As filed with the Securities and Exchange Commission on April 30, 1997
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. 11 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /X/
Amendment No. 16 /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
-------------------------------
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):
/X/ immediately upon filing pursuant to paragraph (b)
/ / on April 30, 1997 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, 1996 on February 28, 1997.
<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 Summary - Financial Highlights
Information
Item 4. General Description Additional Information; Description of
of Registrant 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 Annual Report for the Fiscal Year
of Fund Performance Ended December 31, 1996
Item 6. Capital Stock and Other Additional Information; Dividends and
Securities Distributions; Taxes
Item 7. Purchase of Securities Purchase of Portfolio Shares
Being Offered
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 General Information and History
and History
Item 13. Investment Objectives Investment Restrictions, Policies and
and Policies Risk Considerations
Item 14. Management of the Management of the Fund
Registrant
Item 15. Control Persons and Control Persons and Principal Holders
Principal Holders of of Securities
Securities
Item 16. Investment Advisory and Investment Advisory and Other Services;
Other Services Money Managers
Item 17. Brokerage Allocation Portfolio Transaction Policies
Item 18. Capital Stock and Other General Information and History
Securities
Item 19. Purchase, Redemption and Valuation of Portfolio Shares
Pricing of Securities
Being Offered
Item 20. Tax Status Taxes
Item 21. Underwriters Plan of Distribution
Item 22. Calculations of Performance Performance Information
Data
Item 23. Financial Statements Financial Statements
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 30, 1997 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 30, 1997, 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. The SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund.
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. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS.
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..............................................6
FINANCIAL HIGHLIGHTS.....................................................8
GROWTH PORTFOLIO................................................8
VALUE AND INCOME PORTFOLIO.....................................10
SMALL TO MID CAP PORTFOLIO.....................................12
INTERNATIONAL PORTFOLIO........................................14
PORTFOLIO MANAGEMENT....................................................16
DESCRIPTION OF THE PORTFOLIOS...........................................16
GENERAL........................................................16
RISK FACTORS AND SPECIAL CONSIDERATIONS........................17
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES..................18
INVESTMENT POLICIES............................................20
INVESTMENT RESTRICTIONS........................................26
GENERAL MANAGEMENT OF THE PORTFOLIOS....................................27
THE MONEY MANAGERS......................................................30
EXPENSES OF THE PORTFOLIOS..............................................34
PORTFOLIO TRANSACTION POLICIES..........................................34
DIVIDENDS AND DISTRIBUTIONS.............................................35
TAXES...................................................................36
CALCULATION OF PORTFOLIO PERFORMANCE....................................37
VALUATION OF PORTFOLIO SHARES...........................................38
PURCHASE OF PORTFOLIO SHARES............................................39
REDEMPTION OF PORTFOLIO SHARES..........................................41
ADDITIONAL INFORMATION..................................................42
SERVICE PROVIDERS..............................................42
SHAREHOLDER SERVICING ARRANGEMENTS.............................43
SIGNATURE GUARANTEES...........................................43
ORGANIZATION, CAPITALIZATION AND VOTING........................44
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS..............45
GLASS-STEAGALL ACT.............................................45
MONEY MANAGER PROFILES..................................................46
GROWTH PORTFOLIO...............................................46
VALUE AND INCOME PORTFOLIO.....................................46
SMALL TO MID CAP PORTFOLIO.....................................46
INTERNATIONAL PORTFOLIO........................................47
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:
o 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").
o 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.
o SMALL TO MID CAP PORTFOLIO (1) -- Symphony Asset Management, Inc. -- seeks
capital growth through investing primarily in equity securities of small to
medium capitalization issuers.
o 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.
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."
- ----------
1 Formerly the "Small Cap Portfolio." See Statement of Additional Information
for more detailed information.
<PAGE>
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.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts as
custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan ("IRA
Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
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.
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
---------------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
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
(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."
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
(as a percentage of average ------------------------------------------
net assets) Value Small to
Growth and Income Mid Cap International
------ ---------- -------- -------------
Management Fees(b) 0.65% 0.75% 0.92% 1.05%
12b-1 Fees(c) None None None None
Other Expenses 0.26% 0.31% 0.20% 0.59%
----- ----- ----- -----
Total Portfolio Operating Expenses 0.91% 1.06% 1.12% 1.64%
===== ===== ===== =====
(a) The actual expense ratios for the fiscal year ended December 31, 1996, 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, 1997, not actual expenses. For actual expenses incurred
during the fiscal year ended December 31, 1996, 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:
Portfolios
-------------------------------------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
One Year $ 9 $ 11 $ 11 $ 17
Three Years 29 34 36 52
Five Years 50 58 62 89
Ten Years 112 129 136 194
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" in the Statement of Additional
Information.
<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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Growth Portfolio
Period from
Year ended Year ended Year ended Year ended 8/25/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $17.99 $14.37 $14.16 $13.06 $12.00
------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) 0.19 0.15 0.13 0.14 0.06
Before Bennington expense subsidy 0.19 0.15 0.12 (0.03) (0.06)
Realized and Unrealized Gain (Loss) on
Investments 3.35 4.76 0.42 1.69 1.14
---- ---- ---- ---- ----
Total from Investment Operations 3.54 4.91 0.55 1.83 1.20
---- ---- ---- ---- ----
Dividends from Net Investment Income (0.19) (0.15) (0.13) (0.14) (0.06)
Capital Gains Distributions (1.83) (1.14) (0.21) (0.59) (0.08)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total Distributions (2.02) (1.29) (0.34) (0.73) (0.14)
----- ----- ----- ----- -----
Net Asset Value at End of Period $19.51 $17.99 $14.37 $14.16 $13.06
===== ===== ===== ===== =====
Total Return(2) 19.83% 34.32% 3.99% 14.21% 10.01%
Net Assets, End of Period (000 Omitted) $60,586 $48,532 $23,534 $8,986 $4,253
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.13% 1.26% 1.76% 1.21% 1.18%*
Before Bennington expense subsidy 1.13% 1.26% 1.83% 2.64% 3.91%*
Ratio of Net Investment Income to Average
Net Assets
After Bennington expense subsidy(1) 0.97% 0.97% 1.02% 1.16% 1.26%*
Before Bennington expense subsidy 0.97% 0.97% 0.95% (0.27%) (1.47%)*
Portfolio Turnover Rate(3) 81.79% 99.73% 57.71% 60.92% 19.88%
Average commission rate paid(4) $0.02
- ----------
(1) Effective March 1, 1994, Bennington discontinued subsidizing operating
expenses other than Bennington's and Money Managers' fees ("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."
(4) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* 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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Value and Income Portfolio
Period from
Year ended Year ended Year ended Year ended 8/25/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $15.91 $13.01 $13.58 $12.58 $12.00
----- ----- ----- ----- -----
Net Investment Income
After Bennington expense subsidy(1) 0.24 0.33 0.25 0.25 0.12
Before Bennington expense subsidy 0.24 0.33 0.24 0.08 (0.03)
Realized and Unrealized Gain (Loss) on
Investments 3.51 3.96 (0.51) 1.59 0.59
---- ---- ----- ---- ----
Total from Investment Operations 3.75 4.29 (0.26) 1.84 0.71
---- ---- ----- ---- ----
Dividends from Net Investment Income (0.24) (0.33) (0.25) (0.25) (0.12)
Capital Gains Distributions (1.67) (1.06) (0.05) (0.59) (0.01)
Distributions in Excess of Capital Gains 0.00 0.00 (0.01) 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total Distributions (1.91) (1.39) (0.31) (0.84) (0.13)
----- ----- ----- ----- -----
Net Asset Value at End of Period $17.75 $15.91 $13.01 $13.58 $12.58
====== ====== ====== ====== ======
Total Return(2) 23.94% 33.25% (1.93%) 14.69% 5.92%
Net Assets, End of Period (000 Omitted) 36,367 24,915 19,999 11,225 3,859
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.21% 1.40% 1.77% 1.21% 1.18%*
Before Bennington expense subsidy 1.21% 1.40% 1.85% 2.61% 4.60%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) 1.43% 2.18% 2.00% 2.02% 2.86%*
Before Bennington expense subsidy 1.43% 2.18% 1.92% 0.62% (0.56%)*
Portfolio Turnover Rate(3) 93.54% 100.88% 54.26% 64.56% 7.94%
Average commission rate paid(4) 0.05
- ----------
(1) 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."
(4) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* 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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Small to Mid Cap Portfolio
(formerly the "Small Cap Portfolio")(1)
Period from
Year ended Year ended Year ended Year ended 8/25/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $17.60 $14.08 $14.79 $13.56 $12.00
----- ----- ----- ----- -----
Net Investment Income
After Bennington expense subsidy(2) 0.07 0.06 (0.01) 0.04 0.03
Before Bennington expense subsidy 0.07 0.06 (0.04) (0.20) (0.15)
Realized and Unrealized Gain (Loss)
on Investments 4.22 4.42 (0.59) 1.91 1.56
---- ---- ----- ---- ----
Total from Investment Operations 4.29 4.48 (0.60) 1.95 1.59
---- ---- ----- ---- ----
Dividends from Net Investment Income (0.07) (0.06) 0.00 (0.04) (0.03)
Capital Gains Distributions (3.00) (0.90) (0.10) (0.68) 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 0.00 (0.01) (0.00) 0.00
---- ---- ----- ----- ----
Total Distributions (3.07) (0.96) (0.11) (0.72) (0.03)
----- ----- ----- ----- -----
Net Asset Value at End of Period $18.82 $17.60 $14.08 $14.79 $13.56
===== ===== ===== ===== =====
Total Return(3) 24.85% 31.98% (4.07%) 14.39% 13.28%
Net Assets, End of Period (000 Omitted) 65,479 49,803 24,148 9,791 4,520
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.17% 1.31% 1.98% 1.55% 1.51%*
Before Bennington expense subsidy 1.17% 1.31% 2.38% 3.33% 5.36%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) 0.37% 0.41% (0.18%) 0.30% 0.74%*
Before Bennington expense subsidy 0.37% 0.41% (0.58%) (1.48%) (3.11%)*
Portfolio Turnover Rate(4) 113.44% 84.26% 30.14% 59.20% 12.57%
Average commission rate paid(5) $0.03
- ----------
(1) The financial highlights reflected prior to 12/31/96 are the financial
highlights of the Small Cap Portfolio, referred to as the Small to Mid Cap
Portfolio since September 15, 1995. 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) 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."
(5) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* 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 the year
ended December 31, 1996, is incorporated by reference into and, unless
previously provided, is delivered together with the Statement of Additional
Information dated April 30, 1997.
<TABLE>
<CAPTION>
International Portfolio
Period from 10/3/94
Year ended 12/31/96 Year ended 12/31/95 to 12/31/94
------------------- ------------------- -----------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $12.55 $11.67 $12.00
----- ----- -----
Net Investment Income
After Bennington expense subsidy(1) (0.06) 0.05 0.01
Before Bennington expense subsidy (0.06) 0.04 (0.35)
Realized and Unrealized Gain
(Loss) on Investments 1.80 0.83 (0.34)
---- ---- -----
Total from Investment Operations 1.74 0.88 (0.33)
---- ---- -----
Dividends from Net Investment Income 0.00 0.00 0.00
Capital Gains Distributions (0.44) 0.00 0.00
Distributions in Excess of Capital Gains (0.02) 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00
---- ---- ----
Total Distributions (0.46) 0.00 0.00
----- ---- ----
Net Asset Value at End of Period $13.83 $12.55 $11.67
===== ===== =====
Total Return(2) 13.78% 7.63% (2.75%)
Net Assets, End of Period
000 Omitted) 73,019 39,102 7,566
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.52% 1.83% 1.86%*
Before Bennington expense subsidy 1.52% 1.93% 4.06%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) (0.26)% 0.10% 0.38%*
Before Bennington expense subsidy (0.26)% 0.00% (1.82%)*
Portfolio Turnover Rate(3) 157.66% 84.85% 0.82%
Average commission rate paid(4) $0.01
- ----------
(1) 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."
(4) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* 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. Bennington, in conjunction with the Board of
Directors, reviews Money Managers' performance. Bennington may add or 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. 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 of 1940,
as amended (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."
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. For a more detailed
discussion regarding the benchmark indices, see Appendix A.
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.
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 up to 5% of
their net assets in 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 assets of the International
Portfolio of a dollar amount having an aggregate value, measured on a daily
basis, at least 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 assets with an aggregate value, measured on a daily basis, at
least 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 assets with an aggregate value, measured on a daily basis, 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 assets having an aggregate
value, measured on a daily basis, at least equal to the amount of the covered
obligations. 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, was organized as
a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. 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, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. 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. See "Statement of Additional Information -
Management of the Fund."
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, 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.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington and
Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, effective November 18, 1996, under which Fifth Third provides
certain portfolio accounting and other services, including maintenance of the
books and records of the Portfolios required under the Investment Company Act.
As compensation for these services, the Fund pays Fifth Third an annual fund
accounting and service fee (the "Fee"), to be calculated daily and paid monthly.
The annual Fee for each Portfolio shall be the greater of a monthly minimum or
an asset based fee, as follows:
Monthly First Next Assets over
Portfolio Minimum OR 100,000,000 150,000,000 250,000,000
- --------- ------------------------------------------------------
Growth 1,500 .03% .02% .01%
Value and Income 1,500 .03% .02% .01%
Small to Mid Cap 1,500 .03% .02% .01%
International Equity 3,000 .04% .03% .02%
The Fund pays an additional annual Fee of $2,000 per Portfolio for other
administrative services rendered, to be charged monthly. Should the Fund add
additional share classes, there will be an annual charge of $7,000 per
additional class per Portfolio, also to be charged monthly. Finally, the Fund
reimburses Fifth Third for its out-of-pocket expenses incurred in performing its
services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage. The total
costs for these administrative fees are borne by each Portfolio based on the
proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement on October 4,
1996, effective November 18, 1996, under which Fifth Third acts as Custodian of
the Portfolios' assets. As compensation for its services rendered, the Fund pays
Fifth Third an annual domestic custody fee of: .0025% of the average gross
assets and an annual global custody fee of .08% of the average gross assets,
exclusive of transaction charges. The total costs for the custodial fees are
borne by each Portfolio based on the proportionate net assets of each Portfolio.
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 defensive Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") under the Investment
Company Act that is (i) designed to protect against any claim 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. Payments made under the Distribution Plan 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%
No payments are made by the Portfolios under the Distribution Plan. 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. Money Managers may be added or terminated by Bennington subject to the
approval of the Board of Directors of the Fund and appropriate notice to the
shareholders of the applicable Portfolio, as discussed below.
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. A separate Money Manager currently manages the assets of
each Portfolio. See "MONEY MANAGER PROFILES."
The Fund was issued an exemptive order by the Securities and Exchange
Commission on September 4, 1996 for an exemption (the "Exemption") from certain
provisions of the Investment Company Act, which would otherwise require
Bennington to obtain formal shareholder approval prior to engaging and entering
into money manager agreements with Money Managers. The relief is based on the
conditions set forth in the Exemption that, among other things: (1) Bennington
will select, monitor, evaluate and allocate assets to the Money Managers and
oversee Money Managers compliance with the relevant Portfolio's investment
objective, policies and restrictions; (2) before a Portfolio may rely on the
Exemption, the Exemption must be approved by the shareholders of the Portfolios
operating under the Exemption; (3) the Fund will provide to shareholders certain
information about a new Money Manager and its money manager agreement within 60
days of the engagement of a new Money Manager; (4) the Fund will disclose in
this Prospectus the existence, substance and effect of the Exemption; and (5)
the Directors, including a majority of the "non-interested" Directors, must
approve each money manager agreement in the manner required under the Investment
Company Act. Any changes to the Management Agreement between the Fund and
Bennington would still require shareholder approval. As required by the
Exemption, the shareholders of each Portfolio determined, at a shareholders'
meeting held on August 15, 1995, to permit the Fund to replace or add Money
Managers and to enter into money manager agreements with Money Managers upon
approval of the Board of Directors but without formal shareholder approval.
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. The Money
Managers for the 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 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.
MONEY MANAGER FEE SCHEDULE
FOR A MANAGER FROM THE
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average
Annualized
Performance Annualized
Differential Vs. Performance
Portfolio Basic Fee The Applicable Index Fee
- --------- --------- -------------------- ---
Domestic Equity Portfolios 0.10% = or greater than 2.00% 0.22%
= or greater than 1.00%
and less than 2.00% 0.20%
= or greater than 0.50%
and less than 1.00% 0.15%
= or greater than 0.00%
and less than 0.50% 0.10%
= or greater than -0.50%
and less than 0.00% 0.05%
less than -0.50% 0%
International Portfolio 0.20% = or greater than 4.00% 0.40%
= or greater than 2.00%
and less than 4.00% 0.30%
= or greater than 0.00%
and less than 2.00% 0.20%
= or greater than -2.00%
and less than 0.00% 0.10%
less than -2.00% 0%
The Performance Fee component will be adjusted each quarter and paid quarterly
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.
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
International Morgan Stanley Capital International
EAFE(R) + EMF 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 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. 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.
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
Number Of Portfolio
Quarters Basic Management Performance
Managed By Fee Fee Fee
Money (All (1st 5 6th Quarter
Portfolio Manager Period Quarters) Quarters) Forward) Total Fee
- --------- ------- ------ --------- --------- --------- ---------
Growth 15 2nd Quarter 1996 0.10% N/A 0.22% 0.32%
16 3rd Quarter 1996 0.10% N/A 0.22% 0.32%
17 4th Quarter 1996 0.10% N/A 0.20% 0.30%
18 1st Quarter 1997 0.10% N/A 0.15% 0.25%
19 2nd Quarter 1997 0.10% N/A 0.05% 0.15%
Value 15 2nd Quarter 1996 0.10% N/A 0.15% 0.25%
and Income 16 3rd Quarter 1996 0.10% N/A 0.10% 0.20%
17 4th Quarter 1996 0.10% N/A 0.15% 0.25%
18 1st Quarter 1997 0.10% N/A 0.15% 0.25%
19 2nd Quarter 1997 0.10% N/A 0.20% 0.30%
Small to Mid 4 2nd Quarter 1996 0.10% 0.10% N/A 0.20%
Cap 5 3rd Quarter 1996 0.10% 0.10% N/A 0.20%
6 4th Quarter 1996 0.10% N/A N/A 0.20%
7 1st Quarter 1997 0.10% N/A 0.22% 0.32%
8 2nd Quarter 1997 0.10% N/A 0.22% 0.32%
International 6 2nd Quarter 1996 0.20% N/A 0.00% 0.20%
7 3rd Quarter 1996 0.20% N/A 0.20% 0.40%
8 4th Quarter 1996 0.20% N/A 0.30% 0.50%
9 1st Quarter 1997 0.20% N/A 0.30% 0.50%
10 2nd Quarter 1997 0.10% N/A 0.30% 0.50%
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those expressly
assumed by Bennington. See "FINANCIAL HIGHLIGHTS" for expense information
related to the Fund's most recently completed fiscal year. 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."
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, end of year 1st business day following
end of year
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. The Portfolios may
also include in advertisements data comparing performance with the performance
of non-related investment media, published editorial comments and performance
rankings compiled by independent organizations and publications that monitor the
performance of mutual funds. Performance information may be quoted numerically
or may be presented in a table, graph or other illustration. In addition,
Portfolio performance may be compared to well-known indices of market
performance. Portfolio performance may also be compared, on a relative basis, to
other Portfolios of the Fund. This relative comparison, which may be based upon
historical or expected Portfolio performance, may be presented numerically,
graphically or in text. Portfolio performance may also be combined or blended
with other Portfolios of the Fund, and that combined or blended performance may
be compared to the same indices to which individual Portfolios are compared.
It is important to note that total return figures are based on historical
earnings and are not intended to indicate future performance. The value of Fund
shares when redeemed may be more or less than their original cost. 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, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indices of
investment securities or other industry publications.
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,
Fifth Third and Bennington are open for business. Non-business days in 1997 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--Shareholder Servicing
Arrangements."
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--Shareholder
Servicing Arrangements." 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 or wire made payable to
someone other than the registered owner of the shares and/or sent 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 redemption proceeds payable to
someone other than the registered owner of the shares and/or send them to an
address other than the address of record; and (3) be signed by all registered
owners with their signatures guaranteed. See "ADDITIONAL
INFORMATION--Shareholder Servicing Arrangements."
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, Fifth Third 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 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
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, Administrator, Transfer Agent, Registrar and Dividend Disbursing
Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101, is
the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also 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.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45264, 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. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third 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. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 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.
Shareholder Servicing Arrangements
From time to time, Bennington may pay amounts to third parties that provide
shareholder services or other administrative services to persons who own shares
of the Fund. Such organizations, rather than their customers, may be the
shareholder of record of the shares. Such organizations may also charge a fee
for this service and may require different minimum initial and subsequent
investments than the Fund. Such organizations may also impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. The Fund is not responsible for the failure of any such
organization to carry out its obligations to its customers. The Fund does not
pay any portion of such fees.
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 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, 1997, the following persons were owners of record of 25% or
more of the shares of the Portfolios of the Fund:
Value and Small to
Beneficial Owner Growth Income Mid Cap International
---------------- ------ ------ ------- -------------
Charles Schwab & Company
101 Montgomery St.
San Francisco, CA 94104 25.0%
Stap & Company, account
nominee for
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302 51.5% 44.2%
As of March 31, 1997, 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 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. To the extent that banks or subsidiaries of banks are
deemed to be performing any such activities, the Fund believes such entities may
engage in such activities for the Portfolios 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 entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself 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 but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
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 02116
("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 and registered investment adviser under the Investment
Advisers Act 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. 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 general partner is Nicholas-Applegate
Capital Management Holdings, L.P., a California limited partnership controlled
by Arthur E. Nicholas. Senior members of the seven member international
portfolio team include: Catherine Somhegyi, Lawrence S. Speidell and Loretta J.
Morris. The senior members are primarily responsible for making the day-to-day
management and investment decisions for the International Portfolio. Mr.
Nicholas, Managing Partner, founded Nicholas-Applegate in 1984. Catherine
Somhegyi, Chief Investment Officer, Global Equity Management, joined
Nicholas-Applegate in 1987. 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, Senior Portfolio Manager, International, 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.
<PAGE>
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 (1)
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.
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, 1996 there were 339 companies in the Value Index;
consequently there are 161 companies in the Growth Index.
Wilshire 4500 Index (2)
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 (3)
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
26 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, 1997, the MSCI EAFE(R)+ EMF Index consisted of 2,032
companies traded on stock markets in 45 countries . The weighting of the MSCI
EAFE(R)+ EMF Index by country was as follows:
Developed Markets: Australia 2.60%, Austria 0.36%, Belgium 1.12%, Denmark 0.84%,
Finland 0.63%, France 6.48%, Germany 8.07%, Hong Kong 3.11%, Ireland 0.30%,
Italy 2.78%, Japan 25.28%, Netherlands 4.44%, New Zealand 0.33%, Norway 0.51%,
Singapore 1.43%, Spain 1.97%, Sweden 2.33%, Switzerland 5.43%, United Kingdom
16.94%.
Emerging Markets: Argentina 0.51%, Brazil 2.08%, Chile 0.56%, China Free 0.08%,
Colombia 0.12%, Czech Republic 0.17%, Greece 0.22%, Hungary 0.07%, India 0.07%,
Indonesia 0.80%, Israel 0.77%, Jordan 0.31%, Korea Free 0.58%, Malaysia 2.32%,
Mexico Free 1.20%, Pakistan 0.10%, Peru 0.16%, Philippines Free 0.49%, Poland
0.07%, Portugal 0.31%, South Africa 1.73%, Sri Lanka 0.01%, Taiwan 1.36%,
Thailand 0.57%, Turkey 0.28%, Venezuela Free 0.15%.
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 1997, the current value of the MSCI
EAFE(R) + EMF Index was 188.5 (with gross dividends reinvested).
- ----------
1 "Standard & Poor's," "S&P" and "S&P 500" are trademarks of Standard and
Poor's, a division of The McGraw-Hill Companies, Inc. The Growth and Value
and Income Portfolios are not sponsored, endorsed, sold or promoted by
Standard & Poor's.
2 "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.
3 "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.
<PAGE>
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 30, 1997 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 30, 1997, 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. The SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated by reference, and
other information regarding the Fund.
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. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS.
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.........................8
MORTGAGE SECURITIES PORTFOLIO....................................10
U.S. GOVERNMENT MONEY PORTFOLIO..................................12
PORTFOLIO MANAGEMENT.........................................................14
DESCRIPTION OF THE PORTFOLIOS................................................14
GENERAL..........................................................14
RISK FACTORS AND SPECIAL CONSIDERATIONS..........................15
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES....................16
INVESTMENT POLICIES..............................................18
INVESTMENT RESTRICTIONS..........................................25
GENERAL MANAGEMENT OF THE PORTFOLIOS.........................................26
THE MONEY MANAGERS...........................................................29
EXPENSES OF THE PORTFOLIOS...................................................32
PORTFOLIO TRANSACTION POLICIES...............................................33
DIVIDENDS AND DISTRIBUTIONS..................................................33
TAXES........................................................................34
CALCULATION OF PORTFOLIO PERFORMANCE.........................................36
VALUATION OF PORTFOLIO SHARES................................................37
PURCHASE OF PORTFOLIO SHARES.................................................37
REDEMPTION OF PORTFOLIO SHARES...............................................40
ADDITIONAL INFORMATION.......................................................41
SERVICE PROVIDERS................................................41
SHAREHOLDER SERVICING ARRANGEMENTS...............................42
SIGNATURE GUARANTEES.............................................42
ORGANIZATION, CAPITALIZATION AND VOTING..........................42
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS................43
GLASS-STEAGALL ACT...............................................44
MONEY MANAGER PROFILES.......................................................44
INTERMEDIATE FIXED-INCOME PORTFOLIO..............................44
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO........................45
MORTGAGE SECURITIES PORTFOLIO....................................45
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:
o 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.
o 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.
o MORTGAGE SECURITIES PORTFOLIO -- BLACKROCK FINANCIAL MANAGEMENT, INC. --
seeks generation of current income by investing primarily in
mortgage-related securities.
o 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.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts as
custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan (the
"IRA Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
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.
SHAREHOLDER TRANSACTION EXPENSES(a) PORTFOLIOS(b)
----------------------------------------------------
SHORT- U.S.
INTERMEDIATE INTERMEDIATE MORTGAGE GOVERNMENT
FIXED-INCOME FIXED-INCOME SECURITIES MONEY
------------ ------------ ---------- -----
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
(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."
ANNUAL PORTFOLIO OPERATING EXPENSES(a) PORTFOLIOS
(AS A PERCENTAGE OF SHORT- U.S.
AVERAGE NET ASSETS) INTERMEDIATE INTERMEDIATE MORTGAGE GOVERNMENT
FIXED-INCOME FIXED-INCOME SECURITIES MONEY
------------ ------------ ---------- -----
Management Fees (b) 0.51% 0.51% 0.59% 0.25%
12b-1 Fees(c) None None None None
Other Expenses 0.35% 0.27% 0.28% 0.28%
----- ----- ----- -----
Total Portfolio
Operating Expenses 0.86% 0.78% 0.87% 0.53%
===== ===== ===== =====
(a) The actual expense ratios for the fiscal year ended December 31, 1996,
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, 1997, not actual expenses. For actual
expenses incurred during the fiscal year ended December 31, 1996, 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:
PORTFOLIOS
SHORT- U.S.
INTERMEDIATE INTERMEDIATE MORTGAGE GOVERNMENT
FIXED-INCOME FIXED-INCOME SECURITIES MONEY
------------ ------------ ---------- -----
One Year $9 $8 $9 $5
Three Years $27 $25 $28 $17
Five Years $48 $43 $48 $30
Ten Years $106 $97 $107 $66
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" in the Statement of Additional
Information.
<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, 1996, is
incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Intermediate Fixed-Income Portfolio
Period from
Year ended Year ended Year ended Year ended 6/16/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $12.29 $11.04 $12.34 $12.00 $12.00
------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) 0.67 0.71 0.65 0.56 0.36
Before Bennington expense subsidy 0.67 0.71 0.64 0.52 0.30
Realized and Unrealized Gain (Loss) on
Investments (0.39) 1.25 (1.28) 0.57 0.15
----- ---- ----- ---- ----
Total from Investment Operations 0.28 1.96 (0.63) 1.13 0.51
---- ---- ----- ---- ----
Dividends from Net Investment Income (0.67) (0.71) (0.65) (0.56) (0.36)
Capital Gains Distributions 0.00 0.00 (0.02) (0.23) (0.15)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total Distributions (0.67) (0.71) (0.67) (0.79) (0.51)
----- ----- ----- ----- -----
Net Asset Value at End of Period $11.90 $12.29 11.04 12.34 12.00
====== ====== ===== ===== =====
Total Return(2) 2.56% 18.26% (5.24%) 9.53% 4.26%
Net Assets, End of Period (000 Omitted) $52,248 $36,878 $31,405 $26,642 $10,901
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 0.88% 0.96% 1.24% 1.06% 0.85%*
Before Bennington expense subsidy 0.88% 0.96% 1.28% 1.35% 1.50%*
Ratio of Net Investment Income to Average Net
Assets
After Bennington expense subsidy(1) 5.79% 6.07% 5.65% 4.62% 5.33%*
Before Bennington expense subsidy 5.79% 6.07% 5.61% 4.33% 4.68%*
Portfolio Turnover Rate(3) 94.69% 187.62% 255.11% 265.06% 100.57%
- ----------
(1) Effective March 1, 1994, Bennington discontinued subsidizing operating
expenses other than Bennington's and the Money Managers' fees ("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>
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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Short-Intermediate Fixed-Income Portfolio
Period from
Year ended Year ended Year ended Year ended 5/18/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $12.32 $11.62 $12.29 $12.16 $12.00
------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) 0.59 0.60 0.50 0.46 0.33
Before Bennington expense subsidy 0.59 0.60 0.49 0.45 0.29
Realized and Unrealized Gain (Loss) on
Investments (0.16) 0.70 (0.67) 0.22 0.16
----- ---- ----- ---- ----
Total from Investment Operations 0.43 1.30 (0.17) 0.68 0.49
---- ---- ----- ---- ----
Dividends from Net Investment Income (0.59) (0.60) (0.50) (0.46) (0.33)
Capital Gains Distributions 0.00 0.00 0.00 (0.07) 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 (0.02) 0.00
---- ---- ---- ----- ----
Total Distributions (0.59) (0.60) (0.50) (0.55) (0.33)
----- ----- ----- ----- -----
Net Asset Value at End of Period $12.16 $12.32 $11.62 $12.29 $12.16
===== ===== ===== ===== =====
Total Return(2) 3.63% 11.42% (1.42%) 5.62% 4.12%
Net Assets, End of Period (000 Omitted) $36,701 $35,272 $32,233 $32,568 $13,365
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 0.93% 0.94% 1.18% 1.05% 0.83%*
Before Bennington expense subsidy 0.93% 0.94% 1.22% 1.12% 1.42%*
Ratio of Net Investment Income to Average Net
Assets
After Bennington expense subsidy(1) 4.89% 4.99% 4.17% 3.78% 4.40%*
Before Bennington expense subsidy 4.89% 4.99% 4.13% 3.71% 3.81%*
Portfolio Turnover Rate(3) 31.12% 41.93% 36.54% 88.28% 107.26%
- ----------
(1) 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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
Mortgage Securities Portfolio
Period from
Year ended Year ended Year ended Year ended 5/18/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $12.38 $11.36 $12.17 $12.02 $12.00
----- ----- ----- ----- -----
Net Investment Income
After Bennington expense subsidy(1) 0.73 0.76 0.60 0.55 0.34
Before Bennington expense subsidy 0.73 0.76 0.60 0.53 0.30
Realized and Unrealized Gain on Investments (0.15) 1.02 (0.80) 0.31 0.13
----- ---- ----- ---- ----
Total from Investment Operations 0.58 1.78 (0.20) 0.86 0.47
---- ---- ----- ---- ----
Dividends from Net Investment Income (0.73) (0.76) (0.60) (0.55) (0.34)
Capital Gains Distributions 0.00 0.00 (0.01) (0.16) (0.03)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 (0.08)
---- ---- ---- ---- -----
Total Distributions (0.73) (0.76) (0.61) (0.71) (0.45)
----- ----- ----- ----- -----
Net Asset Value at End of Period $12.23 $12.38 $11.36 $12.17 $12.02
===== ===== ===== ===== =====
Total Return(2) 4.95% 16.03% (1.65%) 7.26% 3.93%
Net Assets, End of Period (000 Omitted) $73,862 $49,830 $32,975 $29,731 $15,356
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 0.95% 1.03% 1.31% 1.03% 0.84%*
Before Bennington expense subsidy 0.95% 1.03% 1.35% 1.18% 1.40%*
Ratio of Net Investment Income to Average Net
Assets
After Bennington expense subsidy(1) 6.08% 6.41% 5.18% 4.55% 4.68%*
Before Bennington expense subsidy 6.08% 6.41% 5.14% 4.40% 4.12%*
Portfolio Turnover Rate (3) 356.23% 422.56% 603.51% 399.19% 114.04%*
- ----------
(1) 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, 1996,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated April 30, 1997.
<TABLE>
<CAPTION>
U.S. Government Money Portfolio(1)
Period from
Year ended Year ended Year ended Year ended 4/9/92
12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $1.00 $1.00 $1.00 $1.00 1.00
----- ----- ----- ----- ----
Net Investment Income
After Bennington expense subsidy(2) 0.05 0.05 0.04 0.03 0.02
Before Bennington expense subsidy 0.05 0.05 0.03 0.03 0.02
Realized and Unrealized Gain on Investments 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total from Investment Operations 0.05 0.05 0.04 0.03 0.02
---- ---- ---- ---- ----
Dividends from Net Investment Income (0.05) (0.05) (0.04) (0.03) (0.02)
Capital Gains Distributions 0.00 0.00 0.00 0.00 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
Total Distributions (0.05) (0.05) (0.04) (0.03) (0.02)
----- ----- ----- ----- -----
Net Asset Value at End of Period $1.00 $1.00 $1.00 $1.00 $1.00
==== ==== ==== ==== ====
Total Return(3) 4.78% 5.33% 3.70% 2.81% 2.40%
Net Assets, End of Period (000 Omitted) $61,672 $41,882 $12,008 $26,693 $51,145
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(2) 0.59% 0.53% 0.45% 0.45% 0.32%*
Before Bennington expense subsidy 0.59% 0.78% 1.27% 0.77% 0.39%*
Ratio of Net Investment Income to Average Net
Assets
After Bennington expense subsidy(2) 4.73% 5.14% 3.51% 2.71% 3.25%*
Before Bennington expense subsidy 4.73% 4.89% 2.69% 2.39% 3.18%*
Portfolio Turnover Rate -- -- -- -- --
- -------
(1) State Street Bank and Trust Company ("State Street") was the Money Manager
for the U.S. Government Money Portfolio from inception of the Portfolio
through September 6, 1994, when 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) 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. Bennington, in conjunction with the Board of
Directors, reviews Money Managers' performance. Bennington may add or 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. 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 of 1940,
as amended (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."
GENERAL MANAGEMENT OF THE PORTFOLIOS
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. For a more detailed
discussion regarding the benchmark indices, see Appendix A.
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 up to 5% of
their net assets in 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 assets with an aggregate value, measured on a daily basis, at
least 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
assets with an aggregate value, measured on a daily basis, 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 assets having an aggregate
value, measured on a daily basis, at least equal to the amount of the covered
obligations. 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, was organized as
a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. 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, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. 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. See "Statement of Additional Information -
Management of the Fund."
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, 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.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington and
Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, for the Intermediate Fixed-Income Portfolio, Short-Intermediate
Fixed-Income Portfolio and U.S. Government Money Portfolio effective October 7,
1996, and for the Mortgage Securities Portfolio effective November 18, 1996,
under which Fifth Third provides certain Portfolio accounting and other
services, including maintenance of the books and records of the Portfolios
required under the Investment Company Act. As compensation for these services,
the Fund pays Fifth Third an annual fund accounting and service fee (the "Fee"),
to be calculated daily and paid monthly. The annual Fee for each Portfolio shall
be the greater of a monthly minimum or an asset based fee, as follows:
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ----------------------- ------------ ------------
Intermediate
Fixed-Income $2,000 .03% .02% .01%
Short-Intermediate
Fixed Income $2,000 .03% .02% .01%
Mortgage
Securities $2,000 .03% .02% .01%
U.S. Government
Money $1,500 .03% .02% .01%
The Fund pays an additional annual Fee of $2,000 per Portfolio for other
administrative services rendered, to be charged monthly. Should the Fund add
additional share classes, there will be an annual charge of $7,000 per
additional class per Portfolio, also to be charged monthly. Finally, the Fund
reimburses Fifth Third for its out-of-pocket expenses incurred in performing its
services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage. The total
costs for these administrative fees are borne by each Portfolio based on the
proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement effective
October 4, 1996, pursuant to which Fifth Third acts as Custodian of the assets
of the Intermediate Fixed-Income Portfolio, Short-Intermediate Fixed-Income
Portfolio and U.S. Government Money Portfolio effective October 7, 1996, and of
the Mortgage Securities Portfolio effective November 18, 1996. Fifth Third 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. Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors. As compensation for
its services rendered, the Fund pays Fifth Third an annual domestic custody fee
of .0025% of the average gross assets and an annual global custody fee of .08%
of the average gross assets, exclusive of transaction charges. The total costs
for the custodial fees are borne by each Portfolio based on the proportionate
net assets of each Portfolio.
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 defensive Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") under the Investment
Company Act that is (i) designed to protect against any claim 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. 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%
No payments are made by the Portfolios under the Distribution Plan. 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. Money Managers may be added or terminated by Bennington subject to the
approval of the Board of Directors of the Fund and appropriate notification to
the shareholders of the Portfolio, as discussed below.
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 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 was issued an exemptive order by the Securities and Exchange
Commission on September 4, 1996 for an exemption (the "Exemption") from certain
provisions of the Investment Company Act which would otherwise require
Bennington to obtain formal shareholder approval prior to engaging and entering
into money manager agreements with Money Managers. The relief is based on the
conditions set forth in the Exemption that, among other things: (1) Bennington
will select, monitor, evaluate and allocate assets to the Money Managers and
oversee Money Managers compliance with the relevant Portfolio's investment
objective, policies and restrictions; (2) before a Portfolio may rely on the
Exemption, the Exemption must be approved by the shareholders of the Portfolios
operating under the Exemption; (3) the Fund will provide to shareholders certain
information about a new Money Manager and its money manager agreement within 60
days of the engagement of a new Money Manager; (4) the Fund will disclose in
this Prospectus the existence, substance and effect of the Exemption; and (5)
the Directors, including a majority of the "non-interested" Directors, must
approve each money manager agreement in the manner required under the Investment
Company Act. Any changes to the Management Agreement between the Fund and
Bennington would still require shareholder approval. As required by the
Exemption, the shareholders of each Portfolio determined, at a shareholders'
meeting held on August 15, 1995, to permit the Fund to replace or add Money
Managers and to enter into money manager agreements with Money Managers upon
approval of the Board of Directors but without formal shareholder approval.
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.
MONEY MANAGER FEE SCHEDULE FOR A
MANAGER FROM THE SIXTH CALENDAR QUARTER OF
MANAGEMENT FORWARD
Average Annualized
Performance Differential Annualized
Basic Fee vs. The Applicable Index Performance Fee
--------- ------------------------ ---------------
Bond Portfolios 0.07% = or Greater than 2.00% 0.18%
= or Greater than 0.50%
and less than 2.00% 0.16%
= or Greater than 0.25%
and less than 0.50% 0.12%
= or Greater than -0.25%
and less than 0.25% 0.08%
= or Greater than -0.50%
and less than -0.25% 0.04%
less than -0.50% 0%
The Performance Fee component will be adjusted each quarter and paid quarterly
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. 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 period:
MONEY MANAGER FEES EARNED FOR CURRENT PERIOD
Number Of Performance
Quarters Basic Fee
Managed Fee (6th
By Money (All Quarter Total
Portfolio Manager Period Quarters) Forward) Fee
--------- ------- ------ ------------------ ---
Intermediate 16 2nd Quarter 1996 0.07% 0.08% 0.15%
Fixed-Income 17 3rd Quarter 1996 0.07% 0.08% 0.15%
18 4th Quarter 1996 0.07% 0.08% 0.15%
19 1st Quarter 1997 0.07% 0.08% 0.15%
20 2nd Quarter 1997 0.07% 0.08% 0.15%
Short-Intermediate 16 2nd Quarter 1996 0.07% 0.08% 0.15%
Fixed-Income 17 3rd Quarter 1996 0.07% 0.08% 0.15%
18 4th Quarter 1996 0.07% 0.08% 0.15%
19 1st Quarter 1997 0.07% 0.08% 0.15%
20 2nd Quarter 1997 0.07% 0.08% 0.15%
Mortgage 16 2nd Quarter 1996 0.07% 0.16% 0.23%
Securities 17 3rd Quarter 1996 0.07% 0.16% 0.23%
18 4th Quarter 1996 0.07% 0.16% 0.23%
19 1st Quarter 1997 0.07% 0.16% 0.23%
20 2nd Quarter 1997 0.07% 0.16% 0.23%
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those expressly
assumed by Bennington. See FINANCIAL HIGHLIGHTS for expense information related
to the Fund's most recently completed fiscal year. 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."
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 Fixed-Income business day of following month
Mortgage Securities month
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. Shareholders
of the U.S. Government Money Portfolio who place orders and wire investment
monies prior to 9:00 a.m. Pacific time are deemed "shareholders of record" for
that day's dividend payment. 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 Portfolios may also include in
advertisements data comparing performance with the performance of non-related
investment media, published editorial comments and performance rankings compiled
by independent organizations and publications that monitor the performance of
mutual funds. Performance information may be quoted numerically or may be
presented in a table, graph or other illustration. In addition, Portfolio
performance may be compared to well-known indices of market performance.
Portfolio performance may also be compared, on a relative basis, to other
Portfolios of the Fund. This relative comparison, which may be based upon
historical or expected Portfolio performance, may be presented numerically,
graphically or in text. Portfolio performance may also be combined or blended
with other Portfolios of the Fund, and that combined or blended performance may
be compared to the same indices to which individual Portfolios are compared.
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
value of Fund shares when redeemed may be more or less than their original cost.
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, Inc. or similar
independent services that monitor the performance of mutual funds or with other
appropriate indices of investment securities or other industry publications.
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,
Fifth Third and Bennington are open for business. Non-business days in 1997 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. If Bennington receives a purchase
order for shares of the U.S. Government Money Portfolio and investment monies
are wired prior to 9:00 a.m. Pacific time, the shareholder will be entitled to
receive that day's dividend. See "Dividends and Distributions." Neither the Fund
nor the Transfer Agent will be responsible for delays of wired proceeds due to
heavy wire traffic over the Federal Reserve System. 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 IRA 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 Bennington receives a redemption request in good
order from a shareholder of the U.S. Government Money Portfolio by 9:00 a.m.
Pacific time, the shareholder will be entitled to receive redemption proceeds by
wire on the same day. Shareholders of the U.S. Government Money Portfolio who
elect this option should be aware that their account will not be credited with
the daily dividend on that day. Neither the Fund nor the Transfer Agent will be
responsible for delays of wired proceeds due to heavy wire traffic over 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 or wire made payable to
someone other than the registered owner of the shares and/or sent 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 redemption proceeds payable to
someone other than the registered owner of the shares and/or send them 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, Fifth Third, 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, Administrator, Transfer Agent, Registrar and Dividend Disbursing
Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101, is
the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also 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.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, 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. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third 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. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 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.
Shareholder Servicing Arrangements
From time to time, Bennington may pay amounts to third parties that provide
shareholder services or other administrative services to persons who own shares
of the Fund. Such organizations, rather than their customers, may be the
shareholder of record of the shares. Such organizations may also charge a fee
for this service and may require different minimum initial and subsequent
investments than the Fund. Such organizations may also impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. The Fund is not responsible for the failure of any such
organization to carry out its obligations to its customers. The Fund does not
pay any portion of such fees.
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 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, 1997, the following persons were the owners of record of
25% or more of the Portfolios of the Fund:
Short- U.S.
Intermediate Intermediate Mortgage Government
Beneficial Owner Fixed-Income Fixed-Income Securities Money
- ---------------- ------------ ----------------------- -----
Rocco Trust & Co.,
nominee for 27.1%
Johnson Heritage
Trust Company,
c/o Marshall & Ilsley
Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Zions First National Bank
One South Main Street
Salt Lake City, UT 84130 42.1% 76.2% 46.9% 48.5%
As of March 31, 1997, 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. To the extent that banks or subsidiaries of banks are
deemed to be performing any such activities, the Fund believes such entities may
engage in such activities for the Portfolios 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 entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself 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 but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
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.
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 H. Lane, Robert Kopprasch 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.
Kopprasch, Managing Director, joined Smith Barney Capital Management in
December, 1995. From 1992 to 1995, Mr. Kopprasch was Senior Vice President at
Alliance Capital Management. Prior to that, from 1989 through 1992, Mr.
Kopprasch was Managing Director at Hyperion Capital Management. 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, with principal offices at 280 Park Avenue, New
York, NY 10017. Mr. Louis M. Hudson, Vice President, is responsible for the day
to day management of the Short-Intermediate Fixed-Income Portfolio. Mr. Hudson
has been employed by Bankers Trust since 1961.
Mortgage Securities Portfolio
BlackRock Financial Management, Inc., 345 Park Avenue, 29th 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 Bank, National
Association, a national banking association ("PNC") the former 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.
<PAGE>
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.
<PAGE>
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 30, 1997
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 30, 1997, 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) -- 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.
- --------
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.
<PAGE>
TABLE OF CONTENTS
Form N-1A
Item No.
Cross reference to page in
Equity Fixed-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 11
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 35 37
16. Investment Advisory and Other Services B-21
Service Providers B-21 4, 34 4, 35
Valuation of Portfolio Shares B-35 29 30
Portfolio Transaction Policies B-35 26 27
17. Brokerage Allocation and Other
Practices B-35 -- --
18. Capital Stock and Other Securities B-4 35 35
19. Purchase, Redemption and Pricing of
Securities Being Offered B-35 30-32 31-34
20. Code of Ethics B-39 -- --
21. Taxes B-40 27 28
22. Underwriters B-32 -- --
23. Calculation of Performance Data B-37 28 29
24. Financial Statements B-43 -- --
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.
<PAGE>
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 Fifth Third Bank, 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 assets
of the Portfolio having an aggregate value, measured on a daily basis, at least
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 assets of the Portfolio of a dollar amount sufficient to make
payment for the portfolio securities to be purchased, measured on a daily basis,
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 assets with a value sufficient to meet its
obligations under the call option, measured on a daily basis, 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 assets with an aggregate value, measured on a daily
basis, 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 assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. 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 Money 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.
Name and Position with Principal Occupations
Address Age the Fund During Past Five Years
------- --- -------- ----------------------
*J. Anthony Whatley, 54 Director, President Executive Director,
III** and Principal Bennington Capital
1420 Fifth Avenue Executive Officer Management L.P.
Seattle, WA since April 1991;
President,
Bennington
Management
Associates, Inc.
since 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. Cobean, III 59 Director Partner, Martinson,
1607 South 341st Place Cobean & Associates,
Federal Way, WA P.S. (certified public
accountants) since 1973.
Geoffrey C. Cross 57 Director President, Geoffrey C.
252 Broadway Cross P.S., Inc.,
Tacoma, WA (general practice of
law) since 1970.
Ravindra A. Deo 34 Vice President, Director and Vice
1420 Fifth Avenue Treasurer and President, Northwest
Seattle, WA Principal Financial Advisors, Inc. since
and Accounting Officer July 1993; Vice
President and Chief
Investment Officer,
Bennington Capital
Management L.P.
since January 1992;
Senior Vice
President, Leland
O'Brien Rubenstein
Associates
Incorporated
(investment adviser)
from 1986 to 1991.
Linda V. Whatley** 39 Vice President and Director, Secretary
1420 Fifth Avenue Assistant Secretary and Treasurer of
Seattle, WA Northwest Advisors,
Inc. since 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 53 Vice President Director and Vice
1420 Fifth Avenue President, Northwest
Seattle, WA 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 40 Vice President and Vice President,
1420 Fifth Avenue Chief Compliance Bennington Capital
Seattle, WA Officer Management L.P.
since April 1994;
Securities and
Exchange Commission
from 1984 to 1994.
Christine J. Stansbery 45 Secretary Assistant Vice
1420 Fifth Avenue President-Compliance
Seattle, WA since January 1997,
Regulatory Manager
from March 1996 to
December 1996, Legal
Assistant from March
1993 to March 1996
at Bennington
Capital Management
L.P.; Assistant to
Administrator,
Bailey Boushay
House, Virginia
Mason Hospital, from
1990 to 1992 (health
care).
- ----------
* This Director is an "Interested Persons" by virtue of his 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, 1996:
COMPENSATION TABLE
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual from Fund
Compensation Accrued as Benefits Paid to
from the part of upon Board
Director Fund Fund Expenses Retirement Members
-------- ---- ------------- ---------- -------
J. Anthony Whatley III 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, 1997, the following persons were the owners of record
of 5% or more of the shares of the Portfolios of the Fund:
Equity Portfolios
Small to
Value and Mid International
Beneficial Owner Growth Income Cap Equity
- ---------------- ------ ------ --- ------
Charles Schwab & Company 21.5% 25.0% 11.7%
101 Montgomery St.
San Francisco, CA 94104
KEITHCO, account nominee for 8.9%
Regions Bank
1807 Tower Drive
Monroe, LA 71211-7232
Lighthouse & Co.,
account nominee for 9.9% 5.6% 5.8%
Johnson Heritage Trust
Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Macbee & Co., account 5.7%
nominee for
Eastern Bank & Trust Co.
225 Essex St.
Salem, MA 01970
OneDun, account nominee for 11.1% 7.2%
First American Bank
218 West Main Street
Dundee, IL 60118
One Valley Bank NA 5.6% 5.1% 11.2%
One Financial Place
Princeton, WV 24740
Rocco Trust & Co.,
account nominee for 19.5% 9.8% 8.0% 11.8%
Johnson Heritage Trust
Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
SNBKC & Co., account nominee for 5.2%
Security Bank of Kansas City
7th and Minnesota Avenue
One Security Plaza
Kansas City, KS 66117
Stap & Company, account nominee for 5.0% 5.2% 51.5% 44.2%
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
Zions First National Bank 9.6%
One South Main Street
Salt Lake City, UT 84130
Fixed-Income Portfolios
Short- U.S.
Intermediate Intermediate Mortgage Government
Beneficial Owner Fixed-Income Fixed-Income Securities Money
- ---------------- ------------ ------------ ---------- -----
Anbee & Company,
account nominee for 5.2%
GreatBanc Trust Company
105 East Galena Blvd.
Aurora, IL 60505
Charles Schwab & Company 5.2%
101 Montgomery St.
San Francisco, CA 94104
KEITHCO, account nominee for
Regions Bank
1807 Tower Drive
Monroe, LA 71211-7232
Lighthouse & Co.,
account nominee for 12.8% 20.2%
Johnson Heritage Trust
Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
North Carolina Trust Company 21.5%
301 North Elm Street
Greensboro, NC 27402-1108
OneDun, account nominee for 5.6% 7.0%
First American Bank
218 West Main Street
Dundee, IL 60118
One Valley Bank NA 14.1
One Financial Place
Princeton, WV 24740
Rocco Trust & Co.,
account nominee for 15.6% 27.1%
Johnson Heritage Trust
Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Zions First National Bank 42.1% 76.2% 47.0% 48.5%
One South Main Street
Salt Lake City, UT 84130
As of March 31, 1997, none of the Directors and officers of the Fund,
as a group, beneficially owned more 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
Custodian and Fund Accounting Agent Fifth Third Bank
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 and Fifth Third Bank that serves as
the Custodian and Fund Accounting Agent. 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, May 16, 1995, and May 29, 1996.
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:
FEES PAID TO DATE TO BENNINGTON UNDER MANAGEMENT AGREEMENT
1/1/94 - 1/1/95 - 1/1/96 -
Portfolio 12/31/94 12/31/95 12/31/96
- --------- -------- -------- --------
Equity Market(1) $10,377 $0 $0
Growth $80,459 $143,280 $266,304
Value and Income $81,349 $105,099 $139,463
Small to Mid Cap(2) $90,212 $222,426 $344,080
International(3) $7,035 $132,843 $305,524
Intermediate Fixed-Income $107,493 $124,073 $168,696
Short-Intermediate Fixed-Income $117,591 $120,579 $127,117
Mortgage Securities $116,704 $133,615 $226,073
Municipal Intermediate Fixed-Income(4) $46,495 $43,032 $0
U.S. Government Money $42,682 $60,535 $122,068
Institutional Investor Fixed-Income(5) $113,412 $61,473 $0
- ----------
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.
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 1/1/96 -
Portfolio 12/1/95 - 12/31/95 12/31/96
- --------- ------------------ --------
Growth $4,251 $71,198
Value and Income $3,397 $41,055
Small to Mid Cap $4,743 $68,977
International $3,505 $66,815
Intermediate Fixed-Income $3,733 $56,981
Short-Intermediate Fixed-Income $3,552 $42,994
Mortgage Securities $4,868 $75,564
U.S. Government Money $4,252 $60,098
Custodian and Fund Accounting Agent. The Fifth Third Bank, 38 Fountain
Square Plaza, Cincinnati, Ohio 45263, a banking company organized under the laws
of the State of Ohio, has acted as Custodian of the Portfolios' assets since
October, 1996, and through an agreement between Fifth Third and the Fund may
employ sub-custodians outside the United States which have been approved by the
Board of Directors. Fifth Third 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. Fifth Third is paid by
the Portfolios an annual fee and also is reimbursed Fifth Third acts as
Custodian for investors of the Portfolios with respect to the individual
retirement accounts ("IRA Accounts"). Fifth Third also provides basic
recordkeeping required by each of the Portfolios for regulatory and financial
reporting purposes. Fifth Third is paid by the Portfolios an annual fee plus
specified transactions costs per Portfolio for these services, and is reimbursed
by the Fund for certain out-of-pocket expenses including postage, taxes, wires,
stationery and telephone.
Independent Auditors. Deloitte & Touche LLP, 1700 Courthouse Plaza NE,
Dayton, Ohio 45402, 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. 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 Growth, Value and Income,
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 Revised Money Manager Agreement for the International
Portfolio was 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
International Portfolio was approved by the sole shareholder as of September 30,
1994. The Money Manager Agreements for the Growth, Value and Income,
Intermediate Fixed-Income, Short-Intermediate Fixed-Income and International
Portfolios are reviewed annually by the Board of Directors and most recently at
a meeting on August 18, 1996, 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, and reviewed by the Board of
Directors at a meeting on February 22, 1997, and renewed for the forthcoming
year. 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.
Listed below are the Money Managers selected by Bennington to invest
certain of the Portfolios' assets:
o State Street Global Advisors, an area of State Street Bank and Trust
Company ("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,
1996, State Street managed assets of approximately $300 billion, providing
complete global investment management services from offices in the United
States, London, Sydney, Hong Kong, Tokyo, Toronto, Luxembourg, Melbourne,
Montreal and Paris.
o 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. The portfolio
created has a combination of value characteristics and growth
opportunities. The portfolio does not attempt to produce returns through
market timing, sector or industry selection. The firm uses a proprietary
valuation process which appraises stocks based on each stock's earnings,
dividends, book value, growth and risk. Industry and risk characteristics
are controlled through rigorous portfolio construction. As of December 31,
1996, Martingale managed assets of approximately $567.9 million.
o 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 two objectives: 1) to be active core managers; and 2) to
provide a stable source of value over index returns. 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 process starts with the
client selecting its fixed income benchmark, for example the Lehman
Government/Corporate Index. Smith Barney then creates a portfolio whose
principal characteristics are similar to that of the index and whose
duration is usually within .25 of the duration of the index. Thus
constructed the portfolio should closely track the performance of the
benchmark index. Thereafter the firm seeks to add value A) by overweighting
sectors and subsectors, B) by seeking out individual securities that it
believes are undervalued, and C) by exploiting changes and anomalies in the
yield curve. As of December 31, 1996, Smith Barney Capital Management
managed assets of approximately $19 billion of which $4 billion were
domestic fixed income.
o 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, 1996, Symphony managed assets of approximately $745 million
and subadvised assets of approximately $240 million.
o 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's investment approach reflects a focus on individual
security selection. Nicholas-Applegate integrates fundamental and
quantitative analysis to exploit the inefficiencies within international
markets. The firm's bottom-up approach drives the portfolio toward issues
demonstrating positive fundamental change, evidence of sustainability and
timeliness. These criteria are defined differently in each country to
adjust for accounting, economic and cultural differences, and varying
reporting requirements. As of December 31, 1996, Nicholas-Applegate managed
assets of approximately $31.5 billion.
o Bankers Trust Company ("Bankers Trust") is the Money Manager of the
Short-Intermediate Fixed-Income Portfolio. Bankers Trust, a New York
banking corporation, is a wholly-owned subsidiary of Bankers Trust New York
Corporation, a public company. Bankers Trust is one of the nation's largest
and most experienced investment managers, with approximately $215 billion
in assets under management globally as of December 31, 1996. Of that total,
approximately $69 billion are in actively managed fixed income funds.
o 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 Group 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, 1996, of approximately $44 billion.
MONEY MANAGERS' FEES
The Money Managers have received the following fees pursuant to their
Money Manager Agreements, since inception:
FEES PAID TO MONEY MANAGERS SINCE INCEPTION
1/1/94 - 1/1/95 - 1/1/96 -
Portfolio Money Manager 12/31/94 12/31/95 12/31/96
- --------- ------------- -------- -------- --------
Equity Market(1) Parametric $2,286 $0 $0
Growth State Street $57,313 $101,767 $188,312
Value and Income Martingale $57,935 $70,037 $78,232
Small to Mid Cap(2) WFNIA/Symphony $36,198 $78,335 $114,693
International(3) Nicholas $5,116 $96,625 $204,067
Applegate
Intermediate Fixed-Income Smith Barney $53,272 $51,705 $70,290
Short-Intermediate Bankers Trust $48,991 $50,323 $52,966
Fixed-Income
Mortgage Securities BlackRock $74,580 $85,091 $144,435
Municipal Intermediate Lazard Freres $19,378 $14,370 $0
Fixed-Income(4)
Institutional Investor Smith Barney $47,252 $0 $0
Fixed-Income(5)
U.S. Government Money State Street(6) $0 $0 $0
- ----------
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, Wells Fargo Nikko Investment Advisors ("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.
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 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."
MONEY MANAGER FEE SCHEDULE FROM A MANAGER'S
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average Annualized Annualized
Performance Differential Performance
Portfolio Basic Fee vs. The Applicable Index Fee
--------- --------- ------------------------ ---
Equity Portfolios 0.10% = or greater than 2.00% 0.22%
= or greater than 1.00% and
less than 2.00% 0.20%
= or greater than 0.50% and
less than 1.00% 0.15%
= or greater than 0.00% and
less than 0.50% 0.10%
= or greater than -0.50% and
less than 0.00% 0.05%
less than -0.50% 0%
International Portfolio 0.20% = or greater than 4.00% 0.40%
= or greater than 2.00% and
less than 4.00% 0.30%
= or greater than 0.00% and
less than 2.00% 0.20%
= or greater than -2.00% and
less than 0.00% 0.10%
less than -2.00% 0%
Bond Portfolios 0.07% = or greater than 2.00% 0.18%
= or greater than 0.50% and
less than 2.00% 0.16%
= or greater than 0.25% and
less than 0.50% 0.12%
= or greater than -0.25% and
less than 0.25% 0.08%
= or greater than -0.50% and
less than -0.25% 0.04%
less than -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.
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)
International Morgan Stanley Capital International
EAFE(R) + EMF Index(2)
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 Effective October 1, 1995, the benchmark index was changed from the
BARRA Institutional Small Index to the Wilshire 4500 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 to the Equity Portfolios Prospectus for additional
information.
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 subsidized operating expenses other than Bennington's and
Money Managers' fees ("Other Expenses") above certain levels for certain of the
Portfolios. By December 31, 1995, Bennington had discontinued all such subsidies
for all Portfolios. These subsidies caused the yield and total return of the
Portfolios to be higher than would otherwise be the case.
EXPENSES SUBSIDIZED BY BENNINGTON
1/1/93- 1/1/94- 1/1/95 -
Portfolio 12/31/93 12/31/94 12/31/95
--------- -------- -------- --------
Equity Market(1) $107,752 $18,273 $0
Growth $85,593 $13,345 $0
Value and Income $100,108 $15,523 $0
Small to Mid Cap(2) $115,933 $60,093 $18
International (3) $0 $27,257 $23,738
Intermediate Fixed-Income $53,046 $10,351 $0
Short-Intermediate Fixed-Income $22,156 $12,152 $0
Mortgage Securities $40,223 $12,956 $0
U.S. Government Money $96,348 $142,836 $60,112
Municipal Intermediate Fixed-Income(4) $0 $110,224 $56,252
Institutional Investor Fixed-Income(5) $0 $3,275 $0
- ----------
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.
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, Fifth Third and
Bennington are open for business. Non-business days for 1997 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 Management Agreement and the Money Manager Agreements
authorize Bennington and the Money Managers, 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) in selecting brokers to execute a
particular transaction and in evaluating the best net price and execution,
provided to the Portfolios. Brokerage and research services include (a)
furnishing advice as to the value of securities, the advisability of investing,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
monetary and fiscal policy, portfolio strategy, and the performance of accounts;
and (c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement, and custody). Bennington or a Money
Manager may select a broker or dealer that has provided research products or
services such as reports, subscriptions to financial publications and
compilations, compilations of securities prices, earnings, dividends and similar
data, and computer databases, quotation equipment and services,
research-oriented computer software and services, consulting services and
services of economic benefit to the Fund. In certain instances, Bennington or
the Money Manager may receive from brokers or dealers products or services which
are used both as investment research and for administrative, marketing, or other
non-research purposes. In such instances, Bennington or the Money Managers will
make a good faith effort to determine the relative proportions of such products
or services which may be considered as investment research. The portion of the
costs of such products or services attributable to research usage may be
defrayed by Bennington or the Money Managers through brokerage commissions
generated by transactions of the Portfolios, while the portions of the costs
attributable to non-research usage of such products or services is paid by
Bennington or the Money Managers in cash. In making good faith allocations
between administrative benefits and research and brokerage services, a conflict
of interest may exist by reason of Bennington or the Money Managers allocation
of the costs of such benefits and services between those that primarily benefit
Bennington or the Money Managers and those that primarily benefit the Fund.
As a general matter, the Fund does not intend to pay commissions to
brokers who provide such brokerage and research services for executing a
portfolio transaction, which are in excess of the amount of commissions another
broker would charge for effecting the same transaction. Nevertheless, occasional
transactions may fall under these circumstances. Bennington 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 or
Bennington 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.
BROKERAGE COMMISSIONS PAID BY EQUITY PORTFOLIOS
1/1/94 - 1/1/95 - 1/1/96 -
Portfolio 12/31/94 12/31/95 12/31/96
--------- -------- -------- --------
Equity Market(1) $15,898 $0 $0
Growth $20,960 $66,971 $57,658
Value and Income $34,411 $52,424 $47,418
Small to Mid Cap(2) $18,095 $90,974 $120,336
International (3) $20,997 $131,316 $467,230
----------
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.
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.
The average annual total returns, calculated using the above method:
1/1/94- 1/1/95 - 1/1/96 -
Portfolio 12/31/94 12/31/95 12/31/96
--------- -------- -------- --------
Equity Market(1) N/A N/A N/A
Growth 3.99% 34.32% 19.83%
Value and Income -1.93% 33.25% 23.94%
Small to Mid Cap(2) -4.07% 31.98% 24.85%
International (3) N/A 7.63% 13.78%
Intermediate Fixed-Income -5.24% 18.26% 2.56%
Short-Intermediate Fixed-Income -1.42% 11.42% 3.63%
Mortgage Securities -1.65% 16.03% 4.95%
Municipal Intermediate Fixed-Income(4) N/A N/A N/A
- ----------
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.
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 +1)6power -1]
-----
cd
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.
The annualized yields for the Bond Portfolios, calculated using the above
method:
As of As of As of
Portfolio 12/31/94 12/31/95 12/31/96
--------- -------- -------- --------
Intermediate Fixed-Income 6.81% 5.36% 6.04%
Short-Intermediate Fixed-Income 5.96% 4.74% 5.39%
Mortgage Securities 6.17% 5.77% 5.90%
Municipal Intermediate Fixed-Income(1) 5.10% N/A N/A
Institutional Investor Fixed-Income(2) 6.26% N/A N/A
- ----------
1 Municipal Portfolio was closed on December 4, 1995.
2 Institutional Investor Fixed-Income Portfolio was closed on August 28, 1995.
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
----------------- ---------------- ---------------
1994 4.91% 5.03%
1995 4.86% 4.90%
1996 4.79% 5.06%
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 Portfolio'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.
On February 6, 1997, President Clinton proposed legislation that would
change several of the tax consequences described above. Under the proposed
legislation, for purposes of measuring gain or loss on the disposition of
Portfolio shares, the tax basis of the Portfolio shares would be determined on
an average basis. In addition, the dividends-received deduction available to
corporations would be reduced from 70 percent to 50 percent. It is impossible to
determine at this time whether or when such proposed legislation will be enacted
or whether the legislation will be revised before it is enacted. Shareholders
are urged to consult their own tax advisors regarding the effect of the proposed
legislation on them.
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, December 31, 1994, and December 31, 1995,
respectively. The Fund's audited financial statements for the fiscal year ended
December 31, 1996, are contained in the Fund's Annual Report to Shareholders for
the fiscal year ended December 31, 1996, which is incorporated herein by this
reference and, unless previously provided, will be delivered together herewith.
<PAGE>
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.
<PAGE>
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, December 31, 1994
and December 31, 1995, 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, December 31, 1994, and
December 31, 1995 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, 1996 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, 1996:
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.
Incorporated by reference to Exhibit (8)(d) to
Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A filed on April
29, 1996 (File No. 33-41245).
(8)(e) Custody Agreement with Fifth Third Bank dated
October 4, 1996.*
(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. Incorporated by reference to Exhibit
(9)(a)(3) to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A filed on
April 29, 1996 (File No. 33-41245).
(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).
(9)(c)(4) Fund Accounting and Other Services Agreement with
Fifth Third Bank and Bennington Capital Management
L.P. dated October 4, 1996.*
(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
Incorporated by reference to Exhibit (14) to
Post-Effective Amendment No. 10 to the
Registration Statement filed on April 29, 1996
(File No. 33-41245).
(14)(a) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of December 16,
1996, 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* IRA Withdrawal 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.
Incorporated by reference to Exhibit No. (15)(d)
to Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A filed on April
29, 1996.
(15)(e) Distribution Plan revised February 22, 1997.*
(16) Schedule of Computation of Performance
Calculation.*
(17) Financial Data Schedules.*
(18) N/A
- ---------------
* 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, 1997
Number of
Title of Class Record Holders
-------------- --------------
Shares of Common Stock, $.001 Par Value
Per Share:
Growth Portfolio 309
Value and Income Portfolio 260
Small to Mid Cap Portfolio 308
International Equity Portfolio 297
Intermediate Fixed-Income Portfolio 163
Short-Intermediate Fixed-Income Portfolio 107
Mortgage Securities Portfolio 175
U.S. Government Money Portfolio 89
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 section "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 Custodian and
and Transfer Agent Fund Accounting Agent
------------------ ---------------------
Bennington Capital Management L. P. Fifth Third Bank
1420 Fifth Avenue, Suite 3130 38 Fountain Square Plaza
Seattle, WA 98101 Cincinnati, OH 45263
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. Cincinnati, 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 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 30th day of April, 1997.
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. 11 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated:
Signature Title Date
/s/ J. Anthony Whatley III 4/30/97
- --------------------------- -------
J. Anthony Whatley III President, Principal Executive Officer
and Director
/s/ George G. Cobean III 4/30/97
- --------------------------- -------
George G. Cobean III Director
/s/ Geoffrey C. Cross 4/30/97
- --------------------------- -------
Geoffrey C. Cross Director
/s/ Ravindra A. Deo 4/30/97
- --------------------------- -------
Ravindra A. Deo Principal Financial and Accounting
Officer
<PAGE>
ACCESSOR FUNDS, INC.
EXHIBIT INDEX
Exhibit Page
Number Description Number
- ------ ----------- ------
(8)(e) Custody Agreement with The Fifth Third Bank
(9)(c)(4) Fund Accounting and Other Services Agreement with The Fifth
Third Bank and Bennington Capital Management L.P.
(11) Consent of Independent Auditors
(14)(a) Registrant's Individual Retirement Custodial Account Plan
dated as of December 16, 1996, 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) (e) Distribution Plan revised February 22, 1997
(16) Computation of Performance Calculation
(17) Financial Data Schedules
<PAGE>
CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT (the "Agreement"), is made as of October 4, 1996, by
and between ACCESSOR FUNDS, INC., a Maryland corporation (the "Fund"), and THE
FIFTH THIRD BANK, a banking company organized under the laws of the State of
Ohio (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Fund desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto as may be amended from time
to time (such investment portfolios individually referred to herein as a
"Portfolio" and collectively as the "Portfolios"), be held and administered by
the Custodian pursuant to this Agreement; and
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Directors to give Oral Instructions and Written
Instructions on behalf of the Fund and named in Exhibit B hereto or in such
resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Directors" shall mean the Directors from time to time serving
under the Fund Articles of Incorporation and By-Laws, as from time to time
amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Portfolio computes
the net asset value of the Portfolio.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Fund.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) given by an
Authorized Person or a person reasonably believed by the Custodian to be an
Authorized Person, (ii) recorded and kept among the records of the Custodian
made in the ordinary course of business and (iii) orally confirmed by the
Custodian. The Fund shall cause all Oral Instructions to be confirmed by Written
Instructions. If such Written Instructions confirming Oral Instructions are not
received by the Custodian prior to a transaction, it shall in no way affect the
validity of the transaction or the authorization thereof by the Fund. If Oral
Instructions vary from the Written Instructions which purport to confirm them,
the Custodian shall notify the Fund of such variance but such Oral Instructions
will govern unless the Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Fund, which
is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Directors, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Fund) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934, as
amended (the "1934 Act"), which acts as a system for the central handling of
Securities where all Securities of any particular class or series of an issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "Shares" shall mean the shares of beneficial interest issued by any
series or class of the Fund.
1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Directors shall have from time to time authorized, or (ii) communications by fax
or any other such system from a person or persons reasonably believed by the
Custodian to be Authorized, or (iii) communications transmitted electronically
through the Institutional Delivery System (IDS), or any other similar electronic
instruction system acceptable to Custodian and approved by resolutions of the
Board of Directors, a copy of which, certified by an Officer, shall have been
delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Fund hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the
Portfolios specified on Exhibit A, as may be amended from time to time, at any
time during the period of this Agreement, provided that such Securities or cash
at all times shall be and remain the property of the Fund.
2.2 Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth. The Custodian
agrees to comply with all applicable requirements of the 1940 Act and other
applicable securities laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
the Custodian hereunder. Except as specifically set forth herein, the Custodian
shall have no liability and assumes no responsibility for any non-compliance by
any Portfolio or the Fund of any laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the Custodian
for the account of each Portfolio, except Securities maintained in a Securities
Depository or Book-Entry System, shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian and shall be
identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Portfolio, subject only to
draft or order of the Custodian, in which the Custodian shall enter and carry
all Securities, cash and other assets of the Portfolio which are delivered to
it.
3.3 Appointment of Agents. (a) In its discretion, and with the approval of
the Board of Directors of the Fund, the Custodian may appoint, and at any time
remove any domestic bank or trust company, which is qualified to act as a
custodian under the 1940 Act, and the rules and regulations promulgated
thereunder and which has agreed to comply with such applicable rules and
regulations, as sub-custodian to hold Securities and cash of the Portfolios and
to carry out such other provisions of this Agreement as it may determine, and
may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian and subject
only to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement and the Custodian shall hold the Fund and each Portfolio
harmless from its own acts or omissions, under the standards of care provided
for herein; (b) the Custodian shall not designate any sub-custodian for the
holding of securities or other assets outside the United States without the
specific written consent of the Board of Directors of the Fund or pursuant to
the Global Custody Addendum, attached hereto as Exhibit D and made a part hereof
by reference.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to be
delivered, to the Custodian all of the Portfolios' Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Portfolio with respect to such Securities, cash or
other assets owned by the Portfolio at any time during the period of this
Agreement, and (b) all cash received by the Portfolio for the issuance, at any
time during such period, of Shares. The Custodian shall not be responsible for
such Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Portfolios in a Securities Depository
or in a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Portfolios in any
Securities Depository or Book-Entry System, the Portfolio shall
deliver to the Custodian a resolution of the Board of Directors,
certified by an Officer, authorizing and instructing the Custodian on
an on-going basis to deposit in such Securities Depository or
Book-Entry System all Securities eligible for deposit therein and to
make use of such Securities Depository or Book-Entry System to the
extent possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities,
and deliveries and returns of collateral consisting of Securities. So
long as such Securities Depository or Book-Entry System shall continue
to be employed for the deposit of Securities of the Portfolios, the
Fund shall annually re-adopt such resolution and deliver a copy
thereof, certified by an Officer, to the Custodian.
(b) Securities of the Portfolio kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or Securities
Depository which includes only assets held by the Custodian as a
fiduciary, custodian or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on
the books of the Book-Entry System and Securities Depository as the
case may be, with respect to Securities of a Portfolio maintained in a
Book-Entry System or Securities Depository shall, by book-entry, or
otherwise identify such Securities as belonging to the Portfolio.
(d) If Securities purchased by the Portfolio are to be held in a
Book-Entry System or Securities Depository, the Custodian shall pay
for such Securities upon (i) receipt of advice from the Book-Entry
System or Securities Depository that such Securities have been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and transfer
for the account of the Portfolio. If Securities sold by the Portfolio
are held in a Book-Entry System or Securities Depository, the
Custodian shall transfer such Securities upon (i) receipt of advice
from the Book-Entry System or Securities depository that payment for
such Securities has been transferred to the Depository Account, and
(ii) the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
(e) Upon request, the Custodian shall provide the Portfolio with
copies of any report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of the Portfolio
is kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-custodian appointed
pursuant to Section 3.3 above or any of its or their employees, or
(ii) from failure of Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Fund shall be subrogated
to the rights of the Custodian with respect to any claim against a
Book-Entry System or Securities Depository or any other person for any
loss or damage to the Portfolios arising from the use of such
Book-Entry System or Securities Depository, if and to the extent that
the Fund has been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Written
Instructions, the Custodian shall disburse moneys from a Portfolio Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Portfolio but only
upon compliance with Section 4.1 of this Agreement and only (i) in the
case of Securities (other than options on Securities, futures
contracts and options on futures contracts), against the delivery to
the Custodian (or any sub-custodian appointed pursuant to Section 3.3
above) of such Securities registered as provided in Section 3.9 below
in proper form for transfer, or if the purchase of such Securities is
effected through a Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 3.5 above; (ii) in
the case of options on Securities, against delivery to the Custodian
(or such sub-custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against delivery
to the Custodian (or such sub-custodian) of evidence of title thereto
in favor of the Fund or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Fund and a bank which is a member of the
Federal Reserve System or between the Fund and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Portfolio with such Securities;
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Portfolio;
(c) For the payment of any dividends or capital gain
distributions declared by the Portfolio;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for the
account of a Portfolio: interest; taxes; administration, investment
management, investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating expenses of a
Portfolio; in all cases, whether or not such expenses are to be in
whole or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to compliance
with rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Fund;
(g) For transfer in accordance with the provisions of any
agreement among the Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the amount and
purpose of such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
3.7 Delivery of Securities from Portfolio Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Portfolio
but only against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of a Portfolio; provided that, in
any such case, the cash or other consideration is to be delivered to
the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the
name of the Fund, the Custodian or any sub-custodian appointed
pursuant to Section 3.3 above, or of any nominee or nominees of any of
the foregoing, or (ii) for exchange for a different number of
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase
or reverse repurchase agreement entered into by a Portfolio;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a
Portfolio, but only against receipt of such collateral as the Fund
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Fund on behalf of a Portfolio requiring a pledge of assets by such
Portfolio, but only against receipt by the Custodian of the amounts
borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund
or a Portfolio;
(l) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other arrangements
in connection with transactions by the Fund on behalf of a Portfolio;
(m) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of a Portfolio, the Custodian, and
a futures commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Fund on behalf of a Portfolio; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of a resolution
of the Board of Directors, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Fund, the Custodian shall with respect to all Securities held for a
Portfolio:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either by law
or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below,
collect on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise become
payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form
for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or the
laws or regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue Service
("IRS") and to the Fund at such time, in such manner and containing
such information as is prescribed by the IRS;
(f) Hold for a Portfolio, either directly or, with respect to
Securities held therein, through a Book-Entry System or Securities
Depository, all rights and similar securities issued with respect to
Securities of the Portfolio; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection
with sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Portfolio.
3.9 Registration and Transfer of Securities. All Securities held for a
Portfolio that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Fund on behalf of a Portfolio, if
eligible therefor. All other Securities held for a Portfolio may be registered
in the name of the Fund on behalf of such Portfolio, the Custodian, or any
sub-custodian appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System, Securities
Depository or any nominee of either thereof; provided, however, that such
Securities are held specifically for the account of the Fund on behalf of a
Portfolio. The Fund shall furnish to the Custodian appropriate instruments to
enable the Custodian to hold or deliver in proper form for transfer, or to
register in the name of any of the nominees hereinabove referred to or in the
name of a Book-Entry System or Securities Depository, any Securities registered
in the name of a Portfolio.
3.10 Records.
(a) The Custodian shall maintain, by Portfolio, complete and
accurate records with respect to Securities, cash or other property
held for the Fund, including (i) journals or other records of original
entry containing an itemized daily record in detail of all receipts
and deliveries of Securities and all receipts and disbursements of
cash; (ii) ledgers (or other records) reflecting (A) Securities in
transfer, (B) Securities in physical possession, (C) monies and
Securities borrowed and monies and Securities loaned (together with a
record of the collateral therefor and substitutions of such
collateral), (D) dividends and interest received, and (E) dividends
receivable and interest accrued; and (iii) cancelled checks and bank
records related thereto. The Custodian shall keep such other books and
records of the Fund as the Fund shall reasonably request, or as may be
required by the 1940 Act, including, but not limited to Section 3.1
and Rules 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall
(i) be maintained in a form acceptable to the Fund and in compliance
with rules and regulations of the Securities and Exchange Commission,
(ii) be the property of the Fund and at all times during the regular
business hours of the Custodian be made available upon request for
inspection by duly authorized officers, employees or agents of the
Fund and employees or agents of the Securities and Exchange
Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2
under the 1940 Act.
(c) The Custodian agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information
relating to the Fund and its shareholders (past, present and future),
unless the release of such records or information is otherwise
consented to, in writing, by the Fund, except as otherwise provided in
this Agreement. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where the Custodian may
be exposed to civil or criminal contempt proceedings or when required
to divulge such information or records to duly constituted
authorities.
3.11 Portfolio Reports by Custodian. The Custodian shall furnish the Fund
with a daily activity statement by Portfolio and a summary of all transfers to
or from the Custody Account on the day following such transfers. At least
monthly and whenever reasonably required, the Custodian shall furnish the Fund
with a detailed statement, by Portfolio, of the Securities and moneys held for
the Fund under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Fund with
such reports, as the Fund may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Portfolio,
to be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Fund such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify the
Fund's fund accounting agent of corporate actions, limited to those Securities
registered in nominee name and to those Securities held at a Depository or
sub-custodian acting as agent for Custodian. Custodian will be responsible only
if the notice of such corporate actions is published by the Financial Daily Card
Service, J.J. Kenny Called Bond Service, DTC, or received by first class mail
from the agent. For market announcements not yet received and distributed by
Custodian's services, the Fund will inform its custody representative with
appropriate instructions. Custodian will, upon receipt of the Fund's response
within the required deadline, affect such action for receipt or payment for the
Fund. For those responses received after the deadline, Custodian will affect
such action for receipt or payment, subject to the limitations of the agent(s)
affecting such actions. Custodian will promptly notify the Fund for put options
only if the notice is received by first class mail from the agent. The Fund will
provide or cause to be provided to Custodian with all relevant information
contained in the prospectus for any security which has unique put/option
provisions and provide Custodian with specific tender instructions at least ten
business days prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE PORTFOLIOS
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof (including CUSIP numbers), (b) the number of shares,
principal amount (and accrued interest, if any) or other units purchased, (c)
the date of purchase and settlement, (d) the purchase price per unit, (e) the
total amount payable upon such purchase, and (f) the name of the person to whom
such amount is payable. The Custodian shall upon receipt of such Securities
purchased by a Portfolio pay out of the moneys held for the account of such
Portfolio the total amount specified in such Written Instructions to the person
named therein. The Custodian shall not be under any obligation to pay out moneys
to cover the cost of a purchase of Securities for a Portfolio, if in the
relevant Custody Account there is insufficient cash available to the Portfolio
for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for the purchase of Securities for a Portfolio
is made by the Custodian in advance of receipt for the account of the Portfolio
of the Securities purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable to the
Portfolio for such Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a
Portfolio, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof (including CUSIP numbers), (b) the number of shares,
principal amount (and accrued interest, if any), or other units sold, (c) the
date of sale and settlement (d) the sale price per unit, (e) the total amount
payable upon such sale, and (f) the person to whom such Securities are to be
delivered. Upon receipt of the total amount payable to the Fund as specified in
such Written Instructions, the Custodian shall deliver such Securities to the
person specified in such Written Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use Portfolios
so credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Fund to facilitate the
settlement of the Fund's transactions on behalf of a Portfolio in its Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
Transfer of Funds. From such funds as may be available for the purpose in
the relevant Custody Account, and upon receipt of Written Instructions sent from
the Fund's transfer agent specifying that the funds are required to redeem
Shares of a Portfolio, the Custodian shall wire each amount specified in such
Written Instructions to or through such bank as the Fund may designate with
respect to such amount in such Written Instructions. Upon effecting payment or
distribution in accordance with such Proper Instructions, the Custodian shall
not be under any obligation or have any responsibility thereafter with respect
to any such paying bank.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Portfolio,
into which account or accounts may be transferred cash and/or Securities,
including Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under the 1934 Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by a Portfolio or in
connection with financial futures contracts (or options thereon)
purchased or sold by a Portfolio,
(c) which constitute collateral for loans of Securities made by a
Portfolio,
(d) for purposes of compliance by the Fund with requirements
under the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors, certified by an Officer, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Fund for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. In no event shall Custodian be liable for any
special, consequential, extraordinary or punitive damages, arising from the
performance or non-performance of Custodian under this Agreement, or Custodian's
failure to comply with any of the terms of this Agreement. The Custodian shall
be entitled to rely on and may act upon advice of counsel on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. The Custodian shall promptly notify the Fund of any action taken
or omitted by the Custodian pursuant to advice of counsel. The Custodian shall
not be under any obligation at any time to ascertain whether the Fund is in
compliance with the 1940 Act, the regulations thereunder, the provisions of the
Fund's charter documents or by-laws, or its investment objectives and policies
as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Fund, to the entity or entities appointed by the Fund to
keep the books of account of the Fund and/or compute the value of the assets of
the Fund. The Custodian shall take all such reasonable actions as the Fund may
from time to time request to enable the Fund to obtain, from year to year,
favorable opinions from the Fund's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Fund's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Fund of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Fund shall indemnify and hold harmless the
Custodian from and against any loss, damage, cost, expense (including reasonable
attorneys' fees and disbursements), liability (including, without limitation,
liability arising under the applicable securities laws, and any state or foreign
securities and/or banking laws) or claim arising (a) from the status as a mere
record holder of securities in the Custody Account; or (b) from any action or
inaction by the Custodian upon Proper Instructions, or (c) from the performance
of its obligations under this Agreement; provided, however, that the Custodian
shall not be indemnified and held harmless from and against any such loss,
damage, cost, expense, liability or claim arising from the Custodian's
negligence, lack of good faith or willful misconduct.
8.2 Indemnity to be Provided. If the Fund requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Fund shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Fund shall be liable for any failure or delay
in performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay, and provided further that such failure or delay is not caused
by the Custodian's own willful misfeasance, lack of good faith, negligence or
reckless disregard of duties under this Agreement.
ARTICLE X
DISASTER RECOVERY PLAN
The Custodian shall maintain in effect a disaster recovery plan, and enter
into any agreements necessary with appropriate parties making reasonable
provisions for emergency use of electronic data processing equipment customary
in the industry. In the event of equipment failures, the Custodian shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. The Custodian shall have no liability with respect to the loss of
data or service interruptions caused by equipment failure provided such loss or
interruption is not caused by the Custodian's own willful misfeasance, gross
negligence, lack of good faith, or reckless disregard of its duties or
obligations under this Agreement.
ARTICLE XI
EFFECTIVE PERIOD; TERMINATION
11.1 Effective Period. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
11.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If the service is terminated due to Custodian's failure
to meet its obligations under this Agreement after written notice documenting
such failure and reasonable opportunity to cure within 15 calendar days, then
from the date Notice of Termination is given, there will be no charges for
services, for a period not to exceed sixty (60) days. If a successor custodian
shall have been appointed by the Board of Directors, the Custodian shall, upon
receipt of a notice of acceptance by the successor custodian, on such specified
date of termination (a) deliver directly to the successor custodian all
Securities (other than Securities held in a Book-Entry System or Securities
Depository) and cash then owned by the Fund and held by the Custodian as
custodian, and (b) transfer any Securities held in a Book-Entry System or
Securities Depository to an account of or for the benefit of the Fund at the
successor custodian, provided that the Fund shall have paid to the Custodian all
fees, expenses and other amounts to the payment or reimbursement of which it
shall then be entitled. Upon such delivery and transfer, the Custodian shall be
relieved of all obligations under this Agreement. The Fund may at any time
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by regulatory authorities, or upon the
happening of a like event at the direction of an appropriate regulatory agency
or court of competent jurisdiction.
11.3 Failure to Appoint Successor Custodian. If a successor custodian is
not designated by the Fund on or before the date of termination specified
pursuant to Section 11.2 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Fund at such bank or trust company all Securities of the
Fund held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 11.3, then Custodian shall have the
right to deliver to the Fund all Securities and cash then owned by the Fund and
to transfer any Securities held in a Book-Entry System or Securities Depository
to an account of or for the Fund. Thereafter, the Fund shall be deemed to be its
own custodian with respect to the Fund and the Custodian shall be relieved of
all obligations under this Agreement.
ARTICLE XII
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation which shall be paid monthly
after the last business day of each calendar month, with the first payment for
the calendar month following any activity. Custodian is hereby authorized to
charge the Account for such fees after review and approval by the Fund. The fees
and other charges in effect on the date hereof and applicable to the Portfolios
are set forth in Exhibit C attached hereto, as may be amended from time to time,
and shall remain in effect for a period of five years from the effective date of
this Agreement, except such pricing shall not apply to any global custody
services, the fees for which are set forth on Schedule B of the Global Custody
Addendum attached hereto.
ARTICLE XIII
LIMITATION OF LIABILITY
All persons dealing with any of the Portfolios of the Fund must look solely
to the assets of the Fund belonging to such Portfolio for the enforcement of any
claims against the Funds.
ARTICLE XIV
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name herein
below:
To the Fund: With a copy to:
Accessor Funds, Inc. Beth R. Kramer, Esq.
1420 Fifth Avenue, #3130 Mayer, Brown & Platt
Seattle, WA 98101 1675 Broadway
Attn: Ravindra A. Deo New York, NY 10019
Telephone: (206) 224-7420 Telephone: (212) 506-2670
Facsimile: (206) 224-4274 Facsimile: (212) 262-1910
To the Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Mail Drop 1090E5
Cincinnati, Ohio 45263
Attn: Mutual Fund Client Services
Telephone: (513) 579-5300
Facsimile: (513) 744-6622
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XV
MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15.2 References to Custodian. The Fund shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Fund
and such other printed matter as merely identifies Custodian as custodian for
the Fund. The Fund shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
15.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
15.4 Amendments. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
15.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
15.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
15.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
15.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: ACCESSOR FUNDS, INC.
By:/s/J. Anthohy Whatley
J. Anthony Whatley
President
ATTEST: THE FIFTH THIRD BANK
By:/s/Tracie D. Hoffman
Tracie D. Hoffman
Vice President
<PAGE>
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
ACCESSOR FUNDS, INC. AND THE FIFTH THIRD BANK
October 4, 1996
Name of Portfolio Date
- ----------------- ----
Growth Portfolio November 18, 1996
Value and Income Portfolio November 18, 1996
Small to Mid Cap Portfolio November 18, 1996
International Equity Portfolio November 18, 1996
Intermediate Fixed - Income Portfolio October 7, 1996
Short-Intermediate Fixed - Income Portfolio October 7, 1996
Mortgage Securities Portfolio November 18, 1996
U.S. Government Money Portfolio October 7, 1996
ACCESSOR FUNDS, INC.
By:/s/ J. Athony Whatley III
----------------------------
J. Anthony Whatley, III
President
THE FIFTH THIRD BANK
By:/s/ Tracie D. Hoffman
------------------------
Tracie D. Hoffman
Vice President
<PAGE>
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
ACCESSOR FUNDS, INC. AND THE FIFTH THIRD BANK
October 4, 1996
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Fund to administer each Custody Account.
ALL PORTFOLIOS
Name Signature
Ravindra A. Deo ___________________________
Bruce Joel King ___________________________
J. Anthony Whatley, III ___________________________
Linda V. Whatley ___________________________
Robert J. Harper ___________________________
<PAGE>
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of Accessor Funds, Inc. and any of
them, namely the President, Vice President, Secretary and Treasurer, are hereby
authorized as signers for the conduct of business for and on behalf of the
Portfolios with THE FIFTH THIRD BANK:
J. Anthony Whatley, III PRESIDENT
Robert J. Harper VICE PRESIDENT
Ravindra A. Deo TREASURER
Linda V. Whatley SECRETARY
In addition, the following Assistant Secretary is authorized to sign on behalf
of the Fund for the purpose of effecting securities transactions:
Bruce Joel King ASSISTANT SECRETARY
The undersigned officers of Accessor Funds, Inc. hereby certify that the
foregoing is within the parameters of a Resolution adopted by Directors of the
Fund in a meeting held August 19, 1996, directing and authorizing preparation of
documents and to do everything necessary to effect the Custody Agreement between
Accessor Funds, Inc. and THE FIFTH THIRD BANK.
ACCESSOR FUNDS, INC.
By: /s/ J. Anthony Whatley III
------------------------------
President
By: /s/ Linda V. Whatley
------------------------
Secretary
<PAGE>
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
ACCESSOR FUNDS, INC. AND THE FIFTH THIRD BANK
October 4, 1996
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
Market Value Charge - All Asset levels .0025%
TRANSACTION FEES
DTC/FED Eligible Trades $ 9.00
DTC/FED Ineligible Trades $ 25.00
Amortized Security Trades $ 25.00
Repurchase Agreements with Fifth Third (purchase and maturity) $No Charge
Third Party Repos (purchase and maturity) $ 11.00
Physical Commercial Paper Trades
(purchase and maturity) $ 25.00
Book-Entry Commercial Paper Trades
(purchase and maturity) $ 9.00
Options, each transaction $ 25.00
Amortized Security Receipts $ 25.00
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
Wire Transfers $ 7.00
Check Disbursements $ 6.00
<PAGE>
FIFTH THIRD BANK
GLOBAL CUSTODY ADDENDUM
This GLOBAL CUSTODY ADDENDUM (the "Addendum") dated as of October 4, 1996,
by and between ACCESSOR FUNDS, INC., a Maryland corporation (the "Fund"), and
THE FIFTH THIRD BANK, a banking corporation organized pursuant to the laws of
the State of Ohio (the "Custodian"), is made as an addendum to the Custody
Agreement dated October 4, 1996, (the "Custody Agreement") between the Fund and
Custodian;
WHEREAS, Custodian has been appointed by the Fund as the Custodian of the
Assets of the Portfolios of the Fund and the Fund desires to establish one or
more custody accounts through Custodian for global custody;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
and covenants contained herein, the parties hereto agree as follows:
1. Appointment of Custodian as Global Custodian. Custodian is hereby
authorized and directed to, and shall, open and maintain one or more custody
accounts (each, the "Account" or collectively, the "Accounts") in such name or
names as the Fund may, from time to time, direct; and will accept, in accordance
with the terms hereof, all cash and currency (collectively referred to herein as
"Cash") and all securities, instruments and other intangible assets as may be
agreed upon by Custodian and the Fund which shall from time to time be delivered
to or received by it or any sub-custodian in the United States or in a country
approved by the Fund for deposit in or otherwise held in the Account
(collectively referred to herein as "Securities") (Cash and Securities are
collectively referred to herein as "Assets"). Custodian assumes no obligation to
review investments in the Account or to recommend the purchase, retention or
sale of any Assets unless provided for by a separate written agreement between
the parties. Custodian may delegate its global custody duties to a sub-custodian
(the "Sub-custodian") with the approval of the Board of Directors of the Fund.
2. Maintenance of Assets Outside the United States. The Fund hereby
authorizes and instructs the Custodian to employ as sub-custodians, for the
Portfolios' Assets maintained outside the United States, the foreign banking
institutions and foreign securities depositories designated on Schedule A hereto
(the "Foreign Sub-custodians"). Upon receipt of Proper Instructions, together
with a certified resolution of the Fund's Board of Directors, the Custodian and
the Fund may agree to amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign securities depositories to
act as Foreign Sub-custodians. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such Foreign
Sub-custodians for maintaining custody of the Portfolios' Assets.
3. Foreign Sub-custodians. Assets of the Fund shall at all times be
maintained in custody of an "Eligible Foreign Custodian" as defined in the 1940
Act or the rules and regulations promulgated thereunder. With respect to holding
Assets with an Eligible Foreign Custodian, it is expressly understood and agreed
that:
(a) Custodian will endeavor, to the extent feasible, to hold
Securities in the country or other jurisdiction in which the principal
trading market for such Securities is located, where such Securities are to
be presented for cancellation and/or payment and/or registration, or where
such Securities are acquired;
(b) Cash which is maintained in a foreign country will be in any
currency which may be legally held in such country and may be held in
non-interest bearing accounts;
(c) Foreign Sub-custodians may hold Securities in central securities
depositories or clearing agencies in which such participates;
(d) The Custodian shall identify on its books as belonging to each
applicable Portfolio of the Fund, the foreign securities of such Portfolios
held by each Foreign Sub-custodian. Unless otherwise required by local law
or practice, a particular sub-custodian agreement, or expressly instructed
by the Fund, Assets deposited with a Foreign Sub-custodian will be held in
a commingled account in the name of Custodian or its designee Sub-custodian
as custodian for its customers;
(e) Settlement of and payment for Securities received for, and
delivered from the Account may be made in accordance with the customary or
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including without limitation, the delivery of Securities to a purchaser,
broker, dealer or their prospective agents either against a receipt for
future payment or without any payment (so-called "free delivery"); and
(f) The Fund is solely responsible for the payment of and the
reclamation, where applicable, of taxes. Custodian will, however, cooperate
with the Fund in connection with the Fund's payment or reclamation of taxes
and shall make the necessary filings in connection with obtaining tax
exemptions and tax reclamations which are available to the Fund.
4. Powers of Custodian.
(a) General Powers. Subject to and in accordance with the Fund's
Proper Instructions, Custodian, as the Fund's agent, and for the account
and risk of the Fund, is hereby authorized and empowered, with respect to
Securities held outside the United States with Foreign Sub-custodians, to
authorize and empower Foreign Sub-custodians to:
(i) receive and deliver Assets;
(ii) receive all payments of principal, interest, dividends and
other income and distributions payable with respect to Assets;
(iii) exchange Securities in temporary or bearer form for
Securities in definitive or registered form; effect an exchange of
shares where the par value of stock is changed; and surrender
Securities at maturity or earlier when advised of a call for
redemption (provided, however, that Custodian shall not be liable for
failure to so exchange or surrender any security or take other action
(A) if notice of such exchange or call for redemption or other action
was not actually received by Custodian from the issuer (with respect
to Securities issued in the United States) or from one of the
nationally or internationally recognized bond or corporate action
services to which Custodian subscribes or from the Fund or (B) if, at
the time of deposit, any Security so deposited is subject to call,
exchange, redemption or similar action, unless specifically instructed
to do so by the Fund);
(iv) hold Assets (A) in its vaults, (B) at a domestic or foreign
entity that provides handling, clearing or safekeeping service, (C)
with issuer in non-certificated form, (D) on Federal Book Entry at the
Federal Reserve Custodian or (E) with the prior approval of the Fund
at any other location;
(v) register and/or hold Assets in the name of any nominee of
Custodian or its Foreign Sub-custodians or any of their respective
nominees or any authorized agent, subsidiary or other entity,
including (without limiting the generality of the foregoing) the
nominee of any central depository, clearing corporation or other
entity with which securities may be deposited (and the Fund hereby
indemnifies and holds harmless Custodian and any such nominee against
any liability as a holder of record);
(vi) hold any investment in bearer form;
(vii) in connection with the receipt of Assets, accept documents
in lieu of such Assets as long as such documents contain the agreement
of the issuer thereof to hold such Assets subject to Custodian's sole
order;
(viii) make, execute, acknowledge and deliver as agent, any and
all documents or instruments (including but not limited to all
declarations, affidavits and certificates of ownership) that may be
necessary or appropriate to carry out the powers granted herein;
(ix) employ and consult with, and obtain advice from, suitable
agents, including auditors and legal counsel (who may be counsel to
the Fund or the Custodian or other advisers), and Custodian shall
incur no liability in acting in good faith in accordance with the
reasonable advice and opinion of such agents or advisers;
(x) make any payments incidental to or in connection with this
paragraph 3(a); and
(xi) exercise all other rights and powers and to take any action
it deems necessary in carrying out the purposes of this Agreement.
(b) Discretionary Corporate Action. Whenever Custodian receives
information concerning the Securities or instruments (including, but not
limited to, warrants, options, tenders, options to tender or non-mandatory
puts or calls) which requires discretionary action by the beneficial owner
of the Securities (other than a proxy) such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notice of the
material intended to be transmitted to securities holders, or which confer
optional rights on the Fund or provide for discretionary action or
alternative courses of action by the Fund ("Corporate Actions"), Custodian
shall promptly give the Fund notice of such Corporate Actions to the extent
that Custodian has actual knowledge of a Corporate Action. The Fund shall
be responsible for making any decisions relating thereto and for
instructing Custodian to act. In order for Custodian to act, it must
receive the Fund's Proper Instructions at Custodian's offices, addressed as
Custodian may from time to time request, by no later than noon (Eastern
Standard Time) at least two (2) business days prior to the last scheduled
date to act with respect to such Securities or instruments (or such earlier
date or time as Custodian may notify the Fund). Absent Custodian's timely
receipt of such instruction, Custodian shall not be liable for failure to
take any action relating to or to exercise any rights conferred by such
Securities or instruments.
(c) Voting. With respect to all Securities, however registered, the
voting rights are to be exercised by the Fund or its designee. With respect
to Securities issued in the United States, Custodian's only duty shall be
to mail to the Fund any documents (including proxy statements, annual
reports and signed proxies) relating to the exercise of such voting rights.
With respect to Securities issued outside the United States at the request
of the Fund, Custodian will provide the Fund with access to a provider of
global proxy services. If the Fund determines not to utilize the services
of such global proxy services provider, Custodian will provide the Fund
with proxy material actually received by Custodian from Sub-custodians, but
otherwise shall have no obligations with respect to voting.
(d) Foreign Exchange Transactions. Custodian, as principal, is
authorized to enter into spot or forward foreign exchange contracts with
the Fund and may provide such foreign exchange services to the Fund through
Foreign Sub-custodians. Instructions, including standing instructions, may
be issued with respect to such contracts, but Custodian may establish rules
or limitations concerning any foreign exchange facility made available to
the Fund. In all cases where Custodian or Foreign Sub-custodians enter into
foreign exchange contracts relating to the Account, the terms and
conditions of such foreign exchange contracts shall apply to such
transaction. Neither Custodian nor any Foreign Sub-custodian shall be
liable for any fluctuations or changes in foreign exchange rates, which
shall be the sole risk and liability of the Fund.
5. Agreements with Foreign Sub-custodians. Each agreement with a Foreign
Sub-custodian shall be substantially in the form previously made available to
the Fund and shall provide that:
(a) the assets of each Portfolio will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
foreign sub-custodian or its creditors or agent, except a claim of payment
for their safe custody or administration;
(b) beneficial ownership of the assets of each Portfolio will be
freely transferable without the payment of money or value other than for
custody or administration;
(c) adequate records will be maintained separately identifying the
assets as belonging to each applicable Portfolio;
(d) officers of or auditors employed by, or other representatives of
the Fund and any sub-custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the Foreign Sub-custodian relating
to its actions under its agreement with Custodian or Sub-custodian; and
(e) Assets of the Portfolios held by the Foreign Sub-custodian will be
subject only to the instructions of the Custodian or its agents.
6. Transactions in Foreign Custody Account.
(a) Except as otherwise provided in Paragraph (b) of this Section 6,
the provisions of Section 3 of the Custody Agreement shall apply, equally
to the Assets of the Fund held outside the United States by a Foreign
Sub-custodian.
(b) Notwithstanding any provision of this Addendum to the contrary,
settlement and payment for Securities received for the account of each
applicable Portfolio and delivery of Securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) against a receipt with expectation of receiving later payment
for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a Foreign Sub-custodian
may be maintained in the name of such entity's nominee to the same extent
as set forth in Section 3 of this Addendum, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
7. Liability of Foreign Sub-custodians. Each agreement pursuant to which
the Custodian or its Sub-custodian employs a foreign banking institution as a
Foreign Sub-custodian shall require the institution to exercise a reasonable
standard of care as is customary in such country in the performance of its
duties and to indemnify, and hold harmless, the Custodian and any Sub-custodian
for the benefit of the Fund for and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to any
claims against a Foreign Sub-custodian as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the extent that the Fund has
not been made whole for any such loss, damage, cost, expense, liability or
claim.
8. Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or any Foreign Sub-custodian by
the tax law of the United States of America or any state or political
subdivision thereof. It shall be the responsibility of the Custodian to notify
the Fund of the obligations imposed on the Fund or any Sub-custodian or Foreign
Sub-custodian by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. Custodian shall use reasonable efforts to assist the Fund with
respect to any claim for exemption or refund.
9. Compensation, Fees, Expenses and Taxes.
(a) In consideration of the services to be rendered pursuant to this
Addendum, the Fund shall compensate Custodian in accordance with and
pursuant to the Fee Schedule annexed hereto as Schedule B, which Fee
Schedule may be amended from time to time upon thirty (30) days' prior
written notice to the Fund.
(b) Fees and reimbursement for costs and expenses shall be paid
monthly after the last business day of each calendar month, with the first
payment for the calendar month following any activity. Custodian is hereby
authorized to charge the Account for such fees, costs and expenses after
review and approval by the Fund.
(c) In the event services are rendered for less than a calendar month
or this Addendum is terminated prior to the end of a calendar month, the
Fund shall pay Custodian's fee prorated for the portion of the calendar
month such services are rendered, plus any costs and expenses incurred by
Custodian for the Fund's Account up to or subsequent to the date of
termination.
10. Limitation of Liability; Indemnification.
(a) The Custodian shall be liable for the acts or omissions of its
Sub-custodian and Foreign Sub-custodians to the same extent as set forth
with respect to sub-custodians generally in the Custody Agreement,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S.
bank as contemplated by this Addendum. In no event shall Custodian or any
Sub-custodian be liable (i) for acting in accordance with Proper
Instructions from Fund, (ii) for special or consequential damages, (iii)
for holding Assets in any particular country, including, but not limited
to, loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the Custodian, Sub-custodian or Foreign
Sub-custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph, in delegating custody duties to a
Sub-custodian or Foreign Sub-custodian, the Custodian shall not be relieved
of any responsibility to the Fund for any loss due to such delegation,
except such loss as may result from political risk (including but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or other
losses (excluding bankruptcy or insolvency of a Foreign Sub-custodian not
caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and a Sub-custodian or
Foreign Sub-custodian have exercised reasonable care.
(b) The Fund shall indemnify Custodian and hold it harmless against
any losses, damages, cost or expenses (including reasonable attorneys' fees
and disbursements), liability (including, without limitation, liability
arising under the applicable securities laws, and any state or foreign
securities and/or banking laws) or claim arising (i) from the status as a
mere record holder of securities in the Account; or (ii) from any action or
inaction by the Custodian upon Proper Instructions in connection with this
Addendum, or (iii) from the performance of its obligations under this
Addendum, provided, however, that nothing contained herein shall limit or
in any way impair the right of the Custodian to indemnification under any
other provision of the Custody Agreement and further provided that the
Custodian shall not be indemnified and held harmless from and against any
such loss damage, cost, expense, liability or claim arising from the
Custodian's negligence, lack of good faith or willful misconduct.
(c) The Fund understands that, due to certain foreign market
practices, when a Sub-custodian or Foreign Sub-custodian is instructed to
deliver Assets against payment, it may deliver such Assets prior to
actually receiving final payment and that, as a matter of bookkeeping
convenience, it may credit Fund's Account with anticipated proceeds of sale
prior to actual receipt of final payment. All credits to the Account of the
Fund of anticipated proceeds of sales and redemptions of Assets and of
anticipated income from Assets shall be conditional upon receipt of final
payment and may be reversed to the extent final payment is not received. In
the event that Custodian in its description advances funds to Fund to
facilitate the settlement of any transaction, or elects to permit Fund to
use funds credited to the Account in anticipation of final payment, Fund
shall reimburse Custodian for such amounts plus any interest thereon.
11. Reports; Statements of Account; Computer Services. Custodian shall
provide the Fund on a periodic basis with Statements of Assets in the Account
("Statement of Assets") and Statements of Account showing all transactions in
the Account ("Statement of Account"). Statement of Assets, Statement of Account
and Confirmations shall identify the Assets held, and transactions involving,
each Foreign Sub-custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the Assets of the
Portfolio(s) held by Foreign Sub-custodians, including but not limited to an
identification of entities having possession of the Portfolio(s) Assets and
advices or notifications of any transfers of Assets to or from each custodian
account maintained by a foreign banking institution for the Custodian on behalf
of each applicable Portfolio indicating, as to Securities acquired for a
Portfolio, the identity of the entity having physical possession of such
Securities.
12. Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for foreign
exchange, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Addendum, except such as may arise from
Custodian's or Custodian's nominee's own negligent action, negligent failure to
act or willful misconduct, any Assets at any time held for the Account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios' Assets to the extent necessary
to obtain reimbursement.
13. Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, information concerning the Foreign Sub-custodians employed hereunder
for use by the Fund in evaluating such Foreign Sub-custodians to ensure
compliance with the requirements of Rule 17f-5 of the 1940 Act. In addition, the
Custodian shall promptly inform the Fund in the event that the Custodian is
notified by a selected Foreign Sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles) or any other capital adequacy
test applicable to it by exemptive order, or if the Custodian has actual
knowledge of any material loss of the assets of the Fund held by a Foreign
Sub-custodian.
14. Insurance The Custodian shall use the same care with respect to the
safekeeping of Portfolio Assets and cash of the Fund held by it as it uses in
respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
15. Notices, Instructions and Other Communications. Unless otherwise
specified herein, all Statements of Assets, Statements of Account and
Confirmations shall be in writing and all notices, instructions or other
communications may be given either orally or in writing (including by tested
telex, telecopy or other electronic transmission, which may include Trade
Reports issued by the Institutions Delivery System or Depository Trust Company).
All Statements of Assets, Statements of Account, Confirmations, notices,
instructions and other communications shall be delivered to the address (post
office, telephone, telex or other electronic address) set forth on Schedule C
annexed hereto, which address may be changed upon thirty (30) days' prior
written notice to the other party. The Fund shall furnish, and shall cause each
Investment Manager to furnish, to Custodian a certificate indicating those
person who are authorized to give Custodian instructions hereunder and with
specimen signatures of such person. Custodian is authorized to comply with and
rely upon any such notices, instructions or other communications believed by it
to have been sent or given by an authorized person. Custodian's understanding of
any oral notice, instruction or other communication shall be deemed controlling
(whether given or received by Custodian), notwithstanding any discrepancy
between such understanding and any subsequent confirming document or
communication.
16. Appointment of Investment Manager. The Fund may, from time to time,
appoint one or more investment managers (each an "Investment Manager") to manage
the Assets in the Account, to vote Securities in the Account, to purchase, sell
or otherwise acquire or dispose of Assets in the Account, and to engage in
foreign exchange transactions on behalf of the Fund. Upon receipt of notice of
the appointment of any Investment Manager, which notice shall be annexed hereto
as Schedule D (as such Schedule may be amended from time to time by the Fund),
and except as otherwise provided herein, Custodian is to rely upon and comply
with (and shall have no liability for relying upon and complying with) Proper
Instructions and directions from the Investment Manager (including instructions
and directions with respect to the voting of Securities in the Account, the
purchase, sale or other acquisition or disposition of Assets in the Account and
the furnishing of information and records relating to the Account to the
Investment Manager) to the same extent as if such instructions and directions
were given by the Fund and Custodian shall have no duty or obligation to
determine the propriety or appropriateness of such instructions or directions.
Any such appointment shall remain in full force and effect unless and until
Custodian receive written notice from the Fund to the contrary.
17. Termination. This Addendum shall be continuing and shall remain in full
force and effect until terminated by Custodian or the Fund upon the termination
of the Custody Agreement between the Fund and Custodian.
18. Assignment. Neither Custodian nor the Fund shall assign this Addendum
without first obtaining the written consent of the other party hereto.
19. Headings and Capital Terms. The section and paragraph headings
contained herein are for convenience and reference only and are not intended to
define or limit the scope of any provision of this Agreement. All capitalized
terms used in this Addendum but not defined shall have the meanings assigned to
such terms in the Custody Agreement.
20. Entire Agreement; Amendment. This Addendum shall constitute the entire
agreement of the parties with respect to the subject matter and supersedes all
prior oral or written agreements in regard thereto. Except as otherwise
provided, this Addendum may be amended only by an instrument in writing duly
executed by both parties hereto.
21. Governing Law; Jurisdiction; Certain Waivers.
(a) This Addendum shall be interpreted and construed in accordance
with the internal substantive laws (and not the choice of law rules) of the
State of New York.
(b) The invalidity, illegality or unenforceability of any provision of
this Addendum shall in no away affect the validity, legality or
enforceability of any other provision; and if any provision is held to be
unenforceable as a matter of law, the other provisions shall not be
affected thereby and shall remain in full force and effect.
<PAGE>
22. Rights and Remedies. The rights and remedies conferred upon the parties
hereto shall be cumulative, and the exercise of waiver of any such rights or
remedy shall not preclude or inhibit the exercise or any additional rights or
remedies. The waiver of any right or remedy hereunder shall not preclude or
inhibit the subsequent exercise of such right or remedy.
IN WITNESS WHEREOF, this Addendum has been executed and attested as of the
day and year first above written, by the duly authorized officers of the Fund
and Custodian.
Attest: ACCESSOR FUNDS, INC.
/s/Linda V. Whatley By: /s/J. Anthony Whatley
- ------------------- -------------------------
Linda V. Whatley J. Anthony Whatley
Secretary President
Attest: THE FIFTH THIRD BANK
By:/s/Tracie D. Hoffman
-----------------------
Name: Tracie D. Hoffman
Title: Vice President
<PAGE>
SCHEDULE A
THE FIFTH THIRD BANK
GLOBAL CUSTODY NETWORK
STATE STREET BANK AND TRUST COMPANY, GLOBAL SUB-CUSTODIAN
COUNTRIES AND FOREIGN SUB-CUSTODIANS
FOR
THE ACCESSOR FUNDS, INC.
October 4, 1996
COUNTRY SUB-CUSTODIAN
Argentina Citibank, Buenos Aires Branch
Australia Westpac Banking Corp, Sydney
Austria GiroCreditBank, AG der Sparkassen, Vienna
Bangladesh Standard Chartered Bank, Dhaka Branch
Belgium Generale Banque, Brussels
Bolivia Banco Boliviano Americano, La Paz
Botswana Barclays Bank of Botswana Limited (BBBL), Gaborone (80.4%
owned by Barclays Bank Plc. U.K.)
Brazil Citibank, NA, Sao Paulo
Canada Canada Trustco Mortgage Company., Toronto
Chile Citibank, NA, Santiago Branch
China Hongkong and Shanghai Bank, Shanghai and Shenzhen branches
Colombia Cititrust Colombia SA Sociedad Fiduciaria (subsidiary of
Citibank Colombia)
Cyprus Barclays Bank, Plc, Nicosia Branch
Czech Republic Ceskoslovenska Obchodni Banka A.S. (CSOB), Prague
Denmark Den Danske Bank, Copenhagen
Ecuador Citibank, NA, Quito
Egypt National Bank of Egypt, Cairo
Finland Merita Bank Ltd., Helsinki
France Banque Paribas, Paris
Germany Dresdner Bank, Frankfurt
Ghana Barclays Bank of Ghana, Ltd (60% owned by Barclays Plc, UK)
Greece National Bank of Greece (NBG), Athens
Hong Kong Standard Chartered Bank, Hong Kong branch
Hungary Citibank Budapest Rt. (via Citibank NA, NY, for US mutual
fund clients)
India Deutsche Bank, AG, Bombay branch
Hongkong and Shanghai Banking Corporation Ltd, Bombay branch
<PAGE>
COUNTRY SUB-CUSTODIAN
Indonesia Standard Chartered Bank, Jakarta Branch
Ireland Bank of Ireland, Dublin
Israel Bank Hapoalim, Tel Aviv
Italy Morgan Guaranty Trust Co., Milan
Banque Paribas, Milan
Ivory Coast Societe Generale de Banques en Cote d'Ivoire
Japan Daiwa Bank, Ltd., Tokyo
The Fuji Bank, Ltd., Tokyo
Sumitomo Trust & Banking Co, Ltd, Tokyo
Jordan British Bank of the Middle East, Amman
Kenya Barclays Bank of Kenya Ltd. (BBKL), Nairobi (68.5% owned by
Barclays Bank Plc. UK
Korea SEOULBANK, Seoul
Malaysia Standard Chartered Bank, Kuala Lumpur
Mexico Citibank, NA, Mexico City branch
Morocco Banque Commerciale du Maroc (BCM), Casablanca
Netherlands MeesPierson NV, Amsterdam
New Zealand Australia and New Zealand Banking Group, Ltd., Wellington
Norway Christiania Bank og Kreditkasse, Oslo
Pakistan Deutsche Bank AG, Karachi branch
Peru Citibank, NA, Lima branch
Philippines Standard Chartered Bank, Manila branch
Poland Citibank Poland, SA, Warsaw
Portugal Banco Commercial Portugues (BCP), Lisbon
Singapore Development Bank of Singapore, Ltd. (DBS), Singapore
South Africa Standard Bank of South Africa, Ltd., Johannesburg
Spain Banco Santander, Madrid
Sri Lanka The Hongkong & Shanghai Banking Corp Ltd (HSBC), Colombo
branch
Sweden Skandinaviska Enskilda Banken (SEB), Stockholm
Switzerland Union Bank of Switzerland (UBS), Zurich
Taiwan The Central Trust of China, Taipei
Thailand Standard Chartered Bank, Bangkok branch
Turkey Citibank NA, Istanbul branch (US mutual fund accounts)
United Kingdom State Street London, Ltd
Uruguay Citibank, NA, Montevideo branch
Venezuela Citibank, NA, Caracas branch
Zimbabwe Barclays Bank of Zimbabwe (BBZL), Harare
<PAGE>
SCHEDULE B
THE FIFTH THIRD BANK
GLOBAL CUSTODY ADDENDUM
FEE SCHEDULE
October 4, 1996
Holding Charge
.08% on all assets No minimum
Foreign Transaction Fees
Group A Countries $ 30.00
Group B Countries $ 60.00
Group C Countries $ 72.00
Group D Countries $ 84.00
Group E Countries $180.00
Group A Group B Group C Group D Group E
- ------- ------- ------- ------- -------
Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Germany Hong Kong France Philippines Brazil
Japan Netherlands Ireland Portugal Chile
New Zealand Italy South Korea China
Singapore Luxembourg Spain Colombia
Switzerland Mexico Sri Lanka Cyprus
Norway Sweden Greece
Thailand Taiwan Hungary
U.K. India
South Africa Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
Miscellaneous Fees
Wire Transfers $7.00
Check Disbursements $6.00
Other charges, including, but not limited to, stamp duties, transfer fees,
brokerage fees and administrative costs, shall be passed directly to the Fund
for approval and payment.
<PAGE>
SCHEDULE C
THE FIFTH THIRD BANK
GLOBAL CUSTODY ADDENDUM
NOTICES
October 4, 1996
TO THE FIFTH THIRD BANK:
Post Office Address: Fifth Third Center
511 Walnut Street, Mail Drop 1090E5
Cincinnati, Ohio 45263
Attention: Mutual Fund Client Services
Telephone: (513) 744-7091
Facsimile: (513) 744-6622
TO THE ACCESSOR FUNDS
Post Office Address: Bennington Capital Management
1420 5th Avenue, Suite 3130
Seattle, WA 98101
Attention: Ravindra A. Deo
Telephone: (206) 224-7420
Facsimile: (206) 224-4874
<PAGE>
SCHEDULE D
THE FIFTH THIRD BANK
GLOBAL CUSTODY ADDENDUM
INVESTMENT MANAGERS
October 4, 1996
Bennington Capital Management L.P.
Nicholas-Applegate Capital Management
State Street Bank and Trust Company (State Street Global Advisors)
Martingale Asset Management, L.P.
Bankers Trust Company
Smith Barney Capital Management
Symphony Asset Management, Inc.
BlackRock Financial Management, Inc.
FUND ACCOUNTING AND SERVICES AGREEMENT
THIS FUND ACCOUNTING AND SERVICES AGREEMENT (the "Agreement") is made as of
4th day of October, 1996, by and among BENNINGTON CAPITAL MANAGEMENT L.P., a
Washington limited partnership ("Bennington"), THE FIFTH THIRD BANK, a banking
company organized under the laws of the State of Ohio ("Fifth Third"), and
ACCESSOR FUNDS, INC., a Maryland corporation (the "Fund").
W I T N E S S E T H
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act");
WHEREAS, Bennington has been appointed manager of the Fund and Bennington
has accepted such appointment;
WHEREAS, Bennington and the Fund have entered into a management agreement
(the "Management Agreement") pursuant to which Bennington provides management,
administrative and other services to the Fund and certain of said services are
commonly referred to as those performed by an administrator;
WHEREAS, Fifth Third provides certain fund accounting, administrative and
other services to investment companies; and
WHEREAS, Bennington, with the consent of the Fund, desires to retain Fifth
Third to provide fund accounting and other services for the portfolios of the
Fund listed on Exhibit A, as may be amended from time to time (each, a
"Portfolio" or collectively, the "Portfolios"), and Fifth Third is willing to
provide such services, all as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions, As Used in This Agreement.
(a) Authorized Person means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral
and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or
any amendment thereto as may be received by Fifth Third. An Authorized
Person's scope of authority may be limited by the Fund by setting
forth such limitation in the Authorized Persons Appendix.
(b) Oral Instructions mean instructions orally transmitted to and
accepted by Fifth Third because such instructions are: (i) given by an
Authorized Person or from a person reasonably believed by Fifth Third
to have been an Authorized Person, (ii) recorded and kept among the
records of Fifth Third made in the ordinary course of business and
(iii) orally confirmed by Fifth Third. The Fund and Bennington shall
cause all Oral Instructions to be confirmed by Written Instructions.
If such Written Instructions confirming Oral Instructions are not
received by Fifth Third prior to a transaction, it shall in no way
affect the validity of the transaction or the authorization thereof by
the Fund or Bennington. If Oral Instructions vary from the Written
Instructions which purport to confirm them, Fifth Third shall notify
the Fund or Bennington of such variance but such Oral Instructions
will govern unless Fifth Third has not yet acted.
(c) Written Instructions mean (i) written communications actually
received by Fifth Third and signed an Authorized Person or a person
reasonably believed by Fifth Third to have been an Authorized Person,
or (ii) communications by facsimile or any other such system from a
person or persons reasonably believed by Fifth Third to be an
Authorized Person or (iii) communications transmitted electronically
through the Institutional Delivery System (IDS), or any other similar
electronic instruction system acceptable to Fifth Third and approved
by resolutions of the Board of Directors, a copy of which, certified
by the Secretary, shall have been delivered to Fifth Third.
(d) Shares mean the shares of beneficial interest of any series
or class of the Fund.
2. Appointment. Bennington hereby appoints Fifth Third to provide fund
accounting and other specified services to each of the Portfolios set forth in
Exhibit A, as may be amended from time to time, in accordance with the terms set
forth in this Agreement. Fifth Third accepts such appointment and agrees to
furnish such specified services.
3. Delivery of Documents. Bennington has provided or, where applicable,
will provide Fifth Third with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of Fifth Third to
provide services to each Portfolio and approving this Agreement;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of any distribution agreement or similar agreement
made with respect to each class of Shares;
(e) a copy of the Management Agreement and any administration
agreements or similar agreements with respect to a Portfolio;
(f) a copy of any shareholder servicing agreement made in respect
of the Fund or a Portfolio; and
(g) copies (certified or authenticated, where applicable) of any
and all amendments or supplements to the foregoing.
4. Compliance with Rules and Regulations. Fifth Third undertakes to comply
with all applicable requirements of the Investment Company Act and other
applicable securities laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
Fifth Third hereunder. Except as specifically set forth herein, Fifth Third
assumes no responsibility for such compliance by Bennington, the Fund or any
Portfolio.
5. Instructions. Fifth Third will provide fund accounting and such other
services as is agreed hereunder.
(a) Fifth Third shall act only upon Oral or Written Instructions,
except as otherwise provided in this Agreement.
(b) Fifth Third shall be entitled to rely upon any Oral and
Written Instructions it receives from an Authorized Person (or from a
person reasonably believed by Fifth Third to be an Authorized Person)
pursuant to this Agreement. Fifth Third may assume that any Oral or
Written Instruction received hereunder is not in any way inconsistent
with the provisions of organizational documents or this Agreement or
of any vote, resolution or proceeding of the Fund's Board of Directors
or of the Fund's shareholders, unless and until Fifth Third receives
Written Instructions to the contrary.
(c) Bennington agrees to forward, or to cause the Fund to forward
to Fifth Third, Written Instructions confirming Oral Instructions so
that Fifth Third receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by
Fifth Third shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral
Instructions. Where Oral or Written Instructions reasonably appear to
have been received from an Authorized Person, Fifth Third shall incur
no liability to Bennington or the Fund in acting upon such Oral or
Written Instructions.
6. Right to Receive Advice.
(a) Advice of the Fund. If Fifth Third is in doubt as to any
action it should or should not take, Fifth Third shall request
directions or advice, including Oral or Written Instructions, from
Bennington or the Fund.
(b) Advice of Counsel. If Fifth Third shall be in doubt as to any
question of law pertaining to any action it should or should not take,
Fifth Third shall request advice at its own cost from such counsel of
its own choosing.
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions Fifth Third
receives from Bennington or the Fund and the advice Fifth Third
receives from counsel, Fifth Third shall inform the Fund of the
conflict and seek resolution.
(d) Protection of Fifth Third. Fifth Third shall be protected in
any action it takes or does not take in reliance upon directions,
advice or Oral or Written Instructions it receives from Bennington,
the Fund or counsel and which Fifth Third believes, in good faith, to
be consistent with those directions, advice or Oral or Written
Instructions. Nothing in this section shall be construed so as to
impose an obligation upon Fifth Third (i) to seek such directions,
advice or Oral or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral or Written Instructions. Nothing
in this subsection shall excuse Fifth Third when an action or omission
on the part of Fifth Third constitutes willful misfeasance, lack of
good faith, negligence or reckless disregard by Fifth Third of any
duties, obligation or responsibilities set forth in this Agreement.
7. Records; Visits.
(a) The books and records pertaining to the Fund and the
Portfolios which are in the possession or under the control of Fifth
Third shall be the property of the Fund. Such books and records shall
be prepared, maintained and preserved as required by the Investment
Company Act and other applicable securities laws, rules and
regulations. The Fund and Authorized Persons shall have access to such
books and records at all times during Fifth Third's normal business
hours. Upon the reasonable request of the Fund, copies of any such
books and records shall be provided by Fifth Third to the Fund or to
an Authorized Person, at the Fund's expense.
(b) Fifth Third shall keep the following records:
(i) all books and records relating to the services it
performs hereunder with respect to a Portfolio's books of
account;
(ii) records relating to the services it performs
hereunder with respect to a Portfolio's securities
transactions; and
(iii) all other books and records as Fifth Third is
required to maintain pursuant to Rule 31a-1 of the
Investment Company Act in connection with the services
provided hereunder.
8. Confidentiality. Fifth Third agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records of information is otherwise consented to, in writing, by
Bennington or the Fund. Bennington and the Fund agree that such consent shall
not be unreasonably withheld and may not be withheld where Fifth Third may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
9. Liaison with Accountants. Fifth Third shall act as liaison with the
Fund's independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules with respect to the services
provided to each Portfolio. Fifth Third shall take all reasonable action in the
performance of its duties under this Agreement to assure that the necessary
information in Fifth Third's control is made available to such accountants for
the expression of their opinion, as required by the Fund.
10. Disaster Recovery. Fifth Third shall maintain in effect a disaster
recovery plan, and enter into any agreements necessary with appropriate parties
making reasonable provisions for emergency use of electronic data processing
equipment customary in the industry. In the event of equipment failures, Fifth
Third shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. Fifth Third shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure
provided such loss or interruption is not caused by Fifth Third's own willful
misfeasance, lack of good faith, gross negligence or reckless disregard of its
duties or obligations under this Agreement.
11. Compensation. As compensation for services rendered by Fifth Third
during the term of this Agreement, the Fund will pay to Fifth Third a fee or
fees set forth in Exhibit B, as may be amended from time to time. It is agreed
that fees set forth in Exhibit B shall not be increased for five years from the
commencement of accounting services under this Agreement. In the event that
Exhibit C is amended such that significant additional services as requested by
the Fund are required from Fifth Third on an ongoing basis, with the approval of
the Fund, additional fees may be charged. The fee for the period from the day of
the year this Agreement is entered into until the end of that year shall be
prorated according to the proportion that such period bears to the full annual
period.
12. Indemnification.
(a) The Fund agrees to indemnify and hold harmless Fifth Third
from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the
securities laws and any state or foreign securities and blue sky laws,
and amendments thereto), and expenses, including (without limitation)
reasonable attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which Fifth Third takes
in reasonable reliance on Oral or Written Instructions from Bennington
or the Fund. Fifth Third, shall not be indemnified against any
liability (or any expenses incident to such liability) arising out of
Fifth Third's own willful misfeasance, lack of good faith, negligence
or reckless disregard of its duties and obligations under this
Agreement. For any legal proceedings giving rise to this
indemnification, the Fund shall be entitled to defend or prosecute any
claim in the name of Fifth Third at the Fund's own expense through
counsel of its own choosing if it gives written notice to Fifth Third
within ten (10) business days of receiving notice of such claim.
(b) Fifth Third agrees to indemnify and hold harmless Bennington
and the Fund from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising
under the securities laws and any state or foreign securities and blue
sky laws, and amendments thereto), and expenses, including (without
limitation) reasonable attorneys' fees and disbursements arising from
any action or omission of Fifth Third's own willful misfeasance, lack
of good faith, gross negligence or reckless disregard of its duties
and obligations under this Agreement. For any legal proceedings giving
rise to this indemnification, Fifth Third shall be entitled to defend
or prosecute any claim in the name of Bennington or the Fund at Fifth
Third's own expense through counsel of its own choosing if it gives
written notice to Bennington or the Fund within ten (10) business days
of receiving notice of such claim.
13. Responsibilities of Fifth Third.
(a) Fifth Third shall be under no duty to take any action on
behalf of Bennington, the Fund or any Portfolio except as specifically
set forth herein or as may be specifically agreed to by Fifth Third in
writing. Fifth Third shall be obligated to exercise commercially
reasonable care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this
Agreement. Fifth Third shall be liable for actual damages arising out
of Fifth Third's failure to perform its duties under this Agreement to
the extent such damages arise out of Fifth Third's willful
misfeasance, lack of good faith, gross negligence or reckless
disregard of such duties.
(b) In no event shall Fifth Third be liable for any special,
consequential, extraordinary or punitive damages, arising from the
performance or non-performance of Fifth Third under this Agreement, or
Fifth Third's failure to comply with any of the terms of this
Agreement.
(c) Without limiting the generality of the foregoing or of any
other provision of this Agreement,
(i) Fifth Third shall not be liable for losses beyond
its reasonable control, provided that Fifth Third has acted
in accordance with the standard of care set forth above; and
(ii) Fifth Third shall not be liable for
(A) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of
this Agreement, and which Fifth Third reasonably believes to
be genuine; or
(B) subject to Section 10, delays or errors or loss of
data occurring by reason of circumstances beyond Fifth
Third's control, including acts of civil or military
authority, national emergencies, non Fifth Third labor
difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
14. Description of Accounting Services on a Continuous Basis. Fifth Third
will perform the accounting services as set forth on Exhibit C, as may be
amended from time to time, with respect to each Portfolio.
15. Description of Other Services on a Continuous Basis. Fifth Third will
perform the other services as set forth on Exhibit C, as may be amended from
time to time, with respect to each Portfolio:
16. Duration and Termination. This Agreement shall continue until
terminated by either Bennington, the Fund or Fifth Third on sixty (60) days'
prior written notice to the other party. If service is terminated due to Fifth
Third's failure to meet its obligations under this Agreement, after written
notice documenting such failure and reasonable opportunity to cure within 15
days, then from the date Notice of Termination is give, there will be no charges
for services for a period not to exceed sixty (60) days.
17. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable or facsimile
sending device. If notice is sent by confirming telegram, cable, or facsimile
sending device, it shall be deemed to have been given immediately. If notice is
sent by first class mail, it shall be deemed to have been given three days after
it has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered. Notices shall be addressed
(a) if to Fifth Third:
38 Fountain Square Plaza
Mail Drop 1090F2
Cincinnati, Ohio 45263
Attention: Fund Accounting Manager
(b) if to the Fund:
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
Attention: Ravindra A. Deo;
(c) if to Bennington:
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
Attention: Ravindra A. Deo; or
(d) if to none of the foregoing, at such other address as
shall have been provided by like notice to the sender of any such
notice or other communication by the receiving party.
18. Amendments. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. Delegation; Assignment. Fifth Third may assign its rights and delegate
its duties hereunder upon prior written consent of Bennington and the Fund to
any wholly-owned direct or indirect subsidiary of Fifth Third, provided that:
(a) Fifth Third gives Bennington and the Fund sixty (60) days'
prior written notice;
(b) the delegate (or assignee) agrees with Fifth Third,
Bennington and the Fund to comply with all relevant provisions of the
securities laws; and
(c) Fifth Third and such delegate (or assignee) promptly provide
such information as Bennington may request, and respond to such
questions as Bennington or the Fund may ask, relative to the
delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. Miscellaneous.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding among the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof,
provided that Bennington and Fifth Third may embody in one or more
separate documents their agreement, if any, with respect to delegated
duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or
effect.
(c) Governing Law. This Agreement will be governed and construed
in accordance with the laws of the State of New York without regard to
principles or conflicts of law. 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 New York.
(d) Partial Invalidity. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
(e) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and biding execution hereof
by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
ACCESSOR FUNDS, INC. BENNINGTON CAPITAL MANAGEMENT L.P.
By: Bennington Management Associates, Inc.
Its: Managing General Partner
By:/s/Ravindra A. Deo By:/s/ J. Anthony Whatley III
- --------------------- -----------------------------
Ravindra A. Deo J. Anthony Whatley III
Vice President President
THE FIFTH THIRD BANK
By:/s/ Tracie D. Hoffman
------------------------
Tracie D. Hoffman
Vice President
<PAGE>
EXHIBIT A
PORTFOLIOS OF ACCESSOR FUNDS, INC.
THIS EXHIBIT A, dated as of October 4, 1996, is Exhibit A to the Fund
Accounting and Services Agreement dated as of October 4, 1996, by and among
Bennington Capital Management L.P., Fifth Third Bank and Accessor Funds, Inc.
This Exhibit A shall supersede all previous forms of Exhibit A.
Name of Portfolio Date
Growth Portfolio November 18, 1996
Value and Income Portfolio November 18, 1996
Small to Mid Cap Portfolio November 18, 1996
International Equity Portfolio November 18, 1996
Intermediate Fixed - Income Portfolio October 7, 1996
Short-Intermediate Fixed - Income Portfolio October 7, 1996
Mortgage Securities Portfolio November 18, 1996
U.S. Government Money Portfolio October 7, 1996
ACCESSOR FUNDS, INC.
By:______________________________________
Ravindra A. Deo
Vice President
BENNINGTON CAPITAL MANAGEMENT L.P.
By: Bennington Management Associates, Inc.
Its: Managing General Partner
By:_______________________________________
J. Anthony Whatley III
President
THE FIFTH THIRD BANK
By:_______________________________________
Tracie D. Hoffman
Vice President
<PAGE>
EXHIBIT B
FEE SCHEDULE
THIS EXHIBIT B, dated as of October 4, 1996, is Exhibit B to the Fund
Accounting and Services Agreement dated as of October 4, 1996, by and among
Bennington Capital Management L.P. ("Bennington"), Fifth Third Bank ("Fifth
Third") and Accessor Funds, Inc. (the "Fund"). This Exhibit B shall supersede
all previous forms of Exhibit B.
The Fund will pay Fifth Third an annual fund accounting and service fee
(the "Fee"), to be calculated daily and paid monthly. The annual Fee for each
Portfolio shall be the greater of a monthly minimum or an asset based fee, as
follows:
Asset Based Fees
--------------------------------------
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ------- -- ------------ ------------ ------------
Growth Portfolio $1,500 .03% .02% .01%
Value and Income Portfolio $1,500 .03% .02% .01%
Small to Mid Cap Portfolio $1,500 .03% .02% .01%
International Equity Portfolio $3,000 .04% .03% .02%
Intermediate Fixed-Income $2,000 .03% .02% .01%
Short-Intermediate Fixed Income $2,000 .03% .02% .01%
Mortgage Securities Portfolio $2,000 .03% .02% .01%
U.S. Government Money $1,500 .03% .02% .01%
The Fund will pay an additional annual Fee of $2,000 per portfolio for
other administrative services rendered, to be charged monthly. Should the Fund
add additional share classes, there will be an annual charge of $7,000 per
additional class per portfolio, also to be charged monthly. Finally, the Fund
will reimburse Fifth Third for its out-of-pocket expenses incurred in performing
its services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage.
ACCESSOR FUNDS, INC. BENNINGTON CAPITAL MANAGEMENT L.P.
By: Bennington Management Associates, Inc.
Its: Managing General Partner
By: /s/ Ravindra A. Deo By:/s/ J. Anthony Whatley III
- ----------------------- -----------------------------
Ravindra A. Deo J. Anthony Whatley III
Vice President President
THE FIFTH THIRD BANK
By:/s/ Tracie D. Hoffman
------------------------
Tracie D. Hoffman
Vice President
<PAGE>
EXHIBIT C
Fifth Third will perform the accounting services with respect to each Portfolio:
(a) Journalize investment, capital share and income and expense
activities;
(b) Verify investment buy/sell trade tickets when received from
the investment adviser for a Portfolio (the "Money Manager") and
transmit trades to the Fund's custodian (the "Custodian") for proper
settlement;
(c) Maintain individual ledgers for investment securities;
(d) Maintain historical tax lots for each security;
(e) Reconcile cash and investment balances with the Custodian,
and provide Bennington and the Money Manager with the beginning cash
balance available for investment purposes daily;
(f) Update the cash availability daily;
(g) Post to and prepare the Statement of Assets and Liabilities
and the Statement of Operations;
(h) Calculate the various contractual expenses (e.g., advisory
and custody fees);
(i) Monitor the expense accruals and notify an officer of the
Fund of any proposed adjustments;
(j) Control all disbursements and authorize such disbursements
upon Written Instructions;
(k) Calculate capital gains and losses and, as appropriate,
prepare Certificates of Treasurer (or other agreed upon procedures);
(l) Determine net income and, as appropriate, calculate dividend
rates and prepare Certificates of Treasurer (or other agreed upon
procedures);
(m) Obtain security market quotes from independent pricing
services, if available, approved by the Money Manager, or if such
quotes are unavailable, then obtain such prices from the Money
manager, and in either case calculate the market value of each
Portfolio's investments;
(n) Transmit or mail a copy of the daily portfolio valuation to
the Money Manager;
(o) Compute net asset value;
(p) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
dollar-weighted maturity;
(q) Supply electronic access to portfolio and fund accounting
data maintained on Fifth Third's portfolio accounting system on an
ongoing basis;
(r) Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments Statement of Assets and Liabilities
Statement of Operations Statement of Changes in Net Assets
Cash Statement Schedule of Capital Gains and Losses.
(s) Prepare quarterly schedule of aged receivables, by country,
for holding of the International Equity Portfolio
Fifth Third will perform the following other services with respect to each
Portfolio:
(a) Prepare quarterly broker security transactions summaries;
(b) Prepare monthly security transaction listings;
(c) Prepare for execution and file the Fund's Federal, state and
excise tax returns;
(d) Prepare and file the Fund's Semi-Annual Reports with the
Securities and Exchange Commission on Form N-SAR;
(e) Prepare the Fund's annual, semi-annual, and quarterly
shareholder reports;
(f) Assist in the preparation of registration statements and
other filings relating to the registration of Shares;
(g) Monitor each Portfolio's status as a regulated investment
company under Sub-chapter M of the Internal Revenue Code of 1986, as
amended;
(h) Provide such information to a Portfolio's Money Manager as
shall be mutually agreed upon between the Money Manager and Fifth
Third to allow the Money Manager to monitor the Portfolio's compliance
with certain requirements of the Investment Company Act and the Fund's
registration statement on Form N-1A.
(i) Rule 24 f- 2 filings; and
(j) Assist in preparation of materials as requested for quarterly
meetings of the Board of Directors of the Fund.
<PAGE>
October 4, 1996
AUTHORIZED PERSONS APPENDIX
Name Signature
Ravindra A. Deo ______________________________
Bruce Joel King ______________________________
J. Anthony Whatley III ______________________________
Linda V. Whatley ______________________________
Robert J. Harper ______________________________
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 11 to Registration
Statement under the Securities Act of 1933 filed under Registration Statement
No. 33-41245, of our report dated February 12, 1997 on the financial statements
of the Growth Portfolio, the Value and Income Portfolio, the Small to Mid Cap
Portfolio, the International Equity Portfolio, the Intermediate Fixed-Income
Portfolio, the Short-Intermediate Fixed-Income Portfolio, the Mortgage
Securities Portfolio, and the U.S. Government Money Portfolio of Accessor Funds
Inc., incorporated by reference in the Statement of Additional Information,
which is part of such Registration Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 23, 1997
- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
I. PROCEDURES
Instructions For Opening Your IRA 1
Individual Retirement Custodial Account Disclosure Statement 2
Individual Retirement Custodial Account Agreement
(Under Section 408(a) Of the Internal Revenue Code) 3
II. RETIREMENT ACCOUNT FORMS
Individual Retirement Custodial Account Application And
Adoption Agreement
IRA Transfer Request/Direct Rollover Request
Authorization For Distribution From Individual Retirement Account
<PAGE>
Revised 12/96
<PAGE>
- --------------------------------------------------------------------------------
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 eight
diversified investment portfolios, each with its own investment objective and
policies. While The Fifth Third Bank is the Custodian of your individual
retirement arrangement 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.
DOCUMENTS
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
Authorization For Distribution From IRA
Accessor Funds, Inc. Prospectuses
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.
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 adviser. 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 adviser, who will deliver them to Accessor Funds, Inc., P.O. Box
1748, Seattle WA 98111.
<PAGE>
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 eight 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:
Accessor Funds, Inc.
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 adviser 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 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 Arrangement" 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")
or Savings Incentive Match Plan for Employees ("SIMPLE") 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
contributions to a simplified employee pension (SEP) or a simple retirement plan
(SIMPLE), 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, at least one of the spouses must have compensation or
earned income from personal services rendered. 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 (potentially, $4,000 for tax years beginning after 1996) 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. (Beginning January 1, 1997, the total combined
contribution is limited to the lesser of $4,000 or 100% of the couple's combined
earned income.) 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 transfer 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 generally 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 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;
however, the employer has the option of giving the check to you for
delivery or mailing it directly to the IRA. 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, 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, 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
o payments over the lifetime or life expectancy of the participant (or
participant and a designated beneficiary),
o installment payments for a period of 10 years or more,
o required distributions after age 70 1/2, and
o 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")
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 ("SAR-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. Beginning January 1, 1997, the SAR-SEP
plan was discontinued, although employers may continue to operate already
existing plans. 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. The amount of
compensation that may be used in 1997 for calculating contributions is $160,000.
The compensation limit reduces the maximum dollar amount that can be contributed
to a SEP-IRA in any given year from $30,000 to $24,000 (0.15 x $160,000).
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.
SIMPLE RETIREMENT PLANS ("SIMPLE IRAS")
A SIMPLE IRA may be established for use by your employer as part of a SIMPLE
retirement plan. If your employer maintains a SIMPLE retirement plan, you may
elect to reduce your annual compensation by a percentage you choose (up to
$6,000, indexed to reflect cost-of-living adjustments) and have your employer
contribute that amount to your SIMPLE IRA. Your employer will either make a
matching contribution equal to 100% of your contributions (up to 3% of your
compensation) or make a non-elective contribution of 2% of compensation for each
eligible employee. You may contribute, in addition to the amount contributed by
your employer to your SIMPLE 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
SIMPLE retirement plan and are, therefore, proper. Employer contributions under
a SIMPLE 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
SIMPLE retirement plan 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, art or coins (other than certain gold and silver
coins issued by the United States).
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
2. Divide this by 10,000: $7,555
----- = 0.7555
$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 or $4,000 for tax years
beginning after 1996). 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 $4,000 for tax years beginning after
1996) 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 or $4,000 for tax years beginning after 1996 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 adviser
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 covers deductible medical
expenses (applies after 1996), or
o pays health insurance premiums for individuals who have received
unemployment compensation for at least 12 consecutive weeks (applies after
1996), 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. A distribution on account of your disability will
not be subject to the "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. Your 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 your 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 1996 a participant's IRA comprised the following:
Total Deductible Contributions $5,000
Total Nondeductible Contributions $2,000
Earnings On IRAs as of 12/31/96 $1,000
Less 1996 Withdrawal $ 500
Total Account Balance as of 12/31/96 $7,500
To determine the nontaxable portion of your 1996 withdrawal, the total 1996
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 1996 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-96 ($7,500) plus the 1996 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 1996 will not be included in your taxable
income. The remaining $375 will be taxable for 1996. 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
adviser 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), although the tax will be suspended for distributions in 1997, 1998
and 1999. 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
adviser 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 adviser 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 accumulated contributions 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:
Accessor Funds, Inc.
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)."
<PAGE>
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 Regulation
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 non spouse 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 adviser 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, paragraph 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 eight 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) or 408(d)(3) of
the Code or an employer contribution to a plan described in section 408(k)
or 408(p) 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 ensure 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 paragraph 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>
ACCESSOR FUNDS, INC.
DISTRIBUTION PLAN
1. THE PLAN. This Distribution 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%
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) (the "Disinterested Directors) 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 the Disinterested Directors 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 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 by a vote of the Board of Directors,
including a majority of the Disinterested Directors (voting separately) who
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. 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,
including a majority of the Disinterested Directors (voting separately) ,
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 the Disinterested Directors , or 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 with respect to any Portfolio, without approval 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, and all amendments
must be approved by a vote of the Board of Directors, including a majority
of the Disinterested Directors (voting separately) who 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 any amendment to this Plan.
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.
Revised: February 22, 1997.
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
8/31/92 $12.12 0.000000000 0.000000000 0.000000000 0.000000000 1.00% 0.00% 0.00% 1.00% 68.01%
9/30/92 $12.20 0.000000000 0.000000000 0.027939771 0.027939771 0.89% 0.00% 0.00% 1.90% 20.40%
10/30/92 $12.51 0.000000000 0.000000000 0.000000000 0.000000000 2.54% 0.00% 0.00% 4.49% 27.02%
11/30/92 $13.22 0.000000000 0.000000000 0.000000000 0.000000000 5.68% 0.00% 0.00% 10.42% 44.65%
12/31/92 $13.06 0.083124773 0.000000000 0.028109583 0.111234356 -0.37% 0.00% 7.96% 10.01% 30.99%
1/29/93 $13.21 0.000000000 0.000000000 0.000000000 0.000000000 1.15% 1.15% 6.50% 11.28% 27.99%
2/26/93 $13.08 0.000000000 0.000000000 0.000000000 0.000000000 -0.98% 0.15% -0.22% 10.18% 20.95%
3/31/93 $13.70 0.000000000 0.000000000 0.023964842 0.023964842 4.92% 5.08% 5.08% 15.60% 27.34%
4/30/93 $13.27 0.000000000 0.000000000 0.000000000 0.000000000 -3.14% 1.79% 0.63% 11.98% 18.04%
5/28/93 $13.69 0.000000000 0.000000000 0.000000000 0.000000000 3.17% 5.01% 4.85% 15.52% 20.94%
6/30/93 $13.36 0.218242000 0.005761000 0.034220000 0.258223000 -0.52% 4.46% -0.60% 14.91% 17.78%
7/30/93 $13.05 0.000000000 0.000000000 0.000000000 0.000000000 -2.32% 2.03% 0.24% 12.25% 13.21%
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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
8/31/92 $12.06 0.000000000 0.000000000 0.000000000 0.000000000 0.50% 0.00% 0.00% 0.50% 29.70%
9/30/92 $12.08 0.000000000 0.000000000 0.047505656 0.047505656 0.56% 0.00% 0.00% 1.06% 10.99%
10/30/92 $11.98 0.000000000 0.000000000 0.000000000 0.000000000 -0.83% 0.00% 0.00% 0.23% 1.24%
11/30/92 $12.41 0.000000000 0.000000000 0.000000000 0.000000000 3.59% 0.00% 0.00% 3.82% 15.00%
12/31/92 $12.58 0.006689588 0.000000000 0.073773497 0.080463085 2.02% 0.00% 4.81% 5.92% 17.67%
1/29/93 $12.94 0.000000000 0.000000000 0.000000000 0.000000000 2.86% 2.86% 8.70% 8.95% 21.90%
2/26/93 $13.34 0.000000000 0.000000000 0.000000000 0.000000000 3.09% 6.04% 8.18% 12.32% 25.60%
3/31/93 $13.62 0.000000000 0.000000000 0.061045594 0.061045594 2.56% 8.75% 8.75% 15.19% 26.58%
4/30/93 $13.45 0.000000000 0.000000000 0.000000000 0.000000000 -1.25% 7.40% 4.41% 13.75% 20.79%
5/28/93 $13.67 0.000000000 0.000000000 0.000000000 0.000000000 1.64% 9.15% 2.93% 15.61% 21.06%
6/30/93 $13.71 0.062197000 0.000000000 0.065674000 0.127871000 1.23% 10.49% 1.60% 17.03% 20.34%
7/30/93 $13.81 0.000000000 0.000000000 0.000000000 0.000000000 0.73% 11.30% 3.63% 17.89% 19.32%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
8/31/92 $11.87 0.000000000 0.000000000 0.000000000 0.000000000 -1.08% 0.00% 0.00% -1.08% 43.33%
9/30/92 $11.97 0.000000000 0.000000000 0.014211419 0.014211419 0.96% 0.00% 0.00% -0.13% -1.29%
10/30/92 $12.34 0.000000000 0.000000000 0.000000000 0.000000000 3.09% 0.00% 0.00% 2.96% 17.19%
11/30/92 $13.15 0.000000000 0.000000000 0.000000000 0.000000000 6.56% 0.00% 0.00% 9.71% 41.24%
12/31/92 $13.56 0.000000000 0.000000000 0.017795769 0.017795769 3.25% 0.00% 13.43% 13.28% 42.32%
1/29/93 $13.93 0.000000000 0.000000000 0.000000000 0.000000000 2.73% 2.73% 13.03% 16.37% 41.95%
2/26/93 $13.72 0.000000000 0.000000000 0.000000000 0.000000000 -1.51% 1.18% 4.47% 14.62% 30.70%
3/31/93 $14.18 0.000000000 0.000000000 0.011683857 0.011683857 3.44% 4.66% 4.66% 18.56% 32.81%
4/30/93 $13.65 0.000000000 0.000000000 0.000000000 0.000000000 -3.74% 0.75% -1.93% 14.13% 21.38%
5/28/93 $14.15 0.000000000 0.000000000 0.000000000 0.000000000 3.66% 4.44% 3.22% 18.31% 24.80%
6/30/93 $14.21 0.000000000 0.005597000 0.013602000 0.019199000 0.56% 5.02% 0.35% 18.97% 22.69%
7/30/93 $14.38 0.000000000 0.000000000 0.000000000 0.000000000 1.20% 6.28% 5.49% 20.39% 22.05%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
10/31/94 $12.17 0.000000000 0.000000000 0.000000000 0.000000000 1.42% 0.00% 0.00% 1.42% 20.13%
11/30/94 $11.55 0.000000000 0.000000000 0.000000000 0.000000000 -5.09% 0.00% 0.00% -3.75% -21.38%
12/30/94 $11.67 0.000000000 0.000000000 0.000000000 0.000000000 1.04% 0.00% 0.00% -2.75% -10.92%
1/31/95 $10.99 0.000000000 0.000000000 0.000000000 0.000000000 -5.83% -5.83% 0.00% -8.42% -23.47%
2/28/95 $10.95 0.000000000 0.000000000 0.000000000 0.000000000 -0.36% -6.17% 0.00% -8.75% -20.21%
3/31/95 $11.21 0.000000000 0.000000000 0.000000000 0.000000000 2.37% -3.94% -3.94% -6.58% -12.97%
4/28/95 $11.54 0.000000000 0.000000000 0.000000000 0.000000000 2.94% -1.11% 5.00% -3.83% -6.66%
5/31/95 $11.37 0.000000000 0.000000000 0.000000000 0.000000000 -1.47% -2.57% 3.84% -5.25% -7.87%
6/30/95 $11.31 0.000000000 0.000000000 0.000000000 0.000000000 -0.53% -3.08% 0.89% -5.75% -7.69%
7/31/95 $12.10 0.000000000 0.000000000 0.000000000 0.000000000 6.98% 3.68% 4.85% 0.83% 1.01%
8/31/95 $12.21 0.000000000 0.000000000 0.000000000 0.000000000 0.91% 4.63% 7.39% 1.75% 1.93%
9/29/95 $12.44 0.000000000 0.000000000 0.000000000 0.000000000 1.88% 6.60% 9.99% 3.67% 3.71%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
6/30/92 $12.04 0.000000000 0.000000000 0.023699912 0.023699912 0.53% 0.00% 0.00% 0.53% 13.75%
7/31/92 $12.24 0.000000000 0.000000000 0.056574635 0.056574635 2.13% 0.00% 0.00% 2.67% 23.28%
8/31/92 $12.33 0.000000000 0.000000000 0.060678762 0.060678762 1.23% 0.00% 0.00% 3.94% 20.09%
9/30/92 $12.45 0.000000000 0.000000000 0.051840530 0.051840530 1.39% 0.00% 4.83% 5.39% 19.59%
10/30/92 $12.18 0.000000000 0.000000000 0.055987904 0.055987904 -1.72% 0.00% 0.88% 3.57% 9.81%
11/30/92 $12.03 0.000000000 0.000000000 0.054149689 0.054149689 -0.79% 0.00% -1.13% 2.76% 6.09%
12/31/92 $12.00 0.152587638 0.000000000 0.053585585 0.206173223 1.46% 0.00% -1.06% 4.26% 7.96%
1/29/93 $12.21 0.000000000 0.000000000 0.052603069 0.052603069 2.19% 2.19% 2.87% 6.55% 10.68%
2/26/93 $12.38 0.000000000 0.000000000 0.047811596 0.047811596 1.78% 4.01% 5.53% 8.45% 12.26%
3/31/93 $12.39 0.000000000 0.000000000 0.050394105 0.050394105 0.49% 4.52% 4.52% 8.98% 11.47%
4/30/93 $12.45 0.000000000 0.000000000 0.035528357 0.035528357 0.77% 5.32% 3.07% 9.82% 11.31%
5/28/93 $12.40 0.000000000 0.000000000 0.047961901 0.047961901 -0.02% 5.31% 1.25% 9.80% 10.33%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
5/29/92 $11.97 0.000000000 0.000000000 0.019734000 0.019734000 -0.09% 0.00% 0.00% -0.09% -2.80%
6/30/92 $12.07 0.000000000 0.000000000 0.042168947 0.042168947 1.19% 0.00% 0.00% 1.10% 9.74%
7/31/92 $12.20 0.000000000 0.000000000 0.044859916 0.044859916 1.45% 0.00% 0.00% 2.57% 13.31%
8/31/92 $12.25 0.000000000 0.000000000 0.049971980 0.049971980 0.82% 0.00% 0.00% 3.41% 12.35%
9/30/92 $12.34 0.000000000 0.000000000 0.042642139 0.042642139 1.08% 0.00% 3.39% 4.53% 12.71%
10/30/92 $12.18 0.000000000 0.000000000 0.042071332 0.042071332 -0.96% 0.00% 0.94% 3.53% 7.97%
11/30/92 $12.09 0.000000000 0.000000000 0.042253189 0.042253189 -0.39% 0.00% -0.28% 3.12% 5.89%
12/31/92 $12.16 0.003757048 0.000000000 0.042981892 0.046738940 0.97% 0.00% -0.39% 4.12% 6.70%
1/29/93 $12.28 0.000000000 0.000000000 0.037273978 0.037273978 1.29% 1.29% 1.87% 5.46% 7.88%
2/26/93 $12.38 0.000000000 0.000000000 0.029614405 0.029614405 1.06% 2.36% 3.35% 6.58% 8.53%
3/31/93 $12.38 0.000000000 0.000000000 0.042711977 0.042711977 0.35% 2.72% 2.72% 6.94% 8.04%
4/30/93 $12.42 0.000000000 0.000000000 0.049274769 0.049274769 0.72% 3.46% 2.14% 7.72% 8.13%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
5/29/92 $12.00 0.000000000 0.000000000 0.016435000 0.016435000 0.14% 0.00% 0.00% 0.14% 4.65%
6/30/92 $12.07 0.000000000 0.000000000 0.044001515 0.044001515 0.95% 0.00% 0.00% 1.09% 9.62%
7/31/92 $12.23 0.000000000 0.000000000 0.050334860 0.050334860 1.74% 0.00% 0.00% 2.85% 14.87%
8/31/92 $12.29 0.000000000 0.000000000 0.041242342 0.041242342 0.83% 0.00% 0.00% 3.70% 13.47%
9/30/92 $12.32 0.000000000 0.000000000 0.038025738 0.038025738 0.55% 0.00% 3.15% 4.28% 11.98%
10/30/92 $12.09 0.000000000 0.000000000 0.047792540 0.047792540 -1.48% 0.00% -0.11% 2.73% 6.15%
11/30/92 $12.02 0.000000000 0.000000000 0.052459986 0.052459986 -0.15% 0.00% -1.08% 2.58% 4.87%
12/31/92 $12.02 0.106429161 0.000000000 0.051724114 0.158153275 1.32% 0.00% -0.33% 3.93% 6.40%
1/29/93 $12.16 0.000000000 0.000000000 0.052071788 0.052071788 1.60% 1.60% 2.79% 5.59% 8.07%
2/26/93 $12.26 0.000000000 0.000000000 0.034631069 0.034631069 1.11% 2.72% 4.07% 6.76% 8.78%
3/31/93 $12.26 0.000000000 0.000000000 0.049366726 0.049366726 0.40% 3.14% 3.14% 7.19% 8.33%
4/30/93 $12.26 0.000000000 0.000000000 0.055907321 0.055907321 0.46% 3.61% 1.98% 7.68% 8.10%
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>
<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
---- --- ------------- ------------- ----- ------------ ------ ------ ------ ------ ------
<C> <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% 0.00%
4/30/92 $1.00 0.000000000 0.000000000 0.002183489 0.002183489 0.22% 0.00% 0.00% 0.22% 3.86%
5/29/92 $1.00 0.000000000 0.000000000 0.003029786 0.003029786 0.30% 0.00% 0.00% 0.52% 3.87%
6/30/92 $1.00 0.000000000 0.000000000 0.002977562 0.002977562 0.30% 0.00% 0.00% 0.82% 3.71%
7/31/92 $1.00 0.000000000 0.000000000 0.003071905 0.003071905 0.31% 0.00% 0.00% 1.13% 3.70%
8/31/92 $1.00 0.000000000 0.000000000 0.002828242 0.002828242 0.28% 0.00% 0.00% 1.42% 3.63%
9/30/92 $1.00 0.000000000 0.000000000 0.002424715 0.002424715 0.24% 0.00% 0.83% 1.66% 3.52%
10/30/92 $1.00 0.000000000 0.000000000 0.002406225 0.002406225 0.24% 0.00% 0.77% 1.91% 3.44%
11/30/92 $1.00 0.000000000 0.000000000 0.002338859 0.002338859 0.23% 0.00% 0.72% 2.15% 3.35%
12/31/92 $1.00 0.000070834 0.000000000 0.002377343 0.002448177 0.24% 0.00% 0.72% 2.40% 3.30%
1/29/93 $1.00 0.000000000 0.000000000 0.002390432 0.002390432 0.24% 0.24% 0.72% 2.64% 3.28%
2/26/93 $1.00 0.000000000 0.000000000 0.002079252 0.002079252 0.21% 0.45% 0.69% 2.85% 3.23%
3/31/93 $1.00 0.000000000 0.000000000 0.002253447 0.002253447 0.23% 0.67% 0.67% 3.09% 3.17%
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> 1
<NAME> GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 50,177,478
<INVESTMENTS-AT-VALUE> 61,212,026
<RECEIVABLES> 160,208
<ASSETS-OTHER> 12,190
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61,384,424
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 798,650
<TOTAL-LIABILITIES> 798,650
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48,379,425
<SHARES-COMMON-STOCK> 3,105,644
<SHARES-COMMON-PRIOR> 2,698,148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,171,801
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,034,548
<NET-ASSETS> 60,585,774
<DIVIDEND-INCOME> 1,231,573
<INTEREST-INCOME> 8,822
<OTHER-INCOME> 0
<EXPENSES-NET> 667,208
<NET-INVESTMENT-INCOME> 573,187
<REALIZED-GAINS-CURRENT> 5,420,155
<APPREC-INCREASE-CURRENT> 5,099,753
<NET-CHANGE-FROM-OPS> 11,093,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 574,634
<DISTRIBUTIONS-OF-GAINS> 5,346,233
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,273,203
<NUMBER-OF-SHARES-REDEEMED> 1,121,506
<SHARES-REINVESTED> 255,799
<NET-CHANGE-IN-ASSETS> 6,881,966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,097,879
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 454,616
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 667,208
<AVERAGE-NET-ASSETS> 59,302,977
<PER-SHARE-NAV-BEGIN> 17.99
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> 3.35
<PER-SHARE-DIVIDEND> .19
<PER-SHARE-DISTRIBUTIONS> 1.83
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.51
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000876603
<NAME> ACCESSOR FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> VALUE & INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 29,544,200
<INVESTMENTS-AT-VALUE> 36,336,835
<RECEIVABLES> 112,249
<ASSETS-OTHER> 11,906
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,460,990
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,016
<TOTAL-LIABILITIES> 94,016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,133,202
<SHARES-COMMON-STOCK> 2,048,702
<SHARES-COMMON-PRIOR> 1,566,206
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 441,137
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,792,635
<NET-ASSETS> 36,366,974
<DIVIDEND-INCOME> 770,119
<INTEREST-INCOME> 50,011
<OTHER-INCOME> 0
<EXPENSES-NET> 375,686
<NET-INVESTMENT-INCOME> 444,444
<REALIZED-GAINS-CURRENT> 3,016,614
<APPREC-INCREASE-CURRENT> 3,381,302
<NET-CHANGE-FROM-OPS> 6,842,360
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 444,511
<DISTRIBUTIONS-OF-GAINS> 3,236,898
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 855,546
<NUMBER-OF-SHARES-REDEEMED> 532,954
<SHARES-REINVESTED> 159,904
<NET-CHANGE-IN-ASSETS> 8,291,138
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 661,421
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 217,695
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 375,686
<AVERAGE-NET-ASSETS> 31,042,306
<PER-SHARE-NAV-BEGIN> 15.91
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> 3.51
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> 1.67
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.75
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000876603
<NAME> ACCESSOR FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> SMALL TO MIDCAP PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 56,767,378
<INVESTMENTS-AT-VALUE> 66,058,553
<RECEIVABLES> 0
<ASSETS-OTHER> 155,642
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,214,195
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 735,359
<TOTAL-LIABILITIES> 735,359
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,662,157
<SHARES-COMMON-STOCK> 3,479,886
<SHARES-COMMON-PRIOR> 2,829,475
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,525,504
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