without prior approval by the
Fund or without the applicability of certain exemptions; (2) the recommendation
of a securities transaction without disclosing his or her interest in the
security or issuer of the security; (3) the commission of fraud in connection
with the purchase or sale of a security held by or to be acquired by a
Portfolio; (4) the purchase of any securities in an initial public offering or
private placement transaction eligible for purchase or sale by a Portfolio
without prior approval by the Fund; and (5) the acceptance of gifts of more than
a de minimus value from those doing business with or on behalf of the Fund or a
Portfolio. Certain transactions are exempt from item (1) of the previous
sentence, including: (1) purchases or sales on the account of a covered person
that are not under the control of or that are non-volitional with respect to
that person; (2) purchases or sales of securities not eligible for purchase or
sale by a Portfolio; (3) purchases or sales relating to rights issued by an
issuer pro rata to all holders of class of its securities; and (4) any
securities transaction, or series of related transactions, involving 500 or
fewer shares of an issuer having a market capitalization greater than $1
billion.
The Code of Ethics specifies that covered persons shall place the
interests of the shareholders of the Fund first, shall avoid potential or actual
conflicts of interest with the Fund first, and shall not take unfair advantage
of their relationship with any Portfolio. Covered persons are required by the
Code of Ethics to file quarterly reports of personal securities investment
transactions. However, a covered person is not required to report a transaction
over which he or she had no control. Furthermore, a director of the Fund who is
not an "interested person" (as defined in the Investment Company Act) of the
Fund is not required to report a transaction if such person did not know or, in
the ordinary course of his duties as a director of the Fund, should have known,
at the time of the transaction, that, within a 15 day period before or after
such transaction, the security that such person purchased or sold was either
purchased or sold, or was being considered for purchase or sale, by a Portfolio.
The Code of Ethics specifies that a designated supervisory person shall
supervise implementation and enforcement of the Code of Ethics and shall, at his
sole discretion, grant or deny approval of transactions required by the Code of
Ethics.
TAXES
Under the Code, each Portfolio is required to be treated as a separate
entity for federal income tax purposes. Each Portfolio has elected to qualify
and intends to remain qualified as a regulated investment company under
Subchapter M of the Code. This relieves each Portfolio (but not its
shareholders) from paying federal income tax on any net investment income and
capital gains, if any, realized during the taxable year which are distributed to
shareholders, provided that it distributes annually to its shareholders at least
90% of its investment company taxable income other than net capital gains
("Distribution Requirement"). To qualify as a regulated investment company, each
Portfolio must meet several additional requirements. Among these requirements
are the following: (i) at least 90% of a Portfolio's gross income each taxable
year must be derived from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies ("Income Requirement"); (ii) less than
30% of a Portfolio's gross income each taxable year may be derived from the sale
or other disposition of stock or securities held for less than three months (the
"Short-Short Gain Test"); (iii) at the close of each quarter of a Portfolio's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other
regulated investment companies and other securities, with such other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Portfolio and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iv) at the close of each
quarter of the Portfolio's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RICs) of any one issuer.
Notwithstanding the Distribution Requirement described above, which
only requires each Portfolio to distribute at least 90% of its annual investment
company taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), each Portfolio will be subject to a nondeductible 4% excise tax
to the extent it fails to distribute by the end of any calendar year at least
98% of its ordinary income for that year and 98% of its capital gain net income
for the one-year period ending on October 31 of that year, plus certain other
amounts. For this and other purposes, dividends declared by each Portfolio in
October, November or December of any calendar year and payable to shareholders
of record on a date in such a month will be deemed to have been paid by such
Portfolio and received by shareholders on December 31 of such year if the
dividends are paid by such Portfolio at any time through the end of the
following January. Each Portfolio intends to make distributions so as to avoid
this excise tax.
All dividends out of net investment income, together with distributions
of net short-term capital gains, will be taxable as ordinary income to
shareholders whether or not reinvested. Distributions of net capital gains by
a Portfolio are taxable to shareholders as long-term capital gains, regardless
of the length of time the shares of the Portfolio have been held by such
shareholders.
To the extent that a Portfolio recognizes income from "conversion
transactions," as defined in Section 1258 of the Code, all or part of the
capital gain from the disposition or other termination of a position held as
part of such conversion transaction may be recharacterized as ordinary income.
A conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction. A transaction, however, is not a conversion
transaction unless it also satisfies one of the following four criteria: (1) the
transaction consists of the acquisition of property by the taxpayer and a
substantially contemporaneous agreement to sell the same or substantially
identical property in the future; (2) the transaction is a straddle, within the
meaning of Section 1092 (treating stock as personal property); (3) the
transaction is one that was marketed or sold to the taxpayer on the basis that
it would have the economic characteristics of a loan but the interest-like
return would be taxed as capital gain; or (4) the transaction is described as a
conversion transaction in regulations to be promulgated on a prospective basis
by the Secretary of the Treasury.
"Regulated futures contracts" and certain listed options which are not
"equity options" constitute "Section 1256 contracts" and will be required to be
"marked to market" for federal income tax purposes at the end of the Portfolios'
taxable year; that is, treated as having been sold at market value. Sixty
percent of any gain or loss recognized on such "deemed sales" and on actual
dispositions will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss. Gain or loss on
the sale, lapse or other termination of options on narrowly-based stock indexes
will be capital gain or loss and will be long-term or short-term depending on
the holding period of the option. Certain of the Portfolio's transactions,
including positions which are part of a "straddle" may be subject to rules which
apply certain wash sale and short sale provisions of the Code. In the case of
a straddle, a Portfolio may be required to defer the recognition of losses on
positions it holds to the extent of any unrecognized gain on offsetting
positions held by the Portfolio.
Gains or losses attributable to fluctuations in exchange rates which
occur between the time a Portfolio accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Portfolio actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts or dispositions of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss. These gains,
referred to under the Code as "Section 988" gains or losses, increase or
decrease the amount of the Portfolio investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of the Portfolio's net capital gain, as was the case
prior to 1987. If Section 988 losses exceed other investment company taxable
income during a taxable year, the Portfolio would not be able to make any
ordinary dividend distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to shareholders, rather
than as an ordinary dividend, reducing each shareholder's basis in his or her
Portfolio shares. The Portfolios' ability to enter into forward foreign currency
exchange contracts, stock index futures contracts, options thereon and options
on stocks and stock indices may be affected by a limitation under the Code that
each Portfolio derive less than 30% of its gross income from gains from the sale
or other disposition of securities or options thereon held less than three
months.
Any loss realized on a sale, redemption or exchange of shares of a
Portfolio by a shareholder will be disallowed to the extent the shares are
replaced within a 61-day period (beginning 30 days before the disposition of
shares). Shares purchased pursuant to the reinvestment of a dividend will
constitute a replacement of shares. A shareholder who acquires shares of a
Portfolio and sells or otherwise disposes of such shares within 90 days of
acquisition may not be allowed to include certain sales charges incurred in
acquiring such shares for purposes of calculating gain or loss realized upon a
sale or exchange of shares of the Portfolio.
Dividends received by corporate shareholders of a Portfolio are
eligible for a dividends received deduction of 70% to the extent such
Portfolio's income is derived from qualified dividends received by the Portfolio
from domestic corporations. Capital gains distributions are not eligible for the
corporate dividends received deduction. Corporate shareholders should consult
their tax advisers regarding other requirements applicable to the dividends
received deduction.
Income received by the International Portfolio from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Income tax treaties between certain countries and the United States
may reduce or eliminate such taxes. It is impossible to determine in advance the
effective rate of foreign tax to which the International Portfolio will be
subject, since the amount of the International 's assets to be invested in
various countries is not known.
If the International Portfolio is liable for foreign income taxes, the
International Portfolio expects to meet the requirement of the Code for
"passing-through" to its shareholders foreign income taxes paid, but there can
be no assurance that the International Portfolio will be able to do so. If the
International Portfolio elects to "pass-through" the foreign taxes, shareholders
will be required to: (i) include in gross income (in addition to taxable
dividends actually received) their pro rata share of the foreign income taxes
paid by the International Portfolio; and (ii) treat their pro rata share of
foreign income taxes as paid by them. Shareholders are then permitted either to
deduct their pro rata share of foreign income taxes in computing their taxable
income or use it as a foreign tax credit against United States income taxes. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Foreign shareholders may not deduct or claim a credit for foreign
tax in determining their U.S. income tax liability unless the dividends paid to
them by the Fund are effectively connected with a United States trade or
business.
The amount of foreign taxes for which a shareholder may claim a credit
in any year will generally be subject to a separate limitation for "passive
income", which includes, among other things, dividends, interest and certain
foreign currency gains. Gain or loss from the sale of a security or from a
Section 988 transaction which is treated as ordinary income or loss (or would
have been so treated absent an election by the Fund) will be treated as derived
from sources within the United States, potentially reducing the amount allowable
as a credit under the limitation.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are advised to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in the Fund.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income tax. This may be
magnified in the Portfolio that pay dividends annually-- such as the
International Portfolio. Therefore, prior to purchasing shares of the Fund, the
investor should carefully consider the impact of dividends, including capital
gains distributions, which are expected to be or have been announced.
State and Local Taxes. Depending upon the extent of a Portfolio's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, a Portfolio may be subject to the
tax laws of such states or localities. Further, in those states which have
income tax laws, the tax treatment of a Portfolio and of shareholders of the
Portfolio with respect to distributions by the Portfolio may differ from federal
tax treatment. Distributions to shareholders may be subject to additional state
and local taxes.
PURCHASES IN KIND
The Portfolios may accept certain types of securities in lieu of wired
funds as consideration for Portfolio shares. Under no circumstances will a
Portfolio accept any securities in consideration of the Portfolio's shares the
holding or acquisition of which would conflict with the Portfolio's investment
objective, policies and restrictions or which Bennington or the applicable Money
Manager believes should not be included in the applicable Portfolio's portfolio
on an indefinite basis. Securities will not be accepted in exchange for
Portfolio shares if the securities are not liquid or are restricted as to
transfer either by law or liquidity of market; or have a value which is not
readily ascertainable (and not established only by evaluation procedures) as
evidenced by a listing on the American Stock Exchange, the New York Stock
Exchange, or NASDAQ. Securities accepted in consideration for a Portfolio's
shares will be valued in the same manner as the Portfolio's portfolio securities
in connection with its determination of net asset value. A transfer of
securities to a Portfolio in consideration for Portfolio shares will be treated
as a sale or exchange of such securities for federal income tax purposes.
A shareholder will recognize gain or loss on the transfer in an amount equal to
the difference between the value of the securities and the shareholder's tax
basis in such securities. Shareholders who transfer securities in consideration
for a Portfolio's shares should consult their tax advisers as to the federal,
state and local tax consequences of such transfers.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal years ended
December 31, 1993 and December 31, 1994, and the reports thereon of Deloitte &
Touche LLP, independent auditors, are included in the Fund's Annual Reports to
Shareholders dated December 31, 1993 and December 31, 1994, respectively. The
Fund's audited financial statements for the fiscal year ended December 31, 1995,
are contained in the Fund's Semi-Annual Report to Shareholders for the fiscal
year ended December 31, 1995, which is incorporated herein by this reference
and, unless previously provided, will be delivered together herewith.
APPENDIX A
RATINGS OF DEBT INSTRUMENTS
Corporate Bond Ratings
Moody's Investors Service ("Moody's")
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.
Those bonds in the Aa and A group which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1 and A1.
Standard & Poor's Corporation ("S&P")
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay interest and repay principal is very strong, and they differ
from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than issues in higher-rated
categories.
The AA and A ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the AA or A rating category,
respectively.
Note Ratings
Moody's
Moody's rating for short-term obligations will be designated Moody's
Investment Grade ("MIG"). This distinction is in recognition of the differences
between short-term credit risk and long-term risk. Factors affecting the
liquidity of the borrower are uppermost in importance in short-term borrowing,
while various factors of the first importance in bond risk are of lesser
importance in the short run. Symbols used are as follows:
MIG-1 - Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
MIG-2 - Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
S&P
An S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment.
. Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
. Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
SP-1 - This designation denotes strong or very strong capacity to pay
interest and repay principal. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) sign designation.
SP-2 - This designation denotes satisfactory capacity to pay interest
and repay principal.
Commercial paper rated A by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated A or better. The issuer has access to at least two additional channels
of borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1, A-2 or A-3.
A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 - This designation indicates the capacity for timely payment on
issues with this designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
A-3 - This designation indicates a satisfactory capacity for timely
payment. Obligations carrying this designation are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
APPENDIX B
CALCULATION OF PERFORMANCE FEES
Bennington and the Board of Directors have carefully considered Release No.
IC-7113, issued by the SEC in April 1972, which addresses the factors which must
be considered by directors and investment advisers in connection with
performance fees payable by investment companies. In particular, they have
considered the statement that "[e]lementary fiduciary standards require that
performance compensation be based only upon results obtained after [performance
fee] contracts take effect." Bennington and the Board of Directors believe that
the Portfolios' performance fee arrangement is consistent with the position of
the SEC articulated in Release No. IC-7113. No performance fees may be paid if
the Board of Directors determines that to do so would be unfair to the
Portfolios' shareholders.
For purposes of calculating the performance differential versus the applicable
index, the investment performance of each Portfolio (or Account) for any day
expressed as a percentage of its net assets at the beginning of such day, is
equal to the sum of: (i) the change in the net assets of each Portfolio (or
Account) during such day and (ii) the value of the Portfolio's (or Account's)
cash distributions accumulated to the end of such day. The return over any
period is the compounded return for all days over the period, i.e., one plus the
daily return multiplied together, minus one. The investment record of each index
for any period shall mean the sum of: (i) the change in the level of the index
during such period; and (ii) the value, computed consistently with the index, of
cash distributions made by companies whose securities comprise the index
accumulated to the end of such period; expressed as a percentage of the index
level at the beginning of such period. For this purpose cash distributions on
the securities which comprise the index shall be treated as reinvested in the
index at least as frequently as the end of each calendar quarter following the
payment of the dividend. For purposes of determining the fee adjustment for
investment performance, the net assets of the Portfolio (or Account) are
averaged over the same period as the investment performance of the Portfolio (or
Account) and the investment record of the applicable index are computed.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part A of this
Registration Statement: Financial Highlights (Per
Share Data and Ratios/Supplemental Data).
(2)(A) The following audited Financial Statements for the
years ended December 31, 1993 and December 31,
1994 are incorporated into Part B of this
Registration Statement by reference to the
relevant sections of the Fund's Annual Reports
dated December 31, 1993 and December 31, 1994,
respectively:
Schedule of Investments
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
(2)(B) The following Audited Financial Statements for the
period ended December 31, 1995 are
incorporated into Part B of this Registration
Statement by reference to the relevant sections of
the Fund's Annual Report to Shareholders for the
period ended December 31, 1995:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets Notes to
Financial Statements
(b) Exhibits
(1)(a) Articles of Incorporation of the Registrant.
Incorporated by reference to Exhibit No. 1 to the
Registration Statement on Form N-1A filed on June
24, 1991 (File No. 33-41245).
(1)(b) Articles of Amendment to Articles of
Incorporation. Incorporated by reference to
Exhibit No. (1)(b) to Pre-Effective Amendment No.
1 to the Registration Statement on Form N-1A filed
on August 28, 1991 (File No. 33-41245).
(1)(c) Articles of Amendment to Articles of
Incorporation. Incorporated by reference to
Exhibit No. (1)(c) to Pre-Effective Amendment No.
2 to the Registration Statement on Form N-1A filed
on October 22, 1991 (File No. 33-41245).
(1)(d) Articles of Amendment to Articles of Incorporation
dated October 18, 1993 of the Registrant.
Incorporated by reference to Exhibit No. (1)(d) to
Post-Effective Amendment No. 5 to the Registration
Statement on Form N-1A filed on February 25, 1994
(File No. 33-41245).
(2) Amended By-Laws of the Registrant. Incorporated by
reference to Exhibit No. (2) to Pre-Effective
Amendment No. 5 to the Registration Statement on
Form N-1A filed on March 11, 1992 (File No.
33-41245).
(3) Not applicable.
(4) Specimen stock certificates. Incorporated by
reference to Exhibit No. (4) to Pre-Effective
Amendment No. 2 to the Registration Statement on
Form N-1A filed on October 22, 1991 (File No.
33-41245).
(5)(a) Management Agreement with Bennington Capital
Management. Incorporated by reference to Exhibit
No. 5(a) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A filed on June
29, 1992 (File No. 33-41245).
(5)(b) Revised Form of Money Manager Agreements among the
Registrant, Money Managers and Bennington Capital
Management. Incorporated by reference to Exhibit
No. (5)(b) to Pre-Effective Amendment No. 5 to the
Registration Statement on Form N-1A filed on March
11, 1992 (File No. 33-41245).
(5)(c) New Management Agreement with Bennington Capital
Management. Incorporated by reference to Exhibit
5(c) to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A filed on
September 1, 1992 (File No. 33-41245).
(5)(c)(1) First Amendment to Management Agreement with
Bennington Capital Management L.P. dated May 24,
1994. Incorporated by reference to Exhibit
(5)(c)(1) of Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on July
7, 1994 (File No. 33-41245).
(5)(d) New Form of Money Manager Agreements among the
Registrant, Money Managers and Bennington Capital
Management. Incorporated by reference to Exhibit
No. 5(d) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A filed on June
29, 1992 (File No. 33-41245).
(5)(e) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
Parametric Portfolio Associates, Inc. Incorporated
by reference to Exhibit A to Proxy Statement For
Special Meeting of Shareholders to be Held
September 1, 1993 and filed on May 24, 1993 (File
No. 33-41245).
(5)(f) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
State Street Bank and Trust Company. Incorporated
by reference to Exhibit B to Proxy Statement For
Special Meeting of Shareholders to be Held
September 1, 1993 and filed on May 24, 1993 (File
No. 33-41245).
(5)(g) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
Martingale Asset Management L.P. Incorporated by
reference to Exhibit C to Proxy Statement For
Special Meeting of Shareholders to be Held
September 1, 1993 and filed on May 24, 1993 (File
No. 33-41245).
(5)(g)(1) Form of New Money Manager Agreement among the
Registrant, Bennington Capital Management L.P. and
Martingale Asset Management L.P. Incorporated by
reference to Exhibit A to Proxy Statement for
Special Meeting of Shareholders to be Held August
15, 1995, and filed on July 17, 1995 (File No.
33-41245).
(5)(h) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
BlackRock Financial Management, L.P. Incorporated
by reference to Exhibit D to Proxy Statement For
Special Meeting of Shareholders to be Held
September 1, 1993 and filed on May 24, 1993 (File
No. 33-41245).
(5)(h)(1) New Form of Money Manager Agreement among the
Registrant, Bennington Capital Management L.P. and
BlackRock Financial Management, Inc. the money
manager of the Mortgage Securities Portfolio.
Incorporated by reference to Exhibit No. 1 to the
Proxy Statement For Special Meeting of
Shareholders Held on January 27, 1995 and filed on
January 6, 1995 (File No. 33-41245).
(5)(i) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
Bankers Trust Company. Incorporated by reference
to Exhibit E to Proxy Statement For Special
Meeting of Shareholders to be Held September 1,
1993 and filed on May 24, 1993 (File No.
33-41245).
(5)(j) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
Smith Barney Capital Management. Incorporated by
reference to Exhibit F to Proxy Statement For
Special Meeting of Shareholders to be Held
September 1, 1993 and filed on May 24, 1993 (File
No. 33-41245).
(5)(k) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management and
Wells Fargo Nikko Investment Advisors.
Incorporated by referenced to Exhibit G to Proxy
Statement For Special Meeting of Shareholders to
be Held September 1, 1993 and filed on May 24,
1993 (File No. 33-41245).
(5)(l) New Form of Revised Money Manager Agreement among
the Registrant, Bennington Capital Management L.P.
and the money managers of the International
Equity Portfolio, International Fixed-Income
Portfolio, Municipal Intermediate Fixed-Income
Portfolio and Institutional Investor Fixed Income
Portfolio. Incorporated by reference to Exhibit
No. 5(l) to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
September 15, 1993 (File No. 33-41245).
(5)(m) New Form of Money Manager Agreement among the
Registrant (on behalf of the Small Cap Portfolio),
Bennington Capital Management L.P. and Symphony
Asset Management, Inc. Incorporated by reference
to Exhibit B to Proxy Statement For Special
Meeting of Shareholder to be Held August 15, 1995,
and filed on July 17, 1995 (File No. 33-41245).
(6) Not applicable.
(7) Not applicable.
(8)(a) Custodian Contract with State Street Bank and
Trust Company. Incorporated by reference to
Exhibit No. 8 to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-1A filed on
June 29, 1992 (File No. 33-41245).
(8)(b) Form of Custodian Services Agreement with PNC
Bank, National Association. Incorporated by
reference to Exhibit (8)(b) of Post-Effective
Amendment No. 6 to the Registration Statement on
Form N-1A filed on July 7, 1994 (File No.
33-41245).
(8)(b)(1) Custodian Services Agreement with PNC Bank,
National Association effective August 20, 1994.
Incorporated by reference to Exhibit (8)(b)(1) to
Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A filed on March 6, 1995
(File No. 33-41245).
(8)(c) Global Custody Agreement dated as of October 28,
1992 between Barclays Bank PLC and Provident
National Bank and investment companies signatory
thereto, effective for Registrant August 20, 1994.
Incorporated by reference to Exhibit (8)(c) to
Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A filed on March 6, 1995
(File No. 33-41245).
(8)(d) Agreement among Registrant, Bennington and The
Fifth Third Bank effective December 1, 1995.*
(9)(a) Transfer Agency and Registrar Agreement with The
Shareholder Services Group, Inc. Incorporated by
reference to Exhibit No. 9(a) to Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A filed on June 29, 1992 (File No.
33-41245).
(9)(a)(1) Transfer Agency and Subtransfer Agency Agreement
among the Registrant, Bennington Capital
Management and State Street Bank and Trust
Company. Incorporated by reference to Exhibit No.
9(a)(1) to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
September 15, 1993 (File No. 33-41245).
(9)(a)(2) Transfer Agency Agreement among the Registrant,
Bennington Capital Management L.P. and State
Street Bank and Trust Company dated February 28,
1995. Incorporated by reference to Exhibit (8)(c)
to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on March
6, 1995 (File No. 33-41245).
(9)(a)(3) Transfer Agency and Administrative Agreement among
the Registrant and Bennington dated December 1,
1995.*
(9)(b) Remote Access and Related Services Agreement among
Bennington Capital Management, the Registrant and
The Shareholder Services Group, Inc. Incorporated
by reference to Exhibit No. 9(a) to Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A filed on June 29, 1992 (File No.
33-41245).
(9)(c) Reporting and Accounting Agreement among
Bennington Capital Management, State Street Bank
and Trust Company and the Registrant. Incorporated
by reference to Exhibit No. 9(c) to Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A filed on June 29, 1992 (File No.
33-41245).
(9)(c)(1) Administration Agreement for Reporting and
Accounting Services among the Registrant,
Bennington Capital Management and State Street
Bank and Trust Company. Incorporated by reference
to Exhibit No. 9(c)(1) to Post-Effective Amendment
No. 4 to the Registration Statement on Form N-1A
filed on September 15, 1993 (File No. 33-41245).
(9)(c)(2) Form of Sub-Administration and Accounting Services
Agreement with PFPC Inc. Incorporated by reference
to Exhibit No. (9)(c)(2) to Post-Effective
Amendment No. 6 to the Registration Statement on
Form N-1A filed on July 7, 1994 (File No.
33-41245).
(9)(c)(2)(A) Sub-Administration and Accounting Services
Agreement with PFPC Inc. effective August 20,
1994. Incorporated by reference to Exhibit (8)(c)
to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on March
6, 1995 (File No. 33-41245).
(9)(c)(3) Form of Administration Agreement with Bennington
Capital Management L.P. Incorporated by reference
to Exhibit No. (9)(c)(3) to Post-Effective
Amendment No. 6 to the Registration Statement on
Form N-1A filed on July 7, 1994 (File No.
33-41245).
(9)(c)(3)(A) Sub-Administration Agreement with Bennington
Capital Management L.P. effective September 7,
1994. Incorporated by reference to Exhibit (8)(c)
to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on March
6, 1995 (File No. 33-41245).
(10) Opinion and Consent of Counsel. Incorporated by
reference to Exhibit No. 10 to Pre-Effective
Amendment No. 4 to the Registration Statement on
Form N-1A filed on February 4, 1992 (File No.
33-41245).
(11) Consent of Independent Public Auditors.*
(12) Not applicable.
(13) Agreement related to initial capital. Incorporated
by reference to Exhibit No. 13 to Pre-Effective
Amendment No. 4 to the Registration Statement on
Form N-1A filed on February 4, 1992 (File No.
33-41245).
(14) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of December 1,
1995, including:
Instructions for Opening Your IRA*
IRA Disclosure Statement*
IRA Custodial Account Agreement*
IRA Application and Adoption Agreement Form*
IRA Transfer Request/Direct Rollover Request Form*
(15)(a) Form of Distribution Plan. Incorporated by
reference to Exhibit No. 15 to Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A filed on June 29, 1992 (File No.
33-41245).
(15)(b) Distribution Plan revised February 10, 1994.
Incorporated by reference to Exhibit No. 15(b) to
Post-Effective Amendment No. 5 to the Registration
Statement on Form N-1A filed on February 25, 1994
(File No. 33-41245).
(15)(c) Distribution Plan revised February 16, 1995.
Incorporated by reference to Exhibit No. (15)(c)
to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on March
6, 1995.
(15)(d) Distribution Plan revised February 6, 1996.*
(16) Schedule of Computation of Performance
Calculation.*
(17) Financial Data Schedules.*
- ---------------
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities as of March 31, 1996
Title of Class Number of
- ---------------- Record Holders
---------------
Shares of Common Stock, $.001 Par Value
Per Share:
Growth Portfolio 330
Value and Income Portfolio 267
Small to Mid Cap Portfolio 339
International Equity Portfolio 246
Intermediate Fixed-Income Portfolio 185
Short-Intermediate Fixed-Income Portfolio 84
Mortgage Securities Portfolio 185
U.S. Government Money Portfolio 149
Item 27. Indemnification
As permitted by Section 17(h) and (i) of the Investment Company
Act of 1940, as amended (the "1940 Act"), and pursuant to Article VI of the
Registrant's Articles of Incorporation, as amended (incorporated by reference to
Exhibit Nos. 1(a), 1(b), 1(c) to the Registration Statement on Form N-1A, filed
on June 24, 1991 (File No. 33-41245), Pre-Effective Amendment No. 1 thereto,
filed on August 28, 1991, Pre-Effective Amendment No. 2 thereto, filed on
October 22, 1991 and 1(d) to Post-Effective Amendment No. 5 thereto, filed on
February 25, 1994, respectively). Section 2-418 of the Maryland General
Corporation Law and Section 7 of the Management Agreement (incorporated by
reference to Exhibit Nos. 5(a) and 5(c) of the Registration Statement on Form
N-1A, filed on June 24, 1991 (File No. 33-41245) and Post-Effective Amendment
No. 2 thereto, filed on September 1, 1992, respectively) (the "Management
Agreement"), officers, directors, employees and agents of the Registrant will
not be liable to the Registrant, any stockholder, officer, director, employee,
agent or other person for any action or failure to act, except for bad faith,
willful misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions. Section 2-418 of Maryland General
Corporation Law permits indemnification of directors who acted in good faith and
reasonably believed that the conduct was in the best interests of the
Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such director, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its
officers and directors against liabilities, and certain costs of defending
claims against such officers and directors, to the extent such officers and
directors are not found to have committed conduct constituting willful
misfeasance, bad faith, gross negligence or reckless disregard in the
performance of their duties. The insurance policy also insures the Registrant
against the cost of indemnification payments to officers and directors under
certain circumstances.
Section 7 of the Management Agreement and Section 12 of the Money
Manager Agreements (Exhibits 5(a) - 5(m), incorporated by reference to this
Registration Statement) limit the liability of Bennington Capital Management
L.P. ("Bennington") and the money managers, respectively, to liabilities arising
from willful misfeasance, bad faith or gross negligence in the performance of
their respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Articles of Incorporation, By-Laws, Management
Agreement, Transfer Agent Agreement and Money Manager Agreements in a manner
consistent with Release No. 11330 of the Securities and Exchange Commission
under the 1940 Act so long as the interpretations of Section 17(h) and 17(i) of
such Act remain in effect and are consistently applied.
Item 28. Business and Other Connections of Investment Adviser
See Registrant's Prospectuses sections "General Management of the
Portfolios," "The Money Managers" and "Money Manager Profiles," and the
Statement of Additional Information sections "Investment Advisory And Other
Services" and "Money Managers."
Item 29. Principal Underwriters
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by section
31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder are maintained in the
following locations:
Manager, Administrator
and Transfer Agent Custodian
---------------------- ----------
Bennington Capital Management L.P. PNC Bank, N.A.
1420 Fifth Avenue, Suite 3130 Broad & Chestnut Streets
Seattle, WA 98101 Philadelphia, PA 19101
Sub-Administrator
------------------
PFPC, Inc.
103 Bellevue Parkway
Wilmington, DE 19809
Money Managers Custodian of IRA Accounts
--------------- -------------------------
See sections of the The Fifth Third Bank
prospectuses entitled "Money Manager 38 Fountain Square Plaza
Profiles" for names and addresses. Cincinatti, OH 45263
Item 31. Management Services
None except as described in Parts A and B.
Item 32. Undertakings
(a) The information called for by Item 5A of Form
N-1A is contained in the Fund's annual report to
shareholders; accordingly, the Fund hereby
undertakes to furnish each person to whom
prospectuses are delivered with a copy of the Fund's
latest annual report, upon request and without
charge.
(b) Registrant undertakes to file, within four to
six months from the effective date of this
Registration Statement or the inception of
investment operations, a post-effective amendment
containing updated financial statements which need
not be certified for the International Fixed-Income
Portfolio.
(c) Registrant undertakes to call, if requested by
the holders of at least 10% of the Registrant's
outstanding shares, a meeting of shareholders for
the purpose of voting upon the question of removal
of a director or directors and to assist in
communications with shareholders as required by
Section 16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, as amended, and has
duly caused this Post-Effective Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Seattle, and State of Washington, on the 29 day of April, 1996.
ACCESSOR FUNDS, INC.
By: /s/J. Anthony Whatley III
-------------------------------
J. Anthony Whatley III
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 10 to the Registration Statement has been
signed by the following persons in the capacities and on the date
indicated:
Signature Title Date
/s/J. Anthony Whatley III
- -------------------------
J. Anthony Whatley III President, Principal Executive 4/29/96
Officer and Director
/s/George G. Cobean III
- -------------------------
George G. Cobean III Director 4/29/96
/s/James A. Kraft
- -------------------------
James A. Kraft Director 4/29/96
/s/Geoffrey C. Cross
- -------------------------
Geoffrey C. Cross Director 4/29/96
/s/Ravindra A. Deo
- -------------------------
Ravindra A. Deo Principal Financial and 4/29/96
Accounting Officer
<PAGE>
ACCESSOR FUNDS, INC.
EXHIBIT INDEX
Exhibit Description Page
Number
(8)(d) Agreement among Registrant, Bennington and The
Fifth Third Bank
(9)(a)(3) Transfer Agency and Administrative Agreement
between Registrant and Bennington
(11) Consent of Independent Auditors
(14) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of December 1,
1995, including:
Instructions for Opening Your IRA
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
(15)(d) Distribution Plan revised February 6, 1996
(16) Computation of Performance Calculation
(17) Financial Data Schedules
AGREEMENT
THIS AGREEMENT made and entered into this 1st day of December, 1995,
among ACCESSOR FUNDS, INC. (the "Fund"), a Maryland corporation, having its
principal office and place of business at 1420 Fifth Avenue, Seattle, WA 98101,
BENNINGTON CAPITAL MANAGEMENT L.P. ("Bennington"), a Washington limited
partnership, having its principal office and place of business at 1420 Fifth
Avenue, Seattle, WA 98101, and THE FIFTH THIRD BANK, a banking company organized
under the laws of the State of Ohio ("Fifth Third"), having its principal place
office and place of business at 38 Fountain Square Plaza, Cincinnati, OH 45263,
(each a "Party" and collectively, the "Parties").
WHEREAS, the Fund is an open-end and diversified management company
registered under the Investment Company Act of 1940, as amended, and is
authorized to issue shares in separate series, with each such series
representing interests in a separate portfolio of securities and other assets
(each such series, together with other series subsequently established by the
Fund and made subject to this Agreement, being referred to as a "Portfolio" or
collectively the "Portfolios," and attached hereto as Exhibit A, as may be
amended from time to time); and
WHEREAS, the Fund is the sponsor of any form of agreement already or
hereafter designed to satisfy the requirements of Section 408 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), or any
successor to such sections (the "Form," attached hereto as Exhibit B, as may be
amended from time to time) which provides that it will be funded in whole or in
part by the purchase of shares of one or more of the Portfolios of the Fund and,
names Fifth Third as Custodian, and which has, as of the relevant point in time
been adopted by an investor;
WHEREAS, Bennington provides certain management, administrative,
transfer agency, dividend disbursing and/or other services to the Fund and is an
affiliate thereof;
WHEREAS, Fifth Third has agreed to act as Custodian of record to the
holders ("Account Holders") of the individual plan and custodial or trust
agreement hereafter established by a shareholder of the Fund using the Form (the
"Accounts"), the application of which has been accepted by Fifth Third;
WHEREAS, Bennington has agreed to perform certain record keeping and
administrative functions on behalf of Fifth Third for the Accounts;
NOW, THEREFORE, the parties agree as follows:
1. Fifth Third hereby appoints Bennington its agent, to perform such
services required under the Form as are set forth on Exhibit C hereto, which
Exhibit C may be amended from time to time, and Bennington accepts such
designation pursuant to the terms of this Agreement. The agency authority of
Bennington shall be to perform for, and on behalf of, Fifth Third the services
contemplated herein.
2. Fifth Third will receive fully completed copies of any required
Internal Revenue Service forms or other documents establishing the Account which
are to be maintained by Fifth Third (collectively, the "Account Documents").
Copies of the Account Documents will have attached thereto all appropriate
exhibits and any other collateral documents as may be necessary for Bennington
to complete its services under this Agreement.
3. Pursuant to the Form, Fifth Third will retain the Account Documents
for safekeeping on behalf of the Account Holders. After receiving quarterly
reports from Bennington in the form of a list of Account Holders, Fifth Third
will confirm that it holds a file containing the appropriate Account Documents
for each of the Account Holders on the list provided by Bennington. If
Bennington does not receive any confirmation from Fifth Third, Bennington will
assume that Fifth Third does hold Account Documents on the Account Holders
included on Bennington's list. Fifth Third will also provide Bennington with the
tax identification number for Fifth Third.
4. Fifth Third will sign all applications for Accounts or other
documents related to the Form that Bennington submits to Fifth Third for its
signature. Fifth Third will execute any other instruments and documents in
regard to such Accounts (including correspondence with various persons such as
employers, Account Holders and beneficiaries), which Bennington also submits to
Fifth Third for that purpose. However, Fifth Third authorizes Bennington to
receive and accept all applications, instructions, notices, forms or other
documents or instruments and remittances from Account Holders in regard to such
Accounts, and to correspond with various persons such as employers, Account
Holders and beneficiaries, on behalf of Fifth Third, as its agent, (and such
authorization may be a blanket or standing authorization until revoked by Fifth
Third). In no event will Bennington sign Fifth Third's name on any application
or other document without Fifth Third's prior written approval.
5. Fifth Third shall be entitled to such compensation as is specified
in Exhibit D, as amended from time to time. Such compensation shall be paid to
Fifth Third by Bennington and Fifth Third shall have no claim for compensation
against the Accounts or the Fund.
6. Bennington shall be entitled to charge an annual maintenance fee
pursuant to the Account Documents. Such annual maintenance fee shall be paid to
Bennington from the Accounts for its expenses incurred in servicing such
Accounts. Bennington shall notify Fifth Third of any change to any charges
applicable to Account Holders and will prepare and distribute the notices to
Account Holders required under the Account Documents. Fifth Third shall
cooperate with Bennington in taking all actions required under the Account
Documents to effect such change.
7. Each of the Fund, Bennington and Fifth Third will indemnify, defend
and hold the other Parties to this Agreement harmless from any and all claims,
arising out of or in any way connected with the Accounts or out of any default
by the indemnifying Party under this Agreement.
8. This Agreement may be terminated by any Party upon 60 days' written
notice to the other Parties. In the event of termination of this Agreement, the
Fund or Bennington shall designate a successor entity, which will be a bank,
financial institution or other organization approved by the Secretary of the
Treasury to hold assets of the individual retirement accounts (a "Successor").
Bennington shall prepare and distribute such notices to the Account Holders
required under the Account Documents to effect the change of Custodian in form
and content satisfactory to and signed by Fifth Third.. Fifth Third shall
cooperate with Bennington in taking all actions required under the Account
Documents to effect such change of Custodian.
9. The Fund or Bennington shall provide Fifth Third with the form of
any amendments necessary to cause the Account Documents for each Account to
continue to satisfy the requirements of Section 408 of the Code or any successor
provision thereof and Bennington shall distribute such amendments to Account
Holders. Fifth Third shall cooperate with Bennington in taking all actions
required under the Account Documents to cause the Account Documents to be
amended in accordance with the form provided by Bennington. No other amendments
shall be made to the Account Documents for any Account without the prior
agreement of the parties hereto and notice to the Account Holder in accordance
with the Account Documents.
10. All records maintained by Bennington pursuant to this Agreement
shall be and remain the property of Bennington. Fifth Third acknowledges and
agrees that all information and documents furnished pursuant to this Agreement
regarding the Accounts, the Fund or Bennington shall be treated as confidential
and shall not be disclosed to third parties except with the prior written
consent of Bennington, or as required by law or court order with written notice
to Bennington as soon as reasonably practicable after Fifth Third learns that
such information or documents must be disclosed.
11. Records of Fifth Third's ownership of shares of the Portfolios in
its capacity as Custodian will be maintained by Bennington, as the Fund's
transfer agent in the name of Fifth Third as Custodian (or its nominee) and no
physical shares will be issued.
12. Consistent with Fifth Third's directions, Bennington shall maintain
or cause to be maintained adequate records reflecting transactions of each
Account. Bennington agrees to furnish Fifth Third with any information Fifth
Third requires to carry out its recordkeeping responsibilities as Custodian of
the Accounts.
13. Fifth Third and Bennington shall each be solely responsible for
performance of those duties expressly assigned to it in this Agreement, and
neither assumes any responsibility as to duties assigned to anyone else
hereunder or by operation of law.
14. Every provision of this Agreement is intended to be severable. If
any term or provision hereof is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
15. In the event any Party brings an action to enforce this Agreement,
the prevailing Party in such action shall be entitled to recover from the losing
party or parties all costs and expenses incurred in connection therewith,
including reasonable attorneys' fees and expenses. Notwithstanding the above, in
no case shall Fifth Third's liability or damages to Bennington or the Fund
exceed the amount of actual damages, and Fifth Third shall not be liable for any
special, consequential, incidental or punitive damages.
16. This Agreement will be governed and construed in accordance with
the laws of the State of Washington. The parties agree that venue for any action
or proceeding brought pursuant to this Agreement shall be in the state or
federal courts located in the State of Washington.
IN WITNESS WHEREOF, the undersigned, by their respective duly
authorized officers, hereby execute this Agreement, effective on the day and
year first above written.
ACCESSOR FUNDS, INC.
By: /s/ Ravindra A. Deo
Ravindra A. Deo
Treasurer
BENNINGTON CAPITAL MANAGEMENT L.P.
By: Bennington Management Associates, Inc.
Its Managing General Partner
By: /s/ J. Anthony Whatley III
J. Anthony Whatley III
President
THE FIFTH THIRD BANK
By: /s/ Howard Kaplan
Name Howard Kaplan
Title Trust Officer
EXHIBIT A
ACCESSOR FUNDS, INC. PORTFOLIOS
as of December 1, 1995
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U. S. Government Money Portfolio
EXHIBIT B
ACCESSOR FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT PLAN
Individual Retirement Custodial Account Agreement
Individual Retirement Custodial Account Disclosure Statement
Individual Retirement Custodial Account Application and Adoption Agreement Form
<PAGE>
CONTENTS
I. Procedures
Instructions For Opening Your IRA
Individual Retirement Custodial Account Disclosure Statement
Individual Retirement Custodial Account Agreement
(Under Section 408(A) Of The Internal Revenue Code)
II. Retirement Account Forms
Individual Retirement Custodial Account Application And Adoption
Agreement
IRA Transfer Request/Direct Rollover Request
INSTRUCTIONS FOR OPENING YOUR IRA
DISCLOSURE
Accessor Funds, Inc. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund, currently with nine
diversified investment portfolios, each with its own investment objective and
policies. While The Fifth Third Bank is the Custodian of your individual
retirement account ("IRA"), investments in the portfolios of the Fund are not
deposits or obligations of, or guaranteed or endorsed by any bank. Further,
investments in the portfolios are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
The Fund's Individual Retirement Custodial Account Plan consists of the
following documents. Please read each of these documents carefully as they
contain the information you need to establish an IRA. Since many of the benefits
of an IRA are related to income taxes, you are encouraged to discuss your IRA
plans with your lawyer, accountant or tax adviser. Neither Bennington Capital
Management L.P. nor the Custodian may act as your tax or investment adviser. You
are responsible for complying with the tax laws and financial considerations as
they apply to your situation.
DOCUMENTS
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
Accessor Funds, Inc. Prospectus(es)
OPENING YOUR IRA
1. Please complete and sign the IRA Application and Adoption Agreement Form.
This sets up an IRA in your name or, if a Spousal IRA, in your spouse's
name, permits rollovers, designates beneficiaries and specifies your
investment choices.
2. Please complete and sign the IRA Transfer Request/Direct Rollover Request
Form if your initial investment is from a transfer of assets or rollover
from another IRA or qualified plan. Complete a form for each organization
or account from which an IRA investment is to be transferred.
3. Remove the IRA Application and Adoption Agreement Form and the Transfer
Request/Direct Rollover Request (if applicable) and deliver them to your
investment advisor. Retain the IRA Disclosure Statement and the IRA
Custodial Account Agreement for your records.
DISTRIBUTIONS
Please contact your investment adviser or Bennington Capital Management L.P. at
1-800-759-3504 for information on taking a distribution from your IRA.
FEES AND MINIMUMS
The fees are set out on the Application and Adoption Agreement form. Currently,
there are no IRA fees if your aggregate IRA investment is $10,000 at year-end.
IRA's under $10,000 will be debited for an annual $25.00 maintenance fee in
January of each year. The fees can be changed with 30 days' written notice to
you.
The minimum initial investment to open an IRA is $1,000 in the aggregate.
Subsequent investments are $100 in the aggregate. These minimums can be changed
with 30 days' written notice to you.
MAILING INSTRUCTIONS
Check to be sure you have properly completed all necessary information and
forms. Your IRA cannot be opened without the properly completed documents.
Please deliver all of the completed and signed forms to your investment advisor,
who will deliver them to:
Bennington Capital Management L.P.
Attn: Shareholder Services
P. O. Box 1748
Seattle WA 98111-1748
Accessor Funds, Inc.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DISCLOSURE STATEMENT
INTRODUCTION
This disclosure statement contains information about your Individual Retirement
Custodial Account ("IRA") for investment in Accessor Funds, Inc. (the "Fund"),
a
multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of nine diversified investment
portfolios, each with its own investment objective and policies. Your interest
in the IRA is nonforfeitable. All assets of the IRA are registered in the name
of The Fifth Third Bank, a banking company organized under the laws of the State
of Ohio (the "Custodian") or of a suitable nominee as custodian for your
benefit, or that of your beneficiary. Bennington Capital Management L.P.
("Bennington") acts as investment adviser, manager and transfer agent to the
Fund. Through an agreement between the Fund, Bennington and the Custodian,
Bennington provides administrative services on behalf of the Fund and the
Custodian to the IRA. Your IRA is a custodial account established for your
exclusive benefit or that of your named beneficiary or beneficiaries as
described in Section 408 of the Internal Revenue Code of 1986, as amended (the
"Code").
Your IRA is established through the use of the provisions of Internal Revenue
Service ("IRS") Form 5305-A, which is a model custodial account agreement that
meets the requirements of Section 408(a) of the Code and has been automatically
approved as to form by the IRS. The IRS approval applies only to Form 5305-A; it
is not an endorsement of the Fund-sponsored IRA. Accessor Funds, Inc. Individual
Retirement Custodial Account Plan consists of the Individual Retirement
Custodial Account Agreement (the "Custodial Account Agreement"), this Disclosure
Statement, the Application and Adoption Agreement (the "Adoption Agreement") and
the other appropriate forms, which will be amended from time to time to comply
with the provisions of the IRS Code and related regulations. Other amendments
may be made with the consent of the persons whose signatures appear on the
Adoption Agreement.
RIGHT TO REVOKE
You may revoke a newly established IRA at any time within seven days after the
date on which you establish your account. An IRA established more than seven
days after the date of your receipt of this Disclosure Statement may not be
revoked.
To revoke your IRA, mail or deliver a written notice of revocation to:
Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Mailed notice will be deemed given on the date that it is postmarked (or, if
sent by certified or registered mail, on the date of certification or
registration). If you revoke your IRA within the seven-day period, you are
entitled to a return of the entire amount you contributed into your IRA, without
adjustment for such items as sales charges, administrative expenses or
fluctuations in market value. Your initial investment in the IRA will be
invested in the U.S. Government Money Portfolio for seven days and then invested
in the Portfolios of the Fund in accordance with the directions on your Adoption
Agreement.
TAX ADVANTAGES
Your IRA gives you several tax benefits. Earnings on the assets held in your IRA
are not subject to federal income tax until withdrawn by you. You may be able to
deduct all or part of your IRA contribution on your federal income tax return.
State income tax treatment of your IRA may differ from federal treatment; ask
your state tax department or your personal tax advisor for details.
If you are eligible to receive a distribution from a tax qualified retirement
plan as a result of, for example, termination of employment, plan
discontinuance, or retirement, all or part of the distribution may be
transferred directly into your IRA. This is a called a "direct rollover." Or, if
your distribution is paid directly to you, you may make a "regular rollover" to
your IRA within 60 days. By making a direct rollover, you can defer income taxes
on the amount rolled over until you subsequently make withdrawals from your IRA.
Since many of the benefits of an IRA are related to income taxes, you are
encouraged to discuss your IRA plans with your lawyer, accountant or tax
adviser. Neither Bennington nor the Custodian may act as your tax adviser. You
must be responsible for complying with the tax laws and financial considerations
as they apply to your situation.
ESTABLISHING YOUR IRA
All IRAs must meet certain requirements. Contributions generally must be made in
cash. The IRA trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance or be commingled with other property except in a
common trust or investment fund. Your interest in the account must be
nonforfeitable at all times. The annual earnings for your IRA consist of all
dividends and distributions on the Portfolio shares held in your account. Fund
dividends and distributions are reinvested in additional shares and accumulate
on a tax deferred basis.
You may obtain further information on IRAs from any district office of the IRS
or by requesting Publication 590, "Individual Retirement Account" from the IRS.
FEES AND EXPENSES
Fees and other expenses of maintaining your IRA account are described in the
Adoption Agreement and in the letter you receive confirming the acceptance of
your IRA and may be changed from time to time, as provided in the Custodial
Agreement.
ELIGIBILITY
Whether you are an employee or a self-employed individual, you are eligible to
contribute to an IRA even if you are already covered under another tax-qualified
plan. Your employer may contribute to an IRA established by you and you may
contribute to an IRA used as part of a Simplified Employee Pension plan ("SEP";
described below). You are eligible to establish and contribute to an IRA for any
year if you received taxable compensation during the year for personal services
you rendered and you did not reach age 70 1/2 during the year. Taxable
compensation includes wages, salaries, tips, commissions, fees, bonuses, taxable
alimony and separate maintenance payments. Income not considered compensation
includes pension income or earnings and profits from property, such as dividend,
interest, rental or capital gains income.
TYPES OF IRAS
Regular IRA
If you have taxable compensation and are under age 70 1/2, you may make a
contribution to a Regular IRA of $2,000 or 100% of your compensation, whichever
is less. To determine the tax deductibility of your contribution, see
"Deductible IRA Contributions" on page 17. However, rollover contributions and
employer contributions to a simplified employee pension (SEP), as explained
below, can be more than $2,000 per year.
Spousal IRA
You may be eligible to establish an additional but separate and independent
account for your unemployed spouse. To qualify, you must be married at the end
of the tax year, you and your spouse must file a joint return, your spouse must
be under age 70 1/2, you must have received compensation for the tax year, and
your spouse must not have received any compensation during the tax year or must
elect to be treated as having not received compensation during the tax year. For
a spousal IRA, your spouse must set up a different IRA, separate from yours, to
which you contribute. The maximum total contribution to your IRA and to a
Spousal IRA may not exceed the lesser of $2,250 or 100% of your compensation.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution to either account is $2,000 or 100% of
compensation. To determine the amount of your income tax deduction for your IRA
contribution and the amount that can be contributed to each account, see the IRS
instruction booklets for Forms 1040 and 1040A. Although you may not continue
contributing to your IRA once you have reached age 70 1/2, you may continue
contributing to a Spousal IRA until the year in which your spouse reaches age
70 1/2. With the exception of the contribution limits, all rules that apply
to a Regular IRA also apply to a Spousal IRA.
If you or your spouse earn more than $250 in taxable compensation in any tax
year, you or your spouse may make contributions to your respective regular IRAs
equal to the lesser of $2,000 or 100% of taxable compensation.
Rollover IRA
Generally, a rollover is a tax-free distribution to you of cash or other assets
from one retirement program to which you contribute to another. The rollover
must be completed by the 60th day after the day you receive the distribution to
be valid and may only be done once in any one-year period (measured from the
date you receive the distribution). This rule applies separately to each IRA you
own, although for purposes of the rule, the Fund-sponsored IRA is considered one
IRA regardless of how many Portfolios of the Fund you choose. Exchanges of IRA
money between the Portfolios are restricted by the Fund's exchange policies, but
not by this rule. See IRS Publication 590 for more information about rollover
IRAs.
There are two types of rollover contributions:
Rollover from one IRA to another. You may withdraw part or all of the
assets from one IRA and reinvest them in another IRA. You are not required
to receive a complete distribution from your IRA in order to make a
rollover contribution to another IRA, nor are you required to roll over the
full amount you received. Any amount you keep will generally be taxable
(unless it is a return of nondeductible contributions) in the year it is
received, and it will be subject to a 10% penalty tax if you are under age
59 1/2. Once you reach age 70 1/2, your required minimum distributions are
not eligible for rollover treatment. However, you may make rollover
contributions, even though you may not make regular IRA contributions.
Rollover from an Employer's Qualified Plan to an IRA. This type of rollover
IRA is an IRA that contains only eligible distributions from an employer's
qualified retirement plan (e.g., profit sharing, pension, 401(k), or 403(b)
plan). By maintaining a separate IRA for this money (called a "Conduit
IRA"), you may subsequently roll it over into another employer's qualified
retirement plan (provided that the employer's plan accepts rollovers). If
you commingle this money with your regular IRA contributions, you may not
roll it over into another employer's qualified retirement plan. These
rollover contributions, if properly made, are not included in your gross
income and therefore are not deductible from it; neither will rollover
contributions count toward the maximum allowable nondeductible
contribution. When you deposit an eligible rollover distribution from an
employer's qualified plan into an IRA, you are making an irrevocable
election indicating that the distribution be treated as a rollover
contribution. Consult your tax adviser before electing to roll over to an
IRA. By signing the Application, you are irrevocably electing to treat your
qualified plan distribution as a rollover. If you receive an eligible
rollover distribution from a qualified retirement plan, you may roll over
the amount you have received to an IRA, as long as the rollover is
completed by the 60th day after the day you receive such amount. Any part
of an eligible rollover distribution that is made payable to you, even if
you intend to roll it over into an individual retirement account (or
eligible retirement plan) is subject to mandatory 20% withholding for
Federal income tax by the employer. You can avoid this withholding by using
the Direct Rollover Option discussed below. Your plan or 403(b) sponsor is
required to provide you with information about direct and regular rollovers
and withholding taxes before you receive your distribution and must comply
with your directions to make a direct rollover. Read this information
carefully before receiving any distributions from a qualified retirement
plan or 403(b) annuity. The rules governing rollovers are complicated. Be
sure to consult your tax adviser or the IRA if you have a question about
rollovers. Direct Rollover Option. If you are entitled to an eligible
distribution of $200 or more from a qualified retirement plan, you may ask
your employer to make a direct rollover of the distribution to the
Custodian. By electing a direct rollover you are exempt from the 20% tax
withholding requirements that would apply if the distribution were made
payable to you. The employer must make the check payable to the
Custodian/Trustee of the receiving IRA or plan; however, the employer has
the option of giving the check to you for delivery or mailing it directly
to the new plan. The employer must report a direct rollover on Form 1099-R
and the Custodian will report the rollover contribution on Form 5498.
The maximum amount you may roll over is the amount of employer contributions and
earnings distributed. You may not roll over any after-tax employee contributions
you made to the employer retirement plan. If you are over age 70 1/2 and are
required to take minimum distributions under the tax laws, you may not roll over
any amount required to be distributed to you under the minimum distribution
rules. Also, if you are receiving periodic payments over your or your and your
designated beneficiary's life expectancy or for a period of at least 10 years,
you may not roll over these payments.
Once you have established a Rollover IRA (or rolled qualified plan money to
another employer's qualified plan), you will not be taxed until you take
distributions.
Special Rules for Surviving Spouses, Alternate Payees, and Other Beneficiaries.
If you are a surviving spouse, you may have an eligible rollover distribution
rolled directly into an IRA or paid to you. If you have the distribution paid to
you, you can keep it or roll it over to an IRA, but you cannot roll it over to
an employer's qualified plan. If you are a beneficiary other than the surviving
spouse, you cannot choose a direct rollover, and you cannot roll over the
distribution. If you are the spouse or former spouse alternate payee under a
Qualified Domestic Relations Order, you may have an eligible rollover
distribution rolled directly into an IRA or a qualified employer plan or have it
paid to you. If the distribution is paid to you, you may roll it over to an IRA
or another employer's qualified plan.
Exceptions to Rollover Contributions. Almost all distributions from employer
plans or 403(b) arrangements (for employees of tax-exempt employers) are
eligible for rollover to an IRA. The main exceptions are
. payments over the lifetime or life expectancy of the participant
(or participant and a designated beneficiary),
. installment payments for a period of 10 years or more,
. required distributions starting at age 70 1/2, and
. payments of employee after-tax contributions.
Transfer to a Successor Trustee/Custodian. A transfer is the movement of your
IRA funds directly from one trustee or custodian to another. You and the
accepting trustee or custodian use a Transfer Request to direct the current
trustee to transfer the IRA. Because you do not take physical receipt of the
money, the transaction is not reported to the IRS. Institutional transfers are
not subject to the one-year restriction that applies to rollovers; you may
transfer IRA money from one trustee or custodian to another as often as you
wish.
Simplified Employee Pension Plan ("SEP-IRA")
A separate IRA may be established for use by your employer as part of a SEP
arrangement. Your employer may contribute to your SEP-IRA up to a maximum of 15%
of your compensation or $30,000, whichever is less. If your SEP-IRA is used as
part of a salary reduction SEP, you may elect to reduce your annual
compensation, up to a maximum of 15% of your compensation or $7,000 (indexed to
reflect cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-IRA. If your employer maintains both a salary
reduction SEP and a regular SEP, the annual contribution limit to both SEPs
together is 15% of your compensation or $30,000, whichever is less. You may
contribute, in addition to the amount contributed by your employer to your
SEP-IRA, an amount not in excess of the limits referred to under the Regular IRA
above. It is your and your employer's responsibility to see that contributions
in excess of normal IRA limits are made under a valid SEP and are, therefore,
proper. For plan years beginning on or after January 1, 1994, the amount of
compensation that may be used for calculating contributions has been reduced
from $200,000 to $150,000, subject to change once annual aggregate cost of
living adjustments exceed $10,000. This new compensation limit reduces the
maximum dollar amount that can be contributed to a SEP-IRA in any given year
from $30,000 to $22,500 (0.15 x $150,000).
Employer contributions under a SEP-IRA are immediately vested and belong to the
employee even if the employee leaves the company. The 70 1/2 age limit for
contributing to a regular IRA does not apply to employer contributions made for
the benefit of eligible SEP participants.
CONTRIBUTIONS
You may make a contribution to your existing IRA or establish a new IRA for a
taxable year at any time from the beginning of the tax year up to the date for
filing your federal tax return for that year (not including any extensions).
Usually this is April 15 of the following year. You do not have to contribute to
an IRA every year. Contributions must be in the form of a check, money order, or
similar cash item. No part of your IRA can be used to buy a life insurance
policy. Your account's assets cannot be commingled with other property, except
in a common trust fund or common investment fund. Your IRA may not be invested
in collectibles, such as gems, coins, or art. However, the Tax Reform Act of
1986 permits certain gold and silver coins issued by the United States as IRA
investments.
Deductible Contributions. The amount of your deduction depends upon whether you
are (or your spouse is) an active participant in any employer-sponsored
retirement plan. If neither you nor your spouse is an active participant of any
employer-sponsored retirement plan, the entire IRA contribution is deductible.
If you are covered by an employer-sponsored retirement plan at any time during
a year, you are an "active participant" for that year, even if you are not
vested in your retirement benefit or are not currently making contributions
to the plan.
As an active participant to an employer-sponsored retirement plan, there may be
limitations on the deductibility of your contribution to your IRA. This depends
on the amount of your income.
Your Form W-2 (or your spouse's W-2) should indicate if you were an active
participant in an employer-sponsored retirement plan during a year. If you have
a question, you should ask your employer or the plan administrator.
In one situation, your spouse's "active participant" status will not affect the
deductibility of your contributions to your IRA. This rule applies only if you
and your spouse file separate tax returns for the taxable year and you lived
apart at all times during the taxable year. The portion of your contribution
that is deductible depends upon your filing status and the amount of your
adjusted gross income ("AGI"). AGI is your gross income minus those deductions
which are available to all taxpayers even if they don't itemize. Instructions to
calculate your AGI are provided with your income tax Form 1040 or 1040A. The
following table shows the deduction rules.
_______________________________________________________________________________
FOR ACTIVE RETIREMENT PLAN -- PARTICIPANTS
----------------------------------------------------------------
If You Are Married Then Your IRA
If You Are Single Filing Jointly Contribution Is
----------------------------------------------------------------
Up to Up to Fully
$25,000 $40,000 Deductible
----------------------------------------------------------------
Adjusted Over $25,000 Over $40,000 Partly
Gross but less than but less than Deductible
Income $35,000 $50,000
----------------------------------------------------------------
$35,000 $50,000 Not
and up and up Deductible
----------------------------------------------------------------
_______________________________________________________________________________
If your AGI falls in the partly deductible range, you must calculate the portion
of your contribution that is deductible. To do this, multiply your contribution
by a fraction in which the numerator is the amount by which your AGI exceeds the
lower limit of the partly deductible range and the denominator is $10,000.
Subtract this from your contribution and then round up to the nearest $10. The
deductible amount is the greater of the amount calculated or $200 (provided you
contributed at least $200). If your contribution was less than $200, then the
entire contribution is deductible.
For example, assume that you make a $2,000 contribution to your IRA in a year in
which you are an active participant in your employer's retirement plan. Also
assume that your AGI for the year is $47,555 and you are married, filing
jointly. You would calculate the deductible portion of your contribution this
way:
1. The amount by which your AGI exceeds the lower limit of the partly -
deductible range:
(47,555-40,000) = 7,555 / 10,000:
3. Multiply this by your contribution:
0.7555 x $2,000 = $1,511
4. Subtract this from your contributions:
($2,000 - $1,551) = $489
5. Round this up to the nearest $10: = $490
6. Your deductible contribution is the greater of this amount or $200.
Nondeductible IRA Contributions. Even though part or all of your contribution is
not deductible, you may still contribute to your IRA up to the limit on
contributions ($2,000, or $2,250 for spousal IRAs). To the extent that your
contribution exceeds the deductible limits, it will be nondeductible. However,
earnings on all IRA contributions are tax deferred until distribution. When you
file your tax return for the year (including extensions), you must designate the
amount of nondeductible IRA contributions for the year by using IRS Form 8606.
If you overstate the amount of nondeductible contributions for a taxable year,
a penalty of $100 will be assessed for each overstatement unless you can show
that the overstatement was due to a reasonable cause.
Excess Contributions. The maximum contribution you can make to an IRA is $2,000
($2,250 for your IRA and a spousal IRA) or 100% of compensation or earned
income, whichever is less. Any amount contributed to the IRA above the maximum
is considered an "excess contribution." The excess is calculated using your
contribution limit, not the deductible limit. An excess contribution is subject
to excise tax of 6% for each year it remains in the IRA.
Excess contributions may be corrected without paying a 6% penalty. To do so, you
must withdraw the excess and any earnings on the excess before the due date
(including extensions) for filing your federal income tax return for the year
for which you made the excess contribution. A deduction should not be taken for
any excess contribution. Earnings on the amount withdrawn must also be
withdrawn. The earnings must be included in your income for the tax year for
which the contribution was made and may be subject to a 10% premature withdrawal
tax if you have not reached age 59 1/2.
Any excess contribution withdrawn after the tax return due date (including any
extensions) for the year for which the contribution was made will be subject to
the 6% excise tax. There will be an additional 6% excise tax for each year the
excess remains in your account. You, not your account, are liable for the excise
tax.
Under limited circumstances, you may correct an excess contribution after tax
filing time by withdrawing the excess contribution (leaving the earnings in the
account). This withdrawal will not be includible in income nor will it be
subject to any premature withdrawal penalty if (1) your contributions to all
IRAs do not exceed $2,250 and (2) you did not take a deduction for the excess
amount (or you file an amended return (Form 1040X) which removes the excess
deduction).
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includible in taxable income and may be subject to a 10% premature
withdrawal penalty. No deduction will be allowed for the excess contribution for
the year in which it is made.
Excess contributions may be corrected in a subsequent year to the extent that
you contribute less than your maximum amount. As the prior excess contribution
is reduced or eliminated, the 6% excise tax will become correspondingly reduced
or eliminated for subsequent tax years. Also, you may be able to take an income
tax deduction for the amount of excess that was reduced or eliminated, depending
on whether you would be able to take a deduction if you had instead contributed
the same amount.
INVESTMENTS
You control the investment and reinvestment of contributions to your IRA.
Investments must be in one or more of the Portfolios available from time to time
as listed in the Application. You direct the investment of your IRA by giving
your investment instructions to Bennington. Since you control the investment of
your IRA, you are responsible for any losses; neither the Custodian, the Fund
nor Bennington has any responsibility for any loss or diminution in value
occasioned by your exercise of investment control. Transactions for your IRA
will generally be effected at the applicable public offering price or net asset
value for shares of the Portfolios involved next established after Bennington
receives proper investment instructions from you; consult the current prospectus
for the Portfolios involved for additional information.
Before making any investment, read carefully the current prospectus for any
Portfolio you are considering as an investment for your IRA. The prospectus will
contain information about the Portfolio's investment objective and policies, as
well as any minimum initial investment or minimum balance requirements and any
sales, redemption or other charges.
Because you control the selection of investments for your IRA, the growth in
value of your IRA cannot be guaranteed or projected.
PROHIBITED TRANSACTIONS
The tax-exempt status of your IRA will be revoked if you or your beneficiary
engages in any of the prohibited transactions listed in Section 4975 of the tax
code. The fair market value of your IRA will be includible in your taxable
income in the year in which such prohibited transaction takes place. The fair
market value of your IRA may also be subject to a 10% penalty tax as a premature
withdrawal if you have not yet reached the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your IRA is
treated as a taxable withdrawal; the only exception involves certain types of
government-sponsored coins.
Generally, a prohibited transaction is any improper use of the assets in your
IRA. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your IRA or
a family member.
o Transfer of any property from your IRA to yourself or a family member or
from yourself or a family member to your IRA.
Your IRA could lose its tax exempt status if you use all or part of your
interest in your IRA as security for a loan or borrow any money from your IRA.
Any portion of your IRA used as security for a loan will be taxed as ordinary
income in the year in which the money is borrowed. If you are under age 59 1/2,
this amount will also be subject to a 10% penalty tax as a premature
distribution.
WITHDRAWALS AND DISTRIBUTIONS
You may withdraw from your IRA at any time. However, withdrawals before age 59
1/2 may be subject to a 10% penalty tax in addition to regular income taxes (see
below). Amounts withdrawn by you are includible in your gross income in the
taxable year that you receive them, and are taxable as ordinary income. Lump sum
withdrawals from an IRA are not eligible for averaging treatment available to
certain lump sum distributions from qualified employer retirement plans.
Methods of Distribution. Assets may be distributed from your IRA according to
one or more of the following methods selected by you:
o total distribution;
o distribution over a specified period
o purchase of an annuity contract
(See Article IV of your IRA Custodial Agreement for a full description of these
distribution methods.)
Latest Time to Withdraw. If you have not withdrawn your entire IRA by the
April 1 following the year in which you reach 70 1/2, you must begin minimum
withdrawals by April 1 of that year in order to avoid penalty taxes. Subsequent
distributions must be made by December 31 of each following year over the
distribution period. If you maintain more than one IRA, you may take from any of
your IRAs the aggregate amount to be withdrawn.
Minimum Distributions. Once distributions are required to begin, they must not
be less than the amount each year (determined by actuarial tables) which
exhausts the value of the account over the required distribution period, which
is generally your life expectancy or the joint life expectancy of you and your
beneficiary. The minimum withdrawal rules are complex. Consult your tax advisor
for assistance. The penalty tax for not withdrawing enough is 50% of the
difference between the minimum withdrawal amount and your actual withdrawals
during a year.
Premature Withdrawals. Since the purpose of the IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain age
59 1/2 generally will be considered as an early withdrawal and subject to a 10%
penalty tax.
The 10% penalty tax for early withdrawal will not apply if the distribution:
o was a result of your death or disability, or
o is one of a scheduled series of substantially equal periodic payments for
your life or life expectancy (or the joint lives or life expectancies of
you and your beneficiary), or
o the distribution is rolled over to another qualified retirement plan.
If there is an adjustment to the scheduled series of payments, the 10% penalty
tax will apply. For example, if you begin receiving payments at age 50 under a
withdrawal program providing for substantially equal payments over your life
expectancy, and at age 58 you elect to receive the remaining amount in your IRA
in a lump-sum, the 10% penalty tax will apply to the lump sum and to the amounts
previously paid to you before age 59 1/2.
Distribution Upon Disability. Any distribution (except for distribution on
account of your disability or death, return of an "excess contribution" referred
to in Code Section 408(d), or a "rollover" from this custodial account) made
earlier than age 59 1/2 may subject you to an "additional tax on early
distributions" under Code Section 72(t). For that purpose, you will be
considered disabled if you can prove, as provided in Code Section 72(m)(7), that
you are unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or be of long-continued and indefinite duration. For additional
information about Disabilities see IRS Publication No. 522.
Distribution Upon Death. The assets remaining in your IRA will be distributed
upon your death to the Beneficiary(ies) named by you on record with the
Custodian. If there is no Beneficiary designated for your IRA in the Custodian's
records, or if the Beneficiary you had designated dies before you do, your IRA
will be paid to your surviving spouse, or if none, to your estate. If your
spouse was your Primary Beneficiary and you had started to receive distributions
from your IRA, but die before receiving the balance of your IRA, your spouse has
several options. You spouse can either keep receiving distributions from your
IRA at least as rapidly, or roll over all or part of your IRA into an IRA in his
or her name. If distributions from your IRA had not yet begun, your spouse may
defer taking distributions until April 1 of the year you would have turned 70
1/2, and then receive distributions over his or her life expectancy, or roll
over the account into an IRA in his or her name, and treat the IRA as his or her
own. If you Beneficiary is not your spouse, and distributions had begun from
your account, your Beneficiary may continue to receive them at least as rapidly
as the payment schedule you had established. If distributions had not yet begun,
your Beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death over
his or her own life expectancy.
Minimum Distribution Incidental Benefit (MDIB) Rule. This rule specifies that
benefits provided under a retirement plan must be for the primary benefit of a
participant rather than for the beneficiary or beneficiaries. If your spouse is
your sole beneficiary, this special MDIB rule does not apply. In some cases, the
distribution under the MDIB rule may exceed the amount required under the normal
age 70 1/2 required minimum distribution rules. If someone other than, or in
addition to, your spouse is a named beneficiary, the minimum distribution
required is the greater of either the amount determined under the regular rules
or the amount determined under the MDIB rule. For additional information, please
see IRS Publication 590 and consult your tax adviser.
Distribution of Nondeductible Contributions. To the extent that a withdrawal
constitutes the return of your nondeductible contributions (not including
earnings) it will be tax-free. However, if you made both deductible and
nondeductible IRA contributions, then each distribution will be treated as
partly a return of your nondeductible contributions (not taxable) and partly a
distribution of deductible contributions and earnings (taxable). The nontaxable
amount is the portion of the amount withdrawn which bears the same ratio as your
total nondeductible IRA contributions bear to the total balance of all your IRAs
(including rollover IRAs and SEPs).
For example, in 1995 a participant's IRA comprised the following:
Total Deductible Contributions $5,000
Total Nondeductible Contributions $2,000
Earnings On IRAs as of 12/31/95 $1,000
Less 1995 Withdrawal $ 500
-------
Total Account Balance as of 12/31/95 $7,500
To determine the nontaxable portion of your 1995 withdrawal, the total 1995
withdrawal ($500) must be multiplied by a fraction, in which the numerator of
the fraction is the total of all nondeductible contributions remaining in the
account before the 1995 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-95 ($7,500) plus the 1995 withdrawal ($500) or
$8,000. The calculation is:
Total Remaining Nondeductible
Contributions $2,000 x $500 = $ 125
-------------
Total Account Balance $8,000
Thus, $125 of the $500 withdrawal in 1995 will not be included in your taxable
income. The remaining $375 will be taxable for 1995. In addition, for future
calculations the remaining nondeductible contribution total will be $2,000 minus
$125, or $1,875.
A loss in your IRA investment may be deductible. You should consult your tax
advisor for further details on the appropriate calculation for this deduction if
applicable.
Excess Distributions There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which exceed
the greater of $150,000 or $112,500 (indexed to reflect cost-of-living
increases). To determine whether you have distributions in excess of this limit,
you must aggregate the amounts of all distributions received by you during the
calendar year from all retirement plans, including IRAs. Please consult your tax
advisor for more complete information, including the availability of favorable
elections.
Tax Withholding. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld. However, if IRA
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%. The tax withheld from an annuity or a similar
periodic payment is based on your marital status and the number of withholding
allowances you claim on your withholding certificate (Form W-4P). If you have
not filed a certificate, the tax withheld will be determined by treating you as
a married individual claiming three withholding allowances.
Generally, tax will be withheld at a 10% rate on lump-sum distributions.
TAX MATTERS
You will receive a report from the Custodian and Bennington not later than 60
days after the close of each calendar year (or after the Custodian's resignation
or removal) reflecting the transactions effected by the Custodian or Bennington
during the calendar year and the assets of your IRA custodial account at its
close. You must respond within 60 days to correct any information on these
reports.
State Tax Treatment of your distributions may differ from federal treatment.
Consult your state tax authorities or personal tax advisor for details.
Custodian IRS Reporting
The Custodian will report all withdrawals from your account to the IRS and the
recipient on the appropriate form. This report will include a description (e.g.
premature, normal, etc.) of the distribution. For reporting purposes, a direct
transfer of assets to a successor custodian or trustee is not considered a
withdrawal.
The Custodian will report to the IRS the year-end value of your account and the
amount of any rollover or accumulation contribution made during a calendar year,
as well as the tax year for which a contribution is made. Unless the Custodian
receives an indication from you to the contrary, it will treat any amount as a
contribution for the tax year in which it is received. It is most important that
a contribution for the prior year made between January and April 15th be clearly
designated as such.
How to File IRA Information with the IRS
Contributions to your IRA must be reported on your federal income tax return
(see Form 1040 or 1040A instructions for details). If you make a designated
nondeductible contribution to any IRA for any tax year, you must attach Form
8606 to your tax return for that year. If you make nondeductible IRA
contributions and you do not file Form 8606, Nondeductible IRAs (Contributions,
Distributions, and Basis), with your tax return, you may have to pay a $50
penalty. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional information on
your tax return. The information required includes: (1) the amount of your
nondeductible contributions for that year; (2) the amount of withdrawals from
IRAs in that year; (3) the amount by which your total nondeductible
contributions for all years exceeds the total amount of your distributions
previously excluded from gross income; and (4) the total value of all your IRAs
as of the end of the year. If you fail to report any of this information, the
IRS will assume that all your contributions were deductible. This will result in
the taxation of the portion of your withdrawals that should be treated as a
nontaxable return of your nondeductible contributions.
You must file Form 5329 with the IRS for each taxable year for which you made an
excess contribution, or you take a premature withdrawal, or you withdraw less
than the required minimum amount from your IRA.
If you overstate the amount of nondeductible contributions for a taxable year,
a $100 penalty will be assessed unless you can justify the overstatement with a
reasonable cause.
Federal income tax will be withheld at a flat rate of 10% from any withdrawal
from your IRA, unless you elect not to have tax withheld. Withdrawals from an
IRA are not subject to the mandatory 20% income tax withholding that applies to
most distributions from qualified plans or 403(b) accounts that are not directly
rolled over to another plan or IRA.
Any earnings on investments held in your IRA are generally exempt from federal
income taxes and will not be taxed until withdrawn by you, unless the tax exempt
status of your IRA is revoked.
ACCOUNT TERMINATION
You may terminate your IRA at any time after its establishment by sending a
complete withdrawal form, or a transfer authorization form, to:
Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Your IRA with Accessor Funds, Inc. will terminate upon the first to occur of the
following:
o The date your properly executed withdrawal form (as described above) is
received and accepted by Bennington or, if later, the termination date
specified in the withdrawal form.
o The date the IRA ceases to qualify under the tax code. This will be deemed
a termination.
o The transfer of the IRA to another custodian/trustee.
o The rollover of the amounts in the IRA to another custodian/trustee.
o Any outstanding fees must be received prior to such a termination of your
account.
The amount you receive from your IRA will be treated as a withdrawal, and thus
the rules relating to IRA withdrawals will apply. For example, if the IRA is
terminated before you reach age 59 1/2, the 10% early withdrawal penalty may
apply on the amount you receive.
IRS DOCUMENTS
For additional information, please consult the district office of the IRS, or
the following IRS publications:
Publication 522, "Disability Payments";
Publication 560, "Retirement Plans for the Self-Employed";
Publication 575, "Pension and Annuity Income (Including Simplified General Rule"
Publication 590, "Individual Retirement Arrangements (IRAs)".
Accessor Funds, Inc.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT (UNDER
SECTION 408(A) OF THE INTERNAL REVENUE CODE)
The Depositor whose name appears on the attached Individual Retirement Custodial
Account Application and Adoption Agreement (the "Adoption Agreement") is
establishing an individual retirement account under Section 408(a) of the
Internal Revenue Code to provide for the Depositor's retirement. The Custodian
has given the Depositor the disclosure statement required under Section 1.408-6.
The following provisions of Articles I to VII are in the form promulgated by the
Internal Revenue Service in Form 5305-A for use in establishing an individual
retirement custodial account.
The Depositor has deposited with Custodian an initial contribution in cash, as
set forth in the attached Adoption Agreement and the Depositor and the Custodian
make the following agreement.
Article I.
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
Article IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with section 408(a)(6) and Proposed Regulations section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either (i) Be distributed by the
December 31 of the year containing the fifth anniversary of the
Depositor's death, or (ii) Be distributed in equal or substantially
equal payments over the life or life expectancy of the designated
beneficiary or beneficiaries starting by December 31 of the year
following the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year
in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age
of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
Article V.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Adoption Agreement.
Article VIII.
1. DEFINITIONS. As used in this Article VIII the following terms have the
following meanings:
"Account" or "Custodial Account" means the custodial account established
hereunder in the name of the Custodian for the benefit of Depositor.
"Agreement" means the Accessor Funds, Inc. Individual Retirement Account
Custodial Agreement, as may be amended from time to time, including the
information and provisions set forth in any Account Adoption Agreement that
goes with this Agreement.
"Adoption Agreement" means the Individual Retirement Custodial Account
Application and Adoption Agreement form by which this Agreement is
established between the Depositor and the Custodian. The statements
contained herein shall be incorporated into this Agreement.
"Authorized Agent" means an investment advisor appointed by the Depositor
on the Adoption Agreement or on a signed form acceptable to and filed with
Bennington, to issue investment directions or issue orders for the purchase
or sale of shares of one or more of the Portfolios in the Depositor's
Account.
"Beneficiary" means the person or persons (including a trust or estate)
designated as such by the Depositor, and as may be amended from time to
time, on a signed form acceptable to and filed with Bennington pursuant to
Article VIII, Section 5 of this Agreement.
"Bennington" means Bennington Capital Management L.P., a Washington limited
partnership and registered investment adviser. Bennington is the manager
and transfer agent of the Fund and has entered into an agreement with the
Custodian to perform various administrative duties of either the Custodian
or the Fund with respect to Accounts, including the services described
herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means The Fifth Third Bank, a banking company organized under
the laws of the State of Ohio , or its successors, as specified in the
Account Adoption Agreement.
"Depositor" means the person named in the Account Adoption Agreement. If
Depositor has designated an Authorized Agent on the Adoption Agreement
Form, the Authorized Agent shall have the authority to act as the Depositor
under this Agreement to issue investment directions or issue orders for the
sale or purchase of shares of one or more Portfolios to Bennington and such
authority shall remain in force until terminated in writing by Depositor.
"Fund" means Accessor Funds, Inc., a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of nine diversified investment portfolios, each with its own
investment objective and policies.
"Portfolio" (collectively "Portfolios") means one or more of the
diversified investment portfolios of the Fund which is specified in the
Adoption Agreement, or which is designated by the Fund, as being available
as an investment for the custodial account; provided, however, that the
Fund and the Portfolios must be legally offered for sale in the state of
the Depositor's residence in order to be a Portfolio hereunder.
2. CONTRIBUTIONS. All assets in the custodial account shall be invested and
reinvested in full and fractional shares of one or more Portfolios. Such
investments shall be made in such proportions and/or in such amounts as
Depositor or the Authorized Agent may direct; provided that the Depositor's
initial contribution to the custodial Account as indicated on the Adoption
Agreement shall be invested and held in the U.S. Government Money Portfolio
until seven (7) days have elapsed from the date of acceptance of the
Adoption Agreement by or on behalf of the Custodian. Bennington shall be
responsible for promptly executing all investment directions by the
Depositor for the purchase or sale of shares of one or more of the
Portfolios hereunder. Any purchase or redemption of shares of a Portfolio
for or from the Depositor's account will be effected at the net asset value
of such Portfolio (as described in the then effective prospectus for such
Portfolio) next established after Bennington has received the Depositor's
investment directions in good order. However, if investment directions with
respect to the investment of any contribution hereunder are not received
from the Depositor as required or, if received, are unclear or incomplete
in the opinion of Bennington, the contribution shall be invested in the
U.S. Government Money Portfolio until clear or complete instructions are
received, without liability for loss of income or appreciation. If
Bennington does not receive clear or complete instructions from the
Depositor within a reasonable time, the contribution shall be returned to
the Depositor. If any directions or other orders by the Depositor with
respect to the sale or purchase of shares of one or more Funds for the
custodial account are unclear or incomplete in the opinion of Bennington,
Bennington will refrain from carrying out such investment directions or
from executing any such sale or purchase, without liability for loss of
income or for appreciation or depreciation of any asset, pending receipt of
clarification or completion from the Depositor. All investment directions
by Depositor will be subject to any minimum initial or additional
investment or minimum balance rules applicable to a Portfolio as described
in its prospectus. All dividends and capital gains or other distributions
received on the shares of any Portfolio held in the Depositor's account
shall be retained in the account and (unless received in additional shares)
shall be reinvested in full and fractional shares of such Portfolio.
3. ROLLOVER CONTRIBUTIONS. Only rollover contributions that are in the form of
a check, money order or similar cash item will be accepted for the
Custodial Account, except that securities may be accepted at the sole
discretion of the Fund, in kind, as described in the prospectuses of the
Fund. The Depositor shall designate each rollover contribution as such to
the Custodian, and by such designation shall confirm to the Custodian that
a proposed rollover contribution qualifies as a rollover contribution
within the meaning of Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3) and
408(k) of the Code. The Custodian, upon written direction of the Depositor
and after submission to the Custodian of such documents as it may
reasonably require, shall, to the extent permitted, transfer the assets
held under this Agreement (reduced by any amounts referred to in paragraph
9) to a successor individual retirement account, individual retirement
annuity (other than an endowment contract) or retirement bond for the
Depositor's benefit or to an exempt employee's trust established under a
plan that satisfies the qualification requirements of section 401(a) of the
Code. Any amounts received or transferred by the Custodian under this
paragraph shall be accompanied by such records and other documents as the
Custodian deems necessary to establish the nature, value and extent of the
assets and of the various interests therein. Neither Bennington, the Fund,
the Custodian nor any other party providing services to the custodial
account will have any responsibility for rendering advice with respect to
the investment and reinvestment of Depositor's custodial account, nor shall
such parties be liable for any loss or diminution in value which results
from Depositor's exercise of investment control over his custodial account.
Depositor shall have and exercise exclusive responsibility for and control
over the investment of the assets of his custodial account, and neither
Bennington, the Fund, the Custodian nor any other such party shall have any
duty to question his directions in that regard or to advise him regarding
the purchase, retention or sale of shares of one or more Funds for the
custodial account. The parties do not intend to confer any fiduciary duties
on Custodian, the Fund or Bennington, and none shall be implied. None of
the Custodian, the Fund or Bennington shall be liable (or assume any
responsibility) for the collection of contributions, the proper amount,
time or deductibility of any contribution to the custodial account or the
propriety of any contributions under this Agreement, or the purpose, time,
amount (including any minimum distribution amounts) or propriety of any
distribution hereunder, which matters are the responsibility of Depositor
and Depositor's Beneficiary.
4. DISTRIBUTIONS. Subject to the provisions of Article IV of the Agreement,
the Custodian shall make distributions from the Account in accordance with
written instructions from the Depositor (or the Beneficiary if Depositor is
deceased). It is the responsibility of the Depositor (or the Beneficiary)
by appropriate distribution instructions to the Custodian to insure that
the distribution requirements of Code Section 401(a)(9) and Article IV
above are met. Neither Custodian nor any other party providing services to
the custodial account assumes any responsibility for the tax treatment of
any distribution from the custodial account; such responsibility rests
solely with the person ordering the distribution. The Custodian or
Bennington shall not incur any liability for errors in calculations as a
result of any reliance on information provided by the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor or administrator).
Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order of Depositor (or Beneficiary if
Depositor is deceased) containing such information as the Custodian may
reasonably request.
5. DESIGNATION OF BENEFICIARY. The Depositor shall have the right by written
notice to the Custodian to designate or to change a beneficiary to receive
any benefit to which Depositor may be entitled in the event of Depositor's
death prior to the complete distribution of such benefit. The form last
accepted by the Custodian before such distribution is to commence, provided
it was received by the Custodian (or deposited in the U.S. Mail or with a
delivery service) during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the custodial account,
thereupon shall revoke all such forms previously filed by that person. If
no such designation is in effect at the time of Depositor's death, or if
the designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate.
6. AMENDING THE AGREEMENT. Articles I through VII of this Agreement are in the
form promulgated by the Internal Revenue Service. It is anticipated that if
and when the Internal Revenue Service promulgates changes to Form 5305-A,
the Custodian will amend this Agreement correspondingly. The Custodian
shall amend in the same manner all agreements comparable to this one; and
may amend retroactively if necessary or appropriate in the opinion of the
Custodian in order to conform this custodial account to pertinent
provisions of the Code and other laws or successor provisions of law, or to
obtain a governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this Agreement,
or as otherwise may be advisable in the opinion of the Custodian. Such an
amendment by the Custodian shall be communicated in writing to Depositor,
and Depositor shall be deemed to have consented thereto unless, within 30
days after such communication to Depositor is mailed, Depositor gives
Custodian a written order for a complete distribution or transfer of the
custodial account in accordance with paragraph 10 of this Article VIII.
Pending the adoption of any amendment necessary or desirable to conform
this custodial account document to the requirements of any amendment to the
Internal Revenue Code or regulations or rulings thereunder, the Custodian
and Bennington may operate the Depositor's custodial account in accordance
with such requirements to the extent that the Custodian and/or Bennington
deem necessary to preserve the tax benefits of the Account. This paragraph
6 shall not be construed to restrict the Custodian's right to substitute
fee schedules in the manner provided by paragraph 9 below, and no such
substitution shall be deemed to be an amendment of this Agreement.
7. DELIVERY OF PROSPECTUSES, PROXIES. Bennington shall deliver, or cause to be
delivered, to Depositor all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting materials
relating to the shares of the Portfolios credited to the custodial account.
No shares shall be voted, and no other action shall be taken pursuant to
such documents, except upon receipt of adequate written instructions from
Depositor.
8. INDEMNIFICATION. Depositor shall always fully indemnify Bennington, the
Fund, the Portfolios and Custodian and save them harmless from any and all
liability whatsoever which may arise either (i) in connection with this
Agreement and the matters which it contemplates, except that which arises
directly out of Bennington's, the Fund's or Custodian's negligence or
willful misconduct, or (ii) with respect to making or failing to make any
distribution, other than for failure to make distribution in accordance
with an order therefor which is in full compliance with Section 10. Neither
Bennington nor Custodian shall be obligated or expected to commence or
defend any legal action or proceeding in connection with this Agreement or
such matters unless agreed upon by that party and Depositor, and unless
fully indemnified for so doing to that party's satisfaction. The
appointment by the Depositor of an Authorized Agent will be in effect until
written notice to the contrary is received by Bennington. Custodian and
Bennington may each conclusively rely upon and shall be protected in acting
upon any written order from Depositor or Beneficiary, or any Authorized
Agent appointed by the Depositor, or any other notice, request, consent,
certificate or other instrument or paper believed by it to be genuine and
to have been properly executed, and so long as it acts in good faith, in
taking or omitting to take any other action in reliance thereon. In
addition, Custodian will carry out the requirements of any apparently valid
court order relating to the custodial account and will incur no liability
or responsibility for so doing.
9. FEES AND EXPENSES. The Custodian shall serve as such without compensation
from the Account and the Custodian hereby waives any right it may have
otherwise to have any fees, commissions or other compensation from the
Account. The Depositor shall pay an annual maintenance charge as specified
on the applicable schedule. The schedule originally applicable shall be the
one attached to the Adoption Agreement furnished to the Depositor. The
Custodian may substitute a different schedule at any time upon 30 days'
written notice to Depositor and no such substitution shall be deemed to be
an amendment of this Agreement. Any purchase, exchange, transfer or
redemption of shares of a Portfolio for or from the Depositor's account
will be subject to any applicable charge as described in the then effective
prospectus for such Portfolio. Any income, gift, estate and inheritance
taxes and other taxes of any kind whatsoever, including transfer taxes
incurred in connection with the investment or reinvestment of the assets of
the custodial account, that may be levied or assessed in respect to such
assets, and all other administrative expenses incurred by Bennington in the
performance of its duties (including fees for legal services rendered to it
in connection with the custodial account) shall be charged to the custodial
account. All such fees and taxes and other administrative expenses charged
to the custodial account shall, to the extent not paid directly by the
Depositor, be collected either from the amount of any contribution or
distribution to or from the account, or (at the option of the person
entitled to collect such amounts) to the extent possible under the
circumstances by the conversion into cash of sufficient shares of one or
more Portfolios held in the custodial account (without liability for any
loss incurred thereby). Conversion into cash of shares of the Portfolio
will occur first from the U.S. Government Money Portfolio, followed in
ascending order of risk through the Portfolios of the Fund. Notwithstanding
the foregoing, Bennington may make demand upon the Depositor for payment of
the amount of such fees, taxes and other administrative expenses. Fees
which remain outstanding after 60 days may be subject to a collection
charge. If the Depositor has appointed an Authorized Agent and has elected
on the Adoption Agreement to cause the fees of the Authorized Agent to be
paid from the custodial account, the Custodian and Bennington shall pay
such fees upon the written request from the Authorized Agent to the
Authorized Agent from the custodial account hereunder. Such election to
authorize the payment of fees by the Depositor shall remain in full force
until terminated in writing by Depositor. The Authorized Agent must make
a written request each time a fee is requested by the Authorized Agent.
10. TERMINATION OF AGREEMENT. This Agreement may be terminated by the Depositor
upon written notice of such termination to the Custodian and Bennington, or
by the receipt by Custodian of a direction from Depositor or his Authorized
Agent to make a complete distribution or transfer of the custodial account
assets. Upon termination of the Agreement, Custodian shall terminate the
custodial account by distributing all assets thereof in a single payment in
cash or in kind to Depositor or transferring all such assets to another
financial institutional in accordance with the directions of Depositor,
subject to Custodian's right to reserve funds as provided in paragraph 11,
below. Upon termination of the custodial account, this custodial account
document shall have no further force and effect, and Custodian shall be
relieved from all further liability hereunder or with respect to the
custodial account and all assets thereof so distributed.
11. CHANGE OF CUSTODIAN. In the event the Custodian shall be converted into,
merged or consolidated with, shall sell and transfer substantially all of
its assets and business to, or shall transfer substantially all of its
custodial accounts maintained pursuant to agreements comparable to this
Agreement to a bank, financial institution or other organization approved
by the Secretary of the Treasury to hold assets of individual retirement
accounts (a "Successor"), such Successor shall thereupon become and be the
Custodian of the Account with the same effect as though specifically so
named. The Depositor shall be provided with 30 days' prior written notice
of any change of Custodian pursuant to this paragraph, and shall be deemed
to have consented thereto unless, within 30 days after such notice to
Depositor is mailed, Depositor gives Custodian a written order for a
complete distribution or transfer of the custodial account assets in
accordance with Paragraph 10. Upon receipt by Custodian of written
acceptance by its Successor of such Successor's appointment, Custodian
shall transfer and pay over to such Successor the assets of the custodial
account and all records (or copies thereof) of Custodian pertaining
thereto, provided that the Successor agrees not to dispose of any such
records without the Custodian's consent. Custodian is authorized, however,
to reserve such sum of money or property as it may deem advisable for
payment of all its fees, compensation, costs, and expenses, or for payment
of any other liabilities constituting a charge on or against the assets of
the custodial account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over
to the Successor. No Custodian shall be liable for the acts or omissions of
its predecessor or its successor.
12. NOTICES. Any notice or distribution from Custodian or Bennington to any
person provided for in this Agreement shall be effective if sent by
first-class mail to such person at that person's last address on the
Custodian's records. The Custodian shall not be bound by any certificate,
notice, order information or other communication unless and until it has
been received in writing at its place of business.
13. PROHIBITED ACTIONS. Depositor or Depositor's Beneficiary shall not have the
right or power to anticipate any part of the custodial account or to sell,
assign, transfer, pledge or hypothecate any part thereof. The custodial
account shall not be liable for the debts of Depositor or Depositor's
Beneficiary or subject to any seizure, attachment, execution or other legal
process in respect thereof. At no time shall it be possible for any part of
the assets of the custodial account to be used for or diverted to purposes
other than for the exclusive benefit of the Depositor or his/her
Beneficiary.
14. ENTIRE AGREEMENT. When accepted by the Custodian, this Agreement together
with the Adoption Agreement attached hereto constitutes the entire
agreement between the parties and is accepted in and shall be construed and
administered in accordance with the laws of the State of Washington. Any
action involving the Custodian brought by any other party must be brought
in a state or federal court in such state. This Agreement is intended to
qualify under Code Section 408(a) as an individual retirement custodial
account and to entitle Depositor to the retirement savings deduction under
Code Section 219 if available, and if any provision hereof is subject to
more than one interpretation or any term used herein is subject to more
than one construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with that intent.
Neither the Custodian nor Bennington shall be responsible for whether or
not such intentions are achieved through use of this Agreement.
<PAGE>
SECTION II
RETIREMENT ACCOUNT FORMS
<PAGE>
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Accessor Funds, Inc.
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Individual Retirement Custodial Account Application And Adoption Agreement
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I, the person signing this Individual Retirement Custodial Account Application
and Adoption Agreement (the "Adoption Agreement") establish an Individual
Retirement Account (the "Account") with Accessor Funds, Inc. (The Fifth Third
Bank, as Custodian). I agree to the terms of my Account, which are contained in
the document entitled "ACCESSOR FUNDS, INC. Individual Retirement Custodial
Account Agreement" and this Adoption Agreement. I certify the accuracy of the
information in this Adoption Agreement. My Account will be effective upon
acceptance by Accessor Funds, Inc. and The Fifth Third Bank, as Custodian.
(Please print all information).
ACCOUNT REGISTRATION
Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code: U.S. Citizen (circle one): Yes/No
Daytime Phone: Alien Resident (circle one): Yes/No
Evening Phone: If no, country of citizenship:
TYPE OF IRA
/__/ Regular IRA: /__/ Spousal IRA (each spouse must complete an
original Adoption Agreement form)
Spouse's Name:
$_____ contribution for the
19__ tax year Spouse's Social Security Number:
$____ contribution for the
19__ tax year Spouse's Accessor Funds, Inc.
IRA Account No:
/__/ Direct Transfer of an
Existing IRA Choose this Transfer if you wish to
authorize Bennington to transfer your
existing IRA from another custodian to
Fifth Third. You must also complete the
IRA Transfer Form.
/__/ Direct Rollover from Employer-
Sponsored Plan
/__/Conduit (do not commingle) Choose this Rollover only if you are
funding this IRA with money you
accumulated in an employer's retirement
plan which is eligible for rollover. You
must also complete the IRA Transfer
Form.
/__/ 60 Day Rollover Choose this Rollover if you are funding
this IRA with money you have received
from another custodian within 60 days of
establishing this Account.
/__/ SEP/IRA (Each eligible employee For a Simplified Employee Pension Plan
must complete an IRA Adoption established by an employer.
Agreement)
Name of Employer:
Must attach copy of employer SEP Plan.
INVESTMENT INFORMATION
Please fill a percentage next to those portfolios in which you plan to invest.
The minimum investment is an aggregate of $1000. Subsequent investments are an
aggregate of $100. Be sure to read the prospectuses of the portfolios you
choose.
Growth Portfolio % Intermediate Fixed-Income %
Value and Income Portfolio % Short-Intermediate Fixed-Income %
Small to Mid Cap Portfolio % Mortgage Securities %
International Equity Portfolio % U.S. Government Money %
PURCHASE INSTRUCTIONS
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
mail to: Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Fed-wire payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management, L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
BENEFICIARY DESIGNATION
I hereby designate the persons named below as primary beneficiaries to receive
payment of the value of my IRA account upon my death:
Primary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If no primary beneficiary is living at
the time of my death, I hereby specify that the balance be distributed
to my contingent beneficiaries below.
Secondary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If more than one beneficiary is named and
no percentages are indicated, payment shall be made in equal shares to
my primary beneficiary(ies) who survives me. If a percentage is
indicated and a primary beneficiary(ies) does not survive me, the
percentage of that beneficiary's designated share shall be divided
equally among the surviving primary beneficiary(ies).
If no beneficiary(ies) are designated, my beneficiary will be my
surviving spouse, or, if I do not have a surviving spouse, my estate.
I am aware that this form becomes effective when received by
Bennington and will remain in effect until I deliver to Bennington
another form with a later date.
To change or revoke your beneficiary designation, contact Bennington
for the appropriate form. All forms must be dated and signed by you.
THIS DESIGNATION OF BENEFICIARY CAN RESULT IN IMPORTANT TAX OR ESTATE
PLANNING CONSEQUENCES. CONSULT YOUR ATTORNEY OR TAX ADVISOR FOR
ADDITIONAL INFORMATION AND ADVICE.
If you live in a community property state or marital property state (i.e.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or
Wisconsin) and have not named your spouse as sole Primary Beneficiary, have
him/her sign below. /__/ Check here if you do not have a spouse.
I certify that I am the spouse of the individual named above. I approve
and consent to the naming of a beneficiary other than myself. I transfer
any community property interest I have in this IRA into the separate
property of my spouse.
Signature of Spouse: Date:
FEES AND EXPENSES
Custodian Fee None
Account Installation Fee None
Annual Maintenance Charge $25.00*
Charge for Termination, Rollover,
or Transfer of Account to
Successor Custodian None
* This Annual Maintenance Charge is waived for any Account which maintains
an aggregate balance of $10,000 or more as of December 31. The Annual
Maintenance Charge will be debited from each applicable Account during
the month of January of each year. If the Account is debited, the charge
will be debited first from the U.S. Government Money Portfolio and in
ascending order of risk from the other Portfolios of Accessor Funds,
Inc. Fees may be changed upon 30 days written notice to you.
Additional Charges
You may be charged for reasonable expenses for services not covered by this fee
schedule such as wire transfer fees, or check processing charges.
* There may be other charges associated with the purchase or redemption
of shares of a Portfolio in which your Account is invested. Be sure to
read carefully the current prospectus of any Portfolio you are
considering as an investment for your Account for a description of
applicable charges.
* When you appoint an Authorized Agent to issue investment directions
or issue orders for the purchase or sale of shares of one or more of the
Portfolios in your Account and you elect to pay any fees from your
Account, these fees may be charged to your Account. The appointment of
an Authorized Agent and your election to pay any fees are made on this
Adoption Agreement form, below.
DESIGNATION OF AUTHORIZED AGENT AND AUTHORIZATION OF PAYMENT OF FEES
Name of Organization:
Address:
City: State: Zip Code: Telephone:
Name of Authorized Agent:
Title: Telephone: Fax:
Signature of Authorized Agent: Date:
/__/ I elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account. I
acknowledge that my Authorized Agent send a written request to
Bennington each time a request for payment of fees is made.
/__/ I do not elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account.
If no election is made, fees will not be paid to the Authorized Agent
from the Account.
AGREEMENTS
I hereby adopt the Accessor Funds, Inc. Individual Retirement Custodial Account
Agreement, appointing The Fifth Third Bank as Custodian. I understand that
administrative services will be performed for the Account on behalf of The Fifth
Third Bank by Bennington Capital Management L.P. and that a successor custodian
or agent may be appointed in accordance with the terms of this Individual
Retirement Custodial Account Agreement.
I acknowledge receipt of the Individual Retirement Account Disclosure Statement
and the Individual Retirement Custodial Account Agreement, both of which are
incorporated in this Adoption Agreement by reference. I accept and agree to be
bound by the terms and conditions contained in the Individual Retirement
Custodial Account Agreement.
I certify to receiving and reading the current prospectus(es) for the portfolios
selected and understand that although The Fifth Third Bank is a bank, mutual
fund shares are not obligations of or guaranteed by a bank, nor are they insured
by the FDIC.
I indemnify The Fifth Third Bank, Accessor Funds, Inc. and Bennington Capital
Management L.P. when making distributions in accordance with my beneficiary
designation on file or in accordance with the Individual Retirement Custodial
Account Agreement, absent any such designation.
I certify that any rollover or direct contribution herein does not include any
employee contributions to any qualified plan (other than accumulated deductible
employee contributions); that any assets transferred in kind by me are the same
assets received by me in the distribution being rolled over; if the distribution
is from an IRA, that no rollover into such IRA has been made within the one-year
period immediately preceding this rollover; and that such distribution was
received within 60 days of making the rollover to the Account.
I acknowledge that I have been advised to seek advice from my attorney regarding
the legal consequences (including but not limited to federal and state tax
matters) of entering into this Agreement, contributing to the Account, and
ordering The Fifth Third Bank, as Custodian to make distributions from the
Account. I acknowledge that The Fifth Third Bank, Accessor Funds, Inc. and
Bennington Capital Management L.P. (and any company associated therewith) are
prohibited by law from rendering such advice.
I acknowledge that I have been informed and I agree that the maintenance fee
described in this Adoption Agreement shall be automatically debited from my
Account, if appropriate, in January of each year.
I appoint the organization listed above in Authorized Representatives as my
Authorized Agent for this account. My Authorized Agent shall have the authority
to issue investment directions or issue orders for the sale or purchase of
shares of one or more Portfolios to Bennington and such authority shall remain
in force until terminated in writing by me. The Authorized Agent(s) has/have
executed this Form on the dates indicated and such is/are the genuine signatures
of the Authorized Agent(s).
I certify under penalty of perjury that I am of legal age to enter into this
agreement and that the Social Security Number on this form is true, correct and
complete.
Signature:
Date:
CUSTODIAN ACCEPTANCE
The Fifth Third Bank hereby accepts this Individual Retirement Custodial
Agreement in accordance with the terms of IRS Form 5305-A as supplemented by
Article VIII.
The Fifth Third Bank: Date:
Accepted by:
BENNINGTON CAPITAL MANAGEMENT L.P.
Agent of The Fifth Third Bank
Signature: Date:
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Accessor Funds, Inc.
- --------------------------------------------------------------------------------
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IRA Transfer Request/Direct Rollover Request
- --------------------------------------------------------------------------------
Complete this form to transfer Individual Retirement Account ("IRA") assets or
directly rollover a qualified retirement plan distribution from an existing
Retirement Plan Custodian/Trustee to the Accessor Funds IRA with The Fifth Third
Bank as the new IRA custodian. All applicable sections must be fully completed
and signed. (Please use one form for each IRA account to be transferred.)
NAME AND ADDRESS OF DEPOSITOR
Full Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code:
Daytime Phone: ( ) Evening Phone: ( )
/__/ Deposit Transfer/Rollover proceeds to my existing Accessor Funds IRA
accounts as follows:
Accessor Funds Account Number:
(Provided by Accessor Funds, Inc.)
OR
/__/ I am opening a new Accessor Funds IRA (minimum $1,000). My completed
IRA Application and Adoption Agreement is attached.
If you are moving funds from an existing IRA or IRA Rollover Account to an IRA
or an IRA Rollover with the Accessor Funds, please fill out the section below:
IRA TRANSFER REQUEST OPTION
Type of IRA: /__/ Regular IRA /__/ Spousal IRA
/__/ Rollover /__/ SEP-IRA
Name of Current Custodian:
Custodian Contact:
Street Address:
City State Zip Telephone No.
1. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
2. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
AUTHORIZATION TO LIQUIDATE AND TRANSFER To Current Custodian: Please liquidate
and transfer my IRA in the manner described above directly to my IRA with
Accessor Funds, Inc. I intend to avoid constructive receipt of the liquidation
proceeds, and I understand that you may assess fees or penalties for this
liquidation. (Check box if applicable) /__/ I am over 70 1/2; please do not
include my required minimum distribution for the current calendar year in the
transfer.
Signature of Account Owner: Date:
If you are moving funds from your company pension plan or 403(b) to an IRA
Rollover with the Accessor Funds, please fill out the section below:
DIRECT ROLLOVER REQUEST
Type of pension plan /__/ 401(k) /__/ 403(b) /__/ Pension Plan
/__/ Profit Sharing /__/ Other:
Benefits Representative:
Street Address:
City: State: Zip: Telephone No.:
Plan Name: Account No.:
Employee No. Distribution to be made (month/year):
Amount: /__/ All /__/ Part $
DIRECT ROLLOVER ELECTION
I elect a Direct Rollover of my eligible retirement distribution to my IRA at
Accessor Funds, Inc. I understand that this is an irrevocable election and that
if I commingle this Rollover with contributory IRA assets I may be precluded
from rolling it into another qualified retirement plan or tax-sheltered annuity
at a future date. Further, I understand that Rollover proceeds must be delivered
in the form of a check or other cash item.
Signature of Account Owner: Date:
PLEASE LIQUIDATE ACCOUNT ASSETS AND TRANSFER ASSETS TO ACCESSOR FUNDS, INC. IRA
CUSTODIAN AS FOLLOWS:
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
Please write "IRA Transfer" or "Direct Rollover"
on the check. Do not include after tax
contributions or required minimum distributions.
Mail check to Bennington Capital Management L.P.,
P.O. Box 1748, Seattle, WA 98111-1748 ATTN:
Operations
Fed-wires payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
SIGNATURE OF DEPOSITOR (Required for acceptance by Accessor Funds, Inc.)
Signature of Depositor: Date:
SIGNATURE GUARANTEE (ONLY if required by present custodian)
Signature Guaranteed by: Date:
(Name of Bank or Dealer Firm)
Date:
(Signature of Officer and Title)
ACCEPTANCE OF ACCOUNT BY FIFTH THIRD BANK OR BENNINGTON CAPITAL MANAGEMENT L.P.
Fifth Third Bank has agreed to accept transfer of the above amount for deposit
to the Depositor's Accessor Funds, Inc. (Fifth Third Bank, as Custodian)
Individual Retirement Custodial Account, and requests the liquidation and
transfer of assets as indicated above.
Bennington Capital Management L.P., ACCEPTING AS AGENT FOR FIFTH THIRD BANK, the
Custodian, pursuant to a Power of Attorney. (To be signed by Bennington Capital
Management L.P.)
By: Title: Date:
Accessor Funds, Inc. IRA Account No.:
<PAGE>
EXHIBIT C
SERVICES TO BE PROVIDED BY BENNINGTON CAPITAL MANAGEMENT UNDER
THE AGREEMENT FOR INDIVIDUAL RETIREMENT PLAN ACCOUNTS HOLDING
THE PORTFOLIOS OF ACCESSOR FUNDS, INC.
1. Receive all applications, instructions, notices, forms and remittances
from Account Holder and deal with or forward the same to the transfer
agent for the Fund.
2. Correspond with various persons, such as employers, account holders
and beneficiaries as necessary in connection with the Accounts.
3. Notify Account Holders of distribution requirements related to age
70-1/2
4. Calculate distributions, withdrawals, required withholding and other
payments to Account Holders.
5. Maintain Account Holder records, such as change of address and
beneficiary information.
6. Address and tabulate proxy cards for any shareholder meetings of the
Fund.
7. Prepare periodic reports on accounts, numbers of shares, etc.
8. Supply an quarterly list of Account Holders to Custodian.
9. Prepare and file federal tax forms (1099-R, 5498).
10. Reply to shareholder correspondence and inquiries.
11. Respond to all telephone inquiries about Accounts and maintain a log
of all such inquiries and the response given.
12. Prepare and distribute all amendments to the Account Documents to
Account Holders and Custodian.
EXHIBIT D
FEE SCHEDULE
Fifth Third Fee $10.00 per Account per year
TRANSFER AGENCY AND ADMINISTRATIVE AGREEMENT
This TRANSFER AGENCY AND ADMINISTRATIVE AGREEMENT (the "Agreement") made
and entered into this 1st day of December, 1995, by and between ACCESSOR FUNDS,
INC. (the "Fund"), a Maryland corporation, having its principal office and place
of business at 1420 Fifth Avenue, Suite 3130, Seattle, WA 98101 and BENNINGTON
CAPITAL MANAGEMENT L.P. ("Bennington"), a Washington limited partnership, having
its principal office and place of business at 1420 Fifth Avenue, Suite 3130,
Seattle, WA 98101.
WHEREAS, the Fund is authorized to, and may from time to time, establish
additional classes of shares of its capital stock;
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Fund is currently offering shares in eight series, each with
one class of shares (as set forth on APPENDIX A, as amended from time to time),
each such series, together with all other series subsequently established by the
Fund and made subject to this Agreement in accordance with Article 13, being
herein referred to as a "Portfolio" and collectively as the "Portfolios"; and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint Bennington
as its transfer agent and dividend disbursing agent, as agent in connection with
certain activities with respect to Fund-sponsored retirement plans and as agent
to ensure that the Fund is in compliance with the applicable securities laws and
regulations of the individual states or territories of the United States ("Blue
Sky compliance services") and Bennington desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Terms of Appointment; Duties of Bennington
1.1. Subject to the terms and conditions set forth in this Agreement, the
Fund, on behalf of the Portfolios, hereby employs and appoints Bennington to act
as, and Bennington agrees to act as its transfer agent for the authorized and
issued shares of capital stock of the Fund representing interests in each of the
respective Portfolios ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of each of the respective Portfolios of the Fund ("Shareholders")
and set out in the currently effective prospectuses and statement of additional
information ("prospectus") of the Fund on behalf of the applicable Portfolio,
including without limitation any periodic investment plan or periodic withdrawal
program.
1.2. In accordance with procedures established from time to time by
agreement between the Fund and Bennington, Bennington shall provide the
following services:
1.2.1. Establish and maintain portfolio control files including, but
not limited to, adding new portfolios or classes of shares, adjusting blue
sky registration amounts and sales totals per the instructions of the Fund,
fees and commission rates, holiday schedules, prices, interest rates and
yields and Fund distribution history;
1.2.2. Daily setup including, but not limited to, daily prices, daily
dividend rates and interest and Share adjustments;
1.2.3. Non-daily posting including, but not limited to, dividends and
capital gains processing and money market dividend posting;
1.2.4. Tax reporting and filing, including but not limited to, of
Forms 1099, 1099-R, 1099-DIV Reporting and 5498;
1.2.5. Proxy mailings and processing;
1.2.6. Federal reserve wire and Automatic Clearing House ("ACH")
settlements for shareholder control and balance;
1.2.7. Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") a record of the total number of Shares of the Fund
which are authorized, issued and outstanding, based upon data provided to
it by the Fund. Bennington shall also provide the Fund on a daily basis
with the total number of Shares which are authorized, issued and
outstanding;
1.2.8. Monitor the issuance of Shares of the Fund and take cognizance
of any laws relating to the issue or sale of such Shares, ;
1.2.9. Create, examine and maintain dealer files including, but not
limited to, adding or changing dealer records;
1.2.10. Create, examine and maintain Shareholder data including, but
not limited to, name, address and other related information for each
Shareholder;
1.2.11. Execute Shareholder transactions including, but not limited
to, purchases, redemptions, exchanges and transfers. In connection with
these services, Bennington shall receive for acceptance Shareholder
transaction orders, confirm the receipt or crediting of Shareholder funds
and maintain all required documentation;
1.2.12. Receive and disburse monies on behalf of the Fund, in
accordance with Shareholder investments, redemptions and dividend
distributions;
1.2.13. Generate dealer reports;
1.2.14. Generate Shareholder reports including, but not limited to,
Shareholder transaction confirmations, account statements, Shareholder
trial balance and Shareholder status listings;
1.2.15. Maintain records documenting all written Shareholder
communications, account set-ups, transaction confirmations, Form 1099s, and
other necessary documents; and
1.2.16. Provide escheatment services as necessary.
1.3. Bennington shall provide additional services on behalf of the Fund,
which may be agreed upon in writing between the Fund and Bennington.
2. Retirement Plans
2.1. In addition, the Fund, on behalf of the Portfolios, and subject to the
terms and conditions set forth in this Agreement, appoints Bennington as its
agent in connection with any prototype plan already or hereafter designed to
satisfy the requirements of Section 401(a), 403(b)(7), or 408 of the Internal
Revenue Code of 1986, as amended from time to time, or any successor to such
sections, sponsored by the Fund, (as amended from time to time, each a
"Prototype" and collectively, the "Prototypes") which provide that they will be
funded in whole or in part by the purchase of Shares of one or more of the
Portfolios of the Fund, and Bennington agrees to act as the Fund's agent with
respect to Fund-sponsored retirement plans.
2.2. In accordance with procedures established from time to time by
agreement between the Fund and Bennington, Bennington shall provide all
administrative, recordkeeping and compliance services required to provide any
such Prototype described in Section 2.1 to Shareholders of the Fund, as more
fully set forth in any separate agreement or agreements among the Fund,
Bennington and any custodian or trustee of such Prototype.
3. Blue Sky Compliance Services
3.1. In addition, the Fund, on behalf of the Portfolios, and subject to the
terms and conditions set forth in this Agreement, appoints Bennington as its
agent for Blue Sky compliance services and Bennington agrees to act as the
Fund's agent for Blue Sky compliance services.
3.2. In accordance with procedures established from time to time by
agreement between the Fund and Bennington, Bennington shall perform Blue Sky
compliance services for the Portfolios for each of the fifty states, the
District of Columbia, Guam and Puerto Rico, where applicable (a listing of the
states in which the Fund is registered as of the date of effectiveness of this
Agreement is set forth in APPENDIX B). Such Blue Sky compliance services shall
include, but shall not be limited to the following:
3.2.1. Initiate registration of Fund Shares and maintain registration
of Fund Shares, as appropriate;
3.2.2. Monitor the total number of Shares sold in each state for each
Portfolio on a daily basis; increase registered amounts where necessary,
and file appropriate sales reports;
3.2.3. Maintain issuer agent licensing and renewals, fingerprint
agents, file licensing and termination forms and obtain surety bonds, as
appropriate;
3.2.4. Make appropriate post-effective filings in each state;
3.2.5. Monitor compliance with restrictions on Portfolio activities
imposed by state laws, when different from federal limits, including
illiquid securities limits and seasoning of issuers and develop appropriate
prospectus disclosure when necessary; and
3.2.6. Monitor changes in Blue Sky laws through use of reference
materials and make appropriate changes to filings, forms or tracking
systems.
3.3. Bennington shall provide additional Blue Sky compliance services on
behalf of the Fund, which may be agreed upon in writing between the Fund and
Bennington.
4. Fees and Expenses
4.1. For the performance by Bennington pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay to Bennington fees as outlined
in APPENDIX C, which fees may be changed from time to time, including with
respect to the establishment of additional classes of Shares, subject to mutual
written agreement between the Fund and Bennington.
4.2. In addition, other expenses incurred by Bennington at the request or
with the consent of the Fund will be reimbursed by the Fund on behalf of the
applicable Portfolio.
4.3. The Fund agrees on behalf of each of the Portfolios to pay all fees
and reimbursable expenses within ten business days following the receipt of the
respective billing notice.
5. Representations, Warranties and Covenants of Bennington
5.1. Bennington represents and warrants to the Fund that:
5.1.1. It is a limited partnership duly organized and existing and in
good standing under the laws of Washington;
5.1.2. It is empowered under applicable laws and by its Limited
Partnership Agreement to enter into and perform this Agreement;
5.1.3. All partnership proceedings required by said Limited
Partnership Agreement have been taken to authorize it to enter into and
perform this Agreement;
5.1.4. It has access to the necessary facilities, equipment and
personnel to perform under this Agreement;
5.1.5. It is duly registered as a transfer agent pursuant to Section
17A(c)(1) of the Exchange Act; and
5.1.6. All services of Bennington under this Agreement will be
provided on days the New York Stock Exchange is open for business.
5.2. Bennington covenants to the Fund that it will continue to have access
to the necessary facilities, equipment and personnel to perform under this
Agreement.
5.3. Bennington covenants to the Fund that it will have in place a written
disaster recovery plan and will revise such plan, as appropriate, to reflect its
responsibilities under this Agreement.
5.4. Bennington covenants to the Fund that it will undertake to comply with
all the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act, the Investment Company Act of 1940, as
amended (the "Investment Company Act"), the Commodities Exchange Act, as amended
(the "CEA"), and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to all duties to be performed hereunder. Except
as specifically set forth herein, Bennington assumes no responsibility for such
compliance by the Fund.
6. Representations, Warranties and Covenants of the Fund
6.1. The Fund represents and warrants to Bennington that:
6.1.1. It is a corporation duly organized and existing and in good
standing under the laws of Maryland;
6.1.2. It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
6.1.3. All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement;
6.1.4. It is an open-end and diversified management investment company
registered under the Investment Company Act; and
6.1.5. A registration statement under the Securities Act on behalf of
each of the Portfolios is currently effective and appropriate state
securities law filings have been made with respect to all Shares of the
Fund being offered for sale in the states listed on APPENDIX B, attached
hereto and incorporated by reference herein.
6.2. The Fund covenants to Bennington that it will take the necessary
actions to (i) maintain an effective registration statement under the Securities
Act for each of the Portfolios and (ii) cause all appropriate state securities
law filings to be made with respect to all Shares of the Fund being offered for
sale.
7. Data Access and Proprietary Information
7.1. The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by Bennington, which provide the Fund access to
certain Fund-related data ("Shareholder Data") maintained by Bennington on data
bases under the control and ownership of Bennington ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to Bennington.
The Fund agrees to treat all Proprietary Information as proprietary to
Bennington and further agrees that it shall not divulge any Proprietary
Information to any person or organization except as may be provided hereunder.
Without limiting the foregoing, the Fund agrees for itself and its employees and
agents:
7.1.1. to access Shareholder Data solely from locations as may be
designated in writing by Bennington and solely in accordance with
Bennington's applicable user documentation;
7.1.2. to refrain from copying or duplicating in any way the
Proprietary Information;
7.1.3. to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently obtained,
to inform Bennington in a timely manner of such fact and dispose of such
information in accordance with Bennington's instructions;
7.1.4. to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility or other
location, except with the prior consent of Bennington;
7.1.5. to limit the Fund's access to only those authorized
transactions agreed upon by the parties; and
7.1.6. to honor all reasonable written requests made by Bennington to
protect, at Bennington's expense, the rights of Bennington in Proprietary
Information at common law, under federal copyright law and under other
applicable federal or state law.
7.2. Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 7. The obligations of this Article
shall survive any early termination of this Agreement.
7.3. If the Fund notifies Bennington that any of the Data Access Services
do not operate in material compliance with the most recently issued user
documentation for such services, Bennington shall endeavor in a timely manner to
correct such failure. Organizations from which Bennington may obtain certain
data included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against Bennington
arising out of Bennington's good faith reliance on the contents of third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES
AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION
THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. BENNINGTON EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
8. Indemnification
8.1. Bennington shall not be responsible for, and the Fund on behalf of the
applicable Portfolios indemnifies and holds Bennington harmless from and
against, any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of:
8.1.1. All actions of Bennington or its agents or subcontractors
required to be taken pursuant to this Agreement, unless such claims
resulted from a negligent act or omission to act, willful misconduct or bad
faith by Bennington or its agents in performance of its duties hereunder;
8.1.2. The Fund's lack of good faith, negligence, or willful
misconduct or breach of any representation or warranty of the Fund
hereunder;
8.1.3. The reliance on or use by Bennington or its agents or
subcontractors of information, records, documents or services which (i) are
received by Bennington or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm
on behalf of the Fund, including, but not limited to, any previous transfer
agent or registrar;
8.1.4. The reliance on or the carrying out by Bennington or its agents
or subcontractors of any written or oral instructions or requests of the
Fund on behalf of the applicable Portfolios; and
8.1.5. The offer or sale of Shares not directly or indirectly caused
by Bennington, in violation of any requirement under the federal securities
laws or regulations or the securities laws or regulations of any state that
such Shares be registered in such state or in violation of any stop order
or other determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
8.2. At any time Bennington may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by Bennington under this
Agreement. Bennington, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided to Bennington or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund.
8.3. In order that the indemnification provisions contained in this Article
8 shall apply, upon the assertion of a claim for which the Fund may be required
to indemnify Bennington, Bennington shall promptly notify the Fund within twenty
(20) calendar days of receipt of a claim of such assertion in writing, and shall
keep the Fund advised with respect to all developments concerning such claim.
The Fund shall have the option to participate with Bennington in the defense of
such claim or to defend against said claim in its own name or in the name of
Bennington. Where the Fund undertakes the defense of Bennington hereunder the
Fund shall control any such defense. Bennington agrees to cooperate with the
Fund with such defense. Bennington shall in no case confess any claim or make
any compromise in any case in which the Fund may be required to indemnify
Bennington without the Fund's prior written consent.
9. Standard of Care
9.1. Bennington shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said errors are caused by its
negligence in acting or omitting to act, bad faith, or willful misconduct or
that of its employees.
10. Covenants of the Fund and Bennington
10.1. The Fund shall on behalf of each of the Portfolios promptly furnish
to Bennington a certified copy of the resolution of the Directors of the Fund
authorizing the appointment of Bennington pursuant to this Agreement and the
execution and delivery of this Agreement.
10.2. Bennington agrees to promptly furnish to the Fund a certified copy of
the unanimous written consent of the general partners of Bennington authorizing
Bennington to serve as transfer agent for the Fund and to obtain custody of an
investment advisory client's securities or funds within the meaning of WAC
460-24A-170(1).
10.3. Bennington hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for the safekeeping of check forms
and facsimile signature imprinting devices, if any, and for the preparation or
use, and for keeping account of, such forms and devices.
10.4. Bennington shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws. To the extent required by Section 31 of the
Investment Company Act, and the Rules thereunder, Bennington agrees that all
such records prepared or maintained by Bennington relating to the services to be
performed by Bennington hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
10.5. Bennington and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
10.6. In the case of any requests or demands for the inspection of the
Shareholder records of the Fund, Bennington will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. Bennington reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
11. Disaster Recovery
11.1. Bennington shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment, to the extent appropriate
equipment is available. In the event of equipment failure, Bennington shall, at
no additional expense to the Fund, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
12. Termination of Agreement
12.1. This Agreement may be terminated by either party upon sixty (60)
calendar days written notice to the other.
12.2. If the Fund should exercise its right to terminate this Agreement in
accordance with Section 12.1, all out-of-pocket expenses associated with the
movement of records and materials will be borne by the Fund on behalf of the
applicable Portfolios. Additionally, Bennington reserves the right to charge the
Fund for any other reasonable out-of-pocket expenses associated with such
termination.
13. Additional Portfolios or Classes of Shares
13.1. In the event that the Fund establishes one or more additional series
of Shares, or creates one or more additional classes of Shares within an
existing Portfolio, in addition to those listed on APPENDIX A, with respect to
which it desires to have Bennington render services under the terms of this
Agreement, it shall so notify Bennington in writing, and if Bennington agrees in
writing to provide such services, any such series of Shares shall become a
Portfolio hereunder and any such class of Shares shall be considered a part of
its respective Portfolio.
14. Assignment
14.1. Neither this Agreement nor any rights or obligations hereunder may be
assigned by any party without the written consent of the other party, which
consent shall not be unreasonably withheld.
14.2. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective permitted successors and assigns.
15. Notices
15.1. All notices and other communications shall be in writing or by
confirming telegram, cable, telex or facsimile sending device. If notice is sent
by confirming telegram, cable, telex or facsimile sending device, it shall be
deemed received immediately. If notice is sent by first-class mail, it shall be
deemed to have been received three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been received on the day it is
delivered. Notices shall be addressed (a) if to Bennington at Bennington's
address, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101, (b) if to the
Fund at the Fund's address, 1420 Fifth Avenue, Suite 3130, Seattle, Washington
98101 and (c) if to neither of the foregoing, at such other address as shall
have been notified to the sender of any such notice or other communication.
16. Amendment
16.1. This Agreement may be amended or modified by a written agreement
executed by the parties and duly authorized or approved by a resolution of the
Directors of the Fund.
17. Washington Law to Apply
17.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Washington.
18. Force Majeure
18.1. In the event any party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other party for any damages resulting from such failure to perform or otherwise
from such cause.
19. Merger of Agreement
19.1. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
20. Counterparts
20.1. This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ACCESSOR FUNDS, INC.
By: /s/ Ravindra A. Deo
Ravindra A. Deo
Vice President
BENNINGTON CAPITAL MANAGEMENT L.P.
By: Bennington Management Associates, Inc.,
Its Managing General Partner
By: /s/J. Anthony Whatley III
J. Anthony Whatley III
President
Appendix A
----------
Portfolios of Accessor Funds, Inc.
as of December 1, 1995
Growth Portfolio
Small to Mid Cap Portfolio
Value and Income Portfolio
International Equity Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Appendix B
----------
Blue Sky Registration as of December 1, 1995
State Registration Status
----- -------------------
Alaska Registration Complete except
International Equity Portfolio not registered
Alabama Fund not Registered
Arkansas Registration Complete
Arizona Registration Complete
California Registration Complete
Colorado Registration Complete
Connecticut Registration Complete
Washington D.C. Registration Exempt
Delaware Registration Complete
Florida Registration Complete
Georgia Registration Complete
Hawaii Registration Exempt
Iowa Registration Complete
Idaho Registration Complete
Illinois Registration Complete
Indiana Registration Complete
Kansas Registration Complete
Kentucky Fund not Registered
Louisiana Registration Complete
Massachusetts Growth Portfolio pending.
No other portfolio registered.
Maryland Registration Complete
Maine Fund not Registered
Michigan Registration Complete
Minnesota Registration Complete
Missouri Registration Complete
Mississippi Registration Complete
Montana Fund not Registered
North Carolina Registration Complete
North Dakota Fund not Registered
Nebraska Registration Complete except
International Equity Portfolio pending
New Hampshire Fund not Registered
New Jersey Registration Complete
New Mexico Registration Complete except
International Equity Portfolio not registered
Nevada Registration Complete
New York Registration Complete
Ohio Registration Complete
Oklahoma Fund not Registered
Oregon Registration Complete
Pennsylvania Registration Complete
Rhode Island Registration Complete
South Carolina Registration Complete
South Dakota Fund not Registered
Tennessee Registration Complete
Texas Registration Complete
Utah Registration Complete
Virginia Registration Complete
Vermont Not Registered
Washington Registration Complete
Wisconsin Registration Complete
West Virginia Fund not Registered
Wyoming Registration Complete
Appendix C
----------
Fee Schedule
FEES:
Maintenance Fee Per Class of Shares Per Portfolio:
- --------------------------------------------------
Each class of each Portfolio shall pay an annual maintenance fee of 0.12% of
its' average daily net assets, with a minimum annual fee of $40,000 by each
class of each Portfolio, which fee shall be calculated daily and billed monthly.
Transaction Fee:
- ----------------
A transaction fee of $.50 per transaction will be calculated daily and billed
monthly.
Includes: cost of postage and mailing for statements, confirmations, etc.,
Facsimile transmission charges, non-fund stationery, paper, and most
out-of-pocket expenses with respect to transfer agent services.
OUT-OF-POCKET EXPENSES:
Transfer Agent Expenses:
- ------------------------
Includes: federal reserve wire processing fees, ACH processing fees, and check
processing charges, which will be billed to the Fund separately.
Administrative Expenses:
- ------------------------
Includes: forms for IRS tax reporting, shareholder tax reporting, state tax
reporting, forms for any Prototype retirement plans, postage, mailing, non-Fund
stationery, paper, copying expenses, and other out-of-pocket expenses, which
will be billed to the Fund separately.
Blue Sky Expenses:
- ------------------
Includes: cost of filing fees, postage, mailing, non-Fund stationery, paper,
copying expenses, and other out-of-pocket expenses, which will be billed to the
Fund separately.
Fund stationery
- ---------------
Fund stationery (paper, envelopes, statements) will be billed to the Fund
separately.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 10 to Registration
Statement No. 33-41245 of Accessor Funds, Inc. of our report dated February 9,
1996 incorporated by reference in the Statement of Additional Information, which
is a part of such Registration Statement and to the references to us under the
headings "Financial Highlights" and "Additional Information" in the
Prospectuses, which are a part of such Registration Statement, and "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information.
/s/ Deloitte & Touche
Deloitte & Touche LLP
New York, New York
April 24, 1996
CONTENTS
I. Procedures
Instructions For Opening Your IRA
Individual Retirement Custodial Account Disclosure Statement
Individual Retirement Custodial Account Agreement
(Under Section 408(A) Of The Internal Revenue Code)
II. Retirement Account Forms
Individual Retirement Custodial Account Application And Adoption
Agreement
IRA Transfer Request/Direct Rollover Request
INSTRUCTIONS FOR OPENING YOUR IRA
DISCLOSURE
Accessor Funds, Inc. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund, currently with nine
diversified investment portfolios, each with its own investment objective and
policies. While The Fifth Third Bank is the Custodian of your individual
retirement account ("IRA"), investments in the portfolios of the Fund are not
deposits or obligations of, or guaranteed or endorsed by any bank. Further,
investments in the portfolios are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
The Fund's Individual Retirement Custodial Account Plan consists of the
following documents. Please read each of these documents carefully as they
contain the information you need to establish an IRA. Since many of the benefits
of an IRA are related to income taxes, you are encouraged to discuss your IRA
plans with your lawyer, accountant or tax adviser. Neither Bennington Capital
Management L.P. nor the Custodian may act as your tax or investment adviser. You
are responsible for complying with the tax laws and financial considerations as
they apply to your situation.
DOCUMENTS
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
Accessor Funds, Inc. Prospectus(es)
OPENING YOUR IRA
1. Please complete and sign the IRA Application and Adoption Agreement Form.
This sets up an IRA in your name or, if a Spousal IRA, in your spouse's
name, permits rollovers, designates beneficiaries and specifies your
investment choices.
2. Please complete and sign the IRA Transfer Request/Direct Rollover Request
Form if your initial investment is from a transfer of assets or rollover
from another IRA or qualified plan. Complete a form for each organization
or account from which an IRA investment is to be transferred.
3. Remove the IRA Application and Adoption Agreement Form and the Transfer
Request/Direct Rollover Request (if applicable) and deliver them to your
investment advisor. Retain the IRA Disclosure Statement and the IRA
Custodial Account Agreement for your records.
DISTRIBUTIONS
Please contact your investment adviser or Bennington Capital Management L.P. at
1-800-759-3504 for information on taking a distribution from your IRA.
FEES AND MINIMUMS
The fees are set out on the Application and Adoption Agreement form. Currently,
there are no IRA fees if your aggregate IRA investment is $10,000 at year-end.
IRA's under $10,000 will be debited for an annual $25.00 maintenance fee in
January of each year. The fees can be changed with 30 days' written notice to
you.
The minimum initial investment to open an IRA is $1,000 in the aggregate.
Subsequent investments are $100 in the aggregate. These minimums can be changed
with 30 days' written notice to you.
MAILING INSTRUCTIONS
Check to be sure you have properly completed all necessary information and
forms. Your IRA cannot be opened without the properly completed documents.
Please deliver all of the completed and signed forms to your investment advisor,
who will deliver them to:
Bennington Capital Management L.P.
Attn: Shareholder Services
P. O. Box 1748
Seattle WA 98111-1748
Accessor Funds, Inc.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DISCLOSURE STATEMENT
INTRODUCTION
This disclosure statement contains information about your Individual Retirement
Custodial Account ("IRA") for investment in Accessor Funds, Inc. (the "Fund"),
a multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of nine diversified investment
portfolios, each with its own investment objective and policies. Your interest
in the IRA is nonforfeitable. All assets of the IRA are registered in the name
of The Fifth Third Bank, a banking company organized under the laws of the State
of Ohio (the "Custodian") or of a suitable nominee as custodian for your
benefit, or that of your beneficiary. Bennington Capital Management L.P.
("Bennington") acts as investment adviser, manager and transfer agent to the
Fund. Through an agreement between the Fund, Bennington and the Custodian,
Bennington provides administrative services on behalf of the Fund and the
Custodian to the IRA. Your IRA is a custodial account established for your
exclusive benefit or that of your named beneficiary or beneficiaries as
described in Section 408 of the Internal Revenue Code of 1986, as amended (the
"Code").
Your IRA is established through the use of the provisions of Internal Revenue
Service ("IRS") Form 5305-A, which is a model custodial account agreement that
meets the requirements of Section 408(a) of the Code and has been automatically
approved as to form by the IRS. The IRS approval applies only to Form 5305-A; it
is not an endorsement of the Fund-sponsored IRA. Accessor Funds, Inc. Individual
Retirement Custodial Account Plan consists of the Individual Retirement
Custodial Account Agreement (the "Custodial Account Agreement"), this Disclosure
Statement, the Application and Adoption Agreement (the "Adoption Agreement") and
the other appropriate forms, which will be amended from time to time to comply
with the provisions of the IRS Code and related regulations. Other amendments
may be made with the consent of the persons whose signatures appear on the
Adoption Agreement.
RIGHT TO REVOKE
You may revoke a newly established IRA at any time within seven days after the
date on which you establish your account. An IRA established more than seven
days after the date of your receipt of this Disclosure Statement may not be
revoked.
To revoke your IRA, mail or deliver a written notice of revocation to:
Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Mailed notice will be deemed given on the date that it is postmarked (or, if
sent by certified or registered mail, on the date of certification or
registration). If you revoke your IRA within the seven-day period, you are
entitled to a return of the entire amount you contributed into your IRA, without
adjustment for such items as sales charges, administrative expenses or
fluctuations in market value. Your initial investment in the IRA will be
invested in the U.S. Government Money Portfolio for seven days and then invested
in the Portfolios of the Fund in accordance with the directions on your Adoption
Agreement.
TAX ADVANTAGES
Your IRA gives you several tax benefits. Earnings on the assets held in your IRA
are not subject to federal income tax until withdrawn by you. You may be able to
deduct all or part of your IRA contribution on your federal income tax return.
State income tax treatment of your IRA may differ from federal treatment; ask
your state tax department or your personal tax advisor for details.
If you are eligible to receive a distribution from a tax qualified retirement
plan as a result of, for example, termination of employment, plan
discontinuance, or retirement, all or part of the distribution may be
transferred directly into your IRA. This is a called a "direct rollover." Or, if
your distribution is paid directly to you, you may make a "regular rollover" to
your IRA within 60 days. By making a direct rollover, you can defer income taxes
on the amount rolled over until you subsequently make withdrawals from your IRA.
Since many of the benefits of an IRA are related to income taxes, you are
encouraged to discuss your IRA plans with your lawyer, accountant or tax
adviser. Neither Bennington nor the Custodian may act as your tax adviser. You
must be responsible for complying with the tax laws and financial considerations
as they apply to your situation.
ESTABLISHING YOUR IRA
All IRAs must meet certain requirements. Contributions generally must be made in
cash. The IRA trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance or be commingled with other property except in a
common trust or investment fund. Your interest in the account must be
nonforfeitable at all times. The annual earnings for your IRA consist of all
dividends and distributions on the Portfolio shares held in your account. Fund
dividends and distributions are reinvested in additional shares and accumulate
on a tax deferred basis.
You may obtain further information on IRAs from any district office of the IRS
or by requesting Publication 590, "Individual Retirement Account" from the IRS.
FEES AND EXPENSES
Fees and other expenses of maintaining your IRA account are described in the
Adoption Agreement and in the letter you receive confirming the acceptance of
your IRA and may be changed from time to time, as provided in the Custodial
Agreement.
ELIGIBILITY
Whether you are an employee or a self-employed individual, you are eligible to
contribute to an IRA even if you are already covered under another tax-qualified
plan. Your employer may contribute to an IRA established by you and you may
contribute to an IRA used as part of a Simplified Employee Pension plan ("SEP";
described below). You are eligible to establish and contribute to an IRA for any
year if you received taxable compensation during the year for personal services
you rendered and you did not reach age 70 1/2 during the year. Taxable
compensation includes wages, salaries, tips, commissions, fees, bonuses, taxable
alimony and separate maintenance payments. Income not considered compensation
includes pension income or earnings and profits from property, such as dividend,
interest, rental or capital gains income.
TYPES OF IRAS
Regular IRA
If you have taxable compensation and are under age 70 1/2, you may make a
contribution to a Regular IRA of $2,000 or 100% of your compensation, whichever
is less. To determine the tax deductibility of your contribution, see
"Deductible IRA Contributions" on page 17. However, rollover contributions and
employer contributions to a simplified employee pension (SEP), as explained
below, can be more than $2,000 per year.
Spousal IRA
You may be eligible to establish an additional but separate and independent
account for your unemployed spouse. To qualify, you must be married at the end
of the tax year, you and your spouse must file a joint return, your spouse must
be under age 70 1/2, you must have received compensation for the tax year, and
your spouse must not have received any compensation during the tax year or must
elect to be treated as having not received compensation during the tax year. For
a spousal IRA, your spouse must set up a different IRA, separate from yours, to
which you contribute. The maximum total contribution to your IRA and to a
Spousal IRA may not exceed the lesser of $2,250 or 100% of your compensation.
The contribution does not have to be equally divided between the two accounts;
however, the maximum contribution to either account is $2,000 or 100% of
compensation. To determine the amount of your income tax deduction for your IRA
contribution and the amount that can be contributed to each account, see the IRS
instruction booklets for Forms 1040 and 1040A. Although you may not continue
contributing to your IRA once you have reached age 70 1/2, you may continue
contributing to a Spousal IRA until the year in which your spouse reaches age 70
1/2. With the exception of the contribution limits, all rules that apply to a
Regular IRA also apply to a Spousal IRA.
If you or your spouse earn more than $250 in taxable compensation in any tax
year, you or your spouse may make contributions to your respective regular IRAs
equal to the lesser of $2,000 or 100% of taxable compensation.
Rollover IRA
Generally, a rollover is a tax-free distribution to you of cash or other assets
from one retirement program to which you contribute to another. The rollover
must be completed by the 60th day after the day you receive the distribution to
be valid and may only be done once in any one-year period (measured from the
date you receive the distribution). This rule applies separately to each IRA you
own, although for purposes of the rule, the Fund-sponsored IRA is considered one
IRA regardless of how many Portfolios of the Fund you choose. Exchanges of IRA
money between the Portfolios are restricted by the Fund's exchange policies, but
not by this rule. See IRS Publication 590 for more information about rollover
IRAs.
There are two types of rollover contributions:
Rollover from one IRA to another. You may withdraw part or all of the
assets from one IRA and reinvest them in another IRA. You are not required
to receive a complete distribution from your IRA in order to make a
rollover contribution to another IRA, nor are you required to roll over the
full amount you received. Any amount you keep will generally be taxable
(unless it is a return of nondeductible contributions) in the year it is
received, and it will be subject to a 10% penalty tax if you are under age
59 1/2. Once you reach age 70 1/2, your required minimum distributions are
not eligible for rollover treatment. However, you may make rollover
contributions, even though you may not make regular IRA contributions.
Rollover from an Employer's Qualified Plan to an IRA. This type of rollover
IRA is an IRA that contains only eligible distributions from an employer's
qualified retirement plan (e.g., profit sharing, pension, 401(k), or 403(b)
plan). By maintaining a separate IRA for this money (called a "Conduit
IRA"), you may subsequently roll it over into another employer's qualified
retirement plan (provided that the employer's plan accepts rollovers). If
you commingle this money with your regular IRA contributions, you may not
roll it over into another employer's qualified retirement plan. These
rollover contributions, if properly made, are not included in your gross
income and therefore are not deductible from it; neither will rollover
contributions count toward the maximum allowable nondeductible
contribution. When you deposit an eligible rollover distribution from an
employer's qualified plan into an IRA, you are making an irrevocable
election indicating that the distribution be treated as a rollover
contribution. Consult your tax adviser before electing to roll over to an
IRA. By signing the Application, you are irrevocably electing to treat your
qualified plan distribution as a rollover. If you receive an eligible
rollover distribution from a qualified retirement plan, you may roll over
the amount you have received to an IRA, as long as the rollover is
completed by the 60th day after the day you receive such amount. Any part
of an eligible rollover distribution that is made payable to you, even if
you intend to roll it over into an individual retirement account (or
eligible retirement plan) is subject to mandatory 20% withholding for
Federal income tax by the employer. You can avoid this withholding by using
the Direct Rollover Option discussed below. Your plan or 403(b) sponsor is
required to provide you with information about direct and regular rollovers
and withholding taxes before you receive your distribution and must comply
with your directions to make a direct rollover. Read this information
carefully before receiving any distributions from a qualified retirement
plan or 403(b) annuity. The rules governing rollovers are complicated. Be
sure to consult your tax adviser or the IRA if you have a question about
rollovers. Direct Rollover Option. If you are entitled to an eligible
distribution of $200 or more from a qualified retirement plan, you may ask
your employer to make a direct rollover of the distribution to the
Custodian. By electing a direct rollover you are exempt from the 20% tax
withholding requirements that would apply if the distribution were made
payable to you. The employer must make the check payable to the
Custodian/Trustee of the receiving IRA or plan; however, the employer has
the option of giving the check to you for delivery or mailing it directly
to the new plan. The employer must report a direct rollover on Form 1099-R
and the Custodian will report the rollover contribution on Form 5498.
The maximum amount you may roll over is the amount of employer contributions and
earnings distributed. You may not roll over any after-tax employee contributions
you made to the employer retirement plan. If you are over age 70 1/2 and are
required to take minimum distributions under the tax laws, you may not roll over
any amount required to be distributed to you under the minimum distribution
rules. Also, if you are receiving periodic payments over your or your and your
designated beneficiary's life expectancy or for a period of at least 10 years,
you may not roll over these payments.
Once you have established a Rollover IRA (or rolled qualified plan money to
another employer's qualified plan), you will not be taxed until you take
distributions.
Special Rules for Surviving Spouses, Alternate Payees, and Other Beneficiaries.
If you are a surviving spouse, you may have an eligible rollover distribution
rolled directly into an IRA or paid to you. If you have the distribution paid to
you, you can keep it or roll it over to an IRA, but you cannot roll it over to
an employer's qualified plan. If you are a beneficiary other than the surviving
spouse, you cannot choose a direct rollover, and you cannot roll over the
distribution. If you are the spouse or former spouse alternate payee under a
Qualified Domestic Relations Order, you may have an eligible rollover
distribution rolled directly into an IRA or a qualified employer plan or have it
paid to you. If the distribution is paid to you, you may roll it over to an IRA
or another employer's qualified plan.
Exceptions to Rollover Contributions. Almost all distributions from employer
plans or 403(b) arrangements (for employees of tax-exempt employers) are
eligible for rollover to an IRA. The main exceptions are
. payments over the lifetime or life expectancy of the participant
(or participant and a designated beneficiary),
. installment payments for a period of 10 years or more,
. required distributions starting at age 70 1/2, and
. payments of employee after-tax contributions.
Transfer to a Successor Trustee/Custodian. A transfer is the movement of your
IRA funds directly from one trustee or custodian to another. You and the
accepting trustee or custodian use a Transfer Request to direct the current
trustee to transfer the IRA. Because you do not take physical receipt of the
money, the transaction is not reported to the IRS. Institutional transfers are
not subject to the one-year restriction that applies to rollovers; you may
transfer IRA money from one trustee or custodian to another as often as you
wish.
Simplified Employee Pension Plan ("SEP-IRA")
A separate IRA may be established for use by your employer as part of a SEP
arrangement. Your employer may contribute to your SEP-IRA up to a maximum of 15%
of your compensation or $30,000, whichever is less. If your SEP-IRA is used as
part of a salary reduction SEP, you may elect to reduce your annual
compensation, up to a maximum of 15% of your compensation or $7,000 (indexed to
reflect cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-IRA. If your employer maintains both a salary
reduction SEP and a regular SEP, the annual contribution limit to both SEPs
together is 15% of your compensation or $30,000, whichever is less. You may
contribute, in addition to the amount contributed by your employer to your
SEP-IRA, an amount not in excess of the limits referred to under the Regular IRA
above. It is your and your employer's responsibility to see that contributions
in excess of normal IRA limits are made under a valid SEP and are, therefore,
proper. For plan years beginning on or after January 1, 1994, the amount of
compensation that may be used for calculating contributions has been reduced
from $200,000 to $150,000, subject to change once annual aggregate cost of
living adjustments exceed $10,000. This new compensation limit reduces the
maximum dollar amount that can be contributed to a SEP-IRA in any given year
from $30,000 to $22,500 (0.15 x $150,000).
Employer contributions under a SEP-IRA are immediately vested and belong to the
employee even if the employee leaves the company. The 70 1/2 age limit for
contributing to a regular IRA does not apply to employer contributions made for
the benefit of eligible SEP participants.
CONTRIBUTIONS
You may make a contribution to your existing IRA or establish a new IRA for a
taxable year at any time from the beginning of the tax year up to the date for
filing your federal tax return for that year (not including any extensions).
Usually this is April 15 of the following year. You do not have to contribute to
an IRA every year. Contributions must be in the form of a check, money order, or
similar cash item. No part of your IRA can be used to buy a life insurance
policy. Your account's assets cannot be commingled with other property, except
in a common trust fund or common investment fund. Your IRA may not be invested
in collectibles, such as gems, coins, or art. However, the Tax Reform Act of
1986 permits certain gold and silver coins issued by the United States as IRA
investments.
Deductible Contributions. The amount of your deduction depends upon whether you
are (or your spouse is) an active participant in any employer-sponsored
retirement plan. If neither you nor your spouse is an active participant of any
employer-sponsored retirement plan, the entire IRA contribution is deductible.
If you are covered by an employer-sponsored retirement plan at any time during a
year, you are an "active participant" for that year, even if you are not vested
in your retirement benefit or are not currently making contributions to the
plan.
As an active participant to an employer-sponsored retirement plan, there may be
limitations on the deductibility of your contribution to your IRA. This depends
on the amount of your income.
Your Form W-2 (or your spouse's W-2) should indicate if you were an active
participant in an employer-sponsored retirement plan during a year. If you have
a question, you should ask your employer or the plan administrator.
In one situation, your spouse's "active participant" status will not affect the
deductibility of your contributions to your IRA. This rule applies only if you
and your spouse file separate tax returns for the taxable year and you lived
apart at all times during the taxable year. The portion of your contribution
that is deductible depends upon your filing status and the amount of your
adjusted gross income ("AGI"). AGI is your gross income minus those deductions
which are available to all taxpayers even if they don't itemize. Instructions to
calculate your AGI are provided with your income tax Form 1040 or 1040A. The
following table shows the deduction rules.
_______________________________________________________________________________
FOR ACTIVE RETIREMENT PLAN -- PARTICIPANTS
----------------------------------------------------------------
If You Are Married Then Your IRA
If You Are Single Filing Jointly Contribution Is
----------------------------------------------------------------
Up to Up to Fully
$25,000 $40,000 Deductible
----------------------------------------------------------------
Adjusted Over $25,000 Over $40,000 Partly
Gross but less than but less than Deductible
Income $35,000 $50,000
----------------------------------------------------------------
$35,000 $50,000 Not
and up and up Deductible
----------------------------------------------------------------
_______________________________________________________________________________
If your AGI falls in the partly deductible range, you must calculate the portion
of your contribution that is deductible. To do this, multiply your contribution
by a fraction in which the numerator is the amount by which your AGI exceeds the
lower limit of the partly deductible range and the denominator is $10,000.
Subtract this from your contribution and then round up to the nearest $10. The
deductible amount is the greater of the amount calculated or $200 (provided you
contributed at least $200). If your contribution was less than $200, then the
entire contribution is deductible.
For example, assume that you make a $2,000 contribution to your IRA in a year in
which you are an active participant in your employer's retirement plan. Also
assume that your AGI for the year is $47,555 and you are married, filing
jointly. You would calculate the deductible portion of your contribution this
way:
1. The amount by which your AGI exceeds the lower limit of the partly -
deductible range:
(47,555-40,000) = 7,555 / 10,000:
3. Multiply this by your contribution:
0.7555 x $2,000 = $1,511
4. Subtract this from your contributions:
($2,000 - $1,551) = $489
5. Round this up to the nearest $10: = $490
6. Your deductible contribution is the greater of this amount or $200.
Nondeductible IRA Contributions. Even though part or all of your contribution is
not deductible, you may still contribute to your IRA up to the limit on
contributions ($2,000, or $2,250 for spousal IRAs). To the extent that your
contribution exceeds the deductible limits, it will be nondeductible. However,
earnings on all IRA contributions are tax deferred until distribution. When you
file your tax return for the year (including extensions), you must designate the
amount of nondeductible IRA contributions for the year by using IRS Form 8606.
If you overstate the amount of nondeductible contributions for a taxable year, a
penalty of $100 will be assessed for each overstatement unless you can show that
the overstatement was due to a reasonable cause.
Excess Contributions. The maximum contribution you can make to an IRA is $2,000
($2,250 for your IRA and a spousal IRA) or 100% of compensation or earned
income, whichever is less. Any amount contributed to the IRA above the maximum
is considered an "excess contribution." The excess is calculated using your
contribution limit, not the deductible limit. An excess contribution is subject
to excise tax of 6% for each year it remains in the IRA.
Excess contributions may be corrected without paying a 6% penalty. To do so, you
must withdraw the excess and any earnings on the excess before the due date
(including extensions) for filing your federal income tax return for the year
for which you made the excess contribution. A deduction should not be taken for
any excess contribution. Earnings on the amount withdrawn must also be
withdrawn. The earnings must be included in your income for the tax year for
which the contribution was made and may be subject to a 10% premature withdrawal
tax if you have not reached age 59 1/2.
Any excess contribution withdrawn after the tax return due date (including any
extensions) for the year for which the contribution was made will be subject to
the 6% excise tax. There will be an additional 6% excise tax for each year the
excess remains in your account. You, not your account, are liable for the excise
tax.
Under limited circumstances, you may correct an excess contribution after tax
filing time by withdrawing the excess contribution (leaving the earnings in the
account). This withdrawal will not be includible in income nor will it be
subject to any premature withdrawal penalty if (1) your contributions to all
IRAs do not exceed $2,250 and (2) you did not take a deduction for the excess
amount (or you file an amended return (Form 1040X) which removes the excess
deduction).
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includible in taxable income and may be subject to a 10% premature
withdrawal penalty. No deduction will be allowed for the excess contribution for
the year in which it is made.
Excess contributions may be corrected in a subsequent year to the extent that
you contribute less than your maximum amount. As the prior excess contribution
is reduced or eliminated, the 6% excise tax will become correspondingly reduced
or eliminated for subsequent tax years. Also, you may be able to take an income
tax deduction for the amount of excess that was reduced or eliminated, depending
on whether you would be able to take a deduction if you had instead contributed
the same amount.
INVESTMENTS
You control the investment and reinvestment of contributions to your IRA.
Investments must be in one or more of the Portfolios available from time to time
as listed in the Application. You direct the investment of your IRA by giving
your investment instructions to Bennington. Since you control the investment of
your IRA, you are responsible for any losses; neither the Custodian, the Fund
nor Bennington has any responsibility for any loss or diminution in value
occasioned by your exercise of investment control. Transactions for your IRA
will generally be effected at the applicable public offering price or net asset
value for shares of the Portfolios involved next established after Bennington
receives proper investment instructions from you; consult the current prospectus
for the Portfolios involved for additional information.
Before making any investment, read carefully the current prospectus for any
Portfolio you are considering as an investment for your IRA. The prospectus will
contain information about the Portfolio's investment objective and policies, as
well as any minimum initial investment or minimum balance requirements and any
sales, redemption or other charges.
Because you control the selection of investments for your IRA, the growth in
value of your IRA cannot be guaranteed or projected.
PROHIBITED TRANSACTIONS
The tax-exempt status of your IRA will be revoked if you or your beneficiary
engages in any of the prohibited transactions listed in Section 4975 of the tax
code. The fair market value of your IRA will be includible in your taxable
income in the year in which such prohibited transaction takes place. The fair
market value of your IRA may also be subject to a 10% penalty tax as a premature
withdrawal if you have not yet reached the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your IRA is
treated as a taxable withdrawal; the only exception involves certain types of
government-sponsored coins.
Generally, a prohibited transaction is any improper use of the assets in your
IRA. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your IRA or
a family member.
o Transfer of any property from your IRA to yourself or a family member or
from yourself or a family member to your IRA.
Your IRA could lose its tax exempt status if you use all or part of your
interest in your IRA as security for a loan or borrow any money from your IRA.
Any portion of your IRA used as security for a loan will be taxed as ordinary
income in the year in which the money is borrowed. If you are under age 59 1/2,
this amount will also be subject to a 10% penalty tax as a premature
distribution.
WITHDRAWALS AND DISTRIBUTIONS
You may withdraw from your IRA at any time. However, withdrawals before age 59
1/2 may be subject to a 10% penalty tax in addition to regular income taxes (see
below). Amounts withdrawn by you are includible in your gross income in the
taxable year that you receive them, and are taxable as ordinary income. Lump sum
withdrawals from an IRA are not eligible for averaging treatment available to
certain lump sum distributions from qualified employer retirement plans.
Methods of Distribution. Assets may be distributed from your IRA according to
one or more of the following methods selected by you:
o total distribution;
o distribution over a specified period
o purchase of an annuity contract
(See Article IV of your IRA Custodial Agreement for a full description of these
distribution methods.)
Latest Time to Withdraw. If you have not withdrawn your entire IRA by the April
1 following the year in which you reach 70 1/2, you must begin minimum
withdrawals by April 1 of that year in order to avoid penalty taxes. Subsequent
distributions must be made by December 31 of each following year over the
distribution period. If you maintain more than one IRA, you may take from any of
your IRAs the aggregate amount to be withdrawn.
Minimum Distributions. Once distributions are required to begin, they must not
be less than the amount each year (determined by actuarial tables) which
exhausts the value of the account over the required distribution period, which
is generally your life expectancy or the joint life expectancy of you and your
beneficiary. The minimum withdrawal rules are complex. Consult your tax advisor
for assistance. The penalty tax for not withdrawing enough is 50% of the
difference between the minimum withdrawal amount and your actual withdrawals
during a year.
Premature Withdrawals. Since the purpose of the IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain age
59 1/2 generally will be considered as an early withdrawal and subject to a 10%
penalty tax.
The 10% penalty tax for early withdrawal will not apply if the distribution:
o was a result of your death or disability, or
o is one of a scheduled series of substantially equal periodic payments for
your life or life expectancy (or the joint lives or life expectancies of
you and your beneficiary), or
o the distribution is rolled over to another qualified retirement plan.
If there is an adjustment to the scheduled series of payments, the 10% penalty
tax will apply. For example, if you begin receiving payments at age 50 under a
withdrawal program providing for substantially equal payments over your life
expectancy, and at age 58 you elect to receive the remaining amount in your IRA
in a lump-sum, the 10% penalty tax will apply to the lump sum and to the amounts
previously paid to you before age 59 1/2.
Distribution Upon Disability. Any distribution (except for distribution on
account of your disability or death, return of an "excess contribution" referred
to in Code Section 408(d), or a "rollover" from this custodial account) made
earlier than age 59 1/2 may subject you to an "additional tax on early
distributions" under Code Section 72(t). For that purpose, you will be
considered disabled if you can prove, as provided in Code Section 72(m)(7), that
you are unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or be of long-continued and indefinite duration. For additional
information about Disabilities see IRS Publication No. 522.
Distribution Upon Death. The assets remaining in your IRA will be distributed
upon your death to the Beneficiary(ies) named by you on record with the
Custodian. If there is no Beneficiary designated for your IRA in the Custodian's
records, or if the Beneficiary you had designated dies before you do, your IRA
will be paid to your surviving spouse, or if none, to your estate. If your
spouse was your Primary Beneficiary and you had started to receive distributions
from your IRA, but die before receiving the balance of your IRA, your spouse has
several options. You spouse can either keep receiving distributions from your
IRA at least as rapidly, or roll over all or part of your IRA into an IRA in his
or her name. If distributions from your IRA had not yet begun, your spouse may
defer taking distributions until April 1 of the year you would have turned 70
1/2, and then receive distributions over his or her life expectancy, or roll
over the account into an IRA in his or her name, and treat the IRA as his or her
own. If you Beneficiary is not your spouse, and distributions had begun from
your account, your Beneficiary may continue to receive them at least as rapidly
as the payment schedule you had established. If distributions had not yet begun,
your Beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death over
his or her own life expectancy.
Minimum Distribution Incidental Benefit (MDIB) Rule. This rule specifies that
benefits provided under a retirement plan must be for the primary benefit of a
participant rather than for the beneficiary or beneficiaries. If your spouse is
your sole beneficiary, this special MDIB rule does not apply. In some cases, the
distribution under the MDIB rule may exceed the amount required under the normal
age 70 1/2 required minimum distribution rules. If someone other than, or in
addition to, your spouse is a named beneficiary, the minimum distribution
required is the greater of either the amount determined under the regular rules
or the amount determined under the MDIB rule. For additional information, please
see IRS Publication 590 and consult your tax adviser.
Distribution of Nondeductible Contributions. To the extent that a withdrawal
constitutes the return of your nondeductible contributions (not including
earnings) it will be tax-free. However, if you made both deductible and
nondeductible IRA contributions, then each distribution will be treated as
partly a return of your nondeductible contributions (not taxable) and partly a
distribution of deductible contributions and earnings (taxable). The nontaxable
amount is the portion of the amount withdrawn which bears the same ratio as your
total nondeductible IRA contributions bear to the total balance of all your IRAs
(including rollover IRAs and SEPs).
For example, in 1995 a participant's IRA comprised the following:
Total Deductible Contributions $5,000
Total Nondeductible Contributions $2,000
Earnings On IRAs as of 12/31/95 $1,000
Less 1995 Withdrawal $ 500
Total Account Balance as of 12/31/95 $7,500
To determine the nontaxable portion of your 1995 withdrawal, the total 1995
withdrawal ($500) must be multiplied by a fraction, in which the numerator of
the fraction is the total of all nondeductible contributions remaining in the
account before the 1995 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-95 ($7,500) plus the 1995 withdrawal ($500) or
$8,000. The calculation is:
Total Remaining Nondeductible
Contributions $2,000 x $500 = $ 125
-------------
Total Account Balance $8,000
Thus, $125 of the $500 withdrawal in 1995 will not be included in your taxable
income. The remaining $375 will be taxable for 1995. In addition, for future
calculations the remaining nondeductible contribution total will be $2,000 minus
$125, or $1,875.
A loss in your IRA investment may be deductible. You should consult your tax
advisor for further details on the appropriate calculation for this deduction if
applicable.
Excess Distributions There is a 15% excise tax assessed against annual
distributions from tax-favored retirement plans, including IRAs, which exceed
the greater of $150,000 or $112,500 (indexed to reflect cost-of-living
increases). To determine whether you have distributions in excess of this limit,
you must aggregate the amounts of all distributions received by you during the
calendar year from all retirement plans, including IRAs. Please consult your tax
advisor for more complete information, including the availability of favorable
elections.
Tax Withholding. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld. However, if IRA
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%. The tax withheld from an annuity or a similar
periodic payment is based on your marital status and the number of withholding
allowances you claim on your withholding certificate (Form W-4P). If you have
not filed a certificate, the tax withheld will be determined by treating you as
a married individual claiming three withholding allowances.
Generally, tax will be withheld at a 10% rate on lump-sum distributions.
TAX MATTERS
You will receive a report from the Custodian and Bennington not later than 60
days after the close of each calendar year (or after the Custodian's resignation
or removal) reflecting the transactions effected by the Custodian or Bennington
during the calendar year and the assets of your IRA custodial account at its
close. You must respond within 60 days to correct any information on these
reports.
State Tax Treatment of your distributions may differ from federal treatment.
Consult your state tax authorities or personal tax advisor for details.
Custodian IRS Reporting
The Custodian will report all withdrawals from your account to the IRS and the
recipient on the appropriate form. This report will include a description (e.g.
premature, normal, etc.) of the distribution. For reporting purposes, a direct
transfer of assets to a successor custodian or trustee is not considered a
withdrawal.
The Custodian will report to the IRS the year-end value of your account and the
amount of any rollover or accumulation contribution made during a calendar year,
as well as the tax year for which a contribution is made. Unless the Custodian
receives an indication from you to the contrary, it will treat any amount as a
contribution for the tax year in which it is received. It is most important that
a contribution for the prior year made between January and April 15th be clearly
designated as such.
How to File IRA Information with the IRS
Contributions to your IRA must be reported on your federal income tax return
(see Form 1040 or 1040A instructions for details). If you make a designated
nondeductible contribution to any IRA for any tax year, you must attach Form
8606 to your tax return for that year. If you make nondeductible IRA
contributions and you do not file Form 8606, Nondeductible IRAs (Contributions,
Distributions, and Basis), with your tax return, you may have to pay a $50
penalty. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional information on
your tax return. The information required includes: (1) the amount of your
nondeductible contributions for that year; (2) the amount of withdrawals from
IRAs in that year; (3) the amount by which your total nondeductible
contributions for all years exceeds the total amount of your distributions
previously excluded from gross income; and (4) the total value of all your IRAs
as of the end of the year. If you fail to report any of this information, the
IRS will assume that all your contributions were deductible. This will result in
the taxation of the portion of your withdrawals that should be treated as a
nontaxable return of your nondeductible contributions.
You must file Form 5329 with the IRS for each taxable year for which you made an
excess contribution, or you take a premature withdrawal, or you withdraw less
than the required minimum amount from your IRA.
If you overstate the amount of nondeductible contributions for a taxable year, a
$100 penalty will be assessed unless you can justify the overstatement with a
reasonable cause.
Federal income tax will be withheld at a flat rate of 10% from any withdrawal
from your IRA, unless you elect not to have tax withheld. Withdrawals from an
IRA are not subject to the mandatory 20% income tax withholding that applies to
most distributions from qualified plans or 403(b) accounts that are not directly
rolled over to another plan or IRA.
Any earnings on investments held in your IRA are generally exempt from federal
income taxes and will not be taxed until withdrawn by you, unless the tax exempt
status of your IRA is revoked.
ACCOUNT TERMINATION
You may terminate your IRA at any time after its establishment by sending a
complete withdrawal form, or a transfer authorization form, to:
Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Your IRA with Accessor Funds, Inc. will terminate upon the first to occur of the
following:
o The date your properly executed withdrawal form (as described above) is
received and accepted by Bennington or, if later, the termination date
specified in the withdrawal form.
o The date the IRA ceases to qualify under the tax code. This will be deemed
a termination.
o The transfer of the IRA to another custodian/trustee.
o The rollover of the amounts in the IRA to another custodian/trustee.
o Any outstanding fees must be received prior to such a termination of your
account.
The amount you receive from your IRA will be treated as a withdrawal, and thus
the rules relating to IRA withdrawals will apply. For example, if the IRA is
terminated before you reach age 59 1/2, the 10% early withdrawal penalty may
apply on the amount you receive.
IRS DOCUMENTS
For additional information, please consult the district office of the IRS, or
the following IRS publications:
Publication 522, "Disability Payments";
Publication 560, "Retirement Plans for the Self-Employed";
Publication 575, "Pension and Annuity Income (Including Simplified General Rule"
Publication 590, "Individual Retirement Arrangements (IRAs)".
Accessor Funds, Inc.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT (UNDER
SECTION 408(A) OF THE INTERNAL REVENUE CODE)
The Depositor whose name appears on the attached Individual Retirement Custodial
Account Application and Adoption Agreement (the "Adoption Agreement") is
establishing an individual retirement account under Section 408(a) of the
Internal Revenue Code to provide for the Depositor's retirement. The Custodian
has given the Depositor the disclosure statement required under Section 1.408-6.
The following provisions of Articles I to VII are in the form promulgated by the
Internal Revenue Service in Form 5305-A for use in establishing an individual
retirement custodial account.
The Depositor has deposited with Custodian an initial contribution in cash, as
set forth in the attached Adoption Agreement and the Depositor and the Custodian
make the following agreement.
Article I.
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
Article IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with section 408(a)(6) and Proposed Regulations section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either (i) Be distributed by the
December 31 of the year containing the fifth anniversary of the
Depositor's death, or (ii) Be distributed in equal or substantially
equal payments over the life or life expectancy of the designated
beneficiary or beneficiaries starting by December 31 of the year
following the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year
in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age
of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
Article V.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Adoption Agreement.
Article VIII.
1. DEFINITIONS. As used in this Article VIII the following terms have the
following meanings:
"Account" or "Custodial Account" means the custodial account established
hereunder in the name of the Custodian for the benefit of Depositor.
"Agreement" means the Accessor Funds, Inc. Individual Retirement Account
Custodial Agreement, as may be amended from time to time, including the
information and provisions set forth in any Account Adoption Agreement that
goes with this Agreement.
"Adoption Agreement" means the Individual Retirement Custodial Account
Application and Adoption Agreement form by which this Agreement is
established between the Depositor and the Custodian. The statements
contained herein shall be incorporated into this Agreement.
"Authorized Agent" means an investment advisor appointed by the Depositor
on the Adoption Agreement or on a signed form acceptable to and filed with
Bennington, to issue investment directions or issue orders for the purchase
or sale of shares of one or more of the Portfolios in the Depositor's
Account.
"Beneficiary" means the person or persons (including a trust or estate)
designated as such by the Depositor, and as may be amended from time to
time, on a signed form acceptable to and filed with Bennington pursuant to
Article VIII, Section 5 of this Agreement.
"Bennington" means Bennington Capital Management L.P., a Washington limited
partnership and registered investment adviser. Bennington is the manager
and transfer agent of the Fund and has entered into an agreement with the
Custodian to perform various administrative duties of either the Custodian
or the Fund with respect to Accounts, including the services described
herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means The Fifth Third Bank, a banking company organized under
the laws of the State of Ohio , or its successors, as specified in the
Account Adoption Agreement.
"Depositor" means the person named in the Account Adoption Agreement. If
Depositor has designated an Authorized Agent on the Adoption Agreement
Form, the Authorized Agent shall have the authority to act as the Depositor
under this Agreement to issue investment directions or issue orders for the
sale or purchase of shares of one or more Portfolios to Bennington and such
authority shall remain in force until terminated in writing by Depositor.
"Fund" means Accessor Funds, Inc., a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of nine diversified investment portfolios, each with its own
investment objective and policies.
"Portfolio" (collectively "Portfolios") means one or more of the
diversified investment portfolios of the Fund which is specified in the
Adoption Agreement, or which is designated by the Fund, as being available
as an investment for the custodial account; provided, however, that the
Fund and the Portfolios must be legally offered for sale in the state of
the Depositor's residence in order to be a Portfolio hereunder.
2. CONTRIBUTIONS. All assets in the custodial account shall be invested and
reinvested in full and fractional shares of one or more Portfolios. Such
investments shall be made in such proportions and/or in such amounts as
Depositor or the Authorized Agent may direct; provided that the Depositor's
initial contribution to the custodial Account as indicated on the Adoption
Agreement shall be invested and held in the U.S. Government Money Portfolio
until seven (7) days have elapsed from the date of acceptance of the
Adoption Agreement by or on behalf of the Custodian. Bennington shall be
responsible for promptly executing all investment directions by the
Depositor for the purchase or sale of shares of one or more of the
Portfolios hereunder. Any purchase or redemption of shares of a Portfolio
for or from the Depositor's account will be effected at the net asset value
of such Portfolio (as described in the then effective prospectus for such
Portfolio) next established after Bennington has received the Depositor's
investment directions in good order. However, if investment directions with
respect to the investment of any contribution hereunder are not received
from the Depositor as required or, if received, are unclear or incomplete
in the opinion of Bennington, the contribution shall be invested in the
U.S. Government Money Portfolio until clear or complete instructions are
received, without liability for loss of income or appreciation. If
Bennington does not receive clear or complete instructions from the
Depositor within a reasonable time, the contribution shall be returned to
the Depositor. If any directions or other orders by the Depositor with
respect to the sale or purchase of shares of one or more Funds for the
custodial account are unclear or incomplete in the opinion of Bennington,
Bennington will refrain from carrying out such investment directions or
from executing any such sale or purchase, without liability for loss of
income or for appreciation or depreciation of any asset, pending receipt of
clarification or completion from the Depositor. All investment directions
by Depositor will be subject to any minimum initial or additional
investment or minimum balance rules applicable to a Portfolio as described
in its prospectus. All dividends and capital gains or other distributions
received on the shares of any Portfolio held in the Depositor's account
shall be retained in the account and (unless received in additional shares)
shall be reinvested in full and fractional shares of such Portfolio.
3. ROLLOVER CONTRIBUTIONS. Only rollover contributions that are in the form of
a check, money order or similar cash item will be accepted for the
Custodial Account, except that securities may be accepted at the sole
discretion of the Fund, in kind, as described in the prospectuses of the
Fund. The Depositor shall designate each rollover contribution as such to
the Custodian, and by such designation shall confirm to the Custodian that
a proposed rollover contribution qualifies as a rollover contribution
within the meaning of Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3) and
408(k) of the Code. The Custodian, upon written direction of the Depositor
and after submission to the Custodian of such documents as it may
reasonably require, shall, to the extent permitted, transfer the assets
held under this Agreement (reduced by any amounts referred to in paragraph
9) to a successor individual retirement account, individual retirement
annuity (other than an endowment contract) or retirement bond for the
Depositor's benefit or to an exempt employee's trust established under a
plan that satisfies the qualification requirements of section 401(a) of the
Code. Any amounts received or transferred by the Custodian under this
paragraph shall be accompanied by such records and other documents as the
Custodian deems necessary to establish the nature, value and extent of the
assets and of the various interests therein. Neither Bennington, the Fund,
the Custodian nor any other party providing services to the custodial
account will have any responsibility for rendering advice with respect to
the investment and reinvestment of Depositor's custodial account, nor shall
such parties be liable for any loss or diminution in value which results
from Depositor's exercise of investment control over his custodial account.
Depositor shall have and exercise exclusive responsibility for and control
over the investment of the assets of his custodial account, and neither
Bennington, the Fund, the Custodian nor any other such party shall have any
duty to question his directions in that regard or to advise him regarding
the purchase, retention or sale of shares of one or more Funds for the
custodial account. The parties do not intend to confer any fiduciary duties
on Custodian, the Fund or Bennington, and none shall be implied. None of
the Custodian, the Fund or Bennington shall be liable (or assume any
responsibility) for the collection of contributions, the proper amount,
time or deductibility of any contribution to the custodial account or the
propriety of any contributions under this Agreement, or the purpose, time,
amount (including any minimum distribution amounts) or propriety of any
distribution hereunder, which matters are the responsibility of Depositor
and Depositor's Beneficiary.
4. DISTRIBUTIONS. Subject to the provisions of Article IV of the Agreement,
the Custodian shall make distributions from the Account in accordance with
written instructions from the Depositor (or the Beneficiary if Depositor is
deceased). It is the responsibility of the Depositor (or the Beneficiary)
by appropriate distribution instructions to the Custodian to insure that
the distribution requirements of Code Section 401(a)(9) and Article IV
above are met. Neither Custodian nor any other party providing services to
the custodial account assumes any responsibility for the tax treatment of
any distribution from the custodial account; such responsibility rests
solely with the person ordering the distribution. The Custodian or
Bennington shall not incur any liability for errors in calculations as a
result of any reliance on information provided by the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor or administrator).
Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order of Depositor (or Beneficiary if
Depositor is deceased) containing such information as the Custodian may
reasonably request.
5. DESIGNATION OF BENEFICIARY. The Depositor shall have the right by written
notice to the Custodian to designate or to change a beneficiary to receive
any benefit to which Depositor may be entitled in the event of Depositor's
death prior to the complete distribution of such benefit. The form last
accepted by the Custodian before such distribution is to commence, provided
it was received by the Custodian (or deposited in the U.S. Mail or with a
delivery service) during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the custodial account,
thereupon shall revoke all such forms previously filed by that person. If
no such designation is in effect at the time of Depositor's death, or if
the designated beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate.
6. AMENDING THE AGREEMENT. Articles I through VII of this Agreement are in the
form promulgated by the Internal Revenue Service. It is anticipated that if
and when the Internal Revenue Service promulgates changes to Form 5305-A,
the Custodian will amend this Agreement correspondingly. The Custodian
shall amend in the same manner all agreements comparable to this one; and
may amend retroactively if necessary or appropriate in the opinion of the
Custodian in order to conform this custodial account to pertinent
provisions of the Code and other laws or successor provisions of law, or to
obtain a governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this Agreement,
or as otherwise may be advisable in the opinion of the Custodian. Such an
amendment by the Custodian shall be communicated in writing to Depositor,
and Depositor shall be deemed to have consented thereto unless, within 30
days after such communication to Depositor is mailed, Depositor gives
Custodian a written order for a complete distribution or transfer of the
custodial account in accordance with paragraph 10 of this Article VIII.
Pending the adoption of any amendment necessary or desirable to conform
this custodial account document to the requirements of any amendment to the
Internal Revenue Code or regulations or rulings thereunder, the Custodian
and Bennington may operate the Depositor's custodial account in accordance
with such requirements to the extent that the Custodian and/or Bennington
deem necessary to preserve the tax benefits of the Account. This paragraph
6 shall not be construed to restrict the Custodian's right to substitute
fee schedules in the manner provided by paragraph 9 below, and no such
substitution shall be deemed to be an amendment of this Agreement.
7. DELIVERY OF PROSPECTUSES, PROXIES. Bennington shall deliver, or cause to be
delivered, to Depositor all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting materials
relating to the shares of the Portfolios credited to the custodial account.
No shares shall be voted, and no other action shall be taken pursuant to
such documents, except upon receipt of adequate written instructions from
Depositor.
8. INDEMNIFICATION. Depositor shall always fully indemnify Bennington, the
Fund, the Portfolios and Custodian and save them harmless from any and all
liability whatsoever which may arise either (i) in connection with this
Agreement and the matters which it contemplates, except that which arises
directly out of Bennington's, the Fund's or Custodian's negligence or
willful misconduct, or (ii) with respect to making or failing to make any
distribution, other than for failure to make distribution in accordance
with an order therefor which is in full compliance with Section 10. Neither
Bennington nor Custodian shall be obligated or expected to commence or
defend any legal action or proceeding in connection with this Agreement or
such matters unless agreed upon by that party and Depositor, and unless
fully indemnified for so doing to that party's satisfaction. The
appointment by the Depositor of an Authorized Agent will be in effect until
written notice to the contrary is received by Bennington. Custodian and
Bennington may each conclusively rely upon and shall be protected in acting
upon any written order from Depositor or Beneficiary, or any Authorized
Agent appointed by the Depositor, or any other notice, request, consent,
certificate or other instrument or paper believed by it to be genuine and
to have been properly executed, and so long as it acts in good faith, in
taking or omitting to take any other action in reliance thereon. In
addition, Custodian will carry out the requirements of any apparently valid
court order relating to the custodial account and will incur no liability
or responsibility for so doing.
9. FEES AND EXPENSES. The Custodian shall serve as such without compensation
from the Account and the Custodian hereby waives any right it may have
otherwise to have any fees, commissions or other compensation from the
Account. The Depositor shall pay an annual maintenance charge as specified
on the applicable schedule. The schedule originally applicable shall be the
one attached to the Adoption Agreement furnished to the Depositor. The
Custodian may substitute a different schedule at any time upon 30 days'
written notice to Depositor and no such substitution shall be deemed to be
an amendment of this Agreement. Any purchase, exchange, transfer or
redemption of shares of a Portfolio for or from the Depositor's account
will be subject to any applicable charge as described in the then effective
prospectus for such Portfolio. Any income, gift, estate and inheritance
taxes and other taxes of any kind whatsoever, including transfer taxes
incurred in connection with the investment or reinvestment of the assets of
the custodial account, that may be levied or assessed in respect to such
assets, and all other administrative expenses incurred by Bennington in the
performance of its duties (including fees for legal services rendered to it
in connection with the custodial account) shall be charged to the custodial
account. All such fees and taxes and other administrative expenses charged
to the custodial account shall, to the extent not paid directly by the
Depositor, be collected either from the amount of any contribution or
distribution to or from the account, or (at the option of the person
entitled to collect such amounts) to the extent possible under the
circumstances by the conversion into cash of sufficient shares of one or
more Portfolios held in the custodial account (without liability for any
loss incurred thereby). Conversion into cash of shares of the Portfolio
will occur first from the U.S. Government Money Portfolio, followed in
ascending order of risk through the Portfolios of the Fund. Notwithstanding
the foregoing, Bennington may make demand upon the Depositor for payment of
the amount of such fees, taxes and other administrative expenses. Fees
which remain outstanding after 60 days may be subject to a collection
charge. If the Depositor has appointed an Authorized Agent and has elected
on the Adoption Agreement to cause the fees of the Authorized Agent to be
paid from the custodial account, the Custodian and Bennington shall pay
such fees upon the written request from the Authorized Agent to the
Authorized Agent from the custodial account hereunder. Such election to
authorize the payment of fees by the Depositor shall remain in full force
until terminated in writing by Depositor. The Authorized Agent must make a
written request each time a fee is requested by the Authorized Agent.
10. TERMINATION OF AGREEMENT. This Agreement may be terminated by the Depositor
upon written notice of such termination to the Custodian and Bennington, or
by the receipt by Custodian of a direction from Depositor or his Authorized
Agent to make a complete distribution or transfer of the custodial account
assets. Upon termination of the Agreement, Custodian shall terminate the
custodial account by distributing all assets thereof in a single payment in
cash or in kind to Depositor or transferring all such assets to another
financial institutional in accordance with the directions of Depositor,
subject to Custodian's right to reserve funds as provided in paragraph 11,
below. Upon termination of the custodial account, this custodial account
document shall have no further force and effect, and Custodian shall be
relieved from all further liability hereunder or with respect to the
custodial account and all assets thereof so distributed.
11. CHANGE OF CUSTODIAN. In the event the Custodian shall be converted into,
merged or consolidated with, shall sell and transfer substantially all of
its assets and business to, or shall transfer substantially all of its
custodial accounts maintained pursuant to agreements comparable to this
Agreement to a bank, financial institution or other organization approved
by the Secretary of the Treasury to hold assets of individual retirement
accounts (a "Successor"), such Successor shall thereupon become and be the
Custodian of the Account with the same effect as though specifically so
named. The Depositor shall be provided with 30 days' prior written notice
of any change of Custodian pursuant to this paragraph, and shall be deemed
to have consented thereto unless, within 30 days after such notice to
Depositor is mailed, Depositor gives Custodian a written order for a
complete distribution or transfer of the custodial account assets in
accordance with Paragraph 10. Upon receipt by Custodian of written
acceptance by its Successor of such Successor's appointment, Custodian
shall transfer and pay over to such Successor the assets of the custodial
account and all records (or copies thereof) of Custodian pertaining
thereto, provided that the Successor agrees not to dispose of any such
records without the Custodian's consent. Custodian is authorized, however,
to reserve such sum of money or property as it may deem advisable for
payment of all its fees, compensation, costs, and expenses, or for payment
of any other liabilities constituting a charge on or against the assets of
the custodial account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over
to the Successor. No Custodian shall be liable for the acts or omissions of
its predecessor or its successor.
12. NOTICES. Any notice or distribution from Custodian or Bennington to any
person provided for in this Agreement shall be effective if sent by
first-class mail to such person at that person's last address on the
Custodian's records. The Custodian shall not be bound by any certificate,
notice, order information or other communication unless and until it has
been received in writing at its place of business.
13. PROHIBITED ACTIONS. Depositor or Depositor's Beneficiary shall not have the
right or power to anticipate any part of the custodial account or to sell,
assign, transfer, pledge or hypothecate any part thereof. The custodial
account shall not be liable for the debts of Depositor or Depositor's
Beneficiary or subject to any seizure, attachment, execution or other legal
process in respect thereof. At no time shall it be possible for any part of
the assets of the custodial account to be used for or diverted to purposes
other than for the exclusive benefit of the Depositor or his/her
Beneficiary.
14. ENTIRE AGREEMENT. When accepted by the Custodian, this Agreement together
with the Adoption Agreement attached hereto constitutes the entire
agreement between the parties and is accepted in and shall be construed and
administered in accordance with the laws of the State of Washington. Any
action involving the Custodian brought by any other party must be brought
in a state or federal court in such state. This Agreement is intended to
qualify under Code Section 408(a) as an individual retirement custodial
account and to entitle Depositor to the retirement savings deduction under
Code Section 219 if available, and if any provision hereof is subject to
more than one interpretation or any term used herein is subject to more
than one construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with that intent.
Neither the Custodian nor Bennington shall be responsible for whether or
not such intentions are achieved through use of this Agreement.
<PAGE>
SECTION II
RETIREMENT ACCOUNT FORMS
<PAGE>
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Accessor Funds, Inc.
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Individual Retirement Custodial Account Application And Adoption Agreement
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I, the person signing this Individual Retirement Custodial Account Application
and Adoption Agreement (the "Adoption Agreement") establish an Individual
Retirement Account (the "Account") with Accessor Funds, Inc. (The Fifth Third
Bank, as Custodian). I agree to the terms of my Account, which are contained in
the document entitled "ACCESSOR FUNDS, INC. Individual Retirement Custodial
Account Agreement" and this Adoption Agreement. I certify the accuracy of the
information in this Adoption Agreement. My Account will be effective upon
acceptance by Accessor Funds, Inc. and The Fifth Third Bank, as Custodian.
(Please print all information).
ACCOUNT REGISTRATION
Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code: U.S. Citizen (circle one): Yes/No
Daytime Phone: Alien Resident (circle one): Yes/No
Evening Phone: If no, country of citizenship:
TYPE OF IRA
/__/ Regular IRA: /__/ Spousal IRA (each spouse must complete an
original Adoption Agreement form)
Spouse's Name:
$_____ contribution for the
19__ tax year Spouse's Social Security Number:
$____ contribution for the
19__ tax year Spouse's Accessor Funds, Inc.
IRA Account No:
/__/ Direct Transfer of an
Existing IRA Choose this Transfer if you wish to
authorize Bennington to transfer your
existing IRA from another custodian to
Fifth Third. You must also complete the
IRA Transfer Form.
/__/ Direct Rollover from Employer-
Sponsored Plan
/__/Conduit (do not commingle) Choose this Rollover only if you are
funding this IRA with money you
accumulated in an employer's retirement
plan which is eligible for rollover. You
must also complete the IRA Transfer
Form.
/__/ 60 Day Rollover Choose this Rollover if you are funding
this IRA with money you have received
from another custodian within 60 days of
establishing this Account.
/__/ SEP/IRA (Each eligible employee For a Simplified Employee Pension Plan
must complete an IRA Adoption established by an employer.
Agreement)
Name of Employer:
Must attach copy of employer SEP Plan.
INVESTMENT INFORMATION
Please fill a percentage next to those portfolios in which you plan to invest.
The minimum investment is an aggregate of $1000. Subsequent investments are an
aggregate of $100. Be sure to read the prospectuses of the portfolios you
choose.
Growth Portfolio % Intermediate Fixed-Income %
Value and Income Portfolio % Short-Intermediate Fixed-Income %
Small to Mid Cap Portfolio % Mortgage Securities %
International Equity Portfolio % U.S. Government Money %
PURCHASE INSTRUCTIONS
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
mail to: Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Fed-wire payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management, L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
BENEFICIARY DESIGNATION
I hereby designate the persons named below as primary beneficiaries to receive
payment of the value of my IRA account upon my death:
Primary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If no primary beneficiary is living at
the time of my death, I hereby specify that the balance be distributed
to my contingent beneficiaries below.
Secondary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If more than one beneficiary is named and
no percentages are indicated, payment shall be made in equal shares to
my primary beneficiary(ies) who survives me. If a percentage is
indicated and a primary beneficiary(ies) does not survive me, the
percentage of that beneficiary's designated share shall be divided
equally among the surviving primary beneficiary(ies).
If no beneficiary(ies) are designated, my beneficiary will be my
surviving spouse, or, if I do not have a surviving spouse, my estate.
I am aware that this form becomes effective when received by
Bennington and will remain in effect until I deliver to Bennington
another form with a later date.
To change or revoke your beneficiary designation, contact Bennington
for the appropriate form. All forms must be dated and signed by you.
THIS DESIGNATION OF BENEFICIARY CAN RESULT IN IMPORTANT TAX OR ESTATE
PLANNING CONSEQUENCES. CONSULT YOUR ATTORNEY OR TAX ADVISOR FOR
ADDITIONAL INFORMATION AND ADVICE.
If you live in a community property state or marital property state (i.e.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or
Wisconsin) and have not named your spouse as sole Primary Beneficiary, have
him/her sign below. /__/ Check here if you do not have a spouse.
I certify that I am the spouse of the individual named above. I approve
and consent to the naming of a beneficiary other than myself. I transfer
any community property interest I have in this IRA into the separate
property of my spouse.
Signature of Spouse: Date:
FEES AND EXPENSES
Custodian Fee None
Account Installation Fee None
Annual Maintenance Charge $25.00*
Charge for Termination, Rollover,
or Transfer of Account to
Successor Custodian None
* This Annual Maintenance Charge is waived for any Account which maintains
an aggregate balance of $10,000 or more as of December 31. The Annual
Maintenance Charge will be debited from each applicable Account during
the month of January of each year. If the Account is debited, the charge
will be debited first from the U.S. Government Money Portfolio and in
ascending order of risk from the other Portfolios of Accessor Funds,
Inc. Fees may be changed upon 30 days written notice to you.
Additional Charges
You may be charged for reasonable expenses for services not covered by this fee
schedule such as wire transfer fees, or check processing charges.
* There may be other charges associated with the purchase or redemption
of shares of a Portfolio in which your Account is invested. Be sure to
read carefully the current prospectus of any Portfolio you are
considering as an investment for your Account for a description of
applicable charges.
* When you appoint an Authorized Agent to issue investment directions
or issue orders for the purchase or sale of shares of one or more of the
Portfolios in your Account and you elect to pay any fees from your
Account, these fees may be charged to your Account. The appointment of
an Authorized Agent and your election to pay any fees are made on this
Adoption Agreement form, below.
DESIGNATION OF AUTHORIZED AGENT AND AUTHORIZATION OF PAYMENT OF FEES
Name of Organization:
Address:
City: State: Zip Code: Telephone:
Name of Authorized Agent:
Title: Telephone: Fax:
Signature of Authorized Agent: Date:
/__/ I elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account. I
acknowledge that my Authorized Agent send a written request to
Bennington each time a request for payment of fees is made.
/__/ I do not elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account.
If no election is made, fees will not be paid to the Authorized Agent
from the Account.
AGREEMENTS
I hereby adopt the Accessor Funds, Inc. Individual Retirement Custodial Account
Agreement, appointing The Fifth Third Bank as Custodian. I understand that
administrative services will be performed for the Account on behalf of The Fifth
Third Bank by Bennington Capital Management L.P. and that a successor custodian
or agent may be appointed in accordance with the terms of this Individual
Retirement Custodial Account Agreement.
I acknowledge receipt of the Individual Retirement Account Disclosure Statement
and the Individual Retirement Custodial Account Agreement, both of which are
incorporated in this Adoption Agreement by reference. I accept and agree to be
bound by the terms and conditions contained in the Individual Retirement
Custodial Account Agreement.
I certify to receiving and reading the current prospectus(es) for the portfolios
selected and understand that although The Fifth Third Bank is a bank, mutual
fund shares are not obligations of or guaranteed by a bank, nor are they insured
by the FDIC.
I indemnify The Fifth Third Bank, Accessor Funds, Inc. and Bennington Capital
Management L.P. when making distributions in accordance with my beneficiary
designation on file or in accordance with the Individual Retirement Custodial
Account Agreement, absent any such designation.
I certify that any rollover or direct contribution herein does not include any
employee contributions to any qualified plan (other than accumulated deductible
employee contributions); that any assets transferred in kind by me are the same
assets received by me in the distribution being rolled over; if the distribution
is from an IRA, that no rollover into such IRA has been made within the one-year
period immediately preceding this rollover; and that such distribution was
received within 60 days of making the rollover to the Account.
I acknowledge that I have been advised to seek advice from my attorney regarding
the legal consequences (including but not limited to federal and state tax
matters) of entering into this Agreement, contributing to the Account, and
ordering The Fifth Third Bank, as Custodian to make distributions from the
Account. I acknowledge that The Fifth Third Bank, Accessor Funds, Inc. and
Bennington Capital Management L.P. (and any company associated therewith) are
prohibited by law from rendering such advice.
I acknowledge that I have been informed and I agree that the maintenance fee
described in this Adoption Agreement shall be automatically debited from my
Account, if appropriate, in January of each year.
I appoint the organization listed above in Authorized Representatives as my
Authorized Agent for this account. My Authorized Agent shall have the authority
to issue investment directions or issue orders for the sale or purchase of
shares of one or more Portfolios to Bennington and such authority shall remain
in force until terminated in writing by me. The Authorized Agent(s) has/have
executed this Form on the dates indicated and such is/are the genuine signatures
of the Authorized Agent(s).
I certify under penalty of perjury that I am of legal age to enter into this
agreement and that the Social Security Number on this form is true, correct and
complete.
Signature:
Date:
CUSTODIAN ACCEPTANCE
The Fifth Third Bank hereby accepts this Individual Retirement Custodial
Agreement in accordance with the terms of IRS Form 5305-A as supplemented by
Article VIII.
The Fifth Third Bank: Date:
Accepted by:
BENNINGTON CAPITAL MANAGEMENT L.P.
Agent of The Fifth Third Bank
Signature: Date:
- --------------------------------------------------------------------------------
Accessor Funds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IRA Transfer Request/Direct Rollover Request
- --------------------------------------------------------------------------------
Complete this form to transfer Individual Retirement Account ("IRA") assets or
directly rollover a qualified retirement plan distribution from an existing
Retirement Plan Custodian/Trustee to the Accessor Funds IRA with The Fifth Third
Bank as the new IRA custodian. All applicable sections must be fully completed
and signed. (Please use one form for each IRA account to be transferred.)
NAME AND ADDRESS OF DEPOSITOR
Full Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code:
Daytime Phone: ( ) Evening Phone: ( )
/__/ Deposit Transfer/Rollover proceeds to my existing Accessor Funds IRA
accounts as follows:
Accessor Funds Account Number:
(Provided by Accessor Funds, Inc.)
OR
/__/ I am opening a new Accessor Funds IRA (minimum $1,000). My completed
IRA Application and Adoption Agreement is attached.
If you are moving funds from an existing IRA or IRA Rollover Account to an IRA
or an IRA Rollover with the Accessor Funds, please fill out the section below:
IRA TRANSFER REQUEST OPTION
Type of IRA: /__/ Regular IRA /__/ Spousal IRA
/__/ Rollover /__/ SEP-IRA
Name of Current Custodian:
Custodian Contact:
Street Address:
City State Zip Telephone No.
1. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
2. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
AUTHORIZATION TO LIQUIDATE AND TRANSFER To Current Custodian: Please liquidate
and transfer my IRA in the manner described above directly to my IRA with
Accessor Funds, Inc. I intend to avoid constructive receipt of the liquidation
proceeds, and I understand that you may assess fees or penalties for this
liquidation. (Check box if applicable) /__/ I am over 70 1/2; please do not
include my required minimum distribution for the current calendar year in the
transfer.
Signature of Account Owner: Date:
If you are moving funds from your company pension plan or 403(b) to an IRA
Rollover with the Accessor Funds, please fill out the section below:
DIRECT ROLLOVER REQUEST
Type of pension plan /__/ 401(k) /__/ 403(b) /__/ Pension Plan
/__/ Profit Sharing /__/ Other:
Benefits Representative:
Street Address:
City: State: Zip: Telephone No.:
Plan Name: Account No.:
Employee No. Distribution to be made (month/year):
Amount: /__/ All /__/ Part $
DIRECT ROLLOVER ELECTION
I elect a Direct Rollover of my eligible retirement distribution to my IRA at
Accessor Funds, Inc. I understand that this is an irrevocable election and that
if I commingle this Rollover with contributory IRA assets I may be precluded
from rolling it into another qualified retirement plan or tax-sheltered annuity
at a future date. Further, I understand that Rollover proceeds must be delivered
in the form of a check or other cash item.
Signature of Account Owner: Date:
PLEASE LIQUIDATE ACCOUNT ASSETS AND TRANSFER ASSETS TO ACCESSOR FUNDS, INC. IRA
CUSTODIAN AS FOLLOWS:
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
Please write "IRA Transfer" or "Direct Rollover"
on the check. Do not include after tax
contributions or required minimum distributions.
Mail check to Bennington Capital Management L.P.,
P.O. Box 1748, Seattle, WA 98111-1748 ATTN:
Operations
Fed-wires payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
SIGNATURE OF DEPOSITOR (Required for acceptance by Accessor Funds, Inc.)
Signature of Depositor: Date:
SIGNATURE GUARANTEE (ONLY if required by present custodian)
Signature Guaranteed by: Date:
(Name of Bank or Dealer Firm)
Date:
(Signature of Officer and Title)
ACCEPTANCE OF ACCOUNT BY FIFTH THIRD BANK OR BENNINGTON CAPITAL MANAGEMENT L.P.
Fifth Third Bank has agreed to accept transfer of the above amount for deposit
to the Depositor's Accessor Funds, Inc. (Fifth Third Bank, as Custodian)
Individual Retirement Custodial Account, and requests the liquidation and
transfer of assets as indicated above.
Bennington Capital Management L.P., ACCEPTING AS AGENT FOR FIFTH THIRD BANK, the
Custodian, pursuant to a Power of Attorney. (To be signed by Bennington Capital
Management L.P.)
By: Title: Date:
Accessor Funds, Inc. IRA Account No.:
ACCESSOR FUNDS, INC.
DISTRIBUTION PLAN
1. THE PLAN. This Plan (the "Plan") is the written plan, contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act") of Accessor Funds, Inc. (the "Fund").
2. DEFINITIONS. As used in this Plan, "Qualified Recipients" shall mean
broker-dealers or others selected by Bennington Capital Management L. P.
(the "Manager"), including but not limited to any principal underwriter of
the Fund (other than a principal underwriter which is an affiliated person,
or an affiliated person of an affiliated person, of the Manager), with
which the Manager has entered into written agreements ("Related
Agreements") contemplated by the Rule and which have rendered assistance
(whether direct, administrative, or both) in the distribution and/or
retention of shares of the Portfolios or servicing of shareholder accounts.
"Qualified Holdings" shall mean, as to any Qualified Recipient, all Fund
shares beneficially owned by such Qualified Recipient, or beneficially
owned by its brokerage customers, other customers, other contacts,
investment advisory clients, or other clients, if the Qualified Recipient
was, in the sole judgment of the Manager, instrumental in the purchase
and/or retention of such Portfolio shares and/or in providing
administrative assistance in relation thereto.
3. CERTAIN PAYMENTS PERMITTED. The Manager may make payments ("Permitted
Payments") to Qualified Recipients, which Permitted Payments shall be made
by the Manager and shall not be the subject of reimbursement by the Fund to
the Manager, which may not exceed, for any fiscal year of the Fund
(pro-rated for any fiscal year which is not a full fiscal year), the
following amounts:
Maximum Permitted Payments
(as a percentage of average
Portfolio daily net assets)
--------- ----------------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International Equity 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
International Fixed-Income 0.55%
The Manager shall have sole authority (i) as to the selection of any
Qualified Recipient or Recipients; (ii) not to select any Qualified
Recipient; and (iii) the amount of Permitted Payments, if any, to each
Qualified Recipient provided that the total Permitted Payments to all
Qualified Recipients do not exceed the amount set forth above. The Manager
is authorized, but not directed, to take into account, in addition to any
other factors deemed relevant by it, the following: (a) the amount of the
Qualified Holdings of the Qualified Recipient; (b) the extent to which the
Qualified Recipient has, at its expense, taken steps in the shareholder
servicing area, including without limitation, any or all of the following
activities: answering customer inquiries regarding account status and
history, and the manner in which purchases and redemptions of shares of the
Fund may be effected; assisting shareholders in designating and changing
dividend options, account designations and addresses; providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in
connection with customer orders to purchase or redeem shares; verifying and
guaranteeing shareholder signatures in connection with redemption orders
and transfers and changes in shareholder designated accounts; furnishing
(either alone or together with other reports sent to a shareholder by such
person) monthly and year end statements and confirmations of purchases and
redemptions; transmitting, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the Fund to
its shareholders; receiving, tabulating and transmitting to the Fund
proxies executed by shareholders with respect to meetings of shareholders
of the Fund; and providing such other related services as the Manager or a
Fund shareholder may request from time to time; and (c) the possibility
that the Qualified Holdings of the Qualified Recipient would be redeemed in
the absence of its selection or continuance as a Qualified Recipient.
Notwithstanding the foregoing two sentences, a majority of the Directors
who are not "interested persons" of the Fund (as that term is defined in
the 1940 Act) may remove any person as a Qualified Recipient.
It is recognized that, in view of the Permitted Payments and bearing by the
Manager of certain distribution expenses, the profits, if any, of the
Manager are dependent primarily on the management fees paid by the Fund to
the Manager and that its profits, if any, would be less, or losses, if any,
would be increased due to such Permitted Payments and the bearing by it of
such expenses. If and to the extent that any such management fees paid by
the Fund might, in view of the foregoing, be considered as indirectly
financing any activity which is primarily intended to result in the sale of
Fund shares, the payment of such fees is authorized by this Plan.
4. CERTAIN FUND PAYMENTS AUTHORIZED. If and to the extent that any of the
payments listed below are considered to be "primarily intended to result in
the sale of" Fund shares within the meaning of the Rule, such payments are
authorized under this Plan: (i) the costs of the preparation of all reports
and notices to shareholders and the costs of printing and mailing such
reports and notices to existing shareholders, irrespective of whether such
reports or notices contain or are accompanied by material intended to
result in the sale of Fund shares, shares of other funds, or other
investments; (ii) the costs of the preparation and setting in type of all
prospectuses and statements of additional information and the costs of
printing and mailing all prospectuses and statements of additional
information to existing shareholders; (iii) the costs of the preparation,
printing, and mailing of all proxy statements and proxies, irrespective of
whether any such proxy statement includes any item relating to, or directed
toward, the sale of the Fund's shares; (iv) all legal and accounting fees
relating to the preparation of any such reports, prospectuses, statements
of additional information, proxies, and proxy statements; (v) all fees and
expenses relating to the registration or qualification of the Fund or its
shares under the securities or "Blue Sky" laws of any jurisdiction; (vi)
all fees under the Securities Act of 1933, as amended and the 1940 Act,
including fees in connection with any application for exemption relating to
or directed toward the sale of the Fund's shares; (vii) all fees and
assessments of the Investment Company Institute or any successor
organization, irrespective of whether some of its activities are designed
to provide sales assistance; (viii) all costs of the preparation and
mailing of confirmations of shares sold or redeemed or stock certificates,
and reports of share balances; and (ix) all costs of responding to
telephone or mail inquiries of investors.
5. DISINTERESTED DIRECTORS. While this Plan is in effect, the selection and
nomination of those Directors of the Fund who are not "interested persons"
of the Fund shall be committed to the discretion of such disinterested
Directors. Nothing herein shall prevent the involvement of others in such
selection and nomination if the final decision on any such selection and
nomination is approved by a majority of such disinterested Directors.
6. REPORTS. While this Plan is in effect, the Fund's Manager shall report at
least quarterly to the Fund's Board of Directors in writing for its review
on the following matters: (i) all Permitted Payments made under Section 3
of this Plan, the identity of the Qualified Recipient of each Payment, and
the purposes for which the amounts were expended; (ii) all costs of each
item specified in Section 4 of this Plan (making estimates of such costs
where necessary or desirable) during the preceding calendar or fiscal
quarter; and (iii) all fees of the Fund to the Manager paid or accrued
during such quarter. In addition if any such Qualified Recipient is an
"affiliate" (as that term is defined in the 1940 Act) of the Fund, a money
manager or the Manager such person shall agree to furnish to the Manager
for transmission to the Board of Directors of the Fund an accounting, in
form and detail satisfactory to the Board of Directors, to enable the Board
of Directors to make the determinations of the fairness of the compensation
paid to such affiliated person, not less often than annually.
7. EFFECTIVENESS, CONTINUATION, TERMINATION, AND AMENDMENT. This Plan shall go
into effect when it has been approved (i) by a vote of the Board of
Directors of the Fund and those Directors who are not "interested persons"
of the Fund and have no direct or indirect financial interest in the
operation of this Plan or in any agreements related to this Plan, with
votes cast in person at a meeting called for the purpose of voting on this
Plan; and (ii) with respect to any Portfolio, by a vote of the holders of
at least a "majority" (as that term is defined in the 1940 Act) of the
outstanding voting securities of the Portfolio. This Plan shall be
submitted to the shareholders of the Fund for approval or disapproval at
the first shareholders' meeting after the Fund commences the sale of its
shares. If approved, this Plan shall, unless terminated as hereinafter
provided, continue in effect from year to year thereafter only so long as
such continuance is specifically approved at least annually by the Fund's
Board of Directors and those Directors who are not "interested persons" of
the Fund, with votes cast in person at a meeting called for the purpose of
voting on such continuance. This Plan may be terminated at any time by the
vote of a majority of those Directors who are not "interested persons" of
the Fund or with respect to any Portfolio, by the vote of the holders of a
"majority" of the outstanding voting securities of the Portfolio. This Plan
may not be amended to increase materially the amount of payments to be made
without shareholder approval as set forth in (ii) above, and all amendments
must be approved in the manner set forth in (i) above.
8. RELATED AGREEMENTS. In the case of a Qualified Recipient which is a
principal underwriter of the Fund, the Related Agreement shall be the
agreement contemplated by Section 15(b) of the 1940 Act since each such
agreement must be approved in accordance with, and contain the provisions
required by, the Rule. In the case of Qualified Recipients which are not
principal underwriters of the Fund, the Related Agreements shall be
approved in accordance with, and contain the provisions required by, the
Rule.
Dated: February 10, 1994.
Revised: February 16, 1995.
Revised: February 6, 1996
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
GROWTH PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/24/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
8/31/92 $12.12 0.000000000 0.000000000 0.000000000 0.000000000 1.00% 0.00% 0.00% 1.00%
9/30/92 $12.20 0.000000000 0.000000000 0.027939771 0.027939771 0.89% 0.00% 0.00% 1.90%
10/30/92 $12.51 0.000000000 0.000000000 0.000000000 0.000000000 2.54% 0.00% 0.00% 4.49%
11/30/92 $13.22 0.000000000 0.000000000 0.000000000 0.000000000 5.68% 0.00% 0.00% 10.42%
12/31/92 $13.06 0.083124773 0.000000000 0.028109583 0.111234356 -0.37% 0.00% 7.96% 10.01%
1/29/93 $13.21 0.000000000 0.000000000 0.000000000 0.000000000 1.15% 1.15% 6.50% 11.28%
2/26/93 $13.08 0.000000000 0.000000000 0.000000000 0.000000000 -0.98% 0.15% -0.22% 10.18%
3/31/93 $13.70 0.000000000 0.000000000 0.023964842 0.023964842 4.92% 5.08% 5.08% 15.60%
4/30/93 $13.27 0.000000000 0.000000000 0.000000000 0.000000000 -3.14% 1.79% 0.63% 11.98%
5/28/93 $13.69 0.000000000 0.000000000 0.000000000 0.000000000 3.17% 5.01% 4.85% 15.52%
6/30/93 $13.36 0.218242000 0.005761000 0.034220000 0.258223000 -0.52% 4.46% -0.60% 14.91%
7/30/93 $13.05 0.000000000 0.000000000 0.000000000 0.000000000 -2.32% 2.03% 0.24% 12.25%
8/31/93 $13.74 0.000000000 0.000000000 0.000000000 0.000000000 5.29% 7.43% 2.31% 18.18% 17.81%
9/30/93 $13.73 0.000000000 0.000000000 0.039251000 0.039251000 0.21% 7.66% 3.06% 18.43% 16.60%
10/29/93 $14.26 0.000000000 0.000000000 0.000000000 0.000000000 3.86% 11.81% 9.58% 23.01% 19.17%
11/30/93 $14.31 0.000000000 0.000000000 0.000000000 0.000000000 0.35% 12.20% 4.45% 23.44% 18.06%
12/31/93 $14.16 0.286746000 0.074974000 0.043472000 0.405192000 1.78% 14.21% 6.08% 25.64% 18.37%
1/31/94 $14.36 0.000000000 0.000000000 0.000000000 0.000000000 1.41% 1.41% 3.58% 27.41% 18.35%
2/28/94 $14.13 0.000000000 0.000000000 0.000000000 0.000000000 -1.60% -0.21% 1.57% 25.37% 16.10%
3/31/94 $13.59 0.000000000 0.000000000 0.033961000 0.033961000 -3.58% -3.79% -3.79% 20.88% 12.58%
4/29/94 $13.67 0.000000000 0.000000000 0.000000000 0.000000000 0.59% -3.22% -4.57% 21.59% 12.35%
5/31/94 $13.92 0.000000000 0.000000000 0.000000000 0.000000000 1.83% -1.45% -1.24% 23.82% 12.85%
6/30/94 $13.63 0.010697000 0.022027000 0.029296000 0.062020000 -1.64% -3.06% 0.75% 21.79% 11.25%
7/29/94 $13.95 0.000000000 0.000000000 0.000000000 0.000000000 2.35% -0.79% 2.51% 24.65% 12.10%
8/31/94 $14.69 0.000000000 0.000000000 0.000000000 0.000000000 5.30% 4.48% 6.01% 31.26% 14.42%
9/30/94 $14.45 0.000000000 0.000000000 0.028692000 0.028692000 -1.44% 2.97% 6.23% 29.37% 13.04%
10/31/94 $14.66 0.000000000 0.000000000 0.000000000 0.000000000 1.45% 4.47% 5.30% 31.25% 13.25%
11/30/94 $14.28 0.000000000 0.000000000 0.000000000 0.000000000 -2.59% 1.76% -2.60% 27.85% 11.44%
12/30/94 $14.37 0.003174000 0.178486000 0.040916000 0.222576000 2.19% 3.99% 0.99% 30.65% 12.05%
1/31/95 $14.70 0.000000000 0.000000000 0.000000000 0.000000000 2.30% 2.30% 1.83% 33.65% 12.63%
2/28/95 $15.23 0.000000000 0.000000000 0.000000000 0.000000000 3.61% 5.98% 8.30% 38.47% 13.82%
3/31/95 $15.66 0.000000000 0.000000000 0.023467000 0.023467000 2.98% 9.14% 9.14% 42.59% 14.62%
4/28/95 $16.25 0.000000000 0.000000000 0.000000000 0.000000000 3.77% 13.25% 10.71% 47.96% 15.76%
5/31/95 $16.95 0.000000000 0.000000000 0.000000000 0.000000000 4.31% 18.13% 11.46% 54.34% 16.98%
6/30/95 $17.35 0.011605000 0.061144000 0.043387000 0.116136000 3.05% 21.73% 11.53% 59.04% 17.68%
7/31/95 $17.93 0.000000000 0.000000000 0.000000000 0.000000000 3.34% 25.80% 11.08% 64.35% 18.45%
8/31/95 $17.78 0.000000000 0.000000000 0.000000000 0.000000000 -0.84% 24.74% 5.60% 62.98% 17.56%
9/29/95 $18.37 0.000000000 0.000000000 0.041512000 0.041512000 3.55% 29.18% 6.12% 68.77% 18.40%
10/31/95 $18.62 0.000000000 0.000000000 0.000000000 0.000000000 1.36% 30.93% 4.08% 71.07% 18.35%
11/30/95 $19.14 0.000000000 0.000000000 0.000000000 0.000000000 2.79% 34.59% 7.89% 75.84% 18.85%
12/29/95 $17.99 0.435170000 0.634089000 0.042101000 1.111360000 -0.20% 34.32% 3.98% 75.49% 18.29%
1/31/96 $18.69 0.000000000 0.000000000 0.000000000 0.000000000 3.89% 3.89% 6.58% 82.32% 19.09%
2/29/96 $19.04 0.000000000 0.000000000 0.000000000 0.000000000 1.87% 5.84% 5.62% 85.73% 19.24%
3/29/96 $18.89 0.000000000 0.000000000 0.042208000 0.042208000 -0.57% 5.24% 5.24% 84.68% 18.59%
</TABLE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
VALUE AND INCOME PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/24/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
8/31/92 $12.06 0.000000000 0.000000000 0.000000000 0.000000000 0.50% 0.00% 0.00% 0.50%
9/30/92 $12.08 0.000000000 0.000000000 0.047505656 0.047505656 0.56% 0.00% 0.00% 1.06%
10/30/92 $11.98 0.000000000 0.000000000 0.000000000 0.000000000 -0.83% 0.00% 0.00% 0.23%
11/30/92 $12.41 0.000000000 0.000000000 0.000000000 0.000000000 3.59% 0.00% 0.00% 3.82%
12/31/92 $12.58 0.006689588 0.000000000 0.073773497 0.080463085 2.02% 0.00% 4.81% 5.92%
1/29/93 $12.94 0.000000000 0.000000000 0.000000000 0.000000000 2.86% 2.86% 8.70% 8.95%
2/26/93 $13.34 0.000000000 0.000000000 0.000000000 0.000000000 3.09% 6.04% 8.18% 12.32%
3/31/93 $13.62 0.000000000 0.000000000 0.061045594 0.061045594 2.56% 8.75% 8.75% 15.19%
4/30/93 $13.45 0.000000000 0.000000000 0.000000000 0.000000000 -1.25% 7.40% 4.41% 13.75%
5/28/93 $13.67 0.000000000 0.000000000 0.000000000 0.000000000 1.64% 9.15% 2.93% 15.61%
6/30/93 $13.71 0.062197000 0.000000000 0.065674000 0.127871000 1.23% 10.49% 1.60% 17.03%
7/30/93 $13.81 0.000000000 0.000000000 0.000000000 0.000000000 0.73% 11.30% 3.63% 17.89%
8/31/93 $14.27 0.000000000 0.000000000 0.000000000 0.000000000 3.33% 15.01% 5.36% 21.81% 21.36%
9/30/93 $14.12 0.000000000 0.000000000 0.060192000 0.060192000 -0.63% 14.28% 3.43% 21.05% 18.94%
10/29/93 $14.24 0.000000000 0.000000000 0.000000000 0.000000000 0.85% 15.25% 3.55% 22.07% 18.40%
11/30/93 $14.00 0.000000000 0.000000000 0.000000000 0.000000000 -1.69% 13.31% -1.47% 20.02% 15.47%
12/31/93 $13.58 0.427203000 0.099197000 0.063914000 0.590314000 1.22% 14.69% 0.36% 21.48% 15.46%
1/31/94 $14.13 0.000000000 0.000000000 0.000000000 0.000000000 4.05% 4.05% 3.54% 26.40% 17.69%
2/28/94 $13.67 0.000000000 0.000000000 0.000000000 0.000000000 -3.26% 0.66% 1.89% 22.28% 14.20%
3/31/94 $13.15 0.000000000 0.000000000 0.043491000 0.043491000 -3.49% -2.85% -2.85% 18.02% 10.91%
4/29/94 $13.25 0.000000000 0.000000000 0.000000000 0.000000000 0.76% -2.11% -5.92% 18.92% 10.87%
5/31/94 $13.35 0.000000000 0.000000000 0.000000000 0.000000000 0.75% -1.37% -2.02% 19.81% 10.77%
6/30/94 $12.94 0.016135000 0.029660000 0.069313000 0.115108000 -2.21% -3.55% -0.72% 17.17% 8.94%
7/29/94 $13.29 0.000000000 0.000000000 0.000000000 0.000000000 2.70% -0.94% 1.19% 20.34% 10.07%
8/31/94 $13.64 0.000000000 0.000000000 0.000000000 0.000000000 2.63% 1.67% 3.08% 23.51% 11.02%
9/30/94 $13.16 0.000000000 0.000000000 0.074448000 0.074448000 -2.97% -1.35% 2.28% 19.83% 8.99%
10/31/94 $13.40 0.000000000 0.000000000 0.000000000 0.000000000 1.82% 0.45% 1.40% 22.02% 9.53%
11/30/94 $12.92 0.000000000 0.000000000 0.000000000 0.000000000 -3.58% -3.15% -4.74% 17.65% 7.43%
12/30/94 $13.01 0.000000000 0.010925000 0.062034000 0.072959000 1.26% -1.93% -0.59% 19.13% 7.73%
1/31/95 $13.31 0.000000000 0.000000000 0.000000000 0.000000000 2.31% 2.31% -0.11% 21.88% 8.45%
2/28/95 $13.83 0.000000000 0.000000000 0.000000000 0.000000000 3.91% 6.30% 7.64% 26.64% 9.85%
3/31/95 $14.12 0.000000000 0.000000000 0.074068000 0.074068000 2.63% 9.10% 9.10% 29.97% 10.61%
4/28/95 $14.53 0.000000000 0.000000000 0.000000000 0.000000000 2.90% 12.27% 9.74% 33.75% 11.48%
5/31/95 $15.25 0.000000000 0.000000000 0.000000000 0.000000000 4.96% 17.83% 10.85% 40.38% 13.04%
6/30/95 $15.20 0.000000000 0.000926000 0.083909000 0.084835000 0.23% 18.10% 8.25% 40.70% 12.73%
7/31/95 $15.62 0.000000000 0.000000000 0.000000000 0.000000000 2.76% 21.37% 8.10% 44.58% 13.39%
8/31/95 $15.81 0.000000000 0.000000000 0.000000000 0.000000000 1.22% 22.84% 4.25% 46.34% 13.44%
9/29/95 $16.16 0.000000000 0.000000000 0.086413000 0.086413000 2.76% 26.23% 6.88% 50.38% 14.07%
10/31/95 $16.06 0.000000000 0.000000000 0.000000000 0.000000000 -0.62% 25.45% 3.37% 49.45% 13.44%
11/30/95 $16.79 0.000000000 0.000000000 0.000000000 0.000000000 4.55% 31.15% 6.77% 56.25% 14.63%
12/29/95 $15.91 0.696693000 0.361353000 0.089750000 1.147796000 1.60% 33.25% 5.56% 58.74% 14.80%
1/31/96 $16.38 0.000000000 0.000000000 0.000000000 0.000000000 2.95% 2.95% 9.35% 63.43% 15.36%
2/29/96 $16.58 0.000000000 0.000000000 0.000000000 0.000000000 1.22% 4.21% 5.87% 65.42% 15.38%
3/29/96 $16.81 0.000000000 0.000000000 0.075000000 0.075000000 1.84% 6.13% 6.13% 68.47% 15.60%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
SMALL TO MID CAP PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/24/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
8/31/92 $11.87 0.000000000 0.000000000 0.000000000 0.000000000 -1.08% 0.00% 0.00% -1.08%
9/30/92 $11.97 0.000000000 0.000000000 0.014211419 0.014211419 0.96% 0.00% 0.00% -0.13%
10/30/92 $12.34 0.000000000 0.000000000 0.000000000 0.000000000 3.09% 0.00% 0.00% 2.96%
11/30/92 $13.15 0.000000000 0.000000000 0.000000000 0.000000000 6.56% 0.00% 0.00% 9.71%
12/31/92 $13.56 0.000000000 0.000000000 0.017795769 0.017795769 3.25% 0.00% 13.43% 13.28%
1/29/93 $13.93 0.000000000 0.000000000 0.000000000 0.000000000 2.73% 2.73% 13.03% 16.37%
2/26/93 $13.72 0.000000000 0.000000000 0.000000000 0.000000000 -1.51% 1.18% 4.47% 14.62%
3/31/93 $14.18 0.000000000 0.000000000 0.011683857 0.011683857 3.44% 4.66% 4.66% 18.56%
4/30/93 $13.65 0.000000000 0.000000000 0.000000000 0.000000000 -3.74% 0.75% -1.93% 14.13%
5/28/93 $14.15 0.000000000 0.000000000 0.000000000 0.000000000 3.66% 4.44% 3.22% 18.31%
6/30/93 $14.21 0.000000000 0.005597000 0.013602000 0.019199000 0.56% 5.02% 0.35% 18.97%
7/30/93 $14.38 0.000000000 0.000000000 0.000000000 0.000000000 1.20% 6.28% 5.49% 20.39%
8/31/93 $14.91 0.000000000 0.000000000 0.000000000 0.000000000 3.69% 10.20% 5.51% 24.83% 24.31%
9/30/93 $15.16 0.000000000 0.000000000 0.012170000 0.012170000 1.76% 12.13% 6.77% 27.03% 24.26%
10/29/93 $15.39 0.000000000 0.000000000 0.000000000 0.000000000 1.52% 13.83% 7.11% 28.95% 24.03%
11/30/93 $14.95 0.000000000 0.000000000 0.000000000 0.000000000 -2.86% 10.58% 0.35% 25.27% 19.43%
12/31/93 $14.79 0.172644000 0.497717000 0.005175000 0.675536000 3.45% 14.39% 2.02% 29.59% 21.11%
1/31/94 $15.24 0.000000000 0.000000000 0.000000000 0.000000000 3.04% 3.04% 3.55% 33.53% 22.27%
2/28/94 $15.02 0.000000000 0.000000000 0.000000000 0.000000000 -1.44% 1.56% 5.06% 31.60% 19.87%
3/31/94 $14.25 0.000000000 0.000000000 0.008335000 0.008335000 -5.07% -3.59% -3.59% 24.93% 14.92%
4/29/94 $14.32 0.000000000 0.000000000 0.000000000 0.000000000 0.49% -3.12% -5.98% 25.54% 14.50%
5/31/94 $14.05 0.000000000 0.000000000 0.000000000 0.000000000 -1.89% -4.95% -6.40% 23.17% 12.52%
6/30/94 $13.64 0.000000000 0.027392000 0.000000000 0.027392000 -2.72% -7.54% -4.09% 19.82% 10.27%
7/29/94 $13.85 0.000000000 0.000000000 0.000000000 0.000000000 1.54% -6.11% -3.09% 21.67% 10.70%
8/31/94 $14.59 0.000000000 0.000000000 0.000000000 0.000000000 5.34% -1.10% 4.05% 28.17% 13.08%
9/30/94 $14.53 0.000000000 0.000000000 0.000000000 0.000000000 -0.41% -1.50% 6.53% 27.64% 12.31%
10/31/94 $14.50 0.000000000 0.000000000 0.000000000 0.000000000 -0.21% -1.71% 4.69% 27.38% 11.70%
11/30/94 $13.89 0.000000000 0.000000000 0.000000000 0.000000000 -4.21% -5.84% -4.80% 22.02% 9.17%
12/30/94 $14.08 0.000000000 0.071519000 0.000000000 0.071519000 1.88% -4.07% -2.60% 24.31% 9.70%
1/31/95 $14.01 0.000000000 0.000000000 0.000000000 0.000000000 -0.50% -0.50% -2.89% 23.70% 9.11%
2/28/95 $14.43 0.000000000 0.000000000 0.000000000 0.000000000 3.00% 2.49% 4.42% 27.40% 10.11%
3/31/95 $14.69 0.000000000 0.000000000 0.013132000 0.013132000 1.89% 4.43% 4.43% 29.82% 10.56%
4/28/95 $15.00 0.000000000 0.000000000 0.000000000 0.000000000 2.11% 6.63% 7.16% 32.56% 11.10%
5/31/95 $15.24 0.000000000 0.000000000 0.000000000 0.000000000 1.60% 8.34% 5.71% 34.68% 11.36%
6/30/95 $15.97 0.000000000 0.044932000 0.012855000 0.057787000 5.17% 13.94% 9.11% 41.64% 12.99%
7/31/95 $17.08 0.000000000 0.000000000 0.000000000 0.000000000 6.95% 21.85% 14.28% 51.48% 15.20%
8/31/95 $17.33 0.000000000 0.000000000 0.000000000 0.000000000 1.46% 23.64% 14.13% 53.70% 15.30%
9/29/95 $17.73 0.000000000 0.000000000 0.021343000 0.021343000 2.43% 26.64% 11.15% 57.44% 15.77%
10/31/95 $17.14 0.000000000 0.000000000 0.000000000 0.000000000 -3.33% 22.43% 0.47% 52.20% 14.09%
11/30/95 $17.97 0.000000000 0.000000000 0.000000000 0.000000000 4.84% 28.36% 3.82% 59.57% 15.37%
12/29/95 $17.61 0.293100000 0.558806000 0.014518000 0.866424000 2.82% 31.98% 4.21% 64.06% 15.94%
1/31/96 $17.54 0.000000000 0.000000000 0.000000000 0.000000000 -0.40% -0.40% 7.37% 63.41% 15.35%
2/29/96 $18.27 0.000000000 0.000000000 0.000000000 0.000000000 4.16% 3.75% 6.67% 70.21% 16.32%
3/29/96 $18.50 0.000000000 0.000000000 0.016686000 0.016686000 1.35% 5.15% 5.15% 72.51% 16.37%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
INTERNATIONAL EQUITY PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/3/94 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
10/31/94 $12.17 0.000000000 0.000000000 0.000000000 0.000000000 1.42% 0.00% 0.00% 1.42%
11/30/94 $11.55 0.000000000 0.000000000 0.000000000 0.000000000 -5.09% 0.00% 0.00% -3.75%
12/30/94 $11.67 0.000000000 0.000000000 0.000000000 0.000000000 1.04% 0.00% 0.00% -2.75%
1/31/95 $10.99 0.000000000 0.000000000 0.000000000 0.000000000 -5.83% -5.83% 0.00% -8.42%
2/28/95 $10.95 0.000000000 0.000000000 0.000000000 0.000000000 -0.36% -6.17% 0.00% -8.75%
3/31/95 $11.21 0.000000000 0.000000000 0.000000000 0.000000000 2.37% -3.94% -3.94% -6.58%
4/28/95 $11.54 0.000000000 0.000000000 0.000000000 0.000000000 2.94% -1.11% 5.00% -3.83%
5/31/95 $11.37 0.000000000 0.000000000 0.000000000 0.000000000 -1.47% -2.57% 3.84% -5.25%
6/30/95 $11.31 0.000000000 0.000000000 0.000000000 0.000000000 -0.53% -3.08% 0.89% -5.75%
7/31/95 $12.10 0.000000000 0.000000000 0.000000000 0.000000000 6.98% 3.68% 4.85% 0.83%
8/31/95 $12.21 0.000000000 0.000000000 0.000000000 0.000000000 0.91% 4.63% 7.39% 1.75%
9/29/95 $12.44 0.000000000 0.000000000 0.000000000 0.000000000 1.88% 6.60% 9.99% 3.67%
10/31/95 $12.12 0.000000000 0.000000000 0.000000000 0.000000000 -2.57% 3.86% 0.17% 1.00% 0.93%
11/30/95 $12.28 0.000000000 0.000000000 0.000000000 0.000000000 1.32% 5.23% 0.57% 2.33% 2.01%
12/29/95 $12.56 0.000000000 0.000000000 0.000000000 0.000000000 2.28% 7.63% 0.96% 4.67% 3.75%
1/31/96 $12.54 0.000000000 0.000000000 0.000000000 0.000000000 -0.16% -0.16% 3.47% 4.50% 3.37%
2/29/96 $12.82 0.000000000 0.000000000 0.000000000 0.000000000 2.23% 2.07% 4.40% 6.83% 4.81%
3/29/96 $13.25 0.000000000 0.000000000 0.000000000 0.000000000 3.35% 5.49% 5.49% 10.42% 6.89%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
INTERMEDIATE FIXED-INCOME PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/15/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
6/30/92 $12.04 0.000000000 0.000000000 0.023699912 0.023699912 0.53% 0.00% 0.00% 0.53%
7/31/92 $12.24 0.000000000 0.000000000 0.056574635 0.056574635 2.13% 0.00% 0.00% 2.67%
8/31/92 $12.33 0.000000000 0.000000000 0.060678762 0.060678762 1.23% 0.00% 0.00% 3.94%
9/30/92 $12.45 0.000000000 0.000000000 0.051840530 0.051840530 1.39% 0.00% 4.83% 5.39%
10/30/92 $12.18 0.000000000 0.000000000 0.055987904 0.055987904 -1.72% 0.00% 0.88% 3.57%
11/30/92 $12.03 0.000000000 0.000000000 0.054149689 0.054149689 -0.79% 0.00% -1.13% 2.76%
12/31/92 $12.00 0.152587638 0.000000000 0.053585585 0.206173223 1.46% 0.00% -1.06% 4.26%
1/29/93 $12.21 0.000000000 0.000000000 0.052603069 0.052603069 2.19% 2.19% 2.87% 6.55%
2/26/93 $12.38 0.000000000 0.000000000 0.047811596 0.047811596 1.78% 4.01% 5.53% 8.45%
3/31/93 $12.39 0.000000000 0.000000000 0.050394105 0.050394105 0.49% 4.52% 4.52% 8.98%
4/30/93 $12.45 0.000000000 0.000000000 0.035528357 0.035528357 0.77% 5.32% 3.07% 9.82%
5/28/93 $12.40 0.000000000 0.000000000 0.047961901 0.047961901 -0.02% 5.31% 1.25% 9.80%
6/30/93 $12.57 0.010122000 0.000000000 0.048557000 0.058679000 1.84% 7.25% 2.61% 11.82% 11.33%
7/30/93 $12.57 0.000000000 0.000000000 0.045534000 0.045534000 0.36% 7.64% 2.20% 12.23% 10.82%
8/31/93 $12.76 0.000000000 0.000000000 0.045128000 0.045128000 1.87% 9.65% 4.13% 14.33% 11.69%
9/30/93 $12.76 0.000000000 0.000000000 0.046823000 0.046823000 0.37% 10.05% 2.61% 14.75% 11.22%
10/29/93 $12.75 0.000000000 0.000000000 0.048831000 0.048831000 0.30% 10.39% 2.56% 15.10% 10.79%
11/30/93 $12.56 0.000000000 0.000000000 0.048436000 0.048436000 -1.11% 9.16% -0.45% 13.82% 9.27%
12/31/93 $12.34 0.180178000 0.035007000 0.046842000 0.262027000 0.33% 9.53% -0.48% 14.20% 8.97%
1/31/94 $12.45 0.000000000 0.000000000 0.050088000 0.050088000 1.30% 1.30% 0.51% 15.68% 9.35%
2/28/94 $12.10 0.000000000 0.000000000 0.048543000 0.048543000 -2.42% -1.16% -0.82% 12.88% 7.36%
3/31/94 $11.76 0.000000000 0.000000000 0.049675000 0.049675000 -2.40% -3.53% -3.53% 10.17% 5.55%
4/29/94 $11.60 0.000000000 0.000000000 0.049692000 0.049692000 -0.94% -4.43% -5.66% 9.14% 4.78%
5/31/94 $11.52 0.000000000 0.000000000 0.053909000 0.053909000 -0.22% -4.65% -3.53% 8.89% 4.44%
6/30/94 $11.40 0.000000000 0.016853000 0.053298000 0.070151000 -0.43% -5.06% -1.59% 8.42% 4.04%
7/29/94 $11.54 0.000000000 0.000000000 0.055335000 0.055335000 1.71% -3.43% 1.05% 10.28% 4.72%
8/31/94 $11.48 0.000000000 0.000000000 0.055169000 0.055169000 -0.04% -3.47% 1.23% 10.23% 4.50%
9/30/94 $11.26 0.000000000 0.000000000 0.057247000 0.057247000 -1.42% -4.84% 0.23% 8.67% 3.69%
10/31/94 $11.17 0.000000000 0.000000000 0.058808000 0.058808000 -0.28% -5.11% -1.73% 8.37% 3.44%
11/30/94 $11.06 0.000000000 0.000000000 0.056579000 0.056579000 -0.48% -5.56% -2.16% 7.85% 3.12%
12/30/94 $11.04 0.000000000 0.000000000 0.057687000 0.057687000 0.34% -5.24% -0.42% 8.22% 3.15%
1/31/95 $11.16 0.000000000 0.000000000 0.061485000 0.061485000 1.64% 1.64% 1.50% 10.00% 3.69%
2/28/95 $11.34 0.000000000 0.000000000 0.054643000 0.054643000 2.10% 3.78% 4.13% 12.31% 4.38%
3/31/95 $11.36 0.000000000 0.000000000 0.062693000 0.062693000 0.73% 4.54% 4.54% 13.13% 4.52%
4/28/95 $11.44 0.000000000 0.000000000 0.059814000 0.059814000 1.23% 5.82% 4.11% 14.52% 4.84%
5/31/95 $11.85 0.000000000 0.000000000 0.059284000 0.059284000 4.10% 10.17% 6.15% 19.22% 6.12%
6/30/95 $11.87 0.000000000 0.000000000 0.063439000 0.063439000 0.70% 10.94% 6.13% 20.06% 6.20%
7/31/95 $11.76 0.000000000 0.000000000 0.056030000 0.056030000 -0.45% 10.44% 4.36% 19.51% 5.87%
8/31/95 $11.85 0.000000000 0.000000000 0.060284000 0.060284000 1.28% 11.85% 1.53% 21.04% 6.13%
9/29/95 $11.92 0.000000000 0.000000000 0.056789000 0.056789000 1.07% 13.04% 1.90% 22.33% 6.32%
10/31/95 $12.03 0.000000000 0.000000000 0.060107000 0.060107000 1.43% 14.66% 3.82% 24.08% 6.60%
11/30/95 $12.16 0.000000000 0.000000000 0.057376000 0.057376000 1.56% 16.44% 4.11% 26.01% 6.91%
12/29/95 $12.29 0.000000000 0.000000000 0.059587000 0.059587000 1.56% 18.26% 4.61% 27.98% 7.22%
1/31/96 $12.29 0.000000000 0.000000000 0.061479000 0.061479000 0.50% 0.50% 3.66% 28.62% 7.18%
2/29/96 $11.99 0.000000000 0.000000000 0.051368000 0.051368000 -2.02% -1.53% 0.00% 26.02% 6.43%
3/29/96 $11.84 0.000000000 0.000000000 0.058250000 0.058250000 -0.77% -2.29% -2.29% 25.05% 6.08%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/18/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
5/29/92 $11.97 0.000000000 0.000000000 0.019734000 0.019734000 -0.09% 0.00% 0.00% -0.09%
6/30/92 $12.07 0.000000000 0.000000000 0.042168947 0.042168947 1.19% 0.00% 0.00% 1.10%
7/31/92 $12.20 0.000000000 0.000000000 0.044859916 0.044859916 1.45% 0.00% 0.00% 2.57%
8/31/92 $12.25 0.000000000 0.000000000 0.049971980 0.049971980 0.82% 0.00% 0.00% 3.41%
9/30/92 $12.34 0.000000000 0.000000000 0.042642139 0.042642139 1.08% 0.00% 3.39% 4.53%
10/30/92 $12.18 0.000000000 0.000000000 0.042071332 0.042071332 -0.96% 0.00% 0.94% 3.53%
11/30/92 $12.09 0.000000000 0.000000000 0.042253189 0.042253189 -0.39% 0.00% -0.28% 3.12%
12/31/92 $12.16 0.003757048 0.000000000 0.042981892 0.046738940 0.97% 0.00% -0.39% 4.12%
1/29/93 $12.28 0.000000000 0.000000000 0.037273978 0.037273978 1.29% 1.29% 1.87% 5.46%
2/26/93 $12.38 0.000000000 0.000000000 0.029614405 0.029614405 1.06% 2.36% 3.35% 6.58%
3/31/93 $12.38 0.000000000 0.000000000 0.042711977 0.042711977 0.35% 2.72% 2.72% 6.94%
4/30/93 $12.42 0.000000000 0.000000000 0.049274769 0.049274769 0.72% 3.46% 2.14% 7.72%
5/28/93 $12.34 0.000000000 0.000000000 0.043498963 0.043498963 -0.29% 3.15% 0.77% 7.40% 7.19%
6/30/93 $12.41 0.004004000 0.000000000 0.039424000 0.043428000 0.92% 4.10% 1.35% 8.39% 7.47%
7/30/93 $12.39 0.000000000 0.000000000 0.036980000 0.036980000 0.14% 4.24% 0.76% 8.53% 7.06%
8/31/93 $12.47 0.000000000 0.000000000 0.038620000 0.038620000 0.96% 5.24% 2.02% 9.57% 7.36%
9/30/93 $12.46 0.000000000 0.000000000 0.037225000 0.037225000 0.22% 5.47% 1.32% 9.81% 7.07%
10/29/93 $12.45 0.000000000 0.000000000 0.033063000 0.033063000 0.19% 5.67% 1.37% 10.02% 6.81%
11/30/93 $12.37 0.000000000 0.000000000 0.036766000 0.036766000 -0.35% 5.30% 0.06% 9.63% 6.17%
12/31/93 $12.29 0.053999000 0.028155000 0.036742000 0.118896000 0.31% 5.63% 0.15% 9.98% 6.04%
1/31/94 $12.35 0.000000000 0.000000000 0.039499000 0.039499000 0.81% 0.81% 0.78% 10.87% 6.23%
2/28/94 $12.18 0.000000000 0.000000000 0.038926000 0.038926000 -1.06% -0.26% 0.05% 9.69% 5.32%
3/31/94 $12.01 0.000000000 0.000000000 0.037688000 0.037688000 -1.09% -1.34% -1.34% 8.50% 4.46%
4/29/94 $11.91 0.000000000 0.000000000 0.035927000 0.035927000 -0.53% -1.87% -2.66% 7.92% 3.99%
5/31/94 $11.88 0.000000000 0.000000000 0.037555000 0.037555000 0.06% -1.81% -1.55% 7.99% 3.85%
6/30/94 $11.86 0.000000000 0.000000000 0.040089000 0.040089000 0.17% -1.64% -0.30% 8.17% 3.78%
7/29/94 $11.92 0.000000000 0.000000000 0.040623000 0.040623000 0.85% -0.81% 1.08% 9.09% 4.04%
8/31/94 $11.91 0.000000000 0.000000000 0.043405000 0.043405000 0.28% -0.53% 1.30% 9.40% 4.00%
9/30/94 $11.79 0.000000000 0.000000000 0.046487000 0.046487000 -0.62% -1.14% 0.51% 8.72% 3.59%
10/31/94 $11.75 0.000000000 0.000000000 0.046667000 0.046667000 0.06% -1.09% -0.28% 8.78% 3.49%
11/30/94 $11.65 0.000000000 0.000000000 0.045364000 0.045364000 -0.47% -1.55% -1.02% 8.28% 3.18%
12/30/94 $11.62 0.000000000 0.000000000 0.044486000 0.044486000 0.12% -1.43% -0.28% 8.41% 3.13%
1/31/95 $11.74 0.000000000 0.000000000 0.048703000 0.048703000 1.45% 1.45% 1.11% 9.99% 3.58%
2/28/95 $11.88 0.000000000 0.000000000 0.045808000 0.045808000 1.58% 3.06% 3.19% 11.73% 4.06%
3/31/95 $11.89 0.000000000 0.000000000 0.050186000 0.050186000 0.51% 3.58% 3.58% 12.29% 4.12%
4/28/95 $11.95 0.000000000 0.000000000 0.049948000 0.049948000 0.92% 4.54% 3.04% 13.33% 4.34%
5/31/95 $12.15 0.000000000 0.000000000 0.051563000 0.051563000 2.11% 6.74% 3.57% 15.72% 4.93%
6/30/95 $12.15 0.000000000 0.000000000 0.052909000 0.052909000 0.44% 7.20% 3.50% 16.22% 4.94%
7/31/95 $12.12 0.000000000 0.000000000 0.048131000 0.048131000 0.15% 7.36% 2.70% 16.39% 4.85%
8/31/95 $12.15 0.000000000 0.000000000 0.052126000 0.052126000 0.68% 8.09% 1.27% 17.18% 4.94%
9/29/95 $12.16 0.000000000 0.000000000 0.050048000 0.050048000 0.49% 8.62% 1.33% 17.76% 4.98%
10/31/95 $12.21 0.000000000 0.000000000 0.051643000 0.051643000 0.84% 9.53% 2.02% 18.75% 5.10%
11/30/95 $12.27 0.000000000 0.000000000 0.050243000 0.050243000 0.90% 10.52% 2.25% 19.82% 5.24%
12/29/95 $12.32 0.000000000 0.000000000 0.050086000 0.050086000 0.82% 11.42% 2.58% 20.80% 5.36%
1/31/96 $12.37 0.000000000 0.000000000 0.049520000 0.049520000 0.81% 0.81% 2.55% 21.77% 5.46%
2/29/96 $12.24 0.000000000 0.000000000 0.045950000 0.045950000 -0.68% 0.12% 0.94% 20.94% 5.15%
3/29/96 $12.14 0.000000000 0.000000000 0.048940000 0.048940000 -0.42% -0.29% -0.29% 20.44% 4.93%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
MORTGAGE SECURITIES PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/18/92 $12.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
5/29/92 $12.00 0.000000000 0.000000000 0.016435000 0.016435000 0.14% 0.00% 0.00% 0.14%
6/30/92 $12.07 0.000000000 0.000000000 0.044001515 0.044001515 0.95% 0.00% 0.00% 1.09%
7/31/92 $12.23 0.000000000 0.000000000 0.050334860 0.050334860 1.74% 0.00% 0.00% 2.85%
8/31/92 $12.29 0.000000000 0.000000000 0.041242342 0.041242342 0.83% 0.00% 0.00% 3.70%
9/30/92 $12.32 0.000000000 0.000000000 0.038025738 0.038025738 0.55% 0.00% 3.15% 4.28%
10/30/92 $12.09 0.000000000 0.000000000 0.047792540 0.047792540 -1.48% 0.00% -0.11% 2.73%
11/30/92 $12.02 0.000000000 0.000000000 0.052459986 0.052459986 -0.15% 0.00% -1.08% 2.58%
12/31/92 $12.02 0.106429161 0.000000000 0.051724114 0.158153275 1.32% 0.00% -0.33% 3.93%
1/29/93 $12.16 0.000000000 0.000000000 0.052071788 0.052071788 1.60% 1.60% 2.79% 5.59%
2/26/93 $12.26 0.000000000 0.000000000 0.034631069 0.034631069 1.11% 2.72% 4.07% 6.76%
3/31/93 $12.26 0.000000000 0.000000000 0.049366726 0.049366726 0.40% 3.14% 3.14% 7.19%
4/30/93 $12.26 0.000000000 0.000000000 0.055907321 0.055907321 0.46% 3.61% 1.98% 7.68%
5/28/93 $12.24 0.000000000 0.000000000 0.042490569 0.042490569 0.18% 3.80% 1.05% 7.88% 7.66%
6/30/93 $12.36 0.000000000 0.000000000 0.048687000 0.048687000 1.38% 5.23% 2.03% 9.37% 8.34%
7/30/93 $12.38 0.000000000 0.000000000 0.047412000 0.047412000 0.55% 5.80% 2.12% 9.96% 8.24%
8/31/93 $12.41 0.000000000 0.000000000 0.046655000 0.046655000 0.62% 6.46% 2.56% 10.64% 8.17%
9/30/93 $12.38 0.000000000 0.000000000 0.043828000 0.043828000 0.11% 6.58% 1.28% 10.77% 7.75%
10/29/93 $12.37 0.000000000 0.000000000 0.040436000 0.040436000 0.25% 6.84% 0.98% 11.04% 7.49%
11/30/93 $12.30 0.000000000 0.000000000 0.045424000 0.045424000 -0.20% 6.62% 0.16% 10.82% 6.91%
12/31/93 $12.17 0.156187000 0.002742000 0.044169000 0.203098000 0.59% 7.26% 0.64% 11.48% 6.93%
1/31/94 $12.25 0.000000000 0.000000000 0.037720000 0.037720000 0.97% 0.97% 1.37% 12.56% 7.18%
2/28/94 $12.09 0.000000000 0.000000000 0.043276000 0.043276000 -0.95% 0.01% 0.60% 11.48% 6.28%
3/31/94 $11.90 0.000000000 0.000000000 0.042740000 0.042740000 -1.22% -1.21% -1.21% 10.13% 5.30%
4/29/94 $11.76 0.000000000 0.000000000 0.045192000 0.045192000 -0.80% -2.00% -2.94% 9.25% 4.65%
5/31/94 $11.70 0.000000000 0.000000000 0.048508000 0.048508000 -0.10% -2.10% -2.10% 9.14% 4.39%
6/30/94 $11.61 0.009527000 0.000000000 0.046293000 0.055820000 -0.29% -2.38% -1.18% 8.82% 4.07%
7/29/94 $11.78 0.000000000 0.000000000 0.052559000 0.052559000 1.92% -0.51% 1.52% 10.91% 4.83%
8/31/94 $11.72 0.000000000 0.000000000 0.054763000 0.054763000 -0.04% -0.55% 1.57% 10.86% 4.61%
9/30/94 $11.50 0.000000000 0.000000000 0.057504000 0.057504000 -1.39% -1.93% 0.46% 9.32% 3.83%
10/31/94 $11.43 0.000000000 0.000000000 0.053836000 0.053836000 -0.14% -2.07% -1.57% 9.17% 3.64%
11/30/94 $11.33 0.000000000 0.000000000 0.057485000 0.057485000 -0.37% -2.44% -1.89% 8.76% 3.37%
12/30/94 $11.36 0.000000000 0.000000000 0.061771000 0.061771000 0.81% -1.65% 0.29% 9.64% 3.58%
1/31/95 $11.53 0.000000000 0.000000000 0.065468000 0.065468000 2.07% 2.07% 2.52% 11.92% 4.25%
2/28/95 $11.74 0.000000000 0.000000000 0.067256000 0.067256000 2.40% 4.53% 5.37% 14.61% 5.02%
3/31/95 $11.74 0.000000000 0.000000000 0.065518000 0.065518000 0.56% 5.11% 5.11% 15.25% 5.07%
4/28/95 $11.82 0.000000000 0.000000000 0.064253000 0.064253000 1.23% 6.40% 4.24% 16.66% 5.37%
5/31/95 $12.12 0.000000000 0.000000000 0.065010000 0.065010000 3.09% 9.69% 4.94% 20.27% 6.27%
6/30/95 $12.13 0.000000000 0.000000000 0.069208000 0.069208000 0.65% 10.40% 5.04% 21.05% 6.32%
7/31/95 $12.07 0.000000000 0.000000000 0.057736000 0.057736000 -0.02% 10.38% 3.74% 21.03% 6.14%
8/31/95 $12.12 0.000000000 0.000000000 0.060420000 0.060420000 0.91% 11.39% 1.56% 22.14% 6.27%
9/29/95 $12.16 0.000000000 0.000000000 0.059155000 0.059155000 0.82% 12.31% 1.72% 23.14% 6.38%
10/31/95 $12.20 0.000000000 0.000000000 0.060048000 0.060048000 0.82% 13.23% 2.58% 24.15% 6.46%
11/30/95 $12.30 0.000000000 0.000000000 0.062456000 0.062456000 1.33% 14.74% 3.00% 25.80% 6.70%
12/29/95 $12.38 0.000000000 0.000000000 0.058744000 0.058744000 1.13% 16.03% 3.32% 27.22% 6.88%
1/31/96 $12.39 0.000000000 0.000000000 0.057502000 0.057502000 0.55% 0.55% 3.03% 27.91% 6.87%
2/29/96 $12.22 0.000000000 0.000000000 0.051786000 0.051786000 -0.95% -0.41% 0.71% 26.69% 6.45%
3/29/96 $12.11 0.000000000 0.000000000 0.054936000 0.054936000 -0.45% -0.86% -0.86% 26.12% 6.19%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCESSOR FUNDS, INC.
MONTH END RATE OF RETURN
U.S. GOVERNMENT MONEY PORTFOLIO
From Annualized
Current Short-Term Long-Term Dividend Per Total Monthly YTD Quarterly Inception Inception
Date NAV Capital Gains Capital Gains Share Distribution Return Return Return Return Return
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/9/92 $1.00 0.000000000 0.000000000 0.000000000 0.000000000 0.00% 0.00% 0.00% 0.00%
4/30/92 $1.00 0.000000000 0.000000000 0.002183489 0.002183489 0.22% 0.00% 0.00% 0.22%
5/29/92 $1.00 0.000000000 0.000000000 0.003029786 0.003029786 0.30% 0.00% 0.00% 0.52%
6/30/92 $1.00 0.000000000 0.000000000 0.002977562 0.002977562 0.30% 0.00% 0.00% 0.82%
7/31/92 $1.00 0.000000000 0.000000000 0.003071905 0.003071905 0.31% 0.00% 0.00% 1.13%
8/31/92 $1.00 0.000000000 0.000000000 0.002828242 0.002828242 0.28% 0.00% 0.00% 1.42%
9/30/92 $1.00 0.000000000 0.000000000 0.002424715 0.002424715 0.24% 0.00% 0.83% 1.66%
10/30/92 $1.00 0.000000000 0.000000000 0.002406225 0.002406225 0.24% 0.00% 0.77% 1.91%
11/30/92 $1.00 0.000000000 0.000000000 0.002338859 0.002338859 0.23% 0.00% 0.72% 2.15%
12/31/92 $1.00 0.000070834 0.000000000 0.002377343 0.002448177 0.24% 0.00% 0.72% 2.40%
1/29/93 $1.00 0.000000000 0.000000000 0.002390432 0.002390432 0.24% 0.24% 0.72% 2.64%
2/26/93 $1.00 0.000000000 0.000000000 0.002079252 0.002079252 0.21% 0.45% 0.69% 2.85%
3/31/93 $1.00 0.000000000 0.000000000 0.002253447 0.002253447 0.23% 0.67% 0.67% 3.09%
4/30/93 $1.00 0.000000000 0.000000000 0.002183094 0.002183094 0.22% 0.89% 0.65% 3.31% 3.13%
5/28/93 $1.00 0.000000000 0.000000000 0.002226907 0.002226907 0.22% 1.12% 0.67% 3.54% 3.12%
6/30/93 $1.00 0.000000000 0.000000000 0.002177000 0.002177000 0.22% 1.34% 0.66% 3.77% 3.06%
7/30/93 $1.00 0.000000000 0.000000000 0.002285000 0.002285000 0.23% 1.57% 0.67% 4.00% 3.05%
8/31/93 $1.00 0.000000000 0.000000000 0.002312000 0.002312000 0.23% 1.80% 0.68% 4.24% 3.03%
9/30/93 $1.00 0.000000000 0.000000000 0.002242000 0.002242000 0.22% 2.03% 0.69% 4.48% 3.01%
10/29/93 $1.00 0.000000000 0.000000000 0.002300000 0.002300000 0.23% 2.27% 0.69% 4.72% 3.01%
11/30/93 $1.00 0.000000000 0.000000000 0.002254000 0.002254000 0.23% 2.50% 0.68% 4.95% 2.99%
12/31/93 $1.00 0.000708000 0.000000000 0.002347011 0.003055011 0.31% 2.81% 0.76% 5.27% 3.02%
1/31/94 $1.00 0.000000000 0.000000000 0.002331000 0.002331000 0.23% 0.23% 0.77% 5.52% 3.01%
2/28/94 $1.00 0.000000000 0.000000000 0.002102000 0.002102000 0.21% 0.44% 0.75% 5.74% 3.00%
3/31/94 $1.00 0.000000000 0.000000000 0.002368000 0.002368000 0.24% 0.68% 0.68% 5.99% 2.99%
4/29/94 $1.00 0.000000000 0.000000000 0.002656000 0.002656000 0.27% 0.95% 0.71% 6.27% 3.01%
5/31/94 $1.00 0.000000000 0.000000000 0.002839000 0.002839000 0.28% 1.24% 0.79% 6.58% 3.02%
6/30/94 $1.00 0.000000000 0.000000000 0.002929000 0.002929000 0.29% 1.53% 0.84% 6.89% 3.04%
7/29/94 $1.00 0.000000000 0.000000000 0.003172000 0.003172000 0.32% 1.85% 0.90% 7.23% 3.07%
8/31/94 $1.00 0.000000000 0.000000000 0.003259290 0.003259290 0.33% 2.19% 0.94% 7.58% 3.10%
9/30/94 $1.00 0.000000000 0.000000000 0.003259901 0.003259901 0.33% 2.52% 0.97% 7.93% 3.13%
10/31/94 $1.00 0.000000000 0.000000000 0.003548476 0.003548476 0.35% 2.88% 1.01% 8.31% 3.17%
11/30/94 $1.00 0.000000000 0.000000000 0.003618654 0.003618654 0.36% 3.26% 1.05% 8.70% 3.21%
12/30/94 $1.00 0.000290000 0.000000000 0.003989000 0.004279000 0.43% 3.70% 1.15% 9.17% 3.27%
1/31/95 $1.00 0.000000000 0.000000000 0.004304000 0.004304000 0.43% 0.43% 1.23% 9.64% 3.32%
2/28/95 $1.00 0.000000000 0.000000000 0.004016000 0.004016000 0.40% 0.83% 1.27% 10.08% 3.38%
3/31/95 $1.00 0.000000000 0.000000000 0.004564000 0.004564000 0.46% 1.29% 1.29% 10.58% 3.44%
4/28/95 $1.00 0.000000000 0.000000000 0.004506000 0.004506000 0.45% 1.75% 1.31% 11.08% 3.50%
5/31/95 $1.00 0.000000000 0.000000000 0.004652000 0.004652000 0.47% 2.22% 1.38% 11.59% 3.55%
6/30/95 $1.00 0.000000000 0.000000000 0.004450000 0.004450000 0.45% 2.68% 1.37% 12.09% 3.60%
7/31/95 $1.00 0.000000000 0.000000000 0.004492674 0.004492674 0.45% 3.14% 1.37% 12.59% 3.65%
8/31/95 $1.00 0.000000000 0.000000000 0.004436933 0.004436933 0.44% 3.60% 1.34% 13.09% 3.69%
9/29/95 $1.00 0.000000000 0.000000000 0.004226527 0.004226527 0.42% 4.04% 1.32% 13.57% 3.73%
10/31/95 $1.00 0.000000000 0.000000000 0.004228931 0.004228931 0.42% 4.48% 1.29% 14.05% 3.76%
11/30/95 $1.00 0.000000000 0.000000000 0.004074766 0.004074766 0.41% 4.90% 1.26% 14.52% 3.79%
12/29/95 $1.00 0.000000000 0.000000000 0.004123732 0.004123732 0.41% 5.33% 1.25% 14.99% 3.82%
1/31/96 $1.00 0.000000000 0.000000000 0.004024956 0.004024956 0.40% 0.40% 1.23% 15.45% 3.84%
2/29/96 $1.00 0.000000000 0.000000000 0.003662782 0.003662782 0.37% 0.77% 1.19% 15.88% 3.86%
3/29/96 $1.00 0.000000000 0.000000000 0.003831275 0.003831275 0.38% 1.16% 1.16% 16.32% 3.88%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000876603
<NAME> ACCESSOR FUNDS, INC.
<SERIES>
<NUMBER> 01
<NAME> GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 43306129
<INVESTMENTS-AT-VALUE> 49240924
<RECEIVABLES> 1499714
<ASSETS-OTHER> 30675
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50771313
<PAYABLE-FOR-SECURITIES> 1734071
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 505662
<TOTAL-LIABILITIES> 2239733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41498906
<SHARES-COMMON-STOCK> 2698148
<SHARES-COMMON-PRIOR> 1637255
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1097879
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5934795
<NET-ASSETS> 48531580
<DIVIDEND-INCOME> 701904
<INTEREST-INCOME> 7482
<OTHER-INCOME> 0
<EXPENSES-NET> 401680
<NET-INVESTMENT-INCOME> 307706
<REALIZED-GAINS-CURRENT> 3836189
<APPREC-INCREASE-CURRENT> 4799659
<NET-CHANGE-FROM-OPS> 8943554
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 307706
<DISTRIBUTIONS-OF-GAINS> 2871763
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1512539
<NUMBER-OF-SHARES-REDEEMED> 599569
<SHARES-REINVESTED> 147923
<NET-CHANGE-IN-ASSETS> 24997578
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