SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Accessor Funds, Inc.
(Name of Registrant as Specified In Its Charter)
Christine J. Stansbery, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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March 13, 1998
Shareholders of Accessor Funds, Inc.
Small to Mid Cap Portfolio
Re: Accessor Funds, Inc.
Proxy Material
Dear Shareholder:
The enclosed proxy materials cover matters that the Board of Directors
of Accessor Funds, Inc. (the "Fund") asks you to approve with regard to the
Small to Mid Cap Portfolio.
The Money Manager of the Small to Mid Cap Portfolio (the "Small Cap
Portfolio") has requested a modification of its fee structure. The modification
could increase the fee paid to the Money Manager by 0.10% or decrease the fee by
0.10%. This modification would allow the Money Manager to earn as much as 0.42%
or as little as 0.00%. The Basic Fee would be eliminated. The Board of Directors
of the Fund has reviewed this request and believes that it is in the best
interests of the shareholders of the Small Cap Portfolio to make these changes.
In addition, the Money Manager, currently Symphony Asset Management,
Inc. ("Symphony Inc.") has informed the Directors that all new advisory
relationships are being established with Symphony Asset Management LLC
("Symphony LLC"). Symphony LLC is a registered investment advisory affiliate of
Symphony Inc., operating under the same management, with the same personnel, at
the same address as Symphony Inc. The Board was advised that existing advisory
relationships are being shifted to Symphony LLC with the intention of eventually
phasing out Symphony Inc.
Accordingly, a new Money Manager Agreement will be signed with Symphony LLC.
As money manager for the Small Cap Portfolio, Symphony's performance
has been excellent, and it is currently earning the highest incentive fee
permissible under the current Money Manager Agreement. Symphony will maintain
its investment style and process, and will continue to view the Fund as an
important client. The New Money Manager Agreement to modify the fee structure to
the Small Cap Portfolio must therefore be approved by the shareholders of the
Small Cap Portfolio.
The Board of Directors has carefully considered the proposal and
recommends your "yes" vote. Please cast your vote. Many shareholders think their
votes are not important. To the contrary, they are vital. The Special Meeting
scheduled for April 27, 1998, will have to be adjourned without conducting any
business if less than a majority of the eligible shares are represented. If that
occurs, the Small Cap Portfolio, at shareholders' expense, may have to continue
to solicit votes until a quorum is obtained. I want to thank you for your
participation as a shareholder. I encourage you to read the enclosed proxy
materials carefully and return your vote promptly. Please be sure to complete,
sign and date each proxy card if there is more than one in your materials.
Should you have any questions, please do not hesitate to contact the
Fund at 1-800-759-3504.
Very truly yours,
J. Anthony Whatley III
President and Chief Executive Officer
ACCESSOR FUNDS, INC.
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1998
TO THE SHAREHOLDERS OF THE SMALL TO MID CAP PORTFOLIO OF ACCESSOR FUNDS, INC.:
Notice is hereby given that a Special Meeting (the "Meeting") of the
shareholders of the Small to Mid Cap Portfolio (the "Small Cap Portfolio") of
Accessor Funds, Inc. (the "Fund") (the "Shareholders") will be held on Monday,
April 27, 1998 at 10:00 A.M. Pacific Standard Time in the offices of the Fund at
1420 Fifth Avenue, Suite 3130, Seattle, WA 98101 for the following purposes:
1. to approve or disapprove a new Money Manager Agreement for the
Small Cap Portfolio among the Fund, Bennington Capital
Management L.P. ("Bennington") and Symphony Asset Management
LLC ("Symphony LLC") and a modification of several aspects of
the money manager fees paid to Symphony LLC as the Money
Manager of the Small Cap Portfolio; and
2. to transact such other business as may be properly brought
before the Meeting or any adjournments thereof.
YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF ALL PROPOSALS. Shareholders
of record of the Small Cap Portfolio at the close of business on March 16, 1998,
are entitled to notice of and to vote at the Meeting and any adjournment
thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD(S) IN THE POSTAGE PAID RETURN
ENVELOPE ENCLOSED, SO THAT A QUORUM WILL BE PRESENT AND A MAXIMUM NUMBER OF
SHARES MAY BE VOTED. IT IS IMPORTANT AND IN YOUR INTEREST TO SIGN YOUR PROXY
CARD AND RETURN IT. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
BY ORDER OF THE BOARD OF DIRECTORS
ACCESSOR FUNDS, INC.
Seattle, Washington
March 27, 1998 Christine J. Stansbery, Secretary
ACCESSOR FUNDS, INC.
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
APRIL 27, 1998
GENERAL INFORMATION
ACCESSOR FUNDS, INC. (the "Fund") is a multi-managed, no-load,
open-end, management investment company currently consisting of eight
diversified investment portfolios (individually, a "Portfolio" and collectively,
the "Portfolios"), each with its own investment objective and policies. The
assets of each Portfolio are allocated among Bennington Capital Management L.P.
("Bennington") and/or investment management organizations (each, a "Money
Manager"), researched and recommended by Bennington and reviewed and approved by
the Board of Directors, pursuant to written agreements (the "Money Manager
Agreements") among the Fund, Bennington and the respective Money Managers. This
proxy statement (the "Proxy Statement") is furnished in connection with the
solicitation of proxies by or on behalf of the Board of Directors of the Fund
for use at a Special Meeting (the "Meeting") of shareholders of the Small to Mid
Cap Portfolio (the "Small Cap Portfolio") (the "Shareholders") to be held at the
offices of the Fund, 1450 Fifth Avenue, Suite 3130, Seattle, WA 98101 on April
27, 1998 and at any adjournments or postponements thereof.
The first mailing of this Proxy Statement and form of proxy to
Shareholders is expected to be made on or about March 27, 1998.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted at the Meeting in accordance with the
instructions noted thereon. If no instruction is indicated, the proxy will be
voted in accordance with the Board of Directors' recommendations as set forth
herein. However, even though you sign and return the accompanying proxy, you may
revoke it by giving written notice of such revocation to the Secretary of the
Fund prior to the Meeting or by delivering a subsequently dated proxy or by
personally attending the Meeting and voting there.
Proxies will be solicited principally by mail but may also be solicited
in person or by telephone or telegraph by officers, directors or agents of the
Fund, employees and/or officers or agents of Bennington, the Fund's investment
adviser and manager, none of whom will receive additional compensation therefor.
The costs of solicitation with respect to Proposal No. 1 will be borne
by the Small Cap Portfolio, Symphony Asset Management LLC ("Symphony LLC"), an
affiliate of Symphony Asset Management, Inc., ("Symphony Inc.") and Symphony,
Inc. the current money manager of the Small Cap Portfolio. Forms of proxy
material also may be distributed to the Shareholders through brokers, custodians
and other like parties, and Symphony will reimburse such parties for their
reasonable out-of-pocket expenses incurred in connection therewith.
Only Shareholders of record at the close of business on March 16, 1998
(the "Record Date") are entitled to notice of and to vote at the Meeting and any
adjournment thereof. As of the Record Date, there were ____________ outstanding
shares of the Small Cap Portfolio. Each share is entitled to one vote on each
matter to come before the Meeting. The presence, in person or by proxy, of the
holders of a majority of the outstanding voting securities entitled to vote at
the Meeting is necessary to constitute a quorum at the Meeting. Absent a quorum,
the meeting will have to be adjourned without conducting any business. The Fund
will then have to solicit votes until a quorum is obtained.
The favorable vote of the holders of a majority of the outstanding
voting securities of the Small Cap Portfolio is required for the approval of the
new Money Manager Agreement among the Fund, Bennington and Symphony LLC (the
"New Agreement") for the Small Cap Portfolio. The vote of the holders of a
majority of the outstanding voting securities of the Small Cap Portfolio is
defined by the Investment Company Act of 1940, as amended (the "Investment
Company Act") as (i) the vote of 67% or more of the shares present at the
Meeting; if the holders of more than 50% of the outstanding shares are present
or represented by proxy, or (ii) the vote of more than 50% of the outstanding
shares, whichever is less.
THE FUND'S ANNUAL REPORT HAS PREVIOUSLY BEEN DELIVERED TO SHAREHOLDERS.
SHAREHOLDERS MAY OBTAIN A COPY OF THE FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL
REPORTS UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, BY CONTACTING THE FUND AT
THE ADDRESS SHOWN ABOVE, OR BY CALLING 1-800-759-3504. IF ANY SHAREHOLDERS WOULD
LIKE ADDITIONAL INFORMATION ABOUT THE MATTERS PROPOSED FOR ACTION, FUND
MANAGEMENT WOULD WELCOME THE OPPORTUNITY TO ANSWER QUESTIONS AND PROVIDE FURTHER
INFORMATION.
PROPOSAL NO. 1
PROPOSAL TO APPROVE OR DISAPPROVE A NEW MONEY MANAGER AGREEMENT FOR THE SMALL
CAP PORTFOLIO AMONG THE FUND, BENNINGTON AND SYMPHONY ASSET MANAGEMENT LLC
("SYMPHONY LLC ") AND MODIFICATIONS OF SEVERAL ASPECTS OF THE MONEY MANAGER FEES
PAID TO SYMPHONY LLC AS THE MONEY MANAGER OF THE SMALL CAP PORTFOLIO
INTRODUCTION
The assets of each Portfolio of the Fund are allocated among Bennington
and investment management organizations (each the "Money Manager" and
collectively, the "Money Managers"), researched and recommended by Bennington
and reviewed and approved by the Board of Directors, pursuant to written
agreements (the "Money Manager Agreements") among the Fund, Bennington and each
Money Manager. Proposal No. 1 (the "Proposal") relates only to the Small Cap
Portfolio and to Symphony, the Money Manager of the Small Cap Portfolio.
Symphony Inc., the Fund and Bennington entered into a Money Manager
Agreement (the "Current Agreement") dated September 15, 1995, which was reviewed
and renewed by the Board of Directors on August 20, 1997. The Current Agreement
was submitted to the Shareholders for approval at a special meeting of
Shareholders held on August 15, 1995, when Wells Fargo Nikko resigned as the
Money Manager of the Small Cap Portfolio, at which time the Money Manager
Agreement among the Fund, Symphony Inc. and Bennington was approved. An advisory
affiliate of Symphony Inc., Symphony LLC, operating under the same management
and with the same personnel, at the same address as Symphony Inc., was
established in July of 1996. All new advisory relationships are being
established with Symphony LLC and existing advisory relationships are being
shifted to Symphony LLC with the intention of eventually phasing out Symphony
Inc. Accordingly, the proposed New Agreement will be with Symphony LLC.
Section 15(a) of the Investment Company Act prohibits any person from
serving as an investment adviser to a registered investment company except
pursuant to a written contract that has been approved by the shareholders of the
registered investment company. Section 15 of the Investment Company Act provides
that any increase in the fee structure must be approved by the Board of
Directors of the Fund and the shareholders of the Portfolio. The Securities and
Exchange Commission issued an exemptive order to the Fund on September 4, 1996
for an exemption (the "Exemptive Order") 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. Pursuant to the Exemptive Order, the Fund is
permitted to replace or add Money Managers and to enter into, modify and
terminate Money Manager Agreements with Money Managers upon approval of the
Board of Directors but without former shareholder approval, for example among
other things a change of control. While the New Agreement with Symphony LLC
would be covered by the Exemptive Order, the modification of the fee structure
in the New Agreement detailed in this Proxy Statement is not covered by the
Exemptive Order due to the fact that the Proposal could result in a potential
increase in fees paid to Symphony LLC.
Therefore, in order to modify the fees paid to Symphony LLC, the
Shareholders must approve the New Agreement, which is attached as Exhibit 1, and
marked to show changes from the Current Agreement. With the exception of the
shift in relationship from Symphony Inc. to Symphony LLC, the modification of
several aspects of the fees paid to Symphony LLC, the commencement date and
termination date and ministerial changes, the New Agreement contains the same
terms and conditions as the Current Agreement.
At its April 27, 1998 Special Meeting of Shareholders, the shareholders
of the Small Cap Portfolio will be asked to approve an amendment to the Current
Agreement among the Fund, Bennington and Symphony (the "New Agreement"). The New
Agreement, if approved by the Shareholders, will take effect on July 1, 1998. If
the New Agreement is adopted by the Shareholders, it will continue in effect
through July 1, 1999, at which time it will be subject to annual approval by the
Board of Directors and a majority of the Directors who are not parties to such
agreement or "interested persons" as that term is defined in the Investment
Company Act (the "Independent Directors").
TERMS OF CURRENT AND NEW AGREEMENTS
With the exception of the change from Symphony Inc. to Symphony LLC,
modification of the fees paid to Symphony LLC, and ministerial changes to the
New Agreement, the New Agreement contains the same terms and conditions as to
the Current Agreement. Under the terms of both the Current Agreement and the New
Agreement, Symphony Inc. or Symphony LLC, as applicable, has complete discretion
to purchase and sell portfolio securities for the Small Cap Portfolio, within
the Small Cap Portfolio's investment objective, restrictions and policies, and
the more specific strategies developed by Bennington. Both the Current Agreement
and the New Agreement provide that Symphony Inc. or Symphony LLC, as applicable,
will receive certain fees (the "Money Manager Fee") for its services. Both the
Current and New Agreements provide that they may be terminated without penalty
by either the Fund, Bennington, Symphony Inc. or Symphony LLC, as applicable,
upon 60 days written notice to the other parties and terminate automatically in
the event of assignment. The Current Agreement provides that after the initial
two year term, unless sooner terminated, it shall continue in effect from year
to year only so long as such continuance is specifically approved at least
annually by either the Board of Directors of the Fund or by a vote of the
majority of the outstanding voting securities of the Small Cap Portfolio,
provided that in either event such continuance also is approved by the vote of
the majority of the Board of Directors, including a separate vote of the
Independent Directors, cast in person at a meeting called for the purpose of
voting on such approval. The New Agreement provides that after an initial one
year term, unless sooner terminated, it shall continue in effect from year to
year only so long as such continuance is specifically approved at least annually
by either the Board of Directors of the Fund or by a vote of the majority of the
outstanding voting securities of the Small Cap Portfolio, provided that in
either event such continuance also is approved by the vote of the majority of
the Board of Directors, including a separate vote of the Independent Directors,
cast in person at a meeting called for the purpose of voting on such approval.
The New Agreement will terminate automatically in the event of its assignment
(as defined in the Investment Company Act.). The Money Manager Fee paid to
Symphony Inc. is described below in "Money Manager Fees". A comparison of the
Money Manager Fee paid pursuant to the Current Agreement and the proposed Money
Manager Fee paid pursuant to the New Agreement is provided for below.
MONEY MANAGER FEES PAID
PURSUANT TO CURRENT AGREEMENT
The fees paid to Symphony Inc. under the Current Agreement are based on
the assets of the Small Cap Portfolio and on the number of complete calendar
quarters of management by Symphony Inc. For the first five complete calendar
quarters of management of the Portfolio, the Small Cap Portfolio paid Symphony a
Money Manager Fee of 0.20% annually on a quarterly basis based on the average
daily net assets of the Small Cap Portfolio. This Money Manager Fee had two
components, a basic fee of 0.10% annually (the "Basic Fee") and a portfolio
management fee of 0.10% annually (the "Portfolio Management Fee").
Commencing with Symphony Inc.'s sixth calendar quarter of management,
the Small Cap Portfolio paid Symphony Inc. a Money Manager Fee which has two
components, the Basic Fee of 0.10% annually and a variable fee (the "Performance
Fee") which varied with Symphony Inc.'s performance. Set forth below is the "Fee
Schedule For Symphony From the Sixth Calendar Quarter of Management Forward" as
described in the Current Agreement.
Fee schedule for Symphony Inc. from the sixth calendar quarter
of management forward
Average annualized Annualized
performance differential vs. performance
the Benchmark Index Basic Fee fee Total
----------------------------- --------- ----------- ---------
Greater Than or Equal to
2.00% 0.10% 0.22% 0.32%
Greater Than or Equal to
1.00% and Less Than 2.00% 0.10% 0.20% 0.30%
Greater Than or Equal to
0.50% and Less Than 1.00% 0.10% 0.15% 0.25%
Greater Than or Equal to
0.00% and Less Than 0.50% 0.10% 0.10% 0.20%
Greater Than or Equal to
-0.50% and Less Than 0.00% 0.10% 0.05% 0.15%
Less Than -0.50% 0.10% 0.00% 0.10%
The Performance Fee was adjusted and paid each quarter based on the annualized
investment performance of Symphony Inc. relative to the annualized investment
performance of the benchmark index. As long as Symphony Inc.'s performance
either exceeded the benchmark index, or trailed the benchmark index by no more
than 0.50%, a Performance Fee was paid to Symphony Inc. Symphony Inc.'s
performance was measured on the portion of the Small Cap Portfolio's assets
managed by it (the "Account"), which excluded assets held by Bennington for
circumstances such as redemptions or other administrative purposes.
Under the Current Agreement, from the sixth to the fourteenth calendar
quarter of management of the Account by Symphony Inc., the performance
differential versus the benchmark index would be recalculated at the end of each
calendar quarter based on Symphony Inc.'s performance during all calendar
quarters since commencement of its management of the Account, except that of the
immediately preceding quarter. Commencing with the fourteenth calendar quarter
of management of the Account, Symphony's average annual performance differential
would be recalculated based on Symphony Inc.'s performance during the preceding
12 calendar quarters (other than the immediately preceding quarter) on a rolling
basis. Symphony Inc.'s performance would be calculated by Bennington in the same
manner in which the total return performance of the benchmark index is
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the benchmark index. For
example, if the benchmark index has an average annual performance of 10.00%, the
Account's average annual performance would have to be equal to or greater than
12.00% for Symphony Inc. to receive an annual Performance Fee of 0.22% (i.e.,
the difference in performance between the Account and the benchmark index must
be equal to or greater than 2.00% for Symphony Inc. to receive the maximum
Performance Fee). Because the maximum Performance Fee for the Small Cap
Portfolio applies whenever Symphony Inc.'s performance exceeds the benchmark
index by 2.00% or more, Symphony Inc. could receive a maximum Performance Fee
even if the performance of the Account is negative. 1
- --------
1 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.
THE NEW AGREEMENT
The Board of Directors is proposing that the Shareholders approve the
New Agreement with Symphony LLC and modify several aspects of the Money Manager
Fees paid to Symphony LLC. Pursuant to the proposed New Agreement, the fees paid
to Symphony LLC will be based on the assets of the Portfolio and on the number
of complete calendar quarters of management by Symphony LLC. For purposes of
calculating the fees, the commencement of investment operations for the New
Agreement will be September 15, 1995. However, the Basic Fee will be eliminated
and Symphony LLC will receive only a variable fee, called a Performance Fee,
which will vary with Symphony LLC's performance and will be based on the "Fee
Schedule For Symphony From the Sixth Calendar Quarter of Management Forward" as
set forth below. The Performance Fee paid by the Small Cap Portfolio to Symphony
LLC under the New Agreement could either increase or decrease based on the
performance of the Small Cap Portfolio as compared to the benchmark index.
Proposed Fee Schedule
AVERAGE ANNUALIZED
PERFORMANCE DIFFERENTIAL VS. THE ANNUALIZED
BENCHMARK INDEX PERFORMANCE FEE
--------------------------------- ---------------
Greater Than or Equal to
3.00% 0.42%
Greater Than or Equal to
2.00% and Less Than 3.00% 0.35%
Greater Than or Equal to
1.00% and Less Than 2.00% 0.30%
Greater Than or Equal to
0.50% and Less Than 1.00% 0.25%
Greater Than or Equal to
0.00% and Less Than 0.50% 0.20%
Greater Than or Equal to
-0.50% and Less Than 0.00% 0.15%
Greater Than or Equal to
-1.00% and Less Than -0.50% 0.10%
Greater Than or Equal to
-1.50% and Less Than -1.00% 0.05%
Less Than -1.50% 0.00%
Under the terms of the New Agreement, the Performance Fee will be adjusted and
paid each quarter based on the annualized investment performance of Symphony LLC
relative to the annualized investment performance of the benchmark index, which
may be changed only with the approval of the Board of Directors. As long as
Symphony LLC's performance either exceeds the benchmark index, or trails the
benchmark index by no more than 1.50%, a Performance Fee will be paid to
Symphony LLC. Symphony LLC's performance is measured on the portion of the Small
Cap Portfolio's assets managed by it (the "Account"), which excludes assets held
by Bennington for circumstances such as redemptions or other administrative
purposes.
From the sixth to the fourteenth calendar quarter of management of the
Account by Symphony LLC, the performance differential versus the benchmark index
is recalculated at the end of each calendar quarter based on Symphony LLC's
performance during all calendar quarters since commencement of its management of
the Account, except that of the immediately preceding quarter. Commencing with
the fourteenth calendar quarter of management of the Account, Symphony LLC's
average annual performance differential will be recalculated based on Symphony
LLC's performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. Symphony LLC's performance
will be calculated by Bennington in the same manner in which the total return
performance of the benchmark index is calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the benchmark index. For
example, if the benchmark index has an average annual performance of 10.00%, the
Account's average annual performance would have to be equal to or greater than
13.00% for Symphony LLC to receive an annual Performance Fee of 0.42% (i.e., the
difference in performance between the Account and the benchmark index must be
equal to or greater than 3.00% for Symphony LLC to receive the maximum
Performance Fee). Because the maximum Performance Fee for the Small Cap
Portfolio applies whenever Symphony LLC's performance exceeds the benchmark
index by 3.00% or more, Symphony LLC could receive the maximum Performance Fee
even if the performance of the Account is negative. For example, if the
Account's average performance is -5.00% and the benchmark index performance is
- -8.50%, Symphony LLC would earn the maximum incentive fee.
MATERIAL DIFFERENCES BETWEEN THE CURRENT AGREEMENT AND
THE PROPOSED NEW AGREEMENT
Under the Current Agreement, the range of the average annualized
performance differential versus the benchmark index is less than -0.50% to
greater than or equal to 2.00%. The Basic Fee was 0.10% and the annualized
performance fee range is from 0.00% to 0.22% with a range of fee payable to
Symphony of 0.10% to 0.32%. Under the New Agreement, the Basic Fee of 0.10% has
been eliminated and the fee will be based solely on the annualized performance
fee. The average annualized performance differential versus the benchmark index
will range from less than -1.50% to greater than or equal to 3.00% and the
annualized performance fee may range from 0.00% to 0.42%. The effect of this
modification of the Current Agreement could result in a maximum increase to
Symphony LLC of 0.10%, and could also result in a decrease of the lowest fee
payable to Symphony LLC from 0.10% to 0.00%.
The table below details the fees and expenses of the Small Cap
Portfolio under the Current Money Manager Agreement and the proposed New
Agreement.
FEES AND PORTFOLIO EXPENSES
ANNUAL PORTFOLIO OPERATING
EXPENSES(a) (as a percentage Current Agreement New Agreement
of average daily net Current Proposed Proposed
assets) Small to Mid Cap Institutional Advisor
Portfolio Class Class
--------- ----- -----
Fee Paid to Bennington 0.60% 0.60% 0.60%
Fee Paid to Symphony 0.32% 0.42% 0.42%
----- ----- -----
Total Management Fees(b) 0.92% 1.02% 1.02%
12b-1 Fees(c) None None 0.25%
Other Expenses 0.23% 0.23% 0.23%
Administrative Fees (d) None None 0.25%
----- ---- -----
Total Other Expenses(e) 0.23% 0.23% 0.48%
===== ===== =====
Total Annual Portfolio
Operating Expenses 1.15% 1.25% 1.75%
===== ===== =====
(a) The Fund has filed Post-Effective Amendment No. 12 with the Securities and
Exchange Commission (the "SEC"), which will become effective on May 1,
1998, to establish two classes of shares. The proposed establishment of the
two classes of shares are described therein. The current shares of each
Portfolio of the Fund will be designated as the Institutional Class Shares.
The class of shares will be designated as the Advisor Class Shares. The
table data for the Proposed Institutional and Advisor Classes of shares
reflects fees and expenses expected to be incurred during the fiscal year
ended December 31, 1998, not actual expenses. The data reflected in Current
Small to Mid Cap Portfolio reflects the actual fees and expenses as of
December 31, 1997.
(b) Management fees consist of the management fee paid to Bennington and the
Money Manager fee paid to Symphony. Bennington receives a fee pursuant to
its Management Agreement with the Fund equal to 0.60% on an annual basis of
the Small Cap Portfolio's average daily net assets.
(c) The 12b-1 fees consist of the maximum allowable fees that may be paid
directly by the Fund pursuant to a Distribution Plan and Shareholder
Service Plan adopted by the Fund on behalf of the Advisor Class Shares. The
Distribution Plan for proposed Advisor Class Shares has been adopted in
conformity with the requirements set forth under Rule 12b-1 of the
Investment Company Act. Pursuant to the Distribution Plan, the Fund will
directly pay or reimburse third parties for distribution related expenses.
In addition, a Shareholder Service Plan has been adopted for the proposed
Advisor Class Shares. The fees paid pursuant to the Shareholder Service
Plan will be for account maintenance and shareholder liaison services. The
combination of the fees paid pursuant to the Distribution Plan and the
Shareholder Service Plan may be no more than 0.25% per annum. The fees paid
pursuant to the Distribution Plan and the Shareholder Service Plan may also
be less than 0.25% per annum. The terms of the Distribution Plan and
Shareholder Service Plan are described in Post-Effective Amendment No. 12
and will be set forth in the Equity Portfolios' Prospectus - Advisor Class
Shares and Fixed-Income Portfolios' Prospectus - Advisor Class Shares when
effective. The initial shareholder of the Advisor Class Shares will approve
the Distribution Plan and Shareholder Service Plan.
(d) The Administrative Fees consist of the maximum allowable fees that could be
paid by the Fund pursuant to an Administrative Services Plan that has been
adopted by the Fund for the Advisor Class Shares. Pursuant to such
Administrative Services Plan, the Fund may pay Service Organizations who
have entered into such arrangements with the Fund up to 0.25% of the
average daily net assets of their clients who may from time to time
beneficially own Advisor Shares of the Portfolios. The Administrative
Service Fee is not for distribution related activities. The terms of the
Administrative Service Plan will be set forth in Post-Effective Amendment
No. 12 and will be described in the Equity Portfolios' Prospectus - Advisor
Class Shares and Fixed-Income Portfolios' Prospectus - Advisor Class Shares
when effective.
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:
Proposed Proposed
New Agreement New Agreement
Institutional Class Advisor Class
Current Agreement Shares Shares
----------------- ------ ------
One Year $12 $13 $18
Three Years $37 $40 $55
Five Years $63 $69 $95
Ten Years $140 $151 $206
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.
Investors should be aware that long term shareholders of Advisor Class Shares of
the Fund may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc. (the "NASD").
The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in the Institutional Class Shares or Advisor
Class Shares of the Small Cap Portfolio will bear directly or indirectly. For
the Institutional Class Shares, the information is based upon the Small Cap
Portfolio's projected fees and expenses.
Fees Paid by Small Cap Portfolio
For the fiscal year ended December 31, 1997, the following fees were paid by the
Small Cap Portfolio:
The following table illustrates the difference between the advisory fees that
would be paid under the current fee structure compared to the fees that would be
paid under the proposed fee structure. Fees are expressed in dollars and as
percentages of the Small Cap Portfolio's average net assets for the year.
<TABLE>
<CAPTION>
1997 Fee Current Agreement New Agreement Percent Increase
---- --- --------------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Quarter 1 Basic Fee (0.10%) $21,061 N/A
Performance Fee (0.22%) $46,334 (0.42%) $88,456
Total Fee (0.32%) $67,395 (0.42%) $88,456 31.25%
Quarter 2 Basic Fee (0.10%) $26,416 N/A
Performance Fee (0.22%) $58,115 (0.42%) $110,947
Total Fee (0.32%) $84,531 (0.42%) $110,947 31.25%
Quarter 3 Basic Fee (0.10% $34,329 N/A
Performance Fee (0.22%) $75,523 (0.42%) $114,181
Total Fee (0.32%) $109,852 (0.42%) $114,181 31.25%
Quarter 4 Basic Fee (0.10%) $33,529 N/A
Performance Fee (0.22%) $73,765 (0.42%) $144,181
Total Fee (0.32%) $107,294 (0.42%) $144,181 31.25%
Total Fees Paid $369,072 $484,407 31.25%
</TABLE>
Bennington received $691,560 in remuneration from the Small Cap
Portfolio pursuant to the Management Agreement with the Fund and $141,256 in
remuneration from the Small Cap Portfolio pursuant to a Transfer Agency and
Administration Agreement with the Fund.
Bennington may out of its own resources provide marketing and
promotional support on behalf of the Small Cap Portfolio, and shareholder and
administrative servicing on behalf of the Institutional Class of Shares.
INFORMATION ABOUT SYMPHONY
Symphony Inc., whose offices are located at 555 California Street, San
Francisco, CA 94104 is a California corporation incorporated on March 30, 1994.
Symphony is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended, and is registered with the California Department of
Corporations. Symphony is a wholly-owned subsidiary of BARRA, Inc. ("BARRA"), a
California corporation, which is registered as an investment adviser 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 LLC, is a registered investment advisory affiliate of Symphony
Inc., organized as a California limited liability company and operating under
the same management, and with the same personnel, at the same address as
Symphony, Inc. Symphony LLC is owned 50% by Symphony Inc., which is owned 100%
by BARRA and 50% by Maestro LLC, a California limited liability company. Maestro
LLC is owned 33-1/3% by Jeffrey L. Skelton and 22.22% each by Neil L. Rudolph,
Praveen K. Gottipalli and Michael J. Henman.
Symphony LLC will continue to be an investment management firm
dedicated to exploiting information inefficiencies in global financial markets.
Symphony Inc. developed an approach to investing that combines the qualities of
both systematic and traditional investment management, which will be continued
by Symphony LLC. The process begins with a factor-return-based valuation model
identifying securities that are relatively under- or over-valued. This 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, 1997, Symphony Inc. and Symphony LLC managed assets of
approximately $2,022.3 million and subadvised assets of approximately $656.1
million. Symphony Inc. also served as an investment adviser/subadviser to the
following registered investment company(s):
Current Advisory Fee Rate
Registered Investment Net Assets as of As a Percent of Net Assets
Company 12/31/97 Managed
Schwab Analytics Fund $160 million 0.20%
The principal executive officers of Symphony LLC and their principal
occupations are as follows:
Name Position
Andrew Thomas Rudd Chairman
Jeffrey L. Skelton Chief Executive Officer and President
Neil L. Rudolph Chief Operating Officer/Chief Compliance
Officer/Chief Financial Officer
Michael Henman Secretary
The Board of Directors of Symphony LLC are:
Name Position
Andrew Thomas Rudd Director and Chairman
Jeffrey L. Skelton Director and Chief Executive Officer
Michael Henman Secretary
Praveen K. Gottipalli will primarily be responsible for the day-to-day
management and investment decisions for the Small Cap Portfolio. Mr. Gottipalli
has been Director of Investments with Symphony Inc. since March, 1994 and with
Symphony LLC since July 1996. From 1985 to 1994, he was with BARRA, Inc., where,
prior to joining Symphony Inc., he was Director of the Active Strategies Group
for BARRA, Inc. Symphony Inc.'s and Symphony LLC's employees include several
individuals with extensive experience as set forth below:
Name Position Experience
---- -------- ----------
Andrew Thomas Rudd Chairman Dr. Rudd has been the Director
and Chairman of Symphony Inc.
B.Sc., Mathematics, University of since March 1994 and Symphony
Sussex LLC since July 1996. He has been
M.B.A., Finance associated with BARRA and its
M.S. & Ph.D., Ops. Research, predecessors since 1975. He has
University of California, Berkeley served as Chief Executive
Officer since 1984, as a member
of the Board of Directors since
1986 and as BARRA's Chairman
since 1992.
Jeffrey L. Skelton Chief Dr. Skelton joined BARRA in
Executive February 1994 as President of
Ph.D., Mathematical Officer BARRA Ventures. Dr. Skelton
Economics and Finance and became the President and Chief
M.B.A., University of Chicago President Executive Officer of Symphony
B.Sc., Georgia Institute of Inc. in March of 1994 and
Technology Symphony LLC in July 1996.
Previously, Dr. Skelton was
Chief Executive of Wells Fargo
Nikko Investment Advisors
Limited in London. Prior to
moving to London in 1991, Dr.
Skelton was Vice Chairman and
co-Chief Investment Officer at
Wells Fargo Nikko Investment
Advisors in San Francisco.
Neil L. Rudolph Chief Mr. Rudolph has been Chief
Operating Operating Officer and Chief
B.Comm., Officer/ Compliance Officer of Symphony
Accounting/Finance, Chief Inc. since May 1994 and Symphony
McMaster University Compliance LLC since July 1996. Prior to
Certified Public Officer/ joining Symphony Inc., he held a
Accountant Chief variety of positions at Wells
Financial Fargo Nikko Investment Advisors
Officer from 1984, most recently as
Managing Director, COO-Mutual
Fund Group.
Praveen K. Gottipalli Director of Mr. Gottipalli has been Director
Investments of Investments with Symphony
M.B.A., Business Inc. since March, 1994 and
Management, M.S., Symphony LLC since July 1996.
Chemical Engineering, From 1985 to 1994, he was with
Rensselaer BARRA where, prior to joining
Polytechnic Institute. Symphony Inc., he was Director
B.Tech., Engineering, of the Active Strategies Group
Indian Institute of for BARRA. Mr. Gottipalli has
Technology. 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
implementations and enhancement
of these strategies.
Michael J. Henman Secretary/ Mr. Henman has been the Director
Director of Business Development at
M.B.A. Finance, of Business Symphony Inc. since May, 1994
George Washington Development and Symphony LLC since July
University 1996. Mr. Henman has been the
B.A., Business, Secretary of Symphony LLC since
Bowling Green July 1996. Prior to joining
State University Symphony Inc., he spent the
Chartered Financial preceding 15 years at Wells
Analyst Fargo Nikko Investment Advisors
in a variety of positions. Most
recently Mr. Henman served as
the Managing Director in charge
of Client Relationship
Management.
EVALUATION BY THE BOARD OF DIRECTORS
The Board of Directors recommends that the Shareholders approve the New
Agreement. On August 20, 1997, the Board of Directors reviewed the Current
Agreement with Symphony Inc. and approved it for the forthcoming year. At that
time, the Board of Directors were advised of a request by Symphony Inc. for a
modification in the fee structure of the Money Manager Agreement and took it
under advisement. On November 14, 1997, the Board of Directors met in person and
discussed the request made by Symphony Inc. for a modification of the fees paid.
On February 19, 1998, the Board of Directors met in person and considered
whether it would be in the best interests of the Small Cap Portfolio and its
Shareholders to amend the Current Agreement to modify the fee structure paid by
the Small Cap Portfolio to Symphony Inc. The Board of Directors discussed the
modification of the fee structure and its possible effect on the Small Cap
Portfolio, including that the effect of this change may be a potential increase
in the fee paid by the Small Cap Portfolio as well as a potential decrease. In
evaluating the New Agreement, the Board of Directors reviewed materials
furnished by Bennington relevant to its decision. Those materials included
information regarding the small to mid cap asset class component of the market
and historical data comparing the greater market variability and potential
higher results of the small cap segment with that of the large cap segment of
the market. The information also related to Symphony Inc. and its affiliates and
their personnel, operations and methods of operation insofar as they related to
the Small Cap Portfolio. The Board of Directors indicated its belief that the
modification of the fee structure by potentially increasing the performance fee
and reflecting the greater risk provides an appropriate range of incentives for
the Money Manager and joins the Money Manager's interests with those of the
Shareholders for good relative investment performance. The Board of Directors
further indicated their belief that the potentially better performance results
and greater market variability of the small cap asset class fell between
domestic equity and international asset classes and that the proposed
modification of the fee structure reflected this observable occurrence.
In its deliberations, the Board of Directors considered, among other
factors, the historical results of the Small Cap Portfolio's advisory
relationship with Symphony Inc., the services provided by Symphony Inc. or
Symphony LLC as applicable under the Current and New Agreements. The Board of
Directors discussed the modification of the fees payable under the New
Agreement. The Board of Directors also considered comparative information on
other investment companies with similar investment objectives, including
information prepared utilizing data derived from independent statistical
services. In addition, the Board of Directors reviewed and discussed the terms
and provisions of the New Agreement and compared fees and expenses under the New
Agreement with those paid by other investment companies. The Board of Directors
of the Fund believes that the modification of the fee structure for the Money
Manager would be equitable and fair to the Shareholders and that the adoption of
the modified fee structure will make it more likely that the objectives of
continued levels of good service and investment performance currently and in the
future will be achieved.
In determining whether or not it was appropriate to approve the New
Agreement and to recommend approval to shareholders, the Board of Directors,
including the Independent Directors, considered various matters and materials
provided by Bennington or the Money Manager. The Board of Directors examined the
nature, quality and scope of the services provided to the Small Cap Portfolio.
They reviewed the basis for a modification of the Money Manager Fee and analyzed
the fee proposed in terms of the services provided or to be provided, and the
investment management fee charged by other investment advisers that manage
comparable funds.
The request for a fee increase referred to, among other things, the
increased competition for high quality investment management, compliance, and
other personnel, the costs and complexity of managing small to mid cap funds,
and the amount of research needed to keep abreast of potential investment
opportunities and to monitor developments in the small to mid cap equity market,
the greater differential between risk and return in the small cap equity market
in comparison to the large cap equity market and capacity constraints on trading
(higher costs of trading on small to mid cap names). The Directors were provided
with data as to the qualifications of Symphony Inc. and it's affiliates
personnel and the quality and extent of the services rendered, as well as an
analysis of the performance and expenses of the Small Cap Portfolio and
comparative advisory fee information regarding other small to mid cap equity
funds.
In approving the New Agreement and recommending its approval by
shareholders, the Directors of the Fund, including the Independent Directors,
considered several factors. The factors considered by the Directors included (1)
the nature, quality and extent of the services furnished to the Small Cap
Portfolio and in particular the performance that Symphony Inc. has achieved for
the Small Cap Portfolio; (2) the complexity of research and investment
activities in the small to mid cap market; (3) the performance of Symphony Inc.
in managing the Small Cap Portfolio with respect to its advisory services; (4)
the effect of the proposed modification of the Performance Fee on the expense
ratio of the Small Cap Portfolio; (5) comparative data to other funds as to
investment performance, investment management fees, and as to expense ratios;
(6) current and developing conditions in the financial services industry,
including competition for and the trend toward escalating compensation for
investment personnel; and (7) the financial resources of Symphony Inc. and its
affiliates and (8) the continuance of appropriate incentives to assure that the
Small Cap Portfolio will continue to be furnished with high quality services.
After reviewing and analyzing the materials provided, the Board of
Directors concluded that the compensation to be paid under the proposed New
Agreement is fair and reasonable. The Board believes that approving the New
Agreement is in the best interests of the Small Cap Portfolio and its
Shareholders. Accordingly, after consideration of the above factors, and such
other factors and information it considered relevant, the Board of Directors
unanimously approved the New Agreement and voted to recommend its approval by
the Small Cap Portfolio's Shareholders. Symphony Inc. and Symphony LLC, as
applicable, has undertaken to pay some of the costs and expenses incurred by the
Fund as a result of the costs of the Meeting and solicitation.
Based on its review, the Board of Directors determined that approval of
the New Agreement is in the best interests of the Small Cap Portfolio and its
Shareholders. Accordingly, after consideration of the above, and such other
factors and information as it deemed relevant, the Board of Directors, including
the Independent Directors, unanimously voted in person to approve the New
Agreement and to recommend its approval to the Shareholders.
RECOMMENDATION AND VOTE REQUIRED
After careful consideration, the Board of Directors recommends that
Shareholders vote "FOR" the New Agreement among the Fund, Bennington and
Symphony LLC to replace the Current Agreement effective May 1, 1998. Approval of
the New Agreement requires the affirmative vote of a majority of the outstanding
voting securities of the Small Cap Portfolio, as defined in the Investment
Company Act. If the Shareholders do not approve the New Agreement, the Current
Agreement will remain in effect. In this event, the Board of Directors shall
take such further action as it may deem to be in the best interests of the Small
Cap Portfolio and its Shareholders.
INVESTMENT MANAGEMENT AND OTHER INFORMATION
INVESTMENT MANAGEMENT
Bennington serves as the investment adviser and Manager to the Fund
pursuant to a Management Agreement between the Fund and Bennington dated
December 23, 1991, revised to provide for payment to Bennington by the
Portfolios of a management fee on June 17, 1992, and renewed by the Board of
Directors, including all of the Directors who are not Interested Persons of the
Fund on May 24, 1994, May 16, 1995, May 29, 1996 and May 28, 1997 (the
"Management Agreement"). Pursuant to the 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 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 in accordance
with the terms of the Exemptive Order. For providing such services, Bennington
is paid a fee equal on an annual basis to 0.60% of the Small Cap Portfolio's
average daily net assets. The Management Agreement will not be affected by the
Proposal and will remain in full force and effect regardless of whether the
Proposal is approved.
In addition to the Management Agreement, under a separate Transfer
Agency and Administrative Agreement approved by the Board of Directors on
December 1, 1995, Bennington performs certain administrative, recordkeeping and
transfer agent services. The Fund pays Bennington an annual rate of 0.13% of the
average daily net assets of the Portfolios. Those fees are in addition to the
fees paid under the Management Agreement. The Transfer Agency Agreement may be
changed by the Board of Directors without shareholder approval. The Transfer
Agency Agreement will not be affected by the Proposal and will remain in full
force and effect regardless of whether the Proposal is approved.
Bennington was organized as a general partnership under the laws of the
State of Washington on April 25, 1991, for the purpose of acting as the Fund's
manager and reorganized as a Washington Limited Partnership on August 12, 1993.
Bennington's general partners, all of which are Washington corporations, are:
Percentage
Name Address of ownership
Northwest Advisors, Inc. 1420 Fifth Avenue, Suite 49.2%
3130, Seattle, WA 98101
Bennington Management Associates, 1420 Fifth Avenue, Suite 1.0%
Inc. /2/ 3130, Seattle, WA 98101
Bennington Capital Management 5000 Columbia Center, 701 24.8%
Investment Corp. Fifth Avenue, Seattle,
WA 98104-7078
__________
2/ The managing partner of Bennington and controlled by J. Anthony Whatley, III.
J. Anthony Whatley, III, a Director of the Fund, is a shareholder of Northwest
Advisors, Inc. and Bennington Management Associates, Inc. During the fiscal year
ended December 31, 1997, Mr. Whatley purchased an additional 20% of shares of
Northwest Advisors, Inc. (by purchase and as part of a stock option).
The names, titles and present positions of the executive officers or
employees of Bennington who are also executive officers and/or directors of the
Fund, all at the offices of Bennington, 1420 Fifth Avenue, Seattle, WA 98101
are:
Name and Position with Principal Occupations
Address the Fund During Past Five Years
------- -------- ----------------------
*J. Anthony Whatley, Director, President Executive Director, Bennington
III** and Principal Capital Management L.P. since
1420 Fifth Avenue Executive Officer April 1991; President,
Seattle, WA 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 Director Partner, Martinson,
1607 South 341st Place Cobean & Associates,
Federal Way, WA P.S. (certified public
accountants) since 1973.
Geoffrey C. Cross Director President, Geoffrey C.
252 Broadway Cross P.S., Inc.,
Tacoma, WA (general practice of
law) since 1970.
Ravindra A. Deo Vice President, Director and Vice
1420 Fifth Avenue Treasurer and President, Northwest
Seattle, WA Principal Financial Advisors, Inc. since
and Accounting July 1993; Vice
Officer 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** 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 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 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 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 Person by virtue of his employment and/or
indirect interest in Bennington.
** J. Anthony Whatley III and Linda V. Whatley are husband and wife.
*** Mr. King resigned as an officer of the Fund and Bennington in January 1998.
Symphony Inc. and its affiliates has no affiliation with or
relationship to the Fund or Bennington other than as discretionary Money Manager
for the Small Cap Portfolio's assets, except Symphony will act as the
relationship manager for the Small Cap Portfolio's inclusion in the Schwab
OneSource Portfolios - Small Company Fund (the "Schwab Portfolio") arrangement.
In connection with this arrangement, Bennington will pay Symphony a service fee
of 0.18% on an annual basis of the net assets attributable to the Schwab
Portfolio investments in the Small Cap Portfolio, once that investment reaches
$20 million (the "Fee"), calculated monthly and payable within fifteen (15) days
at the end of each month so long as (i) Bennington is the manager of the Fund;
(ii) Symphony is the Money Manager of the Small Cap Portfolio; and (iii) the
Small Cap Portfolio is included in the Schwab Portfolio. Bennington may in its
sole discretion modify the Fee upon five (5) business days' notice to Symphony.
BOARD OF DIRECTORS OF THE FUND
The Board of Directors of the Fund consists of:
Name Position
George G. Cobean, III Director
Geoffrey C. Cross Director
J. Anthony Whatley, III* Director, President and
Principal Executive Officer
- -----------------------------
* interested persons
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision of the Board of Directors,
Bennington and the Money Manager are responsible for the Small Cap Portfolio's
portfolio transactions. Generally, securities are purchased for the Small Cap
Portfolio for investment income and/or capital appreciation and not for
short-term trading profits. However, the Small Cap Portfolio may dispose of
securities without regard to the time they have been held when such action, for
defensive or other purposes, appears advisable to Bennington or the respective
money managers.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions; on non-U.S. 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. The Small Cap Portfolio paid
brokerage commissions in 1997 of $239,855.
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 of the Portfolio. The Management Agreement and the
Money Manager Agreements provide, in substance and subject to specific
directions from the Fund's 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. Securities will
ordinarily be purchased from the markets where they are primarily traded, and
the money managers will consider all factors they deems relevant in assessing
the best net price and execution for any transaction, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis).
In addition, the Money Manager Agreement authorizes Bennington (while
exercising investment discretion) and Symphony, in selecting brokers to execute
a particular transaction and in evaluating the best net price and execution, to
consider the "brokerage and research services" (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Small Cap Portfolio, Bennington and/or to Symphony (or its affiliates).
Bennington (while exercising investment discretion) and Symphony are authorized
to cause the Small Cap Portfolio to pay a commission to a broker who provides
such brokerage and research services for executing a portfolio transaction which
is in excess of the amount of commission another broker would have charged for
effecting that transaction. Bennington (while exercising investment discretion)
or the Money Manager must determine in good faith that the commission was
reasonable in relation to the value of the brokerage and research services
provided, viewed 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 Small Cap Portfolio, Bennington (when
exercising investment discretion) and the Money Manager may enter into
transactions giving rise to brokerage commissions with brokers who provide
brokerage, research or other services to the Small Cap Portfolio or Bennington
so long as the money manager believes in good faith that the broker can be
expected to obtain the best price on a particular transaction and the Small Cap
Portfolio 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 Small Cap Portfolio, or to Bennington for the benefit of its
clients 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 Small Cap Portfolio a lower commission on the
particular transaction. For the fiscal year ended December 31, 1997, Symphony
entered into no arrangements of this type.
Bennington does not expect the Small Cap Portfolio ordinarily to
effect a significant portion of its total brokerage business with brokers
affiliated with Bennington or the money managers. However, the Money Manager may
effect portfolio transactions for the Small Cap Portfolio 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. For the fiscal year ended December 31, 1997, Symphony
Inc. effected no portfolio transactions with any affiliated brokers.
INFORMATION ABOUT THE MEETING
All proxies solicited by the Board of Directors which are properly
executed and received by the Secretary or her designees prior to the Meeting
will be voted at the Meeting in accordance with the instructions thereon. If no
instruction is given on a proxy, it will be voted FOR approval of the Proposals.
Shares of the Small Cap Portfolio represented in person or by proxy
(including shares which abstain or do not vote with respect to the Proposals
presented for Shareholder approval) will be counted for purposes of determining
whether a quorum is present at the Meeting. Abstentions will be treated as
shares that are present and entitled to vote for purposes of determining the
number of shares that are present and entitled to vote, but will not be counted
as a vote in favor of the Proposals. Accordingly, an abstention from voting on
the Proposal has the same effect as a vote against the Proposal. As noted above,
the adoption by the Shareholders of the Proposal requires the affirmative vote
of the lesser of (i) 67% of the voting securities present at the Meeting, if the
holders of more than 50% of the shares of the Small Cap Portfolio are present or
represented by proxy or (ii) 50% or more of the outstanding shares of the Small
Cap Portfolio.
Broker-dealer firms holdings shares in "street name" for the benefit
of their customers and clients will request the instructions of such customers
and clients on how to vote their shares before the Meeting. If a broker or
nominee holding shares in "street name" indicates on the proxy that it does not
have discretionary authority to vote as to the Proposal, those shares will not
be considered as present and entitled to vote with respect to the Proposal.
Accordingly, a "broker non-vote" has no effect on the voting in determining
whether the Proposal has been adopted pursuant to item (i) above. However, with
respect to determining whether the Proposal has been adopted pursuant to item
(ii) above, because shares represented by a "broker non-vote" are considered
outstanding shares, a "broker non-vote" has the same effect as a vote against
the Proposal.
In the event that a quorum is not present in person or by proxy when
any session of the Meeting is called to order, the persons named as proxies may
vote those proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor of the
Proposal have not been received, the persons named in the proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies with respect to the Proposal. Any adjournment will require the
affirmative vote of a majority of the shares of the Small Cap Portfolio present
in person or by proxy as the session of the Meeting to be adjourned. The persons
named as proxies will vote those proxies which they are entitled to vote in
favor of the Proposal in favor of an adjournment and will vote those proxies
required to be voted against the Proposal against any adjournment. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the proposals that are the subject of the Meeting, the
percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to Shareholders with respect to the reasons for the solicitation. A shareholder
vote may be taken on the Proposal in the proxy statement prior to adjournment if
sufficient votes for its approval have been received and it is otherwise
appropriate.
CONTROL PERSONS AND PRINCIPAL HOLDERS FOR THE SMALL CAP PORTFOLIO
As of February 28, 1998, the following persons were the owners of
record of 5% or more of the shares of the Small Cap Portfolio.
Small to Mid Cap
Beneficial Owner
Stap & Company, account nominee for 5.15%
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
Macbee & Co., account nominee for
6.88% Eastern Bank & Trust Co.
225 Essex St.
Salem, MA 01970
Rocco Trust & Co., account nominee for 8.20%
Johnson Heritage Trust Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
EDRAYCO, account nominee for 8.27%
Regions Bank
P. O. Box 937
Gainsville, GA 30503
One Valley Bank NA 10.96%
One Financial Place
Princeton, WV 24740
Charles Schwab & Company 11.26%
101 Montgomery St.
San Francisco, CA 94104
Hubco Regions Bank, account nominee for 12.69%
Regions Bank
P. O. Box 10247
Birmingham, AL 35202
As of February 28, 1998, the directors and officers of the Fund, as a
group, beneficially owned less than 1% of the shares of the Small Cap Portfolio.
NEXT MEETING OF SHAREHOLDERS
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. 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, except that if
no annual meeting was 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.
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.
PROPOSAL NO. 2
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented at
the Meeting other than those set forth in this Proxy Statement. If any other
business should come before the meeting, the persons named in the accompanying
proxy will vote thereon in accordance with their best judgment with respect to
such matters.
The Fund's Annual Report has previously been delivered to shareholders.
Shareholders may obtain a copy of the Fund's most recent Annual and Semi-Annual
Reports upon written or oral request, without charge, by contacting the Fund at
the address shown above, or by calling 1-800-759-3504. If any Shareholders would
like additional information about the matters proposed for action, the
management would welcome the opportunity to answer questions and provide further
information.
SHAREHOLDERS ARE URGED TO SIGN THEIR PROXIES AND RETURN THEM PROMPTLY. PLEASE
NOTE THE FORM OF THE NAME OR NAMES PRINTED ON THE PROXY. THIS IS THE FORM IN
WHICH THE STOCK OWNERSHIP IS SHOWN ON THE BOOKS OF THE FUND, AND IT IS THE FORM
IN WHICH THE SIGNATURE OR SIGNATURES SHOULD APPEAR ON THE PROXY.
BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL ONE.
BY ORDER OF THE BOARD OF DIRECTORS
ACCESSOR FUNDS, INC.
Christine J. Stansbery
Secretary
March 27, 1998
MONEY MANAGER AGREEMENT
Effective Date: July 1, 1998
Termination Date: One year after
Effective Date
Portfolio and Account:
Approximately 90% of the
SMALL TO MID CAP PORTFOLIO
Symphony Asset Management LLC
555 California Street, Suite 2975
San Francisco, CA 94104
Re: Accessor Funds, Inc. Money Manager Agreement
Ladies and Gentlemen:
Accessor Funds, Inc., a Maryland corporation (the " Fund"), is an
open-end management investment company of the series type registered as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and subject to the rules and regulations promulgated thereunder.
The Fund issues shares in separate diversified portfolios, each with a different
investment objective and policies.
Bennington Capital Management L. P., a Washington limited partnership
(the "Manager") acts as the manager and administrator of the Fund pursuant to
the terms of a Management Agreement, and is an "investment adviser," as that
term is defined in Section 2(a)(20) of the 1940 Act, to the Fund. The Manager is
responsible for the day-to-day management and administration of the Fund and for
the coordination of investments of each portfolio's assets; however, specific
portfolio purchases and sales for each portfolio's investment portfolio, or a
portion thereof, are to be made by the portfolio management organizations
recommended and selected by the Manager, subject to the approval of the Board of
Directors of the Fund (the "Board").
1. Appointment as a Money Manager. The Manager and the Fund hereby
appoint and employ Symphony Asset Management LLC, a California limited liability
company (the "Money Manager"), as a discretionary money manager to the Fund's
Small to Mid Cap Portfolio (all of the assets of the Small to Mid Cap Portfolio,
including those assets not managed by the Money Manager, hereinafter referred to
as the "Portfolio"), on the terms and conditions set forth herein, for that
portion of the assets of the Portfolio which the Manager determines from time to
time to assign to the Money Manager (those assets being referred to as the
"Account").
2. Acceptance of Appointment; Standard of Performance. The Money Manager
accepts the appointment as a discretionary money manager and agrees to use its
best professional judgment to make and implement investment decisions for the
Fund with respect to the investments of the Account in accordance with the
provisions of this Agreement.
3. Portfolio Management Services of the Money Manager. The Money Manager
is hereby employed and authorized to select portfolio securities for investment
by the Portfolio, to determine to purchase and sell securities for the Account,
and upon making any purchase or sale decision, to place orders for the execution
of such portfolio transactions in accordance with paragraphs 5 and 6 hereof and
Exhibit A attached hereto and incorporated by this reference herein (as it may
be amended in writing by the parties from time to time). In providing portfolio
management services to the Account, the Money Manager shall be subject to such
investment restrictions as are set forth in the 1940 Act and rules thereunder,
the supervision and control of the Board, such specific instructions as the
Board may adopt and communicate to the Money Manager, the investment objectives,
policies and restrictions of the Portfolio furnished pursuant to paragraph 4,
and instructions from the Manager; and the Money Manager shall maintain on
behalf of the Fund the records listed in Exhibit B attached hereto and
incorporated by this reference herein (as it may be amended in writing by the
parties from time to time). At the Fund's or the Manager's reasonable request
(as communicated by the Board or the officers of such entities), the Money
Manager will consult with the officers of the Fund or the Manager, as the case
may be, with respect to any decision made by it with respect to the investments
of the Account.
4. Investment Objectives, Policies and Restrictions. The Fund shall
provide the Money Manager with a statement of the investment objectives and
policies of the Portfolio and any specific investment restrictions applicable
thereto as established by the Fund, including those set forth in its Prospectus
as amended from time to time. The Fund retains the right, on reasonable prior
written notice to the Money Manager from the Fund or the Manager, to modify any
such objectives, policies or restrictions in any manner at any time. The Money
Manager shall have no duty to investigate any instructions received from the
Fund, the Manager, or both, and, absent manifest error, such instructions shall
be presumed reasonable.
5. Transaction Procedures. All transactions will be consummated by
payment to or delivery by the Fund's custodian (the "Custodian"), or such
depositary or agents as may be designated by the Custodian, as custodian for the
Fund, of all cash and/or securities due to or from the Account, and the Money
Manager shall not have possession or custody thereof or any responsibility or
liability with respect thereto. The Money Manager shall advise the Custodian in
writing or by electronic transmission or facsimile of all investment orders for
the Portfolio placed by it with broker/dealers at the time and in the manner and
as set forth in Exhibit A hereto. The Fund shall issue to the Custodian such
instructions as may be appropriate in connection with the settlement of any
transaction initiated by the Money Manager. The Fund shall be responsible for
all custodial arrangements and the payment of all custodial charges and fees
and, upon the Money Manager giving proper instructions to the Custodian, the
Money Manager shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the Custodian.
6. Allocation of Brokerage. The Money Manager shall have authority and
discretion to select broker/dealers to execute portfolio transactions initiated
by the Money Manager, and for the selection of the markets on/in which the
transaction will be executed.
A. In doing so, the Money Manager's primary objective shall be
to select a broker/dealer that can be expected to obtain the best net
price and execution for the Fund. However, this responsibility shall not
be deemed to obligate the Money Manager to solicit competitive bids for
each transaction; and the Money Manager shall have no obligation to seek
the lowest available commission cost to the Fund, so long as the Money
Manager believes in good faith, based upon its knowledge of the
capabilities of the firm selected, that the broker/dealer can be
expected to obtain the best price on a particular transaction and that
the commission cost is reasonable in relation to the total quality and
reliability of the brokerage and research services made available by the
broker/dealer to the Money Manager viewed in terms of either that
particular transaction or of the Money Manager's overall
responsibilities with respect to its clients, including the Fund, as to
which the Money Manager exercises investment discretion, notwithstanding
that the Fund may not be the direct or exclusive beneficiary of any such
services or that another broker/dealer may be willing to charge the Fund
a lower commission on the particular transaction.
B. The Fund shall retain the right to request that transactions
involving the Account that give rise to brokerage commissions in an
annual amount of up to 50% of the Money Manager's executed brokerage
commissions, shall be executed by broker/dealers which provide brokerage
or research services to the Fund or its Manager, or as to which an
ongoing relationship will be of value to the Fund with respect to the
Portfolio, which services and relationship may, but need not, be of
direct benefit to the Portfolio so long as (i) the Money Manager
believes in good faith, based upon its knowledge of the capabilities of
the firm selected, that the broker/dealer can be expected to obtain the
best price on a particular transaction and (ii) 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 the Manager for the benefit of its clients for which it
exercises investment discretion, notwithstanding that the Portfolio may
not be the direct or exclusive beneficiary of any such service or that
another broker/dealer may be willing to charge the Fund a lower
commission on the particular transaction. The Money Manager may reject
any request for directed brokerage that does not appear to it to be
reasonable.
C. The Fund agrees that it will provide the Money Manager with a
list of broker/dealers which are "affiliated persons" of the Fund and
its other money managers. Upon receipt of such list, the Money Manager
agrees that it will not execute any portfolio transactions with a
broker/dealer which is an "affiliated person" (as defined in the 1940
Act) of the Fund or of any money manager for the Fund unless it is in
accordance with the procedures of the Fund.
D. As used in this paragraph 6, "brokerage and research
services" shall be those services described in Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended.
7. Proxies. Unless the Manager gives written instructions to the
contrary, the Money Manager shall vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Account may be invested. The
Money Manager shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Portfolio's shareholders.
8. Reports to the Money Manager. The Fund and the Manager shall furnish
or otherwise make available to the Money Manager such information relating to
the business affairs of the Fund, including periodic reports concerning the
Portfolio, as the Money Manager at any time, or from time to time, may
reasonably request in order to discharge its obligations hereunder.
9. Fees for Services.
A. The compensation of the Money Manager for its services under
this Agreement shall be calculated and paid by the Fund in accordance
with Exhibit C attached hereto and incorporated by this reference
herein. The Money Manager acknowledges that any such fee is payable
solely out of assets of the Portfolio Account.
B. The Money Manager acknowledges that the index against which
the Money Manager's performance is based (the "benchmark index") may be
changed by the Board, including a majority of the directors who are not
parties to this Agreement (as defined in the 1940 Act) or interested
persons of any such party, upon at least one quarter's prior notice. The
Money Manager acknowledges that a change in the benchmark index may
alter the subsequent return of the index measure, but performance prior
to the change in the benchmark index will continue to be based on the
former benchmark index.
10. Other Investment Activities of the Money Manager. The Fund
acknowledges that the Money Manager, or one or more of its affiliates, may have
investment responsibilities or render investment advice to, or perform other
investment advisory services for, other individuals or entities (the "Affiliated
Accounts"). Subject to the provisions of paragraph 2 hereof, the Fund agrees
that the Money Manager and its affiliates may give advice, exercise investment
responsibility and take other action with respect to the Affiliated Accounts
which may differ from the advice given or the timing or nature of action taken
with respect to the Account, provided that the Money Manager acts in good faith,
and provided further that it is the Money Manager's policy to allocate, within
its reasonable discretion, investment opportunities to the Account over a period
of time on a fair and equitable basis relative to the Affiliated Accounts,
taking into account the investment objectives and policies of the Portfolio and
any specific investment restrictions applicable thereto. The Fund acknowledges
that one or more of the Affiliated Accounts may at any time hold, acquire,
increase, decrease, dispose of or otherwise deal with positions in investments
in which the Account may have an interest from time to time, whether in
transactions which may involve the Account or otherwise. The Money Manager shall
have no obligation to acquire for the Account a position in any investment which
any Affiliated Account may acquire, and the Portfolio shall have no first
refusal, co-investment or other rights in respect of any such investment, either
for the Account or otherwise.
11. Certificate of Authority. Each of the Fund, the Manager and the
Money Manager shall furnish to the others from time to time certified copies of
the resolutions of its Board of Directors, Board of Trustees, Managing Partner
or executive committee, as the case may be, evidencing the authority of its
officers and employees who are authorized to act on behalf of it.
12. Limitation of Liability. The Money Manager shall not be liable for,
and shall be indemnified by the Fund for any action taken, omitted or suffered
to be taken by it in its reasonable judgment, in good faith and believed by it
to be authorized or within the discretion or rights or powers conferred upon it
by this Agreement, or in accordance with (or in the absence of) specific
directions or instructions from the Fund or the Manager; provided, however, that
such acts or omissions shall not have resulted from the Money Manager's willful
misfeasance, bad faith or gross negligence, violation of applicable law, or
reckless disregard of its duty or of its obligations hereunder. The rights and
obligations that are provided for in this Paragraph 12 shall survive the
cancellation, expiration or termination of this Agreement.
13. Confidentiality. Subject to the right of each money manager and the
Fund to comply with applicable law, including any demand or request of any
regulatory or taxing authority having jurisdiction over it, the parties hereto
shall treat as confidential all information pertaining to the Portfolio and the
actions of each money manager, the Manager and the Fund in respect thereof,
other than any such information which is or hereafter becomes ascertainable from
public or published information or trade sources. The rights and obligations
that are provided for in this Paragraph 13 shall survive the cancellation,
expiration or termination of this Agreement.
14. Use of the Money Manager's Name. The Fund and the Manager agree to
furnish the Money Manager at its principal office prior to use thereof copies of
all prospectuses, proxy statements, reports to stockholders, sales literature,
or other material prepared for distribution to stockholders of the Fund or the
public that refer in any way to the Money Manager, and not to use such material
if the Money Manager reasonably objects in writing within three business days
(or such other time as may be mutually agreed) after receipt thereof. In the
event of termination of this Agreement, the Fund and the Manager will continue
to furnish to the Money Manager copies of any of the above-mentioned materials
that refer in any way to the Money Manager, and will not use such material if
the Money Manager reasonably objects in writing within three business days (or
such other time as may be mutually agreed) after receipt thereof.
15. Assignment. No assignment, as that term is defined in Section
2(a)(4) of the 1940 Act, of this Agreement shall be made by the Money Manager,
and this Agreement shall terminate automatically in the event that it is
assigned. The Money Manager shall notify the Manager and the Fund in writing
sufficiently in advance of any proposed change of control, as defined in Section
2(a)(9) of the 1940 Act, to enable the Manager and the Fund to consider whether
an assignment, as that term is defined in Section 2(a)(4) of the 1940 Act, will
occur, and to take the steps necessary to enter into a new money manager
agreement with the Money Manager.
16. Representations, Warranties and Agreements of the Investment
Company. The Fund represents, warrants and agrees that:
A. The Money Manager has been duly appointed by the Board to
provide investment services to the Account as contemplated hereby.
B. The Fund will deliver to the Money Manager a true and
complete copy of its current prospectus as effective from time to time,
such other documents or instruments governing the investments of
Portfolio, and such other information as is necessary for the Money
Manager to carry out its obligations under this Agreement.
C. The organization of the Fund and the conduct of the business
of the Portfolio as contemplated by this Agreement, materially complies,
and shall at all times materially comply, with the requirements imposed
upon the Fund by applicable law.
17. Representations, Warranties and Agreements of Manager. Manager
represents, warrants and agrees that:
A. The Manager acts as an "investment adviser," as that term is
defined in Section 2(a)(20) of the 1940 Act, pursuant to a Management
Agreement with the Fund.
B. The appointment of the Money Manager by the Manager to
provide the investment services as contemplated hereby has been approved
by the Board.
C. The Manager is registered as an "investment adviser" under
the Investment Advisers Act of 1940, as amended (the "Advisers Act").
18. Representations, Warranties and Agreements of Money Manager. The
Money Manager represents, warrants and agrees that:
A. The Money Manager is registered as an "investment adviser"
under the Advisers Act; or it is a "bank" as defined in Section
202(a)(2) of the Advisers Act or an "insurance company" as defined in
Section 202(a)(12) of the Advisers Act and is exempt from registration
thereunder.
B. The Money Manager will maintain, keep current and preserve on
behalf of the Fund, the records identified in Exhibit B, in the manner
required by such Exhibit. The Money Manager agrees that such records
(other than those required by No. 4 of Exhibit B) are the property of
the Fund and will be surrendered to the Fund promptly upon request.
C. The Money Manager will adopt or has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the 1940 Act,
will provide to the Fund a copy of the code of ethics and evidence of
its adoption, and will make such reports to the Fund as required by Rule
17j-1 under the 1940 Act. The Money Manager has policies and procedures
sufficient to enable the Money Manager to detect and prevent the misuse
of material, nonpublic information by the Money Manager or any person
associated with the Money Manager, in compliance with the Insider
Trading and Securities Fraud Enforcement Act of 1988.
D. The Money Manager will notify the Fund of any changes in the
membership of its partnership or in the case of a corporation in the
ownership of more than five percent of its voting securities, within a
reasonable time after such change.
19. Amendment. This Agreement may be amended at any time, but only by
written agreement among the Money Manager, the Manager and the Fund, which
amendment, other than amendments to Exhibits A and B, must be approved by the
Board in the manner required by the 1940 Act.
20. Effective Date; Term. This Agreement shall become effective for the
Portfolio on the effective date set forth on page 1 of this Agreement, and shall
continue in effect until the termination date set forth on page 1 of this
Agreement. Thereafter, the Agreement shall continue in effect for successive
annual periods only so long as its continuance has been specifically approved at
least annually (a) by a vote of a majority of the Board or (b) by a vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Portfolio for which the Money Manager acts as money manager, and in either
case by a majority of the directors who are not parties to the Agreement or
interested persons of any parties to the Agreement (other than as directors of
the Fund) cast in person at a meeting called for purposes of voting on the
Agreement.
21. Termination. This Agreement may be terminated, without the payment
of any penalty, by the Board, the Manager, the Money Manager or by the vote of a
majority of the outstanding voting securities (as that term is defined in the
1940 Act) of the Portfolio for which the Money Manager acts as money manager,
upon 60 days' prior written notice to the other parties hereto. Any such
termination shall not affect the status, obligations or liabilities of any party
hereto to any of the other parties that accrued prior to such termination.
22. Applicable Law. To the extent that state law shall not have been
preempted by the provisions of any laws of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the State
of Washington.
<PAGE>
ACCESSOR FUNDS, INC.
BY:_________________________________________
J. Anthony Whatley, III
President and Principal Executive Officer
DATE:
BENNINGTON CAPITAL
MANAGEMENT L.P.
By Bennington Management Associates, Inc.
Its Managing General Partner
BY:
J. Anthony Whatley, III
President
DATE:
Accepted and agreed to:
SYMPHONY ASSET MANAGEMENT LLC
By:_____________________________________
Name:
Title:
DATE:
<PAGE>
EXHIBITS: A. Operational Procedures (including Schedules 1 and 2).
B. Recordkeeping Requirements.
C. Fee Schedule.
<PAGE>
EXHIBIT A
OPERATIONAL PROCEDURES
The Money Manager (the "MM") shall abide by certain rules and procedures
in order to minimize operational problems. The MM will be required to have
various records and files (as required by regulatory agencies) at its offices.
The MM will have to maintain a certain flow of information to Fifth Third Bank
("Fifth Third") the Fund's accounting agent and the custodian bank.
The MM will be required to furnish Fifth Third with daily information as
to executed trades. Fifth Third should receive this data no later than the
morning following the day of the trade. The necessary information should be
transmitted via facsimile machine or electronic transmission to Fifth Third.
Upon receipt of brokers' confirmations, the MM or Fifth Third will be required
to notify the other party if any differences exist. The reporting of trades by
the MM to Fifth Third must include the following:
o Name of the Portfolio of the Fund as to which trade relates
o Whether Purchase or Sale
o Security name
o Number of shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC (Purchase only)
When opening accounts with brokers for the Fund, the account should be a
cash account. No margin accounts are to be maintained. The broker should be
advised to use Fifth Third's ID system number to facilitate the receipt of
information by Fifth Third . If this procedure is followed, DK problems will be
held down to a minimum and additional costs of security trades will not become
an important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1.
The MM will also be required to submit to Fifth Third a daily trade
authorization form signed by two authorized individuals prior to settlement
date. A list of authorized persons with specimen signatures must be sent to
Fifth Third (see Schedule 2). The authorization will contain information on
which Fifth Third and Fifth Third can rely to either accept delivery or deliver
out of the account securities as per each trade by the MM. A preprinted form
will be supplied to the MM by the Fund, or the MM may use an equivalent form
acceptable to Fifth Third and the Fund.
<PAGE>
SCHEDULE 1 TO EXHIBIT A
FIFTH THIRD BANK
DELIVERY INSTRUCTIONS FOR
ACCESSOR SMALL TO MID CAP PORTFOLIO
I. DTC ELIGIBLE SECURITIES:
Participant Number 2116
Agent Bank Number 10016
Institution Number 11153* *Note: If you have your own
Customer Acct Number 010033141322 Institution number, substitute that
number for Fifth Third's.
II. FEDERAL RESERVE WIRE TRANSFERS:
ABA #042000314
FIFTH THIRD BANK
A/C #71575856
FOR FURTHER CREDIT TO: #010033141322
ATTN: JENNIFER MOSER
III. FEDERAL RESERVE ELIGIBLE SECURITIES: REPURCHASE AGREEMENTS:
THROUGH FED CINCINNATI THROUGH FED CINCINNATI
ABA #042000314/Fifth Cin/1050 ABA#04000314/Fif Cin/1040
FFC: Accessor Small/Midcap Port FFC: Accessor Small/Midcap Port
A/C #010033141322 A/C#010033141322
IV. PTC ELIGIBLE SECURITIES, i.e., GNMAs:
A/C FIFTH
F/A/O Accessor Midcap Portfolio
A/C #010033141322
V. PHYSICAL/INELIGIBLE:
PHYSICAL NEW YORK
Bank of New York
One Wall Street - Securities Department
3rd Floor - "Window A"
New York, NY 10286
FFC: Fifth Third Bank - A/C#135500
EUROCLEAR
(Payment due 1 day prior to settlement date)
Euroclear #97816
A/C Bank of New York
Ref: Fifth Third Bank
A/C #135500
<PAGE>
SCHEDULE 2 TO EXHIBIT A
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
Fifth Third, Inc.
Fifth Third Center
38 Fountain Square Plaza
Cincinnati, OH 45263
Attention: Accessor Funds, Inc. - Small to Mid Cap Portfolio
Re: Persons Authorized to Execute Trades For Small to Mid Cap Portfolio
The following individuals are authorized to execute and report trade
instructions on behalf of the Portfolio. Should there be any changes to the list
of authorized persons , we will notify you immediately of those changes.
NAME SIGNATURE
Sincerely yours,
[Money Manager]
<PAGE>
EXHIBIT B
RECORDS TO BE MAINTAINED BY MONEY MANAGER
*1. A record of each brokerage order, and all other portfolio purchases and
sales, given by the Money Manager or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed or
unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry or cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(Rule 31a-1(b)(5) and (6) of the 1940 Act).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio
securities to brokers or dealers was made, and the division of brokerage
commissions or other compensation on such purchase and sale orders. The
record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or dealers
to:
(a) The Fund,
(b) The Manager (Bennington Capital Management),
(c) Yourself (i.e., the Money Manager), and
(d) Any person other than the foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation (Rule 31a-1(b)(9) of the 1940
Act).
*3. A record in the form of an appropriate memorandum identifying the person
or persons, committees, or groups authorizing the purchase or sale of
portfolio securities. Where an authorization is made by a committee or
group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting or
authorizing the purchase or sale of portfolio securities (Rule
31a-1(b)(10) of the 1940 Act) and such other information as is
appropriate to support the authorization.**
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Advisers Act , to the extent such records are
necessary or appropriate to record the Money Manager's transactions with
the Fund. (Rule 31a-1(f) of the 1940 Act).
5. All accounts, books, records or other documents that are required to be
maintained pursuant to the 1940 Act, the Advisers Act, or any rule or
regulation thereunder, need only be retained by the Money Manager as
required under such laws, rule or regulations. Any other account, book,
record or other document that is required to be maintained by the Money
Manager pursuant to this Exhibit B need only be maintained for five
years after the date of its creation.
* Maintained as property of the Fund pursuant to Rule 31a-3(a) of the 1940
Act.
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or portfolio manager reviews.
<PAGE>
EXHIBIT C
MONEY MANAGER FEE
The following compensation of the Money Manager for its services under
the Agreement shall be calculated and paid by the Fund (except that no such fees
shall be paid to the Manager as to any portion of the Portfolio for which it
acts as money manager). For purposes of calculating the Money Manager's fees,
commencement of investment operations for the Account shall be considered to be
September 15, 1995.
Fees will be calculated and paid after the end of each calendar quarter
at one-fourth of an annual percentage rate as described in the following
paragraph and in the table below applied to the average daily net assets of the
Account. The net assets of the Account are determined by including receivables
and deducting payables. Expenses beyond the control of the Money Manager
including, but not limited to, fees payable to the Fund's Custodian, Accounting
Agent and Transfer Agent, fees of accountants, legal fees and expenses allocable
to the Portfolio are not included as payables of the Account, but expenses
within the control of the Money Manager including, but not limited to, brokerage
commissions are included in determining the net assets of the Account.
For the first five complete calendar quarters of management of the
Account by the Money Manager, the Fund will pay the Money Manager on a monthly
basis at the following annual fee rates, applied to the average daily net assets
of the Portfolio.
BASIC FEE PORTFOLIO MANAGEMENT FEE TOTAL
0.10% 0.10% 0.20%
Commencing with the sixth calendar quarter of management by the Money
Manager for the Account, the Fund will pay the Money Manager based on the
schedule below as applied to the average daily net assets of the Portfolio.
AVERAGE ANNUALIZED
PERFORMANCE DIFFERENTIAL VS. THE ANNUALIZED
BENCHMARK INDEX PERFORMANCE FEE
--------------- ---------------
Greater Than or Equal to
3.00% 0.42%
Greater Than or Equal to
2.00% and Less Than 3.00% 0.35%
Greater Than or Equal to
1.00% and Less Than 2.00% 0.30%
Greater Than or Equal to
0.50% and Less Than 1.00% 0.25%
Greater Than or Equal to
0.00% and Less Than 0.50% 0.20%
Greater Than or Equal to
-0.50% and Less Than 0.00% 0.15%
Greater Than or Equal to
-1.00% and Less Than -0.50% 0.10%
Greater Than or Equal to
-1.50% and Less Than -1.00% 0.05%
Less Than -1.50% 0.00%
The Account's performance differential versus the benchmark index is
recalculated at the end of each calendar quarter based on the Account's
performance during all calendar quarters since commencement of management by the
Money Manager for the Account through the next preceding calendar quarter, so
that the performance fee, although measured on an average annual rate of return
basis, covers all prior quarters except that of the immediately preceding
quarter. Commencing with the 14th calendar quarter of management by the Money
Manager for the Account, the Account's average annual performance differential
will be recalculated based on the Account's performance during the preceding 12
calendar quarters (other than the immediately preceding quarter) on a rolling
basis.
The Manager agrees to make every effort to minimize cash inflows and
outflows to the Account, and to attempt to limit them to once a month. For
purposes of calculating the performance of the benchmark index, the Fund, the
Manager and the Money Manager agree to accept the calculation provided by the
publisher of the index or another mutually acceptable source. For purposes of
calculating the performance differential versus the benchmark index, the
investment performance of the Account for any period, expressed as a percentage
of its net asset value per share at the beginning of such period, is equal to
the sum of: (i) the change in the net asset value per share of the Account
during such period; (ii) the value of the Account's cash distributions per share
accumulated to the end of such period; and (iii) the value of capital gains
taxes per share paid or payable on undistributed realized long-term capital
gains accumulated to the end of such period. For this purpose, the value of
distributions per share of realized capital gains, or dividends per share paid
from investment income and of capital gains taxes per share paid or payable on
undistributed realized long-term capital gains, shall be treated as reinvested
in shares of the Account at the net asset value per share in effect at the close
of business on the record date for the payment of such distributions and
dividends and the date on which provision is made for such taxes, after giving
effect to such distributions, dividends and taxes. The investment record of the
benchmark 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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ACCESSOR FUNDS, INC. THE UNDERSIGNED HEREBY APPOINTS J.
SMALL CAP PORTFOLIO ANTHONY WHATLEY III AND LINDA V. WHATLEY
PROXY FOR A SPECIAL MEETING OF PROXIES OF THE UNDERSIGNED, WITH FULL
SHAREHOLDERS TO BE HELD ON POWER OF SUBSTITUTION, TO VOTE ALL
April 27, 1998 SHARES OF COMMON STOCK OF ACCESSOR
FUNDS, INC. (THE "FUND") SMALL TO MID
CAP PORTFOLIO HELD OF RECORD BY THE
UNDERSIGNED, AUTHORIZED TO BE
REPRESENTED BY PROXY AND WHICH THE
UNDERSIGNED IS ENTITLED TO VOTE AT THE
SPECIAL MEETING OF SHAREHOLDERS OF THE
FUND TO BE HELD AT 1420 5TH AVENUE,
SUITE 3130, SEATTLE, WASHINGTON 98101 AT
10:00 A.M. PACIFIC STANDARD TIME, OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF,
WITH ALL THE POWERS THE UNDERSIGNED
WOULD HAVE IF PERSONALLY PRESENT ON THE
FOLLOWING MATTERS:
FOR AGAINST ABSTAIN 1.to approve or disapprove a New Money Manager Agreement
among Accessor Funds, Inc., Bennington Capital
|_| |_| |_| Management L.P. and Symphony Asset Management, LLC
that changes the fee structure of the Money Manager Fee
FOR AGAINST ABSTAIN paid to Symphony Asset Management, LLC.
|-| |-| |-| 2.to transact such other business as may be properly
brought before the Meeting or any adjournments thereof
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED 'FOR' THE
APPROVAL OF THE MONEY MANAGER AGREEMENT IN ITEM 1, AND THE
PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTERS REFERRED TO IN ITEM 2. THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF A COPY OF THE ACCOMPANYING NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT.
Account No.
DATED: , 1998 ________________________________________________
________________________________________________
PLEASE COMPLETE, DATE AND SIGN EXACTLY AS YOUR
NAME APPEARS HEREON. WHEN SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR, GUARDIAN, TRUSTEE OR
CORPORATE OFFICER, PLEASE ADD YOUR TITLE, IF
SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD
SIGN.
March 13, 1998
Dealer Contact
Dealer Name
Dealer Address
Dealer Address2
Dealer City, Dealer State Dealer ZIP
Re: Accessor Funds, Inc. - Small to Mid Cap Portfolio
Proxy Material
Dear Dealer Salutation:
As the manager of Accessor Funds, Inc. (the "Fund") Small to Mid Cap
Portfolio (the "Small Cap Portfolio"), we would like to inform you that the
Money Manager of the Small Cap Portfolio has requested a modification of the fee
structure. The modification could increase the fee paid to the Money Manager by
0.10% or decrease the fee by 0.10%. This modification would allow the Money
Manager to earn as much as 0.42% or as little as 0.00%. The Basic Fee would be
eliminated. The Board of Directors of the Fund has reviewed this request and
believes that it is in the best interests of the shareholders of the Small Cap
Portfolio to make these changes.
In addition, the Money Manager, currently Symphony Asset Management,
Inc. ("Symphony Inc.") has informed the Directors that all new advisory
relationships are being established with Symphony Asset Management LLC
("Symphony LLC"). Symphony LLC is a registered investment advisory affiliate of
Symphony Inc., operating under the same management, with the same personnel, at
the same address as Symphony Inc. The Board was advised that existing advisory
relationships are being shifted to Symphony LLC with the intention of eventually
phasing out Symphony Inc. Accordingly, a new Money Manager Agreement will be
signed with Symphony LLC.
As money manager for the Small Cap Portfolio, Symphony's performance
has been excellent, and it is currently earning the highest incentive fee
permissible under the current Money Manager Agreement. Symphony will maintain
its investment style and process, and will continue to view the Fund as an
important client. The New Money Manager Agreement to modify the fee structure to
the Small Cap Portfolio must therefore be approved by the shareholders of the
Small Cap Portfolio.
We anticipate that proxy material will be sent on March 27, 1998, to
all shareholders of record of the Fund on March 16, 1998, and the Shareholder
Meeting will be held on April 27, 1998. The Proxy Card must be signed by the
beneficial owner of the shares or the agent appointed to act on the
shareholder's behalf. The Proxy cards must be received by Bennington prior to
April 27, 1998.
Bennington will send the proxy materials to all shareholders of record.
If we do not have the individual names and/or addresses of the shareholders who
are your clients, we ask that you let us know, as soon as possible, the number
of sets of proxy material you require and whether (i) you can act on behalf of
your clients and sign the proxy cards; or (ii) you will forward the proxy
material to your clients upon receipt by you.
Very truly yours,
Ravindra A. Deo
Vice President
/cjs
<PAGE>
ACCESSOR FUNDS, INC.
Response to request for Proxy material Distribution
Dealer Name Dealer No. Dealer Number
In response to the request for distribution of proxy materials:
|_| Bennington has the names and addresses of DealerName's clients who are
shareholders of Accessor Funds, Inc.
|_| DealerName can act on behalf of its clients and sign the proxy cards
|_| DealerName will forward the proxy material to its clients upon receipt from
Bennington and requests ________ copies of the proxy material.
Dated: ____________________________________
Dealer Contact
Dealer Name
