As filed with the Securities and Exchange Commission on April 30, 1998
Registration No. 33-41245
811-6337
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES [X]
ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 18 [X]
(Check appropriate box or boxes)
ACCESSOR FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1420 Fifth Avenue
Suite 3130
Seattle, Washington 98101
(206) 224-7420
("ddress, including zip code, and telephone number,
including area code, of Principal Executive Offices)
--------------------------------
J. ANTHONY WHATLEY III
1420 Fifth Avenue
Suite 3130
Seattle, Washington 98101
(Name and Address of Agent for Service)
--------------------------------
Copies of all communications, including all communications sent to the
agent for service, should be sent to:
BETH R. KRAMER, ESQ.
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
--------------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of the registration statement. It is proposed that this filing
will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on May 1, 1998 pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[__] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has elected, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of shares by this
Registration Statement. Registrant filed the Rule 24f-2 notice for its fiscal
year ended December 31, 1997 on March 26, 1998.
<PAGE>
ACCESSOR FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
- - ---- -------- --------
Part A
<S> <C> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Summary - Financial Highlights
Item 4. General Description of Registrant Additional Information; Description
of the Portfolios
Item 5. Management of the Fund General Management of the
Portfolios; The Money Managers;
Money Manager Profiles;
Additional Information; Expenses of
the Portfolios
Item 5A. Management's Discussion of Fund Annual Report for the Fiscal Year
Performance Ended December 31, 1997
Item 6. Capital Stock and Other Securities Additional Information; Dividends
and Distributions; Taxes
Item 7. Purchase of Securities Being Offered Purchase of Portfolio Shares
Item 8. Redemption or Repurchase Redemption of Portfolio Shares
Item 9. Legal Proceedings Not Applicable
-1-
<PAGE>
Part B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History General Information and History
Item 13. Investment Objectives and Policies Investment Restrictions, Policies
and Risk Considerations
Item 14. Management of the Registrant Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities Control Persons and Principal
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and Other
Services Services; Money Managers
Item 17. Brokerage Allocation Portfolio Transaction Policies
Item 18. Capital Stock and Other Securities General Information and History
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Valuation of Portfolio Shares
Item 20. Tax Status Taxes
Item 21. Underwriters Plan of Distribution
Item 22. Calculations of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
EQUITY PORTFOLIOS--Advisor Class Shares Suite 3130
PROSPECTUS - May 1, 1998 Seattle, WA 98101
(800) 759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services (206) 224-7420
- --------------------------------------------------------------------------------
ACCESSOR(R)FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. Each portfolio intends to offers two classes
of shares, Advisor Class Shares and Investor Class Shares. This Prospectus
pertains only to the Advisor Class Shares of the following four equity
portfolios of the Fund (individually, a "Portfolio" and collectively, the
"Portfolios"):
GROWTH PORTFOLIO
VALUE AND INCOME PORTFOLIO
SMALL TO MID CAP PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
and sets forth concisely the information about the Portfolios that a prospective
investor should know before investing. Through a separate prospectus, the Fund
intends to offer an additional class of shares, the Investor Class Shares, for
the Portfolios and through separate prospectuses, the Fund intends to offer
Investor Class Shares and Advisor Class Shares for the four fixed-income
portfolios of the Fund. Investor Class Shares have different expenses that would
affect performance. Investors desiring to obtain information about the Investor
Class Shares should call (800) 759-3504 or ask their sales representative. See
"Description of the Fund --Multiple Classes of Shares."
The Fund has filed a Statement of Additional Information, dated May 1, 1998,
with the Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, containing further information about the portfolios and
the Fund that may be of interest to investors, is incorporated herein by
reference in its entirety. A free copy may be obtained by writing or calling the
Fund at the address or phone number shown above. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS, INCLUDING
THE POSSIBLE LOSS OF THE PRINICIPAL AMOUNT INVESTED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.......................................................................3
FEES AND PORTFOLIO EXPENSES...................................................6
FINANCIAL HIGHLIGHTS..........................................................7
GROWTH PORTFOLIO...........................................................7
VALUE AND INCOME PORTFOLIO.................................................8
SMALL TO MID CAP PORTFOLIO.................................................9
INTERNATIONAL PORTFOLIO...................................................10
PORTFOLIO MANAGEMENT.........................................................11
DESCRIPTION OF THE PORTFOLIOS................................................11
GENERAL...................................................................11
RISK FACTORS AND SPECIAL CONSIDERATIONS...................................12
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES.............................12
INVESTMENT POLICIES.......................................................14
INVESTMENT RESTRICTIONS...................................................21
GENERAL MANAGEMENT OF THE PORTFOLIOS.........................................21
THE MONEY MANAGERS...........................................................24
EXPENSES OF THE PORTFOLIOS...................................................29
PORTFOLIO TRANSACTION POLICIES...............................................29
DIVIDENDS AND DISTRIBUTIONS..................................................30
TAXES........................................................................30
CALCULATION OF PORTFOLIO PERFORMANCE.........................................32
VALUATION OF PORTFOLIO SHARES................................................33
PURCHASE OF PORTFOLIO SHARES.................................................34
REDEMPTION OF PORTFOLIO SHARES...............................................37
ADDITIONAL INFORMATION.......................................................38
SERVICE PROVIDERS.........................................................38
SHAREHOLDER SERVICING ARRANGEMENTS........................................39
SIGNATURE GUARANTEES......................................................39
ORGANIZATION, CAPITALIZATION AND VOTING...................................39
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS.........................40
GLASS-STEAGALL ACT........................................................40
MONEY MANAGER PROFILES.......................................................41
GROWTH PORTFOLIO..........................................................41
VALUE AND INCOME PORTFOLIO................................................41
SMALL TO MID CAP PORTFOLIO................................................41
INTERNATIONAL PORTFOLIO...................................................42
DESCRIPTION OF INDICES......................................................A-1
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX .......................A-1
S&P/BARRA GROWTH INDEX...................................................A-1
S&P/BARRA VALUE INDEX....................................................A-1
WILSHIRE 4500 INDEX......................................................A-2
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + EMF INDEX....................A-2
-2-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end, management
investment company, known as a mutual fund. The Fund currently consists of eight
diversified investment portfolios, each with its own investment objective and
policies.
Multi-Class Structure. Each Portfolio intends to offers two classes of
shares, the Advisor Class Shares and the Investor Class Shares through different
prospectuses. The shares of each Portfolio existing prior to May 1, 1998, when
the multi-class structure was established, are redesignated as Advisor Class
Shares. The Advisor Class Shares are primarily available directly from the Fund.
Advisor Class Shares are also available through financial institutions,
retirement plans, broker-dealers, depository institutions, institutional
shareholders of record, registered investment advisers, or other financial
intermediaries (collectively, "Service Organizations") that may impose
additional or different conditions on purchase or redemption of Fund shares and
may charge transaction or account fees. Service Organizations are responsible
for transmitting to their customers a schedule of any such fees and conditions.
The Investor Class Shares are primarily available through Service Organizations
and through the various brokerage firms or other industry recognized service
providers of fund supermarkets or similar programs. Generally fund
supermarket-type programs require customers to pay either no or low transaction
fees in connection with purchases or redemptions, while other Service
Organizations may charge a fee for their services. Service Organizations and the
fund supermarket-type programs may enter into written agreements with the Fund
on behalf of the Investor Class Shares, which allow reimbursements or payments
directly by the Fund for administrative services, shareholder services and
distribution-related services. Service Organizations are responsible for
transmitting to their customers a schedule of any such fees and conditions. See
the "Equity Portfolios--Investor Class Shares Prospectus" and the "Multi-Class
Structure" in the Statement of Additional Information for more detailed
information about the Investor Class Shares.
Bennington may enter into arrangements with Service Organizations and
pay such organizations directly for services provided by Service Organizations.
See "Additional Information--Shareholder Servicing Arrangements".
Equity Portfolios--Advisor Class Shares Prospectus. This Prospectus
pertains only to the Advisor Class Shares of the Fund's Growth Portfolio, Value
and Income Portfolio, Small to Mid Cap Portfolio (collectively, the "Domestic
Equity Portfolios") and the International Equity Portfolio (the "International
Portfolio"). See "Description of the Portfolios--General", "--Investment
Objectives and Investment Policies" and "Multi-Class Structure".
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from the investment
policies and strategies of other portfolios of the Fund. The investment
objective and the name of the investment management organization (individually,
the "Money Manager" and collectively, the "Money Managers") for each of the
Portfolios are described below:
0 GROWTH PORTFOLIO -- Geewax, Terker & Co.1-- seeks capital growth
through investing primarily in equity securities with greater than
average growth characteristics selected from the 500 U.S. issuers which
make up the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500").
0 VALUE AND INCOME PORTFOLIO -- Martingale Asset Management, L.P. --
seeks generation of current income and capital growth by investing
primarily in income-producing equity securities selected from the 500
U.S. issuers which make up the S&P 500.
0 SMALL TO MID CAP PORTFOLIO2 -- Symphony Asset Management, Inc.3 --
seeks capital growth through investing primarily in equity securities
of small to medium capitalization issuers.
0 INTERNATIONAL EQUITY PORTFOLIO -- Nicholas-Applegate Capital Management
-- seeks capital growth by investing primarily in equity securities of
companies domiciled in countries other than the United States and
traded on foreign stock exchanges.
Management. Bennington Capital Management L. P., a Washington limited
partnership ("Bennington"), is the manager and administrator of the Fund
pursuant to its Management Agreement with the Fund. As such, Bennington provides
or oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. See "General Management
of the Portfolios."
Purchase and Redemption of Shares. Advisor Class Shares offered by this
Prospectus are intended to be purchased and redeemed by shareholders either (i)
directly from the Portfolios, or (ii) through Service Organizations that may
charge a transaction or account fee for their services, at net asset value next
determined after an order for purchase or redemption has been received. The
Service Organizations are responsible for promptly transmitting client or
customer purchase and redemption orders to the Fund in accordance with their
agreements with clients or customers. The minimum initial investment for Advisor
Class Shares of the Portfolios is $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investments are $1,000 per
Portfolio or $2,000 in aggregate across the portfolios of the Fund. See
"Purchase of Portfolio Shares" and "Redemption of Portfolio Shares."
Risk Factors and Special Considerations. The Fund is designed to
provide diverse opportunities in equity and debt securities. There can be no
assurance that the investment objective for any Portfolio will be achieved. See
"Description of the Portfolios--Risk Factors and Special Considerations."
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. Up to 20% of the net assets of the Growth,
Value and Income and Small to Mid Cap Portfolios and up to 100% of the net
assets of the International Portfolio may be held in securities denominated in
one or more foreign currencies, which will result in that Portfolio bearing the
risk that those currencies may lose value in relation to the U.S. dollar.
Certain Portfolios also may be subject to certain risks in using investment
techniques and strategies such as entering into forward currency contracts and
repurchase agreements and trading futures contracts and options on futures
contracts. In particular, emerging markets are associated with substantial
investment risks. These risks include market volatility, investment illiquidity,
currency risk, political instability and unexpected changes in economic policy
including capital controls, expropriation, taxes and hyper-inflation. Emerging
markets may exhibit substantially greater volatility than the U.S. and more
developed foreign markets. See "Description of the Portfolios--Investment
Objectives and Investment Policies," "Investment Policies--Risks of Investing in
Foreign Securities--Special Risks of Investing in Foreign Securities of Emerging
Countries" and "Investment Restrictions, Policies and Risk
Considerations--Investment Restrictions" in the Statement of Additional
Information.
Dividends and Distributions. Each Portfolio intends to distribute at
least annually to its shareholders substantially all of its net investment
income and its net realized long- and short-term capital gains. Dividends from
the net investment income of the Domestic Equity Portfolios will be declared and
paid quarterly. Dividends from the net investment income of the International
Portfolio will be declared and paid annually. See "Dividends and Distributions."
Taxation. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company for federal income tax purposes. As
such, the Fund anticipates that no Portfolio will be subject to federal income
tax on income and gains that are distributed to shareholders. See "Taxes."
Service Providers.
Bennington is the manager and administrator of the Fund, as described
above. Bennington provides or oversees the provision of all general management,
administration, investment advisory and portfolio management services for the
Fund. Bennington provides transfer agent, registrar, dividend disbursing agent,
recordkeeping, administrative and compliance services to the Fund, pursuant to
its Transfer Agency and Administrative Agreement (the "Transfer Agent
Agreement") with the Fund.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts
as custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan ("IRA
Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel. See
"Additional Information--Service Providers."
- --------
1 Formerly managed by State Street Bank and Trust Company. See Statement
of Additional Information for more detailed information.
2 Formerly the "Small Cap Portfolio." See Statement of Additional
Information for more detailed information.
3 Effective July 1, 1998, Symphony Asset Management LLC, an affiliate of
Symphony Asset Management, Inc., will become the Money Manager. See
"Money Manager Profiles".
-3-
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor should
expect to incur as a shareholder of Advisor Class Shares of each of the
Portfolios based on projected annual operating expenses.
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
---------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees(c) None None None None
- ----------
(a) Shares of the Portfolios are expected to be sold primarily through
Service Organizations that may charge shareholders a fee. See "General
Management of the Portfolios--Distribution."
(b) An annual maintenance fee of $25.00 may be charged by the Transfer
Agent to each IRA Account with an aggregate balance of less than
$10,000 on December 31 of each year.
(c) The Transfer Agent may charge a processing fee of $10.00 for each
redemption check requested by a shareholder. See "Redemption of
Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
(as a percentage of average daily net assets)-----------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
Management Fees(b) 0.65% 0.77% 1.02% 1.15%
12b-1 Fees None None None None
Other Expenses 0.28% 0.31% 0.23% 0.45%
Total Portfolio
Operating Expenses 0.93% 1.08% 1.25% 1.60%
==== ==== ==== ====
- ----------
(a) The table data reflects fees and expenses expected to be incurred
during the fiscal year ended December 31, 1998, not actual expenses.
For actual expenses of the Portfolios, prior to establishing the
multi-class structure incurred during the fiscal year ended December
31, 1997, see "Financial Highlights" or the Annual Report for the
period ended December 31, 1997.
(b) Management fees consist of the management fee paid to Bennington and
the Money Manager fee paid to each Portfolio's Money Manager. See
"General Management of the Portfolios--Fund Manager Services and Fees"
and "--Money Manager Fees."
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Portfolios
------------------------------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
One Year $9 $11 $13 $16
Three Years $30 $34 $39 $51
Five Years $51 $60 $68 $87
Ten Years $114 $132 $149 $190
The example assumes Money Manager and other fees are paid at the rates
provided in the Annual Portfolio Operating Expenses table above. For a
discussion of certain management and Money Manager fees, see footnote (b) to the
Annual Portfolio Operating Expenses table.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in the Advisor Class Shares of the
Portfolios will bear directly or indirectly. The information is based upon each
Portfolio's current fees and expenses. For a more complete description of the
various costs and expenses, see "Expenses of the Portfolios" in the Statement of
Additional Information.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Growth Portfolio(1)
<TABLE>
<CAPTION>
Year Year Year Year Year Period from 8/25/92
ended 12/31/97 ended 12/31/96 ended 12/31/95 ended 12/31/94 ended 12/31/93 to 12/31/92
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $19.51 $17.99 $14.37 $14.16 $13.06 $12.00
------ ------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(2) 0.13 0.19 0.15 0.13 0.14 0.06
Before Bennington expense subsidy 0.13 0.19 0.15 0.12 (0.03) (0.06)
Realized and Unrealized Gain (Loss)
on Investments 6.31 3.35 4.76 0.42 1.69 1.14
---- ---- ---- ---- ---- ----
Total from Investment Operations 6.44 3.54 4.91 0.55 1.83 1.20
---- ---- ---- ---- ---- ----
Dividends from Net Investment Income (0.13) (0.19) (0.15) (0.13) (0.14) (0.06)
Capital Gains Distributions (4.25) (1.83) (1.14) (0.21) (0.59) (0.08)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ---- ----
Total Distributions (4.38) (2.02) (1.29) (0.34) (0.73) (0.14)
----- ----- ----- ----- ----- -----
Net Asset Value at End of Period $21.57 $19.51 $17.99 $14.37 $14.16 $13.06
====== ====== ====== ====== ====== ======
Total Return(3) 33.24% 19.83% 34.32% 3.99% 14.21% 10.01%
Net Assets, End of Period (000 Omitted) $87,907 $60,586 $48,532 $23,534 $8,986 $4,253
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(2) 0.93% 1.13% 1.26% 1.76% 1.21% 1.18%*
Before Bennington expense subsidy 0.93% 1.13% 1.26% 1.83% 2.64% 3.91%*
Ratio of Net Investment Income
to Average Net Assets
After Bennington expense subsidy(2) 0.56% 0.97% 0.97% 1.02% 1.16% 1.26%*
Before Bennington expense subsidy 0.56% 0.97% 0.97% 0.95% (0.27%) (1.47%)*
Portfolio Turnover Rate(4) 131.75% 81.79% 99.73% 57.71% 60.92% 19.88%
Average commission rate paid(5) $ 0.0401 $ 0.0200
</TABLE>
- ----------
(1) Effective July 21, 1997, a new Money Manager commenced management of
the Growth Portfolio. See "The Money Manager" and "Money Manager
Profiles."
(2) Effective March 1, 1994, Bennington discontinued subsidizing operating
expenses other than Bennington's and Money Managers' fees ("Other
Expenses") of the Growth Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "Redemption of Portfolio Shares."
(4) See discussion of portfolio turnover rates in "Portfolio Transaction
Policies."
(5) Represents the dollar amount of commissions paid on Portfolio
transactions divided by the total number of shares purchased and sold
for which commissions were charged. Disclosure not required for periods
prior to fiscal year 1996.
* Annualized.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Value and Income Portfolio
<TABLE>
<CAPTION>
Period from
Year Year Year Year Year 8/25/92
ended 12/31/97 ended 12/31/96 ended 12/31/95 ended 12/31/94 ended 12/31/93 to 12/31/92
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $17.75 $15.91 $13.01 $13.58 $12.58 $12.00
------ ------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) 0.26 0.24 0.33 0.25 0.25 0.12
Before Bennington expense subsidy 0.26 0.24 0.33 0.24 0.08 (0.03)
Realized and Unrealized Gain (Loss)
on Investments 5.54 3.51 3.96 (0.51) 1.59 0.59
---- ---- ---- ----- ---- ----
Total from Investment Operations 5.80 3.75 4.29 (0.26) 1.84 0.71
---- ---- ---- ----- ---- ----
Dividends from Net Investment Income (0.26) (0.24) (0.33) (0.25) (0.25) (0.12)
Capital Gains Distributions (2.41) (1.67) (1.06) (0.05) (0.59) (0.01)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 (0.01) 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ---- ----
Total Distributions (2.67) (1.91) (1.39) (0.31) (0.84) (0.13)
----- ----- ----- ----- ----- -----
Net Asset Value at End of Period $20.88 $17.75 $15.91 $13.01 $13.58 $12.58
====== ====== ====== ====== ====== ======
Total Return(2) 32.94% 23.94% 33.25% (1.93%) 14.69% 5.92%
Net Assets, End of Period (000 Omitted) $81,127 $36,367 $24,915 $19,999 $11,225 $3,859
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.05% 1.21% 1.40% 1.77% 1.21% 1.18%*
Before Bennington expense subsidy 1.05% 1.21% 1.40% 1.85% 2.61% 4.60%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) 1.32% 1.43% 2.18% 2.00% 2.02% 2.86%*
Before Bennington expense subsidy 1.32% 1.43% 2.18% 1.92% 0.62% (0.56%)*
Portfolio Turnover Rate(3) 68.14% 93.54% 100.88% 54.26% 64.56% 7.94%
Average commission rate paid(4) $0.0476 $0.0500
</TABLE>
- ----------
(1) Effective March 1, 1994, Bennington discontinued subsidizing Other
Expenses of the Value and Income Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "REDEMPTION OF PORTFOLIO SHARES".
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
(4) Represents the dollar amount of commissions paid on Portfolio
transactions divided by the total number of shares purchased and sold
for which commissions were charged. Disclosure not required for periods
prior to fiscal year 1996.
* Annualized.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Small to Mid Cap Portfolio
(formerly the "Small Cap Portfolio")(1)
<TABLE>
<CAPTION>
Period from
Year Year Year Year Year 8/25/92
ended 12/31/97 ended 12/31/96 ended 12/31/95 ended 12/31/94 ended 12/31/93 to 12/31/92
-------------- -------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $18.82 $17.60 $14.08 $14.79 $13.56 $12.00
------ ------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(2) 0.00 0.07 0.06 (0.01) 0.04 0.03
Before Bennington expense subsidy 0.00 0.07 0.06 (0.04) (0.20) (0.15)
Realized and Unrealized Gain (Loss)
on Investments 6.75 4.22 4.42 (0.59) 1.91 1.56
---- ---- ---- ----- ---- ----
Total from Investment Operations 6.75 4.29 4.48 (0.60) 1.95 1.59
---- ---- ---- ----- ---- ----
Dividends from Net Investment Income 0.00 (0.07) (0.06) 0.00 (0.04) (0.03)
Capital Gains Distributions (3.73) (3.00) (0.90) (0.10) (0.68) 0.00
Distributions in Excess of Capital Gains (0.02) 0.00 0.00 0.00 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 (0.01) (0.00) 0.00
---- ---- ---- ----- ----- ----
Total Distributions (3.75) (3.07) (0.96) (0.11) (0.72) (0.03)
----- ----- ----- ----- ----- -----
Net Asset Value at End of Period $21.82 $18.82 $17.60 $14.08 $14.79 $13.56
====== ====== ====== ====== ====== ======
Total Return(3) 36.14% 24.85% 31.98% (4.07%) 14.39% 13.28%
Net Assets, End of Period (000 Omitted) $125,221 $65,479 $49,803 $24,148 $9,791 $4,520
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.15% 1.17% 1.31% 1.98% 1.55% 1.51%*
Before Bennington expense subsidy 1.15% 1.17% 1.31% 2.38% 3.33% 5.36%*
Ratio of Net Investment Income to Average
Net Assets
After Bennington expense subsidy(1) 0.00 0.37% 0.41% (0.18%) 0.30% 0.74%*
Before Bennington expense subsidy 0.00 0.37% 0.41% (0.58%) (1.48%) (3.11%)*
Portfolio Turnover Rate(4) 129.98% 113.44% 84.26% 30.14% 59.20% 12.57%
Average commission rate paid(5) $0.0279 $0.0300
</TABLE>
- ----------
(1) The financial highlights reflected prior to 12/31/96 are the financial
highlights of the Small Cap Portfolio, referred to as the Small to Mid
Cap Portfolio since September 15, 1995. Effective September 15, 1995,
along with the change of name, a new Money Manager commenced management
of the Small to Mid Cap Portfolio. See "The Money Managers" and "Money
Manager Profiles."
(2) Effective September 15, 1995, Bennington discontinued subsidizing Other
Expenses of the Small to Mid Cap Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "Redemption of Portfolio Shares."
(4) See discussion of portfolio turnover rates in "Portfolio Transaction
Policies."
(5) Represents the dollar amount of commissions paid on Portfolio
transactions divided by the total number of shares purchased and sold
for which commissions were charged. Disclosure not required for periods
prior to fiscal year 1996.
* Annualized.
-7-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the International
Portfolio, which commenced investment operations on October 3, 1994, has been
audited by Deloitte & Touche LLP, independent auditors, whose report thereon was
unqualified. This information should be read in conjunction with the financial
statements and notes thereto and auditors' report that appear in the Fund's
Annual Reports to Shareholders. The Annual Report to Shareholders for the year
ended December 31, 1997, is incorporated by reference into and, unless
previously provided, is delivered together with the Statement of Additional
Information dated May 1, 1998.
International Portfolio
<TABLE>
<CAPTION>
Period from
Year Year Year 10/3/94
ended 12/31/97 ended 12/31/96 ended 12/31/95 12/31/94
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $13.83 $12.55 $11.67 $12.00
------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) (0.02) (0.06) 0.05 0.01
Before Bennington expense subsidy (0.02) (0.06) 0.04 (0.35)
Realized and Unrealized Gain (Loss) on
Investments 1.54 1.80 0.83 (0.34)
---- ---- ---- -----
Total from Investment Operations 1.52 1.74 0.88 (0.33)
---- ---- ---- -----
Dividends from Net Investment Income 0.00 0.00 0.00 0.00
Capital Gains Distributions (0.50) (0.44) 0.00 0.00
Distributions in Excess of Capital Gains (0.02) (0.02) 0.00 0.00
Return of Capital Distributions 0.00 0.00 0.00 0.00
---- ---- ---- ----
Total Distributions (0.52) (0.46) 0.00 0.00
----- ----- ---- ----
Net Asset Value at End of Period $14.83 $13.83 $12.55 $11.67
====== ====== ====== ======
Total Return(2) 10.96% 13.78% 7.63% (2.75%)
Net Assets, End of Period (000 Omitted) $151,441 $73,019 $39,102 $7,566
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 1.55% 1.52% 1.83% 1.86%*
Before Bennington expense subsidy 1.55% 1.52% 1.93% 4.06%*
Ratio of Net Investment Income to Average
Net Assets
After Bennington expense subsidy(1) (0.20)% (0.26)% 0.10% 0.38%*
Before Bennington expense subsidy (0.20)% (0.26)% 0.00% (1.82%)*
Portfolio Turnover Rate(3) 196.66% 157.66% 84.85% 0.82%
Average commission rate paid(4) $0.0098 $0.0100
</TABLE>
- ----------
(1) Effective September 15, 1995, Bennington discontinued subsidizing Other
Expenses for the International Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "REDEMPTION OF PORTFOLIO SHARES."
(3) See discussion of portfolio turnover rates in "PORTFOLIO TRANSACTION
POLICIES."
(4) Represents the dollar amount of commissions paid on Portfolio
transactions divided by the total number of shares purchased and sold
for which commissions were charged. Disclosure not required for periods
prior to fiscal year 1996.
* Annualized.
-8-
<PAGE>
PORTFOLIO MANAGEMENT
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios. Bennington allocates the assets within a
Portfolio among any Money Managers selected. Bennington, in conjunction with the
Board of Directors, reviews Money Managers' performance. Bennington may add or
terminate a Money Manager at any time, subject to approval by the Board of
Directors and prompt notification of the applicable Portfolio's shareholders. A
separate Money Manager currently manages the assets of each Portfolio. See
"Money Manager Profiles" and "The Money Manager."
Although Bennington's activities are subject to general oversight by
the Board of Directors and the officers of the Fund, neither the Board nor the
officers evaluate the investment merits of Bennington's or any Money Manager's
individual security selections. The Board of Directors will review regularly the
Portfolios' performance compared to the applicable indices and also will review
the Portfolios' compliance with their investment objectives and policies. See
"General Management of the Portfolio."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as a
multi-managed, no load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. Each portfolio
issues two classes of shares, Advisor Class Shares and Investor Class Shares.
This Prospectus covers only the Advisor Class Shares of the four equity
Portfolios of the Fund. The Investor Class Shares of the four equity Portfolios
of the Fund as well as the Advisor Class Shares and Investor Class Shares of the
Fund's other four portfolios, which are designed for investment in fixed-income
securities, are intended to be offered through separate prospectuses. Each
Portfolio's assets are invested by Bennington and/or a Money Manager that has
been analyzed, evaluated and recommended by Bennington. Bennington also operates
and administers the Fund and monitors the performance of the Money Managers.
Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio, as defined in
the Investment Company Act. Other policies reflect current practices of the
Portfolios, and may be changed by the Portfolios without the approval of
shareholders. This section of the Prospectus describes each Portfolio's
investment objective, policies and restrictions. A more detailed discussion
appears in the Statement of Additional Information and includes a list of the
Portfolios' investment restrictions.
Under normal circumstances, each Portfolio will invest more than 80% of
its total assets in the types of securities identified in its statement of
objective as principal investments. Bennington will attempt to have each
Portfolio managed so that the Portfolio's investment performance equals or
exceeds the total return performance of a relevant index. See Appendix A for a
description of the current indices. Each Portfolio may have up to 20% of its
total assets invested in money market instruments to provide liquidity. If, in
the opinion of Bennington or a Money Manager, market or economic conditions
warrant, any Portfolio may adopt a temporary defensive strategy. In that event,
a Portfolio may hold assets as cash reserves without limit. See "Investment
Policies--Liquidity Reserves." There can be no assurance that the investment
objective for any Portfolio will be realized.
No Portfolio will invest in fixed-income securities, including
convertible securities, rated less than A by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in unrated securities
judged by Bennington or a Money Manager to be of a lesser credit quality than
those designations. The Portfolios will sell securities that they have purchased
in a prudent and orderly fashion when ratings drop below these minimum ratings.
See Appendix A in the Statement of Additional Information for a description of
securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity and
debt securities. No assurance can be given that the Portfolios will achieve
their investment objectives.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. See "Investment Policies--Risks of Investing
in Foreign Securities" and "--Special Risks of Investing in Foreign Securities
of Emerging Countries." Up to 20% of the net assets of the Domestic Equity
Portfolios and up to 100% of the net assets of the International Portfolio may
be held in securities denominated in one or more foreign currencies, which will
result in that Portfolio bearing the risk that those currencies may lose value
in relation to the U.S. dollar. Certain Portfolios also may be subject to
certain risks in using investment techniques and strategies such as entering
into forward currency contracts and repurchase agreements and trading futures
contracts and options on futures contracts. See "Description of the
Portfolios--Investment Policies." The use of options and futures transactions by
a Portfolio entails certain risks, including the risk that to the extent the
Money Manager's views as to certain market movements are incorrect, the use of
such instruments could result in losses greater than if they had not been used.
Such instruments may also force sales or purchases of portfolio securities at
inopportune times or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, limit the amount
the Portfolio could realize on its investments or cause the Portfolio to hold a
security it might otherwise sell. Also, when used for hedging existing
positions, the variable degree of correlation between price movements of futures
contracts and price movements in the related portfolio position of the Portfolio
could create the possibility that losses on the hedging instrument will be
greater than gains in the value of the Portfolio's position, thereby reducing
the Portfolio's net asset value. See "Description of the Portfolios--Investment
Policies" and "Investment Restrictions, Policies and Risk
Considerations--Investment Restrictions" in the Statement of Additional
Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Manager may increase a Portfolio's portfolio
turnover rate, realization of gains or losses, and brokerage commissions. High
portfolio turnover may involve correspondingly greater brokerage commissions and
transaction costs, which will be borne by the Portfolios and may result in
increased short-term capital gains which, when distributed to shareholders, are
treated as ordinary income. See "Portfolio Transaction Policies" and "Taxes."
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot be
changed without the approval of the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Statement of Additional
Information. The other investment policies and practices of each Portfolio,
unless otherwise noted, are not fundamental and may therefore be changed by a
vote of the Board of Directors without shareholder approval. For a more detailed
discussion regarding the benchmark indices, see Appendix A.
The GROWTH PORTFOLIO seeks capital growth through investing primarily
in equity securities with greater than average growth characteristics selected
from the S&P 500.
The Portfolio seeks to achieve this objective by investing principally
in common and preferred stocks, securities convertible into common stocks, and
rights and warrants of such issuers. The Money Manager will attempt to equal or
exceed the total return performance of the S&P/BARRA Growth Index over a market
cycle of five years by investing primarily in stocks of companies that are
expected to experience higher than average growth of earnings or growth of stock
price. Current income will not be a primary objective. Since the prices of
growth stocks tend to be more volatile and more sensitive to economic and market
swings than those of average stocks, Bennington expects that the Portfolio will
underperform the overall U.S. stock market during periods of general market
weakness, although this is not inconsistent with the goal of outperforming the
S&P/BARRA Growth Index over a market cycle. Under normal circumstances, up to
20% of the Portfolio's net assets may be invested in common stocks of foreign
issuers with large market capitalizations whose securities have greater than
average growth characteristics. The Portfolio may engage in various portfolio
strategies to reduce certain risks of its investments and may thereby enhance
income, but not for speculation. See "Investment Policies--Options" and
"--Futures Contracts."
The VALUE AND INCOME PORTFOLIO seeks generation of current income and
capital growth by investing primarily in income-producing equity securities
selected from the S&P 500.
The Portfolio seeks to achieve this objective by investing principally
in common and preferred stocks, convertible securities, and rights and warrants
of companies whose stocks have higher than average dividend yield relative to
other stocks of issuers in the same industry, or whose stocks have lower price
multiples (either price/earnings or price/book value) than others in their
industries, or which, in the opinion of the Money Manager, have improving
fundamentals (such as growth of earnings and dividends). The Money Manager will
attempt to equal or exceed the total return performance of the S&P/BARRA Value
Index over a market cycle of five years. Because the prices of value stocks tend
to be less volatile and less sensitive to economic and market swings than those
of average stocks, Bennington expects that the Value and Income Portfolio will
underperform the overall U.S. stock market during periods of general market
strength and will lose less value than the overall U.S. stock market during
times of general market decline, although this is not inconsistent with the goal
of outperforming the S&P/BARRA Value Index over a market cycle. Under normal
circumstances, up to 20% of the Portfolio's net assets may be invested in
income-producing equity securities of foreign issuers with large market
capitalizations. The Portfolio may engage in various portfolio strategies to
reduce certain risks of its investments and to enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures Contracts."
The SMALL TO MID CAP PORTFOLIO seeks capital growth through investing
primarily in equity securities of small to medium capitalization issuers.
Under normal market conditions, the Portfolio seeks to achieve this
objective by investing at least 65% of the value of its total assets in equity
securities of small and medium capitalization issuers. Small capitalization
issuers are issuers which have a capitalization of $1 billion or less at the
time of investment whereas medium capitalization issuers have a capitalization
ranging from $1 billion to $5 billion at the time of investment. The Portfolio
invests principally in common and preferred stocks, securities convertible into
common stocks, and rights and warrants of such issuers. The Money Manager will
attempt to equal or exceed the total return performance of the Wilshire 4500
Index over a market cycle of five years by investing primarily in stocks of
companies that are expected to experience higher than average growth of earnings
or growth of stock price. Current income will not be a primary objective. Since
the prices of small to medium capitalization growth stocks tend to be more
volatile and more sensitive to economic and market swings than those of stocks
comprising the S&P 500, Bennington expects that the Small to Mid Cap Portfolio
will underperform the S&P 500 during periods of general market weakness,
although this is not inconsistent with the goal of outperforming the Wilshire
4500 Index over a market cycle. Under normal circumstances, up to 20% of the
Portfolio's net assets may be invested in common stocks of foreign issuers with
small market capitalizations. The Portfolio may engage in various portfolio
strategies to reduce certain risks of its investments and may thereby enhance
income, but not for speculation. See "Investment Policies--Options" and
"--Futures Contracts."
The INTERNATIONAL EQUITY PORTFOLIO seeks capital growth by investing
primarily in equity securities of companies domiciled in countries other than
the United States and traded on foreign stock exchanges.
The Portfolio seeks to achieve this objective by investing at least 65%
of its total assets principally in equity securities issued by companies
domiciled in Europe (including Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden,
Switzerland and the United Kingdom) and the Pacific Rim (including Australia,
Hong Kong, Japan, Malaysia, New Zealand and Singapore). The Portfolio may also
invest in securities of countries generally considered to be emerging or
developing countries by the World Bank, the International Finance Corporation,
the United Nations or its authorities ("Emerging Countries"). The International
Portfolio considers an issuer to be located in an Emerging Country if (i) the
issuer derives 50% or more of its total revenues from either goods produced,
sales made or services performed in Emerging Countries or (ii) the issuer is
organized under the laws of, and has a principal office in, an Emerging Country.
See " Investment Policies--Special Risks of Investing in Foreign Securities of
Emerging Countries." The Portfolio intends to maintain investments in at least
three different countries outside the United States. The Portfolio will treat
securities issued by any one foreign government, its agencies and
instrumentalities as if they are securities having their principal business
activities in the same industry. The Portfolio will not purchase securities
issued by any one foreign government if as a result 25% or more of the
Portfolio's total assets would be invested in securities issued by that one
foreign government. The Portfolio may invest up to 20% of its net assets in
fixed-income securities, including instruments issued by foreign governments and
their agencies, and in securities of U.S. companies which derive, or are
expected to derive, a significant portion of their revenues from their foreign
operations. The Money Manager will attempt to equal or exceed the net yield
(after withholding taxes) of the Morgan Stanley Capital International ("MSCI")
EAFE(R) + EMF Index. See "The Money Managers--Benchmark Indices." The Portfolio
may invest in securities denominated in currencies other than U.S. dollars.
The securities markets of most countries the International Portfolio
can invest in have substantially less trading volume than the securities markets
of the United States and Japan, and the securities traded in those countries are
less liquid and more volatile than securities of comparable U.S. companies. As a
result, these markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is the case in the United States. In addition, these
securities markets generally are not as highly regulated as U.S. markets.
Consequently, there may be limited liquidity for certain securities and the
prices at which the Portfolio may acquire investments may be affected by the
trading of others on material non-public information. Some countries impose
substantial restrictions on investments in their capital markets by foreign
entities such as the Portfolio, but this is not anticipated to limit the Money
Manager's ability to make suitable investments for the Portfolio. See
"Investment Policies--Risks of Investing in Foreign Securities" and "--Special
Risks of Investing in Foreign Securities of Emerging Countries." The Portfolio
may use options on stocks and currencies, forward foreign currency exchange
contracts and financial futures contracts to reduce certain risks of its
investments and may thereby enhance income, but not for speculation. See
"Investment Policies--Forward Foreign Currency Exchange Contracts," "--Options"
and "--Futures Contracts."
Investment Policies
Liquidity Reserves. Each Portfolio is authorized to invest its cash
reserves (funds awaiting investment in the specific types of securities to be
acquired by a Portfolio or cash to provide for payment of the Portfolio's
expenses or to permit the Portfolio to meet redemption requests) in money market
instruments or in debt securities which are at least comparable in quality to
the Portfolio's permitted investments. Under normal circumstances, no more than
20% of a Portfolio's net assets will be comprised of these instruments. The
Portfolios also may enter into financial futures contracts in accordance with
their investment objectives to minimize the impact of cash balances. See
"General Management of the Portfolios" and "Investment Policies--Liquidity
Reserves" in the Statement of Additional Information.
Money Market Instruments. Each Portfolio may invest up to 20% of its
net assets in:
(i) Obligations (including certificates of deposit and
bankers' acceptances) maturing in 13 months or less of (a) banks
organized under the laws of the United States or any state thereof
(including foreign branches of such banks) or (b) U.S. branches of
foreign banks or (c) foreign banks and foreign branches thereof;
provided that such banks have, at the time of acquisition by the
Portfolio of such obligations, total assets of not less than $1 billion
or its equivalent. The term "certificates of deposit" includes both
Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not
a market. "Eurodollars" are dollars deposited in banks outside the
United States; the Portfolios may invest in Eurodollar instruments of
foreign and domestic banks; and
(ii) Commercial paper, variable amount demand master notes,
bills, notes and other obligations issued by a U.S. company, a foreign
company or a foreign government, its agencies or instrumentalities,
maturing in 13 months or less, denominated in U.S. dollars, and of
"eligible quality" as described below. If such obligations are
guaranteed or supported by a letter of credit issued by a bank, such
bank (including a foreign bank) must meet the requirements set forth in
paragraph (i) above. If such obligations are guaranteed or insured by
an insurance company or other non-bank entity, such insurance company
or other non-bank entity must represent a credit of high quality, as
determined by the Portfolio's Money Manager under the supervision of
Bennington and the Board of Directors.
"Eligible quality," for this purpose, means (i) a security rated (or
issued by an issuer that is rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security) in the highest short-term rating category (e.g.,
A-1/P-1) or one of the two highest long-term rating categories (e.g., AAA/Aaa or
AA/Aa) by at least two major rating agencies assigning a rating to the security
or issuer (or, if only one agency assigned a rating, that agency) or (ii) an
unrated security deemed of comparable quality by the Portfolio's Money Manager
or Bennington under the general supervision of the Board of Directors. The
purchase by the Portfolio of a security of eligible quality that is rated by
only one rating agency or is unrated must be approved or ratified by the Board
of Directors.
In selecting commercial paper and other corporate obligations for
investment by a Portfolio, the Money Manager also considers information
concerning the financial history and condition of the issuer and its revenue and
expense prospects. Bennington monitors, and the Board of Directors reviews on a
quarterly basis, the credit quality of securities purchased for the Portfolio.
If commercial paper or another corporate obligation held by a Portfolio is
assigned a lower rating or ceases to be rated, the Money Manager under the
supervision of Bennington and the Board of Directors will promptly reassess
whether that security presents minimal credit risks and whether the Portfolio
should continue to hold the security in its portfolio. If a portfolio security
no longer presents minimal credit risks or is in default, the Portfolio will
dispose of the security as soon as reasonably practicable unless Bennington and
the Board of Directors determine that to do so is not in the best interests of
the Portfolio and its shareholders. Variable amount demand master notes with
demand periods of greater than seven days will be deemed to be liquid only if
they are determined to be so in compliance with procedures approved by the Board
of Directors.
U.S. Government Securities. Each Portfolio may invest in United States
Treasury securities, including bills, notes, bonds and other debt securities
issued by the United States Treasury. These instruments are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and credit"
of the United States. They differ primarily in their interest rates, the lengths
of their maturities and their issue dates.
The Portfolios may invest in securities issued by agencies or
instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
Obligations of the Government National Mortgage Association ("GNMA"),
the Farmers Home Administration and the Export-Import Bank are backed by the
full faith and credit of the United States. Securities in which the Portfolios
may invest that are not backed by the full faith and credit of the United States
include obligations issued by (i) the Tennessee Valley Authority, the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service (each of these
issuers has the right to borrow from the United States Treasury to meet its
obligations) and (ii) the Federal Farm Credit Bank and the Federal Home Loan
Bank (each of these issuers may rely only on the individual credit of the
issuing agency to satisfy its obligations). No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the U.
S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a bank or broker-dealer that agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified time (ordinarily a week
or less). If the party agreeing to repurchase should default and if the value of
the securities held by the Portfolio should fall below the repurchase price, the
Portfolio could incur a loss. Subject to the limitation on investing no more
than 15% of a Portfolio's net assets in illiquid securities, no Portfolio will
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days. See "Investment
Policies--Illiquid Securities."
Repurchase agreements will at all times be fully collateralized by U.S.
Government obligations or other collateral in an amount at least equal to the
repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's Custodian, either
physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the other
party to the repurchase agreement becomes bankrupt or otherwise fails to deliver
the securities.
A Portfolio will enter into repurchase transactions only with parties
who meet creditworthiness standards approved by the Board of Directors.
Bennington or the Money Managers monitor the creditworthiness of such parties
under the general supervision of the Board of Directors. See "Investment
Policies--Repurchase Agreements" in the Statement of Additional Information.
Rights and Warrants. Each Portfolio may acquire up to 5% of its net
assets in rights and warrants in securities of issuers that meet each
Portfolio's investment objective and policies. See "Investment Restrictions" and
"Investment Policies--Rights and Warrants" in the Statement of Additional
Information.
Privately-Issued STRIP Securities. The Portfolios may invest up to 5%
of their net assets in privately-issued STRIP securities. See "Investment
Policies--Privately-Issued STRIP Securities" in the Statement of Additional
Information.
Reverse Repurchase Agreements. Each Portfolio's entry into reverse
repurchase agreements, together with its other borrowings, is limited to 5% of
its net assets. See "Investment Policies--Reverse Repurchase Agreements" in the
Statement of Additional Information.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio, pursuant to a securities lending agency agreement
between the lending agent and the Fund, may lend its portfolio securities to
brokers, dealers and financial institutions deemed creditworthy by Bennington
and the applicable lending agent. The outstanding loans may not exceed in the
aggregate the maximum amount of the value of the Portfolio's net assets allowed
by applicable law, currently 33- 1/3%. Such loans are callable at any time by
the Portfolio and are at all times secured by cash or U.S. Government
securities, irrevocable letters of credit or such other acceptable collateral
that is at least equal to the market value, determined daily, of the loaned
securities. The Portfolio will receive the collateral in an amount equal to at
least 102% (in the case of domestic securities) or 105% (in the case of foreign
securities) of the current market value of the loaned securities plus accrued
interest. Cash collateral received by the Portfolio will be invested in any
securities in which the Fund is authorized to invest. A loan may be terminated
by the borrower on one business day's notice or by the Portfolio at any time. As
with any extensions of credit, there are risks of delay in recovery and in some
cases loss of right in the collateral should the borrower of the securities fail
financially. The advantage of such loans is that the Portfolio continues to
receive interest and dividends on the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations. The risks of lending securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral or in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy as monitored by Bennington and the lending agent pursuant to
procedures approved by the Board of Directors. On termination of the loan, the
borrower is required to return the securities to the Portfolio, and any gain or
loss in the market price during the loan would be borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower. See "Investment Policies--Lending of Portfolio Securities" in the
Statement of Additional Information.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities. Securities which are illiquid include repurchase
agreements of more than seven days duration, securities which lack a readily
available market or have legal or contractual restrictions on resale, certain
interest only/principal only strips and over-the-counter ("OTC") options.
Restricted securities issued pursuant to Rule 144A under the Securities Act of
1933, as amended, that have a readily available market are not deemed illiquid
for purposes of this limitation, pursuant to liquidity procedures that have been
adopted by the Board of Directors. Investing in Rule 144A securities could
result in increasing the level of a Portfolio's illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. The International Portfolio will treat investments of the
International Portfolio that are subject to repatriation restrictions of more
than seven (7) days as illiquid securities. See "Investment Policies--Special
Risks of Investing in Foreign Securities of Emerging Countries--Political and
Economic Factors." Each Money Manager will monitor the liquidity of such
restricted securities under the supervision of Bennington and the Board of
Directors. See "Investment Policies--Illiquid Securities" in the Statement of
Additional Information.
Forward Foreign Currency Exchange Contracts. The International
Portfolio may enter into forward foreign currency exchange contracts for hedging
purposes. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market directly
between currency traders (typically large commercial banks) and their customers.
A forward contract generally has no deposit requirements and no commissions are
charged for such trades.
When the International Portfolio invests in foreign securities, it may
enter into forward foreign currency exchange contracts in several circumstances
to protect its value against a decline in exchange rates, or to protect against
a rise in exchange rates for securities it intends to purchase, but it will not
use such contracts for speculation. The International Portfolio may not use
forward contracts to generate income, although the use of such contracts may
incidentally generate income. There is no limitation on the value of forward
contracts into which the International Portfolio may enter. When effecting
forward foreign currency contracts, cash or liquid assets of the International
Portfolio of a dollar amount having an aggregate value, measured on a daily
basis, at least sufficient to make payment for the portfolio securities to be
purchased will be segregated on the International Portfolio's records at the
trade date and maintained until the transaction is settled.
Options. Each Portfolio may purchase put and call options and write
(sell) "covered" put and "covered" call options. The Domestic Equity Portfolios
may purchase and write options on stocks and stock indices. These options may be
traded on national securities exchanges or in the OTC market. Options on a stock
index are similar to options on stocks except that there is no transfer of a
security and settlement is in cash. The Domestic Equity Portfolios may write
covered put and call options to generate additional income through the receipt
of premiums, purchase put options in an effort to protect the value of a
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in the price of securities
it intends to purchase.
The International Portfolio may purchase and write options on
currencies. Currency options may be either listed on an exchange or traded OTC.
OTC options are privately negotiated with the counterparty to such contract and
are purchased from and sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Portfolios. If
the counterparty fails to take delivery of the securities underlying an option
it has written, the Portfolios must rely on the credit quality of the
counterparty. The staff of the SEC has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities subject to the 15% limitation described above in "Illiquid
Securities." Options on currencies are similar to options on stocks except that
there is no transfer of a security and settlement is in cash. The International
Portfolio may write covered put and call options on currencies to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a currency that it owns against a decline in
value and purchase call options in an effort to protect against an increase in
the price of currencies it intends to purchase. The currency options are traded
on national currency exchanges, the OTC market and by large international banks.
The International Portfolio may trade options on international stocks or
international stock indices in a manner similar to that described above.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's Custodian, cash, U.S.
Government securities or other liquid assets with an aggregate value, measured
on a daily basis, at least sufficient to meet its obligations under the call
option, or if the Portfolio owns an offsetting call option. When a Portfolio
writes a call option, it receives a premium and gives the purchaser the right to
buy the underlying security at any time during the call period, at a fixed
exercise price regardless of market price changes during the call period. If the
call is exercised, the Portfolio foregoes any gain from an increase in the
market price of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. A written put option is "covered"
if a Portfolio deposits with the Fund's Custodian, cash, U.S. Government
securities or other liquid assets with an aggregate value, measured on a daily
basis, at least equal to the exercise price of the put option.
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and the assets used as cover for written OTC
options. The SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities subject to
the 15% limitation described above in "Illiquid Securities." Furthermore, the
Portfolios will not purchase or write put or call options on securities, stock
index futures or financial futures if the aggregate premiums paid on all such
options exceed 20% of the Portfolio's total net assets, subject to the foregoing
limitations.
When a Portfolio writes either a put or call option, the Portfolio is
required to deposit an initial margin with the Fund's Custodian for the benefit
of the options broker. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its option commitment. When the Portfolio writes
options and an adverse price movement occurs, the Portfolio may be called upon
to deposit an additional or variation margin. Both the initial and additional or
variation margin must be made in cash or U.S. Government securities. The
required margin amount is subject to change by the appropriate exchange or
regulatory authority.
Futures Contracts. Each Portfolio is permitted to enter into financial
futures contracts, stock index futures contracts and related options ("futures
contracts") in accordance with its investment objective. The International
Portfolio also may purchase and write futures contracts on foreign currencies.
Futures contracts will be limited to hedging transactions to minimize the impact
of cash balances and for return enhancement and risk management purposes in
accordance with regulations of the Commodity Futures Trading Commission.
A "financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as United States Treasury bonds, notes
and bills, commercial paper, bank certificates of deposit, an agreed amount of
currencies, or the cash value of a financial instrument index at a specified
future date at a price agreed upon when the contract is made. Substantially all
futures contracts are closed out before settlement date or called for cash
settlement. A futures contract is closed out by buying or selling an identical
offsetting contract which cancels the original contract to make or take
delivery.
The Portfolios may purchase and write options on futures contracts as
an alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures contracts are similar to options on the security
upon which the futures contracts are written except that options on stock index
futures contracts give the purchaser the right to assume a position at a
specified price in a stock index futures contract at any time during the life of
the option.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's Custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its futures commitment. The initial margin amount is
subject to change by the appropriate exchange or regulatory authority. The
Portfolio will also be required to settle any gains or losses on a daily basis
in cash (variation margin). If the Portfolio is unable to meet an additional
margin requirement, the Portfolio may be forced to close out its position at a
price that may be detrimental to the Portfolio. When trading futures contracts,
a Portfolio will not commit more than 5% of the market value of its total assets
as initial margins. See "Investment Policies--Futures Contracts" in the
Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies.
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a
Portfolio would not be subject absent the use of these strategies. If the Money
Manager's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to
the Portfolio may leave the Portfolio in a worse position than if such
strategies were not used. Risks inherent in the use of options, foreign currency
and futures contracts and options on futures contracts include: (1) dependence
on the Money Manager's ability to predict correctly movements in the direction
of interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities being hedged; (3) the fact
that skills needed to use these strategies are different from those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; (5) the possible need to raise
additional initial margin; (6) in the case of futures, the need to meet daily
margin in cash; and (7) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences. See "Taxes" in the Statement of
Additional Information.
Risks of Investing in Foreign Securities. The Portfolios may invest in
foreign securities. Foreign securities involve certain risks. These risks
include political or economic instability in the country of the issuer, the
difficulty of predicting international trade patterns, the possibility of
imposition of exchange controls and the risk of currency fluctuations. Such
securities may be subject to greater fluctuations in price than securities
issued by U.S. corporations or issued or guaranteed by the U.S. Government, its
instrumentalities or agencies. Generally, outside the United States there is
less government regulation of securities exchanges, brokers and listed companies
and, with respect to certain foreign countries, there is a possibility of
expropriation, confiscatory taxation or diplomatic developments which could
affect investments within such countries.
In many instances, foreign debt securities may provide higher yields
than securities of domestic issuers which have similar maturities and quality.
However, under certain market conditions, these investments may be less liquid
than investments in the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
If a security is denominated in a foreign currency, such security will
be affected by changes in currency exchange rates and in exchange control
regulations, and costs will be incurred in connection with conversions between
currencies. A change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of the
Portfolio's securities denominated in that currency. Such changes also will
affect the Portfolio's income and distributions to shareholders. In addition,
although the Portfolio will receive income in such currencies, the Portfolio
will be required to compute and distribute its income in U.S. dollars.
Therefore, if the exchange rate for any such currency declines after the
Portfolio's income has been accrued and translated into U.S. dollars, the
Portfolio could be required to liquidate portfolio securities to make such
distributions, particularly when the amount of income the Portfolio is required
to distribute is not immediately reduced by the decline in such security.
Similarly, if an exchange rate declines between the time the Portfolio incurs
expenses in U.S. dollars and the time such expenses are paid, the amount of such
currency which must be converted into U.S. dollars to pay such expenses in U.S.
dollars will be greater than the equivalent amount in any such currency of such
expenses at the time they were incurred.
Special Risks of Investing in Foreign Securities of Emerging Countries.
Political and Economic Factors. Investing in Emerging Countries
involves potential risks relating to political and economic developments abroad.
Governments of many Emerging Countries have exercised and continue to exercise
substantial influence over many aspects of the private sector. Accordingly,
government actions in the future could have a significant effect on economic
conditions in Emerging Countries, which could affect the value of securities in
the Portfolios. The value of the investments made by the Portfolios will be
affected by commodity prices, inflation, interest rates, taxation, social
instability, and other political, economic or diplomatic developments in or
affecting the Emerging Countries in which the Portfolios have invested. In
addition, there is a possibility of expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, or other
similar developments which could affect investments in those countries. While
the Money Managers intend to manage the Portfolios in a manner that will
minimize the exposure to such risks, there can be no assurance that adverse
political changes will not cause the Portfolios to suffer a loss of interest or
principal on any of its holdings. The Portfolios will treat investments of the
Portfolios that are subject to repatriation restrictions of more than seven (7)
days as illiquid securities.
Foreign Exchange Risk. The value of non-U.S. dollar denominated
securities of issuers in Emerging Countries is affected by changes in currency
exchange rates or exchange control regulations. Foreign currency exchange rates
are determined by forces of supply and demand on the foreign exchange markets.
These forces are affected by the international balance of payments, economic and
financial conditions, government intervention, speculation and other factors.
Many of the currencies of Emerging Countries have experienced significant
devaluations relative to the U.S. dollar and major adjustments have been made in
certain of them at times.
Investing in Securities Markets of Emerging Countries. Certain of the
risks associated with investments generally are heightened for investments in
Emerging Countries. For example, securities markets in Emerging Countries may be
less liquid, more volatile and less subject to governmental regulation than U.S.
securities markets. There may be less publicly available information about
issuers in Emerging Countries than about domestic issuers. Emerging Country
issuers are not generally subject to accounting, auditing and financial
reporting standards comparable to those applicable to domestic issuers. Markets
in Emerging Countries also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Portfolios are uninvested and no
return is earned thereon. Inability to dispose of securities due to settlement
problems could result in losses to the Portfolios due to subsequent declines in
value of securities or, if the Portfolios have entered into a contract to sell
securities, could result in possible liability to the purchaser.
Certain Emerging Countries require prior governmental approval of
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company, limit the investment by foreign persons only to
a specific class of securities of a company that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain Emerging Countries
may also restrict investment opportunities in issuers in industries deemed
important to national interests.
Certain Emerging Countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
Emerging Country's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Portfolios
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Portfolios of any restrictions on investments.
Costs associated with transactions in securities of companies in
Emerging Countries are generally higher than costs associated with transactions
in U.S. securities. There are three basic components to such transaction costs,
which include brokerage fees, market impact costs (i.e., the increase or
decrease in market prices which may result when a Portfolio purchases or sells
thinly traded securities), and the difference between the bid-ask spread. Each
one of these components may be significantly more expensive in Emerging
Countries than in the U.S. or other developed markets because of less
competition among brokers, lower utilization of technology by exchanges and
brokers, the lack of derivative instruments and less liquid markets. In addition
to these transaction costs, the cost of maintaining custody of foreign
securities generally exceeds custodian costs for U.S. securities.
Throughout the last decade many Emerging Countries have experienced and
continue to experience high rates of inflation. In certain countries, inflation
has at times accelerated rapidly to hyperinflationary levels, creating a
negative interest rate environment and sharply eroding the value of outstanding
financial assets in those countries. See "Redemption of Portfolio Shares."
Investment Restrictions
Each Portfolio is subject to investment restrictions which, as
described in more detail in the Statement of Additional Information, have been
adopted by the Fund on behalf of the Portfolios as fundamental policies that
cannot be changed with respect to a Portfolio without the approval of the
holders of a majority of such Portfolio's outstanding voting securities, as
defined in the Investment Company Act. Among other restrictions, the Portfolios
will not purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result (i) with respect to 75% of a
Portfolio's total assets, more than 5% of a Portfolio's total assets would then
be invested in securities of a single issuer, or (ii) 25% or more of a
Portfolio's total assets would be invested in one or more issuers having their
principal business activities in the same industry. See "Investment
Restrictions, Policies and Risk Considerations--Investment Restrictions" in the
Statement of Additional Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally the
operation of the Fund, including reviewing and approving the Fund's service
contracts with Bennington and the Money Managers. The Fund's officers, all of
whom are employed by Bennington, are responsible for the day-to-day management
and administration of the Fund's operations. The Money Managers are responsible
for the selection of individual portfolio securities for the assets assigned to
them by Bennington.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, was organized
as a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. Bennington's general partners are
Northwest Advisors, Inc., Bennington Management Associates, Inc. and Bennington
Capital Management Investment Corp., all of which are Washington corporations.
The sole limited partner is Zions Investment Management, Inc., a wholly-owned
subsidiary of Zions First National Bank, N.A. Bennington Management Associates,
Inc., which is controlled by J. Anthony Whatley, III, is the managing general
partner of Bennington. Mr. Whatley, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. Ravindra
A. Deo, Vice President and Chief Investment Officer of Bennington, is primarily
responsible for the day-to-day management of the Portfolios through interaction
with each Portfolio's Money Manager and Mr. Deo is responsible for managing the
liquidity reserves of each Portfolio. Mr. Deo has served Bennington in such
capacity since January 1992. Prior thereto, he was Senior Vice President at
Leland O'Brien Rubenstein Associates Incorporated, an investment manager, where
he was employed from 1986 to 1991. See "Management of the Fund" in the
Statement of Additional Information.
Fund Manager Services and Fees. Pursuant to the Management Agreement
with the Fund, Bennington provides the following services: (i) provides or
oversees the provision of all general management, investment advisory and
portfolio management services for the Fund, including the transfer agent,
custodian, portfolio accounting and shareholder recordkeeping services for the
Fund; (ii) provides the Fund with office space, equipment and personnel
necessary to operate and administer the Fund's business; (iii) develops the
investment programs, selects Money Managers, allocates assets among Money
Managers, and monitors the Money Managers' investment programs and results; and
(iv) invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' other assets. For providing these services, Bennington is paid by
each Portfolio a fee equal on an annual basis to the following percentage of the
Portfolio's average daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
--------- -------------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Pursuant to the Transfer Agent Agreement effective December 1, 1995, as
amended February 19, 1998, between Bennington and the Fund, Bennington provides
transfer agent, registrar and dividend disbursing agent services as well as
certain other administrative, compliance and recordkeeping services to the Fund.
For providing these services, Bennington receives (i) a fee equal to 0.13% of
the average daily net assets of each Portfolio of the Fund, and (ii) a
transaction fee of $0.50 per transaction.
Bennington may, out of its own resources, provide marketing and
promotional support on behalf of the Portfolios. Services provided by Bennington
are in addition to, and not duplicative of, the services provided by Service
Organizations to their clients.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington
and Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, effective November 18, 1996, under which Fifth Third provides
certain portfolio accounting and other services, including maintenance of the
books and records of the Portfolios required under the Investment Company Act.
As compensation for these services, the Fund pays Fifth Third an annual fund
accounting and service fee (the "Fee ), to be calculated daily and paid monthly.
The annual Fee for each Portfolio shall be the greater of a monthly minimum or
an asset based fee, as follows:
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ------- ------------ ------------ ------------
Growth $1,500 0.03% 0.02% 0.01%
Value and Income $1,500 0.03% 0.02% 0.01%
Small to Mid Cap $1,500 0.03% 0.02% 0.01%
International Equity $3,000 0.04% 0.03% 0.02%
The Fund pays an additional annual Fee of $2,000 per Portfolio for
other administrative services rendered, to be charged monthly. For additional
Classes of shares the Fund will pay an annual charge of $7,000 per additional
Class of shares per Portfolio, also to be charged monthly. Finally, the Fund
reimburses Fifth Third for its out-of-pocket expenses incurred in performing its
services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage. The total
costs for these additional fees are borne by each Portfolio based on the
proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement on October
4, 1996, effective November 18, 1996, under which Fifth Third acts as Custodian
of the Portfolios' assets. As compensation for its services rendered, the Fund
pays Fifth Third an annual domestic custody fee of: .0025% of the average gross
assets and an annual global custody fee of .08% of the average gross assets,
exclusive of transaction charges. The total costs for the custodial fees are
borne by each Portfolio based on the proportionate net assets of each Portfolio.
Year 2000 Preparedness. The management and money management services
provided to the Fund by Bennington and the Money Managers and the services
provided by Fifth Third to the Fund, in part, depend on the reasonably
consistent operations of their computer systems. Many software programs and, to
a lesser extent, computer hardware in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. This
design flaw may a have negative impact on the handling of securities trades,
pricing and accounting services. Bennington and the Money Managers and Fifth
Third have been actively working on necessary changes to their computer systems
to deal with the year 2000 and reasonably believe that their systems will be
year 2000 compliant in time for that event.
Multi-Class Structure. The Fund has adopted a Rule 18f-3 Plan (the
"Multi-Class Plan") pursuant to Rule 18f-3 under the Investment Company Act.
Under the Multi-Class Plan, shares of each class of each Portfolio represent an
equal pro rata interest in such Portfolio and, generally, have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other. See "Multi-Class Structure" in the
Statement of Additional Information.
Distribution. Investment advisors, banks, insurance companies and other
entities that sell shares of the Fund may enter into a license agreement with
Bennington which permits them to use Bennington's proprietary asset allocation
software program, Alloset(R), pursuant to which such entities may recommend an
allocation of their clients' assets over a broad range of asset classes, which
may include the various portfolios of the Fund. The Alloset(R) Model was
developed by Bennington. Investment advisors, banks, insurance companies and
other licensed entities may charge a fee, not for providing access to the Fund,
but for providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive any
portion of such fees and has no control over whether and in what amount such
fees are charged. Investors also may purchase shares of the Fund directly if
they do not wish to use any of the above services, in which case no service fees
or additional fees, beyond those borne by the shareholders of the Fund
generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R). Using
Alloset(R), assets may be allocated among the Fund's portfolios in a manner
intended to achieve the investment objectives and desired investment returns of
such entities' clients based upon the individual client's situation and
tolerance for risk and desire for return on investment. There can be no
assurance that the allocation recommended by the entities that use
Alloset(R)will meet any of the clients' investment objectives. T he Money
Managers engaged by the Fund do not use Alloset(R)in investing any of the
Portfolio's assets under management.
THE MONEY MANAGERS
Bennington is responsible for evaluating, selecting, and recommending
Money Managers needed to manage all or part of the assets of the Portfolios of
the Fund. Bennington is also responsible for allocating the assets within a
Portfolio among any Money Managers selected. Such allocation is reflected in the
Money Manager Agreement among the Fund, Bennington and any Money Manager, and
can be changed at any time by Bennington. The Board of Directors reviews and
approves selections of Money Managers and allocations of assets among any Money
Managers. Money Managers may be added or terminated by Bennington subject to the
approval of the Board of Directors of the Fund and appropriate notice to the
shareholders of the applicable Portfolio, as discussed below.
Money Managers are selected based on such factors as their experience,
the continuity of their portfolio management team, their security selection
process, the consistency and rigor with which they apply that process and their
demonstrated ability to add value to investment decisions. Short-term investment
performance is not a controlling factor in selecting or terminating Money
Managers. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance. A separate Money Manager currently manages the assets of
each Portfolio. See "Money Manager Profiles."
The Fund was issued an exemptive order by the SEC on September 4, 1996
for an exemption (the "Exemption") from certain provisions of the Investment
Company Act, which would otherwise require Bennington to obtain formal
shareholder approval prior to engaging and entering into money manager
agreements with Money Managers. The relief is based on the conditions set forth
in the Exemption that, among other things: (1) Bennington will select, monitor,
evaluate and allocate assets to the Money Managers and oversee Money Managers
compliance with the relevant Portfolio's investment objective, policies and
restrictions; (2) before a Portfolio may rely on the Exemption, the Exemption
must be approved by the shareholders of the Portfolios operating under the
Exemption; (3) the Fund will provide to shareholders certain information about a
new Money Manager and its money manager agreement within 60 days of the
engagement of a new Money Manager; (4) the Fund will disclose in this Prospectus
the existence, substance and effect of the Exemption; and (5) the Directors,
including a majority of the "non-interested" Directors, must approve each money
manager agreement in the manner required under the Investment Company Act. Any
changes to the Management Agreement between the Fund and Bennington would still
require shareholder approval. As required by the Exemption, the shareholders of
each Portfolio determined, at a shareholders' meeting held on August 15, 1995,
to permit the Fund to replace or add Money Managers and to enter into money
manager agreements with Money Managers upon approval of the Board of Directors
but without formal shareholder approval.
Neither the Board of Directors nor the officers evaluate the investment
merits of any Money Manager's individual security selections. However, the Board
of Directors will review regularly each Portfolio's performance compared to the
applicable indices and also will review each Portfolio's compliance with its
investment objective and policies.
Money Manager Fees. The Money Manager fee of a Portfolio is paid to the
Money Manager of a Portfolio pursuant to a Money Manager Agreement among the
Fund, Bennington and the respective Money Manager. See the Statement of
Additional Information for a more detailed description of the Money Manager
Agreements. The Money Manager fee is based on the assets of the Portfolio and on
the number of complete calendar quarters of management by the Money Manager on
the portion of the assets of its respective Portfolio managed by it (the
"Account"). The fee structure for the Money Manager fee paid to the Money
Managers of the Growth, Value and Income and International Portfolios differs
from that paid to the Money Manager for the Small to Mid Cap Portfolio, as
described below.
Money Manager Fees - Growth Portfolio, Value and Income Portfolio and
International Portfolio. The Money Manager fee for each Money Manager has two
components during the first five calendar quarters, the basic fee (the "Basic
Fee") and the portfolio management fee (the "Portfolio Management Fee") for the
Growth, Value and Income and International Equity Portfolios. The Money Manager
for the Growth Portfolio has not completed five complete calendars and will
receive a Basic Fee of 0.10% and a Portfolio Management Fee of 0.10%. The Money
Managers for the Value and Income and International Equity Portfolios, have
completed the first five calendar quarters of management of their respective
Accounts. If at any time a Money Manager should be replaced, the new Money
Manager for the applicable Portfolio will receive the fee set forth in the table
"Money Manager Fee Schedule For a Manager's First Five Calendar Quarters of
Management" during the first five calendar quarters of such new Money Manager's
management of the relevant Portfolio. See "Money Manager Fees--Money Manager Fee
Schedule For a Manager's First Five Calendar Quarters of Management" in the
Statement of Additional Information for a complete description of the schedule
for the first five calendar quarters.
Commencing with the sixth calendar quarter of management by a Money
Manager of the Growth Portfolio, Value and Income Portfolio and International
Equity Portfolio, such Portfolio will pay its Money Manager based on the "Money
Manager Fee Schedule For A Manager From the Sixth Calendar Quarter of Management
Forward." The Money Manager Fee commencing with the sixth quarter consists of
two components, the Basic Fee and the performance fee (the "Performance Fee"),
which varies with a Portfolio's performance.
MONEY MANAGER FEE SCHEDULE FOR A MANAGER FROM THE
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Growth and 0.10% greater than or equal to 2.00% 0.22%
Value and Income greater than or equal to 1.00% and less than 2.00% 0.20%
greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
International 0.20% greater than or equal to 4.00% 0.40%
greater than or equal to 2.00% and less than 4.00% 0.30%
greater than or equal to 0.00% and less than 2.00% 0.20%
greater than or equal to -2.00% and less than 0.00% 0.10%
less than -2.00% 0%
</TABLE>
The Performance Fee component will be adjusted each quarter and paid quarterly
based on the annualized investment performance of each Money Manager relative to
the annualized investment performance of the Benchmark Indices set forth below.
A description of each Benchmark Index is contained in Appendix A. A change in a
Benchmark Index may be effected with the approval of only the Board of Directors
and does not require the approval of shareholders. As long as the Growth or
Value and Income Portfolio's performance either exceeds its Benchmark Index, or
trails its Benchmark Index by no more than .50%, a Performance Fee will be paid
to the Money Manager. As long as the International Portfolio's performance
either exceeds its Benchmark Index, or trails its Benchmark Index by no more
than 2%, a Performance Fee will be paid to the Money Manager. A Money Manager's
performance is measured on the Account.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Growth S&P/BARRA Growth Index
Value and Income S&P/BARRA Value Index
International Morgan Stanley Capital International EAFE(R) + EMF Index
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable Benchmark
Index is recalculated at the end of each calendar quarter based on the Money
Manager's performance during all calendar quarters since commencement of
investment operations except that of the immediately preceding quarter.
Commencing with the 14th calendar quarter of investment operations, the Money
Manager's average annual performance differential will be recalculated based on
the Money Manager's performance during the preceding 12 calendar quarters (other
than the immediately preceding quarter) on a rolling basis. A Money Manager's
performance will be calculated by Bennington in the same manner in which the
total return performance of the Portfolio's index is calculated, which is not
the same method used for calculating the Portfolios' performance for advertising
purposes as described under "Calculation of Portfolio Performance." See Appendix
B to the Statement of Additional Information for a discussion of how performance
fees are calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
example, currently if a Benchmark Index has an average annual performance of
10%, the Growth or Value and Income Portfolio Account's average annual
performance would have to be equal to or greater than 12% for the Money Manager
to receive an annual Performance Fee of 0.22% (i.e., the difference in
performance between the Account and the index must be equal to or greater than
2% for the Portfolios' Money Managers to receive the maximum Performance Fee.)
Because the maximum Performance Fee for the Growth and Value and Income
Portfolios applies whenever a Money Manager's performance exceeds the index by
2.00% or more, the Money Managers for those Portfolios could receive a maximum
Performance Fee even if the performance of the Account is negative. Also,
because the maximum Performance Fee for the International Portfolio applies
whenever a Money Manager s performance exceeds the index by 4.00% or more, the
Money Manager for the International Portfolio could receive a maximum
Performance Fee even if the performance of the Account is negative. A more
detailed description of the operation of each Performance Fee is contained in
Appendix B to the Statement of Additional Information.
The Money Managers have agreed to the foregoing fees, which are
generally lower than they charge to institutional accounts for which they serve
as investment adviser and perform all administrative functions associated with
serving in that capacity. These lower fees are in recognition of the reduced
administrative and client service responsibilities the Money Managers have
undertaken with respect to the Portfolios.
The combined fees payable to Bennington and the Money Manager for the
International Portfolio may at times be higher than those paid by other mutual
funds. The Board of Directors believes that the fees payable by International
Portfolio are appropriate, in light of its investment objective and policies and
the nature of the securities in which it invests. The following table lists the
fees earned by the Money Managers of the Portfolios for the current period.
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
For Growth, Value and Income and International Portfolio
Number of Portfolio
Quarters Management Performance
Managed by Basic Fee Fee Fee
Money (All (1st 5 (6th Quarter Total
Portfolio Manager Period Quarters) Quarters) Forward) Fee
- --------- ------- ------ --------- --------- -------- ---
State
Growth* Street/ 3rd Quarter 1997 0.10% N/A 0% 0.10%
Geewax 3rd Quarter 1997 0.10% 0.10% N/A 0.20%
2 4th Quarter 1997 0.10% 0.10% 0% 0.20%
3 1st Quarter 1998 0.10% 0.10% 0% 0.20%
4 2nd Quarter 1998 0.10% 0.10% 0% 0.20%
Value 20 3rd Quarter 1997 0.10% N/A 0.20% 0.30%
and Income 21 4th Quarter 1997 0.10% N/A 0.22% 0.32%
22 1st Quarter 1998 0.10% N/A 0.22% 0.32%
23 2nd Quarter 1998 0.10% N/A 0.22% 0.32%
International 11 3rd Quarter 1997 0.20% N/A 0.40% 0.60%
12 4th Quarter 1997 0.20% N/A 0.40% 0.60%
13 1st Quarter 1998 0.20% N/A 0.40% 0.60%
14 2nd Quarter 1998 0.20% N/A 0.40% 0.60%
- ----------
* State Street Bank and Trust Company was the Money Manager of the Growth
Portfolio from inception through July 20, 1997, and was entitled to
earn a Performance Fee, but did not. Effective July 21, 1997, Geewax,
Terker & Co. became the Money Manager, and has not completed the first
five calendar quarters of investment operations.
Money Manager Fees - Small to Mid Cap Portfolio. For the period May 1,
1998 through June 30, 1998, the Money Manager fee for the Money Manager of the
Small to Mid Cap Portfolio has two components, the basic fee (the "Basic Fee")
and the performance fee (the "Performance Fee"). The Basic Fee is 0.10% and the
Performance Fee is 0.22%. The Money Manager for the Small to Mid Cap Portfolio
has completed over five calendar quarters of management of its Account and is
being paid a Performance Fee under the following structure:
MONEY MANAGER FEE SCHEDULE FOR Small to Mid Cap
Portfolio For the Period from May 1, 1998 through
June 30, 1998
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Small to Mid Cap 0.10% greater than or equal to 2.00% 0.22%
greater than or equal to 1.00% and less than 2.00% 0.20%
greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
</TABLE>
The Performance Fee component is adjusted each quarter and paid quarterly based
on the annualized investment performance of the Money Manager relative to the
annualized investment performance of the Wilshire 4500 Index, the Benchmark
Index for the Small to Mid Cap Portfolio. A description of Benchmark Index is
contained in Appendix A. A change in an index may be effected with the approval
of only the Board of Directors and does not require the approval of
shareholders. As long as the Small to Mid Cap Portfolio's performance either
exceeds the Benchmark Index, or trails the Benchmark Index by no more than .50%,
a Performance Fee will be paid to the Money Manager.
Beginning July 1, 1998, the new Money Manager Agreement among the Fund,
Bennington and the Money Manager for the Small to Mid Cap Portfolio has a
different fee structure. See "Money Managers" in the Statement of Additional
Information for a description of the "Money Manager Fees--Money Manager Fee
Schedule For a Manager's First Five Calendar Quarters of Management". The Money
Manager of the Small to Mid Cap Portfolio has completed five calendar quarters
of management. From July 1, 1998, the Money Manager Fee schedule from the sixth
calendar quarter of management forward will be as follows:
MONEY MANAGER FEE SCHEDULE FOR
Small to Mid Cap Portfolio from July 1, 1998, for
THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average annualized Annualized
performance differential vs. the Benchmark Index Money Manager 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 Money Manager Fee will be adjusted each quarter and paid quarterly based on
the annualized investment performance of the Small to Mid Cap Money Manager
relative to the annualized investment performance of the Benchmark Index as
described above. As long as the Small to Mid Cap Portfolio's performance either
exceeds its Benchmark Index, or trails its Benchmark Index by no more than
1.50%, a Money Manager Fee will be paid to the Money Manager. The Money
Manager's performance is measured on the Account.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
the Small to Mid Cap Portfolio, if the Benchmark Index has an average annual
performance of 10%, the Account's average annual performance would have to be
equal to or greater than 13% for the Money Manager to receive an annual Money
Manager Fee of 0.42% (i.e., the difference in performance between the Account
and the index must be equal to or greater than 3.00% for the Money Manager to
receive the maximum Money Manager Fee). Because the maximum Money Manager Fee
for the Small to Mid Cap Portfolio applies whenever its Money Manager's
performance exceeds its Benchmark Index by 3.00% or more, the Small to Mid Cap
Portfolio Money Manager could receive the maximum Money Manager 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%, the Small
to Mid Cap Portfolio Money Manager would earn the maximum incentive fee.
The combined fees payable to Bennington and the Money Manager for the
Small to Mid Cap Portfolio may at times be higher than those paid by other
mutual funds. The Board of Directors believes that the fees payable by the Small
to Mid Cap Portfolio are appropriate, in light of its investment objective and
policies and the nature of the securities in which it invests. The following
table lists the fees earned by the Money Manager of the Portfolio for the
current period.
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
For Small to Mid Cap Portfolio
------------------------------
Number of Portfolio
Quarters Management Performance
Managed by Basic Fee Fee Fee
Money (All (1st 5 (6th Quarter Total
Portfolio Manager Period Quarters) Quarters) Forward) Fee
- --------- ------- ------ --------- --------- -------- ---
Small to Mid 8 3rd Quarter 1997 0.10% N/A 0.22% 0.32%
Cap
9 4th Quarter 1997 0.10% N/A 0.22% 0.32%
10 1st Quarter 1998 0.10% N/A 0.22% 0.32%
11 2nd Quarter 1998 0.10% N/A 0.22% 0.32%
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those
expressly assumed by Bennington, including, without limitation, Directors' fees
and fees for auditing, legal, custodian and shareholder services. All general
expenses of the Portfolios are allocated among and charged to the assets of the
respective Portfolios and between the classes of each Portfolio on a basis that
the Directors deem fair and equitable, which may be based on the relative net
assets of each Portfolio and class of shares, or the nature of the services
performed and relative applicability to each Portfolio and class of shares.
Class-specific expenses include certain distribution, administrative and service
fees payable with respect to the Investor Class Shares as described in the
Fund's distribution, shareholder service and administrative plans on behalf of
the Investor Class Shares. See "Multi-Class Structure" in the Statement of
Additional Information. Class-specific expenses may include certain other
expenses as permitted by the Fund's Multi-Class Plan adopted pursuant to Rule
18f-3 under the Investment Company Act and subject to review and approval by the
Directors. See "FINANCIAL HIGHLIGHTS" or the Annual Report for the period ended
December 31, 1997 for the Advisor Class Shares, for expense information related
to the Fund's most recently completed fiscal year. The Board of Directors has
determined that it is appropriate to allocate certain expenses attributable to
more than one Portfolio among the Portfolios affected based on their relative
net assets. See "General Management of the Portfolios."
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers for
the assets assigned to them and by Bennington for assets not assigned to a Money
Manager. Currently, each Portfolio has one Money Manager. Bennington invests the
Portfolios' liquidity reserves and all or any portion of the Portfolios' assets
not assigned to a Money Manager.
Each Money Manager, or Bennington, as applicable, makes decisions to
buy or sell securities independently from other Money Managers. Thus, if there
is more than one Money Manager for a Portfolio, one Money Manager could be
selling a security when another Money Manager for the same Portfolio is
purchasing the same security. In addition, when a Money Manager's services are
terminated and another retained, the new Money Manager may significantly
restructure the Portfolio. These practices may increase the Portfolios'
portfolio turnover rates, realization of gains or losses, and brokerage
commissions. The portfolio turnover rates for the Portfolios may vary greatly
from year to year as well as within a year and may be affected by sales of
investments necessary to meet cash requirements for redemptions of shares.
Historical portfolio turnover rates for the Portfolios are listed under
"Financial Highlights." It is expected that the annual portfolio turnover rate
for each Portfolio, under normal market conditions, will not exceed 100%. These
rates should not be considered as limiting factors. A high rate of turnover
involves correspondingly greater expenses, increased brokerage commissions and
other transaction costs, which must be borne by the Portfolios and their
shareholders. See "Investment Advisory and Other Services--Portfolio Transaction
Policies" in the Statement of Additional Information. In addition, high
portfolio turnover may result in increased short-term capital gains, which, when
distributed to shareholders, are treated as ordinary income. See "Taxes."
Each Portfolio may effect portfolio transactions with or through
affiliates of the Fund, Bennington or any Money Manager or its affiliates, when
Bennington or the Money Manager, as appropriate, determines that the Portfolio
will receive the best net price and execution. This standard would allow
affiliates of Bennington and the Money Managers to receive no more than the
remuneration that would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to declare
dividends from net investment income for payment on the following schedule:
Portfolio Declared Payable
- --------- -------- -------
Growth Quarterly, on last 1st business day
Value and Income business day of following end of
Small to Mid Cap quarter calendar quarter
International Annually, 2nd to last Last business day of
business day of calendar calendar year
year
The Portfolios determine net investment income immediately prior to the
determination of a Portfolio's net asset value on the dividend declaration day.
The income will be credited to the shareholders of record prior to the net asset
value calculation and paid on the next business day.
Capital Gains Distribution. The Board of Directors intends to declare
distributions from net capital gains annually, generally in mid-December. In
addition, in order to satisfy certain distribution requirements, a Portfolio may
declare special year-end dividend and capital gains distributions during
October, November or December. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on December 31 of the prior year.
Automatic Reinvestment. All dividends and distributions will be
automatically reinvested, at the net asset value per share at the close of
business on the record date, in additional shares of the same class of the
Portfolio paying the dividend or making the distribution unless a shareholder
elects to have dividends or distributions paid in cash. Shareholders may elect
to invest dividends and/or distributions paid by any portfolio in shares of the
same class of any other portfolio of the Fund at net asset value. The
shareholder must have an account existing in the portfolio selected and must
elect this option on the Account Application or on a form provided for that
purpose. For further information on this option, contact your broker or call
Bennington at (800) 759-3504. Any election may be changed by electronic
instruction if received by Bennington no later than the close of the New York
Stock Exchange, normally 4:00 p.m. Eastern time on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for federal
income tax purposes and shareholders of each Portfolio will be entitled to the
amount of net investment income and net realized capital gains (if any) earned
by their Portfolio. The Board of Directors intends to distribute each year
substantially all of each Portfolio's net investment income and net realized
capital gains (if any), thereby eliminating virtually all federal income taxes
to each Portfolio (but not to its investors). The Portfolios may be subject to
nominal, if any, state and local taxes.
Dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholders, whether or not reinvested, and paid in cash or in additional
shares. Capital gain distributions declared by the Board of Directors and
distributed to the shareholders are taxed as long-term capital gains regardless
of the length of time a shareholder has held such shares. Recent legislation
reduced the maximum tax rate on capital gains to 20% for assets held by
individuals for more than 18 months on the date of the sale or exchange of those
assets (a maximum rate of 28% applies if the assets were held for more than one
year and up to 18 months). A notice issued by the Internal Revenue Service
provides that regulated investment companies such as the Portfolios may, but are
not required to, designate which portion of a capital gain distribution
qualifies for the reduced capital gain rate. Dividends and distributions may
otherwise also be subject to state or local taxes. Shareholders should be aware
that any loss realized upon the sale, exchange or redemption of shares held for
six months or less will be treated as a long-term capital loss to the extent any
capital gain dividends have been paid with respect to such shares.
The International Portfolio will receive dividends and interest paid by
non-U.S. issuers which will frequently be subject to withholding taxes by
non-U.S. governments. Bennington expects that at the end of each taxable year
the International Portfolio will hold more than 50% of the value of its total
assets in non-U.S. securities and will file specified elections with the
Internal Revenue Service which will permit its shareholders either to deduct
such foreign taxes in computing taxable income, or to use these withheld foreign
taxes as credits against U.S. income taxes. If the International Portfolio
elects to "pass-through" the foreign taxes, shareholders will be required to:
(i) include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign income taxes paid by the International
Portfolio; and (ii) treat their pro rata share of foreign income taxes as paid
by them. However, shareholders who have held their shares in the International
Portfolio for 16 days or more during the 30 day period beginning 15 days before
shares in the International Portfolio become ex-dividend may be able to treat
their pro rata share of foreign taxes as either an itemized deduction or a
foreign tax credit against U.S. income taxes (but not both) on their federal
income tax return.
The sale of shares of a Portfolio is a taxable event and may result in
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series or portfolios of a mutual fund). Any gain or loss realized upon a sale,
exchange or redemption of shares of a Portfolio by a shareholder who is not a
dealer in securities will be treated generally as long-term capital gain or loss
taxable at a maximum rate of 20% if the shares in the Portfolio were held for
more than 18 months, "mid-term" capital gain taxable at a rate of 28% if the
shares were held for more than one year and up to 18 months and otherwise as
short-term capital gain or loss. Any such loss, however, on shares that are held
for six months or less will be treated as long-term capital loss to the extent
of any capital gain distributions received by the shareholder.
However, all or a portion of this capital gain will be recharacterized
as ordinary income if the shareholder enters into a "conversion transaction." A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction and certain other criteria are satisfied. A
conversion transaction also includes a transaction which is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected return
from the transaction is "attributable to the time value of the taxpayer's net
investment in such transaction." The Secretary of the Treasury also is
authorized to promulgate regulations (which would apply only after they are
issued) which specify other transactions to be included in the definition of a
conversion transaction. Section 1258 of the Internal Revenue Code of 1986, as
amended (the "Code") contains many ambiguities and its scope is unclear; it may
be clarified or refined in future regulations or other official pronouncements.
Until further guidance is issued, it is unclear whether a purchase and
subsequent disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own tax
advisors concerning whether or not Section 1258 may apply to their transactions
in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will be
treated as long-term or mid-term capital gains or losses if the securities have
been held by it for more than 18 months or one year, respectively, except in
certain cases where the Portfolio acquires a put or writes a call thereon or the
transaction is treated as a "conversion transaction." Other gains or losses on
the sale of securities generally will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as "Section 1256 contracts" defined
below). If an option written by a Portfolio on securities lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will generally realize a capital
gain or loss. If securities are sold by the Portfolio pursuant to the exercise
of a call option written by it, the Portfolio will include the premium received
in the sale proceeds of the securities delivered in determining the amount of
gain or loss on the sale. Certain of the Portfolios' transactions may be subject
to wash sale and short sale provisions of the Code. In addition, debt securities
acquired by the Portfolios may be subject to original issue discount and market
discount rules.
Under the Code, special rules apply to the treatment of certain options
and future contracts (Section 1256 contracts). At the end of each year, such
investments held by the Portfolio will be required to be "marked to market" for
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales" and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Shareholders of the appropriate Portfolios will be notified after each
calendar year of the amounts of ordinary income and long-term capital gains
distributions, including any amounts which are deemed paid on December 31 of the
prior year; of the dividends which qualify for the 70% dividends-received
deduction available to corporations and of the foreign taxes withheld and
foreign source income per country of the International Portfolio.
Under United States Treasury Regulations, a Portfolio currently is
required to withhold and remit to the United States Treasury 31% of all taxable
dividends, distributions and redemption proceeds payable to any non-corporate
shareholder which does not provide the Fund with the shareholder's taxpayer
identification number on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) or required certification or which is subject to backup
withholding.
The tax discussion set forth above is included for general information
only and is based upon the current law as of the date of this Prospectus.
Shareholders are urged to consult their tax advisers for further information
regarding the federal, state and local tax consequences of an investment in the
shares of the Fund. See "Taxes" in the Statement of Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time the Fund may make available certain information about
the performance of the Advisor Class Shares of some or all of the Portfolios.
Information about a Portfolio's performance is based on that Portfolio's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance. From time to time, the yield and total return for each class of
shares of the Portfolios may be included in advertisements or reports to
shareholders or prospective investors. Quotations of yield for a Portfolio or
class will be based on the investment income per share (as defined by the SEC)
during a particular 30-day (or one-month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
The total return of Advisor Class Shares of all Portfolios may be
included in advertisements or other written material. When a Portfolio's total
return is advertised with respect to its Advisor Class Shares, it will be
calculated for the past year, the past five years, and the past ten years (or if
the Portfolio has been offered for a period shorter than one, five or ten years,
that period will be substituted) since the establishment of the Portfolio. Any
fees charged by Service Organizations directly to their customers in connection
with investments in the Advisor Class Shares of the Portfolios are not reflected
in the Portfolio's total return and such fees, if charged, will reduce the
actual return received by customers on their investment.
From time to time, the Portfolios may advertise their performance in
terms of average annual total return, which is computed by finding the average
annual compounded rates of return over a period that would equate the initial
amount invested to the ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested on the reinvestment dates during the
relevant time period and accounts for all recurring fees. The Portfolios may
also include in advertisements data comparing performance with the performance
of non-related investment media, published editorial comments and performance
rankings compiled by independent organizations (such as Lipper Analytical
Services, Inc. or Morningstar, Inc.) or entities or organizations which track
the performance of investment companies or investment advisers and publications
that monitor the performance of mutual funds (such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, Inc., Mutual Fund Magazine, Smart Money and
The Wall Street Journal). Performance information may be quoted numerically or
may be presented in a table, graph or other illustration. In addition, Portfolio
performance may be compared to well-known unmanaged indices of market
performance or other appropriate indices of investment securities or with data
developed by the Fund or Bennington derived from such indices. Unmanaged indices
(i.e., other than Lipper) generally do not reflect deductions for administrative
and management costs and expenses. Portfolio performance may also be compared,
on a relative basis, to other Portfolios of the Fund. This relative comparison,
which may be based upon historical or expected Portfolio performance, may be
presented numerically, graphically or in text. Portfolio performance may also be
combined or blended with other Portfolios of the Fund, and that combined or
blended performance may be compared to the same Benchmark Indices to which
individual Portfolios are compared. In addition, the Fund may from time to time
compare the expense ratio of its Advisor Class Shares to that of investment
companies with similar objectives and policies, based on data generated by
Lipper or similar investment services that monitor mutual funds.
In reports or other communications to investors or in advertising, the
Fund may discuss relevant economic and market conditions affecting the Fund. In
addition, the Fund, Bennington and the Money Managers may render updates of Fund
investment activity, which may include, among other things, discussion or
quantitative statistical or comparative analysis of portfolio composition and
significant portfolio holdings including analysis of holdings by sector,
industry, country or geographic region, credit quality and other
characteristics. The Fund may also describe the general biography, work
experience and/or investment philosophy or style of the Money Managers of the
Fund and may include quotations attributable to the Money Managers describing
approaches taken in managing the Fund's investments, research methodology
underlying stock selection or the Fund's investment objectives. The Fund may
also discuss measures of risk, including those based on statistical or
econometric analyses, the continuum of risk and return relating to different
investments and the potential impact of foreign stocks on a portfolio otherwise
composed of domestic securities.
Any performance information related to the Portfolios, should be
considered in light of the Portfolios' investment objectives and policies,
characteristics and quality of the portfolio, and the market conditions during
the time period indicated. It is important to note that total return figures are
based on historical earnings and are not intended to indicate future
performance. The value of Fund shares when redeemed may be more or less than
their original cost. The Statement of Additional Information describes the
method used to determine a Portfolio's total return. In reports or other
communications to shareholders or in advertising material, a Portfolio may quote
total return figures that do not reflect recurring fees (provided that these
figures are accompanied by standardized total return figures calculated as
described above), as well as compare its performance with that of other mutual
funds as listed in the rankings prepared by Morningstar, Inc. or similar
independent services that monitor the performance of mutual funds or with other
appropriate indices of investment securities or other industry publications.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share of each class
of the Portfolios is calculated on each business day on which shares are offered
or orders to redeem are tendered by dividing the value of the Portfolio's net
assets represented by such class (i.e., the value of its assets less
liabilities) by the total number of shares of such class outstanding. See
"Valuation of Portfolio Shares" in the Statement of Additional Information. A
business day is one on which the New York Stock Exchange, Fifth Third and
Bennington are open for business. Non-business days in 1998 will be: New Year's
Day, Presidents' Day, Martin Luther King Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day. Net
asset value per share is computed for a Portfolio by dividing the current value
of the Portfolio's assets and other assets attributable to that class, less its
liabilities, by the number of shares of the class of the Portfolio outstanding,
and rounding to the nearest cent. All Portfolios determine net asset value as of
the close of the New York Stock Exchange, normally 4:00 p.m. Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below, the
Portfolios value portfolio securities at "fair market value." This generally
means that equity securities and fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of the
last sale price or, lacking any sales, at the closing bid price on the exchange
on which the security is primarily traded. United States equity and fixed-income
securities traded principally OTC, options and futures contracts are valued on
the basis of the closing bid price.
Because many fixed-income securities do not trade each day, last sale
or bid prices are frequently not available. Fixed-income securities therefore
may be valued based on prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
International equity securities traded on a securities exchange are
valued on the basis of the last sale price. International securities traded
over-the-counter are valued on the basis of the mean of bid and asked prices. In
the absence of a last sale or mean bid and asked price, respectively, such
securities may be valued on the basis of prices provided by a pricing service if
those prices are believed to reflect the fair value of such securities. The risk
also exists that an emergency situation may arise in one or more Emerging
Countries as a result of which trading of securities may cease or may be
substantially curtailed and prices for the International Portfolio's securities
in such markets may not be readily available. The Fund may suspend or postpone
redemption of the shares of the International Portfolio for any period during
which an emergency exists, as determined by the SEC. Accordingly, if the
International Portfolio believes that appropriate circumstances exist, the Board
of Directors or Bennington will promptly apply to the SEC for a determination
that an emergency is present. During the period commencing from the
International Portfolio's identification of such condition until the date of the
SEC action, the International Portfolio's securities in the affected markets
will be valued at fair value determined in good faith by or under the direction
of the Board of Directors. See "Investment Policies--Special Risks of Investing
in Foreign Securities of Emerging Countries."
Money market instruments maturing within 60 days of the valuation date
held by Portfolios are valued at "amortized cost" unless the Board of Directors
determines that amortized cost does not represent fair value. The "amortized
cost" valuation procedure initially prices an instrument at its cost and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The Portfolios value securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the Portfolios
with no sales charge or commission. Investors may also purchase shares of the
Portfolios from intermediaries, such as a broker-dealer, bank or other financial
institution. Such intermediaries may be required to register as a dealer
pursuant to certain states' securities laws and may charge the investor a
reasonable service fee, no part of which will be paid to the Portfolios. Shares
of the Portfolios will be sold at the net asset value next determined after an
order is received and accepted, provided that payment has been received by 12:00
p.m. Eastern Time on the following business day. Net asset value is determined
as set forth above under "Valuation of Portfolio Shares." All purchases must be
made in U.S. dollars. The minimum initial investment requirements for Advisor
Class Shares of each Portfolio are $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investment requirements for
Advisor Class Shares of each Portfolio are $1,000 per Portfolio or $2,000 in
aggregate across the portfolios of the Fund. The minimum initial investment
requirement for an IRA Account is an aggregate amount of $2,000 in the
portfolios of the Fund. The subsequent investment requirement for an IRA Account
is an aggregate amount of $2,000 in the portfolios of the Fund. The Fund
reserves the right to accept smaller purchases or reject any purchase order in
its sole discretion.
Orders are accepted on each business day. Orders to purchase Portfolio
shares must be received by Bennington prior to close of the New York Stock
Exchange, normally 4:00 p.m. Eastern time, on the day shares of those Portfolios
are offered and orders accepted, or the orders will not be accepted and invested
in the particular Portfolio until the next day on which shares of that Portfolio
are offered. Payment must be received by 12:00 p.m. Eastern time the next
business day. Purchases by telephone may only be made as described in the
telephone transaction procedures set forth in "Purchase of Portfolio
Shares--Telephone Transactions." No fees are currently charged shareholders by
the Fund directly in connection with purchases.
The Fund reserves the right to suspend the offering of shares for a
period of time. The Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be refused
if, in Bennington's opinion, they would disrupt management of the Fund. The Fund
also reserves the right to refuse exchange purchases by any person or group if,
in Bennington's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Purchases through Intermediaries. Advisor Class Shares of the
Portfolios are available through Service Organizations. Certain features of the
Advisor Class Shares, such as the initial and subsequent investment minimums,
redemption fees and certain trading restrictions, may be modified or waived by
Service Organizations. Service Organizations may impose transaction or
administrative charges or other direct charges, which charges or fees would not
be imposed if Advisor Class Shares are purchased directly from the Fund.
Therefore, a client or customer should contact the Service Organization acting
on their behalf concerning the fees (if any) charged in connection with a
purchase or redemption of Advisor Class Shares and should read this prospectus
in light of the terms governing their accounts with the Service Organization.
Service Organizations are responsible for transmitting to their customers a
schedule of any such fees and conditions. Service Organizations will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Fund in accordance with their agreements with clients or
customers.
Order and Payment Procedures. Investments in the Portfolios may be made
as follows:
Federal Funds Wire. Purchases may be made on any business day by wiring
federal funds to Seattle First National Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check drawn on a
foreign bank will not be accepted). If an investor has purchased Portfolio
shares by check and subsequently submits a redemption request, the redemption
request will be honored at the net asset value next calculated after receipt of
the request, however, the redemption proceeds will not be transmitted until the
check used for investment has cleared, which may take up to 15 days. See
"Redemption of Portfolio Shares.
Please call the Fund for further information at (800) 759-3504.
Purchases in Kind. The Portfolios may accept certain types of
securities in lieu of wired funds as consideration for Portfolio
shares. Under no circumstances will a Portfolio accept any securities
the holding or acquisition of which conflicts with the Portfolio's
investment objective, policies and restrictions or which Bennington or
the applicable Money Manager believes should not be included in the
applicable Portfolio's portfolio on an indefinite basis. Securities
accepted in consideration for a Portfolio's shares will be valued in
the same manner as the Portfolio's portfolio securities in connection
with its determination of net asset value. A transfer of securities to
a Portfolio in consideration for Portfolio shares will be treated as a
sale or exchange of such securities for federal income tax purposes. A
shareholder will recognize gain or loss on the transfer in an amount
equal to the difference between the value of the securities and the
shareholder's tax basis in such securities. Shareholders who transfer
securities in consideration for a Portfolio's shares should consult
their tax advisers as to the federal, state and local tax consequences
of such transfers. See "Purchases in Kind" in the Statement of
Additional Information.
IRA Accounts. The Fund has established an Individual
Retirement Custodial Account Plan under which investors may set up IRA
Accounts that invest in the Fund. Fifth Third serves as Custodian for
the IRA Accounts. The Transfer Agent charges an annual account fee of
$25 to each IRA Account with an aggregate balance of less than $10,000
on December 31. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The subsequent investment requirement for an IRA Account is an
aggregate amount of $2,000 in the portfolios of the Fund. Please refer
to the IRA Account plan documents: the IRA Disclosure Statement, IRA
Custodial Account Agreement and IRA Application and Adoption Agreement
Form for additional information, copies of which may be obtained from
Bennington free of charge at (800) 759-3504.
Exchange Privilege. Shares of any class of any Portfolio of the Fund
may be exchanged for shares of any other class of any of the other portfolios
offered by the Fund to the extent the shareholder meets the investment
requirements of such shares and such shares are offered for sale in the
investor's state of residence, on the basis of current net asset values per
share at the time of the exchange. Other than the Advisor Class Shares of the
Portfolios offered by this Prospectus, the portfolios of the Fund also include
Investor Class Shares of the Portfolios and Advisor Class and Investor Class
Shares of the Intermediate Fixed-Income Portfolio, Short-Intermediate
Fixed-Income Portfolio, Mortgage Securities Portfolio and the U.S. Government
Money Portfolio. Advisor Class Shares and Investor Class Shares are expected to
be available to qualified investors as described in the applicable prospectuses.
Investor Class Shares are expected to be offered primarily through Service
Organizations. Generally, the fund supermarket-type programs require customers
to pay either no or low transaction fees in connection with purchases or
redemptions. Advisor Class Shares and Investor Class Shares may also be offered
through Service Organizations that charge their customers transaction or other
fees with respect to their customers' investment in the Fund. The minimum
initial investment in Investor Class Shares is $5,000 per Portfolio or $10,000
in aggregate across the portfolios of the Fund and for subsequent investments is
$1,000 per Portfolio or $2,000 in aggregate across the portfolios of the Fund.
Investor Class Shares may have different distribution and other expenses, which
may affect performance. The Advisor Class Shares are not subject to shareholder
service, administrative service and/or 12b-1 fees as are the Investor Class
Shares. As a result, the Advisor Class Shares are expected to achieve higher
investment returns than the Investor Class Shares.
Under certain circumstances, the per share net asset value of the
Investor Class Shares of the Portfolios may be lower than the per share net
asset value of the Advisor Class Shares as a result of the daily expense
accruals of the shareholder service, administrative services and/or distribution
fees applicable to the Investor Class Shares. Generally, for Portfolios that pay
income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the
classes. See "Valuation of Portfolio Shares" in the Statement of Additional
Information.
If the exchanging shareholder does not currently own shares of the
portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and authorized
dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures guaranteed
by an eligible guarantor institution as defined below under "Redemption of
Portfolio Shares" and in "Additional Information--Shareholder Servicing
Arrangements." For additional information, contact the Fund. A shareholder
should obtain and read the prospectus relating to any other portfolio of the
Fund before making an exchange.
An exchange other than between classes in the same portfolio is a
redemption of the shares and is treated as a sale for federal income tax
purposes, and a short- or long-term capital gain or loss may be realized. The
exchange privilege may be modified or terminated at any time on 60 days' notice
to shareholders. Exchanges are available only in states where exchanges may
legally be made. Exchanges may be made by faxing instructions to Bennington at
(206) 224-4274 or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Exchanges may only be made by telephone as set out in
the telephone transaction procedures set forth in "Purchase of Portfolio
Shares--Telephone Transactions" and "Additional Information--Shareholder
Servicing Arrangements." No fees are currently charged shareholders by the Fund
directly in connection with exchanges.
Telephone Transactions. A shareholder of the Fund with an aggregate
account balance of $1 million or more may request purchases, redemptions or
exchanges of shares of a Portfolio by telephone at the appropriate toll free
number provided in this Prospectus. It may be difficult to implement redemptions
or exchanges by telephone in times of drastic economic or market changes. In an
effort to prevent unauthorized or fraudulent redemption or exchange requests by
telephone, the Fund employs reasonable procedures specified by the Board of
Directors to confirm that such instructions are genuine. Telephone transaction
procedures include the following measures: requiring the appropriate telephone
transaction election be made on the telephone transaction authorization form
sent to shareholders upon request; requiring the caller to provide the names of
the account owners, the account owner's social security number or tax
identification number and name of Portfolio, all of which must match the Fund's
records; requiring that a service representative of Bennington, acting as
Transfer Agent complete a telephone transaction form listing all of the above
caller identification information; requiring that redemption proceeds be sent by
wire only to the owners of record at the bank account of record or by check to
the address of record; sending a written confirmation for each telephone
transaction to the owners of record at the address of record within five (5)
business days of the call; and maintaining tapes of telephone transactions for
six months, if the Fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or
an attorney-in-fact (under a power of attorney), additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. The Fund may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund may be liable for any loss due to unauthorized or fraudulent transactions.
In all other cases, neither the Fund, the Portfolio nor Bennington will be
responsible for authenticity of redemption or exchange instructions received by
telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net asset
value next determined after the receipt of a redemption request in proper form.
Payment will ordinarily be made within seven days and will be wire-transferred
by automatic clearing house funds or other bank wire to the account designated
for the shareholder at a domestic commercial bank that is a member of the
Federal Reserve System. If requested in writing, payment will be made by check
to the account owners of record at the address of record. The Transfer Agent
charges a processing fee of $10.00 for each redemption check requested by a
shareholder, which processing fee may be waived by the Transfer Agent at its
discretion. If an investor has purchased Portfolio shares by check and
subsequently submits a redemption request, the redemption request will be
honored at the net asset value next calculated after receipt of the request,
however, the redemption proceeds will not be transmitted until the check used
for investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire transfer.
If a shareholder requests a redemption check or wire made payable to
someone other than the registered owner of the shares and/or sent to an address
other than the address of record, the request to redeem must (1) be made in
writing; (2) include an instruction to make the redemption proceeds payable to
someone other than the registered owner of the shares and/or send them to an
address other than the address of record; and (3) be signed by all registered
owners with their signatures guaranteed. See "Additional Information--Signature
Guarantees."
Portfolio shares may be redeemed by faxing instructions to Bennington
at (206) 224-4274 or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Redemptions of the Portfolios' shares may be effected on
any business day on which the New York Stock Exchange, Fifth Third and
Bennington are open, as long as instructions are received by Bennington by the
close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern
time. In periods of severe market or economic conditions, the electronic
redemption of shares may be difficult due to an increase in the amount of
electronic transmissions. Use of the mail may result in the redemption request
being processed at a later time than it would have been if a instructions had
been sent by facsimile transmission. During the delay, the Portfolios' net asset
value may fluctuate.
Portfolio shares also may be redeemed through Service Organizations who
have made arrangements with the Fund permitting them to redeem such shares by
telephone or facsimile transmission and who may charge a fee for this service.
Advisor Class Shares of the Portfolios may be available through certain Service
Organizations that may charge a fee to their customers.
If the Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole or
in part by a distribution in kind of securities from the investment portfolio of
the Portfolio, in lieu of cash, in conformity with any applicable rules of the
SEC. Securities will be readily marketable and will be valued in the same manner
as in a regular redemption. See "Valuation of Portfolio Shares." If shares are
redeemed in kind, the redeeming shareholders would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Portfolio during any 90-day period for any one
shareholder.
The Fund reserves the right to redeem the shares of any shareholder
whose account balance is less than $500 per portfolio or whose aggregate account
is less than $2,000, and who is not part of an Automatic Investment Plan. The
Fund, however, will not redeem shares based solely on market reductions in net
asset value. The Fund will give sixty (60) days prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption or
postpone the date of payment for the Portfolios if the unlikely emergency
conditions which are specified in the Investment Company Act or determined by
the SEC should exist. Shareholders uncertain of requirements for redemption
should telephone the Fund at (206) 224-7420 or (800) 759-3504. Redemptions by
telephone may only be made as set out in the telephone transaction procedures
set forth in "Purchase of Portfolio Shares-- Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly withdrawal
on the Systematic Withdrawal Plan is $500.00 in aggregate) on a monthly basis on
the 15th (or the first business day before the 15th) and/or on the last business
day of each month. An application for automatic withdrawal can be obtained from
Bennington or the Fund and must be received by Bennington ten calendar days
before the first scheduled withdrawal date. Automatic withdrawal may be ended at
any time by the investor or the Fund. The Systematic Withdrawal Plan may be
discontinued at any time by the Fund or Bennington. The Fund reserves the right
to reject any Systematic Withdrawal Plan application. Purchases of additional
shares concurrently with withdrawals generally are undesirable. Funds will be
disbursed according to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101,
is the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also the transfer agent, registrar and dividend
disbursing agent for the Portfolios and provides other administrative,
recordkeeping and compliance services to the Fund pursuant to a Transfer Agent
Agreement between Bennington and the Fund.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45264, acts as
Custodian of the Portfolios' assets and may employ sub-custodians outside the
United States, which have been approved by the Board of Directors. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third holds all portfolio securities and cash assets of the Portfolios and
is authorized to deposit securities in securities depositories or to use the
services of sub-custodians. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Independent Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 are
the Fund's independent auditors. Shareholders will receive an unaudited
semi-annual and an audited annual financial statements.
Fund Counsel
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 serves as
the Fund's outside counsel.
Shareholder Servicing Arrangements
From time to time, Bennington may enter into arrangements with certain
Service Organizations to provide shareholder services or other administrative
services to persons who beneficially own shares of the Advisor Class Shares of
the Portfolios. Such organizations, rather than their customers, may be the
shareholder of record of the shares. Such organizations may also charge a fee
for this service and may require different minimum initial and subsequent
investments than the Fund. Such organizations may also impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. The Fund is not responsible for the failure of any such
organization to carry out its obligations to its customers. The Fund does not
pay any portion of the fees paid by Bennington, and Bennington does not receive
any portion of any fee such organizations charge their customers.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and the
Portfolios against fraudulent transactions by unauthorized persons. In certain
instances, such as transfer of ownership or when the registered shareholder(s)
requests that redemption proceeds be sent to a different name or address than
the registered name and address of record on the shareholder account, the Fund
will require that the shareholder's signature be guaranteed. When a signature
guarantee is required, each signature must be guaranteed by a domestic bank or
trust company, credit union, broker, dealer, national securities exchange,
registered securities association, clearing agency or savings association as
defined by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and be
signed in the name of the guarantor by an authorized person with that person's
title and the date. The Fund may reject a signature guarantee if the guarantor
is not a member of or participant in a signature guarantee program. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular transaction, to require a signature guarantee at its
discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The Fund is
authorized to issue 15 billion shares of common stock of $0.001 par value per
share, currently divided into eight Portfolios, each with two classes of shares,
the Advisor Class Shares and the Investor Class Shares. Investor Class Shares
may have different distribution and other expenses, which may affect
performance. The Advisor Class Shares are not subject to shareholder service,
administrative services and/or 12b-1 fees as are the Investor Class Shares. As a
result, the Advisor Class Shares are expected to achieve different investment
returns than the Investor Class Shares. Please contact your sales
representative, or the Fund at (800) 759-3504, for additional information about
the Investor Class Shares for the Portfolios or the Advisor Class Shares and
Investor Class Shares of the Fixed-Income Portfolios. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board of Directors
may determine. Shareholders of a class of shares or Portfolio have separate
voting rights with respect to matters that only that affect that class or
Portfolio. See "Other Information--Voting Rights" in the Statement of Additional
Information.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Fund's
outstanding shares for the purpose of voting on the removal of one or more
Directors or to transact any other business. Any proposals by shareholders to be
presented at an annual meeting must be received by the Fund for inclusion in its
proxy statement and form of proxy relating to that meeting at least 120 calendar
days in advance of the date of the Fund's proxy statement released in connection
with the previous year's annual meeting, if any. If there was no annual meeting
held in the previous year or the date of the annual meeting has changed by more
than 30 days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made. See "Multi-Class Structure".
As of April 24, 1998, the following persons were owners of record of
25% or more of the shares of the Portfolios of the Fund, which were redesignated
the Advisor Class Shares on May 1, 1998:
International
Beneficial Owner Portfolio
- ---------------- ---------
Stap & Company, account nominee for 30.26%
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
As of April 24, 1998, the directors and officers of the Fund, as a
group, beneficially owned less than 1% of the shares of each Portfolio. The
fiscal year end for each Portfolio is December 31.
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing further
information about performance, is available without charge from the Fund.
Inquiries regarding the Portfolios and requests for Annual Reports should be
addressed to the Fund at 1420 Fifth Avenue, Suite 3130, Seattle, Washington
98101, or by telephone at (206) 224-7420 or (800) 759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally prohibit
banks that are members of the Federal Reserve System from engaging in the
business of underwriting, selling, distributing securities or engaging in
investment advisory activities. To the extent that banks or subsidiaries of
banks are deemed to be performing any such activities, the Fund believes such
entities may engage in such activities for the Portfolios without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. However,
it is possible that future changes in either Federal or state statutes and
regulations concerning the permissible activities of banks or trust companies,
as well as further judicial or administrative decisions and interpretations of
present and future statutes and regulations, might prevent such entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself of any services
then being provided. The Board of Directors does not expect that shareholders of
the Fund would suffer any adverse financial consequences as a result of these
occurrences but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
MONEY MANAGER PROFILES
The following information as to each Money Manager has been supplied by
the respective Money Managers. The Statement of Additional Information contains
further information concerning each Money Manager, including a description of
its business history and identification of its controlling persons.
Growth Portfolio
Geewax, Terker & Company, 99 Starr Street, Phoenixville, PA 19460, is a
Pennsylvania partnership and registered investment adviser whose general
partners are John J. Geewax and Bruce E. Terker. John J. Geewax, MBA, JD, is
primarily responsible for the day-to-day management and investment decisions for
the Growth Portfolio and is supported by Christopher P. Ouimet who assists in
the management of the Growth Portfolio. Mr. Geewax founded Geewax Terker in
1982. Mr. Ouimet joined Geewax Terker in 1994. Prior to that, Mr. Ouimet was at
The Vanguard Group as a quantitative analyst from 1992 to 1994 and as a
marketing analyst from 1990 to 1992.
Value and Income Portfolio
Martingale Asset Management, L.P., 222 Berkeley Street, Boston, MA
02116 ("Martingale"), is the Money Manager of the Value and Income Portfolio.
Martingale is a Delaware limited partnership, which consists of two general
partners, Martingale Asset Management Corporation ("Martingale Corp.), a
Massachusetts corporation, and Commerz Asset Management USA Corporation ("CAM"),
a Delaware corporation, and four limited partners. Arnold S. Wood and William E.
Jacques each own 32.26% of Martingale Corp. CAM is a wholly-owned subsidiary of
Commerz International Capital Management GmbH ("CICM") headquartered in
Frankfurt, Germany. Commerzbank AG is the parent company of CICM. William E.
Jacques, CFA, Executive Vice President and Chief Investment Officer of
Martingale, is primarily responsible for the investment decisions for the Value
and Income Portfolio. Mr. Jacques joined Martingale in 1987. Douglas E. Stark,
CFA, Senior Vice President and Director of US Equity Management and Research is
primarily responsible for the day-to-day management of the Value and Income
Portfolio. Mr. Stark joined Martingale in 1996. Prior to joining Martingale, Mr.
Stark was Senior Vice President and Portfolio Manager at InterCoast Capital
Company from 1994 to 1996. Prior to that, he was Vice President and managed
international stock portfolios at State Street Global Advisors, an area of State
Street Bank and Trust Company, from 1990 until 1994.
Small to Mid Cap Portfolio
Symphony Asset Management, Inc., 555 California Street, San Francisco,
CA 94104 ("Symphony Inc."), is the Money Manager of the Small to Mid Cap
Portfolio until July 1, 1998, at which time the Money Manager will become
Symphony Asset Management LLC ("Symphony LLC"). Symphony Inc. is a California
corporation founded in March, 1994. Symphony Inc. is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act"). Symphony Inc. is a wholly owned subsidiary of BARRA, Inc.
("BARRA"), a California corporation and registered investment adviser with the
California Department of Corporations, and as a publicly traded corporation
under Section 12(g) of the Securities Exchange Act of 1934, as amended. BARRA is
one of the world's leading suppliers of analytical financial software and has
pioneered many of the techniques used in systematic investment management,
including active management based on so-called factor return predictions.
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
by Jeffrey L. Skelton, Neil L. Rudolph, Praveen K. Gottipalli and Michael J.
Henman, each of whom hold management roles with Symphony LLC.
Praveen K. Gottipalli, Director of Investments of Symphony Inc. and
Symphony LLC, is primarily responsible for the day-to-day management and
investment decisions for the Small to Mid Cap Portfolio. Mr. Gottipalli has been
Director of Investments with Symphony Inc. since March, 1994 and Symphony LLC
since July 1996. From 1985 to 1994, he was with BARRA, Inc., where, prior to
joining Symphony, he was Director of the Active Strategies Group for BARRA, Inc.
Mr. Gottipalli has worked on a number of different investment management
strategies including valuation models for global equities, global tilt funds and
aggressive market neutral strategies that combine quantitative and qualitative
analysis. He has been actively involved with design, analysis, implementation
and enhancement of these strategies.
International Portfolio
Nicholas-Applegate Capital Management, ("Nicholas-Applegate"), 600 West
Broadway, 29th Floor, San Diego, CA 92101, is the Money Manager for the
International Portfolio. Nicholas-Applegate is a California limited partnership
and registered investment adviser whose general partner is Nicholas-Applegate
Capital Management Holdings, L.P., a California limited partnership controlled
by Arthur E. Nicholas. Senior members of the seven member international
portfolio team include: Catherine Somhegyi, Lawrence S. Speidell and Loretta J.
Morris. The senior members are primarily responsible for making the day-to-day
management and investment decisions for the International Portfolio. Mr.
Nicholas, Managing Partner, founded Nicholas-Applegate in 1984. Catherine
Somhegyi, Chief Investment Officer, Global Equity Management, joined
Nicholas-Applegate in 1987. Mr. Speidell, Partner and Director of Global and
Systematic Portfolio Management, joined Nicholas-Applegate in 1994. From 1983 to
1994, Mr. Speidell was a portfolio manager for Batterymarch Financial
Management. Ms. Morris, Senior Portfolio Manager, International, joined
Nicholas-Applegate in 1990. From 1981 to 1989, Ms. Morris was responsible for
research, client service and operations at Collins Associates, a pension
consulting firm.
-9-
<PAGE>
APPENDIX A
DESCRIPTION OF INDICES
The following information as to each index has been supplied by the
respective preparer of the index or has been obtained from other
publicly-available information.
Standard & Poor's 500 Composite Stock Price Index 1
The purpose of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500") is to portray the pattern of common stock price movement.
Construction of the index proceeds from industry groups to the whole. Currently
there are four groups: 400 Industrials, 40 Utilities, 20 Transportation and 40
Financial. Since some industries are characterized by companies of relatively
small stock capitalization, the index does not comprise the 500 largest
companies listed on the New York Stock Exchange.
Component stocks are chosen solely with the aim of achieving a
distribution by broad industry groupings that approximates the distribution of
these groupings in the New York Stock Exchange common stock population, taken as
the assumed model for the composition of the total market. Each stock added to
the index must represent a viable enterprise and must be representative of the
industry group to which it is assigned. Its market price movements must in
general be responsive to changes in industry affairs.
The formula adopted by S&P is generally defined as a "base-weighted
aggregative" expressed in relatives with the average value for the base period
(1941-1943) equal to 10. Each component stock is weighted so that it will
influence the index in proportion to its respective market importance. The most
suitable weighting factor for this purpose is the number of shares outstanding.
The price of any stock multiplied by number of shares outstanding gives the
current market value for that particular issue. This market value determines the
relative importance of the security.
Market values for individual stocks are added together to obtain their
particular group market value. These group values are expressed as a relative,
or index number, to the base period (1941-1943) market value. As the base period
market value is relatively constant, the index number reflects only fluctuations
in current market values.
S&P/BARRA Growth Index
S&P/BARRA Value Index
BARRA, in collaboration with Standard and Poor's Corporation, has
constructed the S&P/BARRA Growth Index (the "Growth Index") and S&P/BARRA Value
Index (the "Value Index") to separate the S&P 500 into value stocks and growth
stocks.
The Growth and Value Indices are constructed by dividing the stocks in
the S&P 500 according to their price-to-book ratios. The Value Index contains
firms with lower price-to-book ratios and has 50 percent of the capitalization
of the S&P 500. The Growth Index contains the remaining members of the S&P 500.
Each of the indices is capitalization-weighted and is rebalanced semi-annually
on January 1 and July 1 of each year.
Although the Value Index is created based on price-to-book ratios, the
companies in the index generally have other characteristics associated with
"value" stocks: low price-to-earnings ratios, high dividend yields, and low
historical and predicted earnings growth. Because of these characteristics, the
Value Index historically has had higher weights in the Energy, Utility, and
Financial sectors than the S&P 500.
Companies in the Growth Index tend to have opposite characteristics
from those in the Value Index: high earnings-to-price ratios, low dividend
yields, and high earnings growth. Historically, the Growth Index has been more
concentrated in Electronics, Computers, Health Care and Drugs than the S&P 500.
As of December 31, 1996 there were 339 companies in the Value Index;
consequently there are 161 companies in the Growth Index.
Wilshire 4500 Index 2
While the S&P 500 Index includes the preponderance of large market
capitalization stocks, it excludes most of the medium and small size companies
which comprise the remaining 33% of the capitalization of the U.S. stock market.
The Wilshire 4500 Index (an unmanaged index) consists of all U.S. stocks that
are not in the S&P 500 and that trade regularly on the New York and American
Stock Exchanges as well as in the NASDAQ over-the-counter market. The Wilshire
4500 Index is constructed from the Wilshire 5000 Equity Index, which measures
the performance of all U.S. headquartered equity securities with readily
available price data. Approximately 6500 capitalization weighted security
returns are used to adjust the Wilshire 5000 Equity Index. The Wilshire 5000
Equity Index was created by Wilshire Associates in 1974 to aid in performance
measurement. The Wilshire 4500 Index consists of the Wilshire 5000 Equity Index
after excluding the companies in the S&P 500.
Wilshire Associates view the performance of the Wilshire 5000's
securities several ways. Price and total return indices using both capital and
equal weightings are computed. The unit value of these four indices was set to
1.0 on December 31, 1970.
Morgan Stanley Capital International EAFE(R) + EMF Index3
The Morgan Stanley Capital International ("MSCI") EAFE(R)+ EMF Index is
a market capitalization weighted index composed of companies representative of
the market structure of 41 Developed and Emerging Market countries. The index is
calculated without dividends or with gross dividends reinvested, in both U.S.
Dollars and local currencies.
MSCI EAFE(R)Index is a market capitalization weighted index composed of
companies representative of the market structure of 19 Developed Market
countries in Europe, Australasia and the Far East. The index is calculated
without dividends, with net or with gross dividends reinvested, in both U.S.
Dollars and local currencies.
MSCI Emerging Markets Free ("EMF") Index is a market capitalization
weighted index composed of companies representative of the market structure of
26 Emerging Market countries in Europe, Latin America and the Pacific Basin. The
MSCI EMF Index excludes closed markets and those shares in otherwise free
markets which are not purchasable by foreigners.
The MSCI indices reflect stock market trends by representing the
evolution of an unmanaged portfolio containing a broad selection of domestically
listed companies. A dynamic optimization process which involves maximizing float
and liquidity, reflecting accurately the market's size and industry profiles,
and minimizing cross ownership is used to determine index constituents. Stock
selection also takes into consideration the trading capabilities of foreigners
in emerging market countries.
As of March 31, 1997, the MSCI EAFE(R)+ EMF Index consisted of 2,032
companies traded on stock markets in 45 countries . The weighting of the MSCI
EAFE(R)+ EMF Index by country was as follows:
Developed Markets: Australia 2.60%, Austria 0.36%, Belgium 1.12%, Denmark 0.84%,
Finland 0.63%, France 6.48%, Germany 8.07%, Hong Kong 3.11%, Ireland 0.30%,
Italy 2.78%, Japan 25.28%, Netherlands 4.44%, New Zealand 0.33%, Norway 0.51%,
Singapore 1.43%, Spain 1.97%, Sweden 2.33%, Switzerland 5.43%, United Kingdom
16.94%.
Emerging Markets: Argentina 0.51%, Brazil 2.08%, Chile 0.56%, China Free 0.08%,
Colombia 0.12%, Czech Republic 0.17%, Greece 0.22%, Hungary 0.07%, India 0.07%,
Indonesia 0.80%, Israel 0.77%, Jordan 0.31%, Korea Free 0.58%, Malaysia 2.32%,
Mexico Free 1.20%, Pakistan 0.10%, Peru 0.16%, Philippines Free 0.49%, Poland
0.07%, Portugal 0.31%, South Africa 1.73%, Sri Lanka 0.01%, Taiwan 1.36%,
Thailand 0.57%, Turkey 0.28%, Venezuela Free 0.15%.
Unlike other broad-based indices, the number of stocks included in MSCI
EAFE(R)+ EMF Index is not fixed and may vary to enable the Index to continue to
reflect the primary home markets of the constituent countries. Changes in the
Index will be announced when made. MSCI EAFE(R)+ EMF Index is a
capitalization-weighted index calculated by Morgan Stanley Capital International
based on the official closing prices for each stock in its primary local or home
market. The base value of the MSCI EAFE(R)+ EMF Index was equal to 100.0 on
January 1, 1988. As of March month-end 1997, the current value of the MSCI
EAFE(R)+ EMF Index was 188.5 (with gross dividends reinvested).
- --------
1 "Standard & Poor's," "S&P" and "S&P 500" are trademarks of Standard and
Poor's, a division of The McGraw-Hill Companies, Inc. The Growth and
Value and Income Portfolios are not sponsored, endorsed, sold or
promoted by Standard & Poor's.
2 "Wilshire 4500" and "Wilshire 5000" are registered trademarks of
Wilshire Associates. The Small to Mid Cap Portfolio is not sponsored,
endorsed, sold or promoted by Wilshire Associates.
3 "EAFE" is a registered trademark of Morgan Stanley Capital
International. The International Portfolio is not sponsored, endorsed,
sold or promoted by Morgan Stanley Capital International.
A-1
<PAGE>
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state to any person to whom it is unlawful to make such an offer. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Portfolios, Bennington or the Money Managers since the date
hereof; however, if any material change occurs while this Prospectus is required
by law to be delivered, this Prospectus will be amended or supplemented
accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington Capital
Management L.P.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
FIXED-INCOME PORTFOLIOS--Advisor Class Shares Seattle, WA 98101
PROSPECTUS - May 1, 1998 (800) 759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services (206) 224-7420
- --------------------------------------------------------------------------------
ACCESSOR(R)FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. Each portfolio intends to offers two classes
of shares, Advisor Class Shares and Investor Class Shares. This Prospectus
pertains only to the Advisor Class Shares of the following four fixed-income
portfolios of the Fund (individually, a "Portfolio" and collectively, the
"Portfolios"):
INTERMEDIATE FIXED-INCOME PORTFOLIO
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
U.S. GOVERNMENT MONEY PORTFOLIO
and sets forth concisely the information about the Portfolios that a prospective
investor should know before investing. Through a separate prospectus, the Fund
intends to offer an additional class of shares, the Investor Class Shares, for
the Portfolios, and through separate prospectuses, the Fund intends to offer
Advisor Class Shares and Investor Class Shares for the four equity portfolios of
the Fund. Investor Class Shares have different expenses that would affect
performance. Investors desiring to obtain information about the Investor Class
Shares should call (800) 759-3504 or ask their sales representative. See
"Description of the Fund --Multiple Classes of Shares."
The Fund has filed a Statement of Additional Information, dated May 1, 1998,
with the Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, containing further information about the portfolios and
the Fund that may be of interest to investors, is incorporated herein by
reference in its entirety. A free copy may be obtained by writing or calling the
Fund at the address or phone number shown above. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE U.S. GOVERNMENT MONEY PORTFOLIO ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE U.S. GOVERNMENT MONEY PORTFOLIO
INTENDS TO MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO DO SO. SEE "VALUATION OF PORTFOLIO
SHARES."
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS, INCLUDING
THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.......................................................................3
FEES AND PORTFOLIO EXPENSES...................................................6
FINANCIAL HIGHLIGHTS..........................................................7
Intermediate Fixed-Income Portfolio........................................7
Short-Intermediate Fixed-Income Portfolio..................................8
Mortgage Securities Portfolio..............................................9
U.S. Government Money Portfolio...........................................10
PORTFOLIO MANAGEMENT.........................................................11
DESCRIPTION OF THE PORTFOLIOS................................................11
General...................................................................11
Risk Factors and Special Considerations...................................12
Investment Objectives and Investment Policies.............................13
Investment Policies.......................................................15
Investment Restrictions...................................................23
GENERAL MANAGEMENT OF THE PORTFOLIOS.........................................23
THE MONEY MANAGERS...........................................................26
EXPENSES OF THE PORTFOLIOS...................................................28
PORTFOLIO TRANSACTION POLICIES...............................................29
DIVIDENDS AND DISTRIBUTIONS..................................................29
TAXES........................................................................30
CALCULATION OF PORTFOLIO PERFORMANCE.........................................32
VALUATION OF PORTFOLIO SHARES................................................34
PURCHASE OF PORTFOLIO SHARES.................................................35
REDEMPTION OF PORTFOLIO SHARES...............................................38
ADDITIONAL INFORMATION.......................................................39
Service Providers.........................................................39
Shareholder Servicing Arrangements........................................40
Signature Guarantees......................................................40
Organization, Capitalization and Voting...................................40
Shareholder Inquiries and Reports to Shareholders.........................41
Glass-Steagall Act........................................................41
MONEY MANAGER PROFILE........................................................42
Mortgage Securities Portfolio............................................ 42
DESCRIPTION OF INDICES......................................................A-1
Lehman Brothers Government/Corporate Index...............................A-1
Lehman Brothers Government/Corporate 1-5 Year Index......................A-1
Lehman Brothers Mortgage-Backed Securities Index.........................A-1
-2-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end management
investment company, known as a mutual fund. The Fund currently consists of eight
diversified investment portfolios, each with its own investment objective and
policies.
Multi-Class Structure. Each Portfolio intends to offer two classes of
shares, the Advisor Class Shares and the Investor Class Shares through different
prospectuses. The shares of each Portfolio existing prior to May 1, 1998, when
the multi-class structure was established, are redesignated as Advisor Class
Shares. The Advisor Class Shares are primarily available directly from the Fund.
Advisor Class Shares are also available through financial institutions,
retirement plans, broker-dealers, depository institutions, institutional
shareholders of record, registered investment advisers, or other financial
intermediaries (collectively, "Service Organizations") that may impose
additional or different conditions on purchase or redemption of Fund shares and
may charge transaction or account fees. Service Organizations are responsible
for transmitting to their customers a schedule of any such fees and conditions.
The Investor Class Shares are primarily available through Service Organizations
and through various brokerage firms or other industry recognized service
providers of fund supermarkets or similar programs, who may charge a fee for
their services. Service Organizations are responsible for transmitting to their
customers a schedule of any such fees and conditions. Generally fund
supermarket-type programs require customers to pay either no or low transaction
fees in connection with purchases or redemptions. Service Organizations and the
fund supermarket-type program providers may enter into written agreements with
the Fund on behalf of the Investor Class Shares, which allow reimbursements or
payments directly by the Fund for administrative services, shareholder services
and distribution-related services. See the "Fixed-Income Portfolios--Investor
Class Shares Prospectus" and the "Multi-Class Structure" in the Statement of
Additional Information for more detailed information about the Investor Class
Shares.
Bennington may enter into arrangements with Service Organizations and
pay such organizations directly for services provided by Service Organizations.
See "Additional Information--Shareholder Servicing Arrangements".
Fixed-Income Portfolios--Advisor Class Shares Prospectus. This
Prospectus pertains only to the Advisor Class Shares of the Fund's Intermediate
Fixed-Income Portfolio, Short-Intermediate Fixed-Income Portfolio, Mortgage
Securities Portfolio (collectively, the "Bond Portfolios") and the U.S.
Government Money Portfolio. See "DESCRIPTION OF THE PORTFOLIOS--General" and
"--Investment Objectives and Investment Policies" and "Multi-Class Structure".
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from the investment
policies and strategies of other portfolios of the Fund. The investment
objective of the Portfolios managed by Bennington are set forth below:
o INTERMEDIATE FIXED-INCOME PORTFOLIO -- Bennington Capital Management L.P.1
-- seeks generation of current income by investing primarily in
fixed-income securities with durations of between three and ten years.
Under normal market conditions, the Portfolio will have a dollar weighted
average duration of not less than three years nor more than ten years.
o SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO -- Bennington Capital Management
L.P.2 -- seeks preservation of capital and generation of current income by
investing primarily in fixed-income securities with durations of between
one and five years. Under normal market conditions, the Portfolio will have
a dollar weighted average duration of not less than two years nor more than
five years.
o U. S. GOVERNMENT MONEY PORTFOLIO -- Bennington Capital Management L.P. --
seeks maximum current income consistent with the preservation of principal
and liquidity by investing primarily in short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The investment objective and the name of the investment management organization
(the "Money Manager") for the Mortgage Securities Portfolio is described below:
o MORTGAGE SECURITIES PORTFOLIO -- BlackRock, Inc. -- seeks generation of
current income by investing primarily in mortgage-related securities.
Management. Bennington Capital Management L.P., a Washington limited
partnership ("Bennington"), is the manager and administrator of the Fund
pursuant to its Management Agreement with the Fund. As such, Bennington provides
or oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. See "GENERAL MANAGEMENT
OF THE PORTFOLIOS."
Purchase and Redemption of Shares. Advisor Class Shares offered by this
Prospectus are intended to be purchased and redeemed by shareholders either (i)
directly from the Portfolios, or (ii) through Service Organizations that may
charge a transaction or account fee for their services, at net asset value next
determined after an order for purchase or redemption has been received. The
Service Organizations are responsible for promptly transmitting client or
customer purchase and redemption orders to the Fund in accordance with their
agreements with clients or customers. The minimum initial investment for Advisor
Class Shares of the Portfolios is $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investments are $1,000 per
Portfolio or $2,000 in aggregate across the portfolios of the Fund. See
"PURCHASE OF PORTFOLIO SHARES" and "REDEMPTION OF PORTFOLIO SHARES."
Risk Factors and Special Considerations. The Fund is designed to
provide diverse opportunities in equity and debt securities. There can be no
assurance that the investment objective for any Portfolio will be achieved.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, involves risks that go beyond the usual risks
inherent in a mutual fund limiting its holdings to domestic investments. See
"DESCRIPTION OF THE PORTFOLIOS--Risk Factors and Special Considerations."
Dividends and Distributions. Each Portfolio intends to distribute at
least annually to its shareholders substantially all of its net investment
income and its net realized long- and short-term capital gains. Dividends from
the net investment income of the U.S. Government Money Portfolio will be
declared daily and paid monthly. Dividends from the net investment income of the
Bond Portfolios will be declared and paid monthly. See "DIVIDENDS AND
DISTRIBUTIONS."
Taxation. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company for federal income tax purposes. As
such, the Fund anticipates that no Portfolio will be subject to federal income
tax on income and gains that are distributed to shareholders. See "TAXES."
Service Providers.
Bennington is the manager and administrator of the Fund, as described
above. Bennington provides or oversees the provision of all general management,
administration, investment advisory and portfolio management services for the
Fund. Bennington also provides transfer agent, registrar, dividend disbursing
agent, recordkeeping, administrative and compliance services to the Fund,
pursuant to its Transfer Agency and Administrative Agreement (the "Transfer
Agent Agreement") with the Fund.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts
as custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan (the
"IRA Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel. See
"ADDITIONAL INFORMATION--Service Providers."
- --------
1 Managed by Smith Barney Capital Management from inception through April
30, 1998. See Statement of Additional Information for more detailed
information.
2 Managed by Bankers Trust Company from inception through April 30, 1998.
See Statement of Additional Information for more detailed information.
-3-
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor should
expect to incur as a shareholder of Advisor Class Shares of each of the
Portfolios based on projected annual operating expenses.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
-------------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees(c) None None None None
</TABLE>
- ----------------
(a) Shares of the Portfolios are expected to be sold primarily through
Service Organizations, which may charge shareholders a fee. See
"GENERAL MANAGEMENT OF THE PORTFOLIOS--Distribution."
(b) An annual maintenance fee of $25.00 may be charged by the Transfer
Agent to each IRA Account with an aggregate balance of less than
$10,000 on December 31 of each year.
(c) The Transfer Agent may charge a processing fee of $10.00 for each
redemption check requested by a shareholder. See "REDEMPTION OF
PORTFOLIO SHARES."
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
---------------------------------------------------------------
(as a percentage of average daily net assets) Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Management Fees (b) 0.36% 0.36% 0.59% 0.25%
12b-1 Fees None None None None
Other Expenses (c) 0.33% 0.35% 0.27% 0.29%
Total Portfolio Operating Expenses 0.69% 0.71% 0.86% 0.54%
</TABLE>
(a) The table data reflects fees and expenses expected to be incurred
during the fiscal year ended December 31, 1998, not actual expenses.
For actual expenses of the Portfolios, prior to establishing the
multi-class structure, incurred during the fiscal year ended December
31, 1997 see "Financial Highlights" and the Annual Report for the
period ended December 31, 1997.
(b) Management fees consist of the management fee paid to Bennington and
the Money Manager fee paid to BlackRock, Inc. for the Mortgage
Securities Portfolio. Bennington receives only the management fee and
not a Money Manager fee for the Portfolios it manages directly. See
"GENERAL MANAGEMENT OF THE PORTFOLIOS--Fund Manager Services and Fees"
and "THE MONEY MANAGERS--Money Manager Fees."
(c) "Other Expenses" are based on estimated amounts for the current fiscal
year.
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time
period:
Portfolios
---------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
One Year $7 $7 $9 $6
Three Years $22 $23 $27 $17
Five Years $38 $40 $48 $30
Ten Years $86 $88 $106 $68
The example assumes Money Manager and other fees are paid at the rates
provided in the Annual Portfolio Operating Expenses table above. For a
discussion of certain management and Money Manager fees, see footnote (b) to the
Annual Portfolio Operating Expenses table.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Advisor Class Shares of the
Portfolios will bear directly or indirectly. The information is based upon each
Portfolio's current fees and expenses. For a more complete description of the
various costs and expenses, see "Expenses of the Portfolios" in the Statement of
Additional Information.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Intermediate Fixed-Income Portfolio (1)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Period from 6/16/92
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $ 11.90 $ 12.29 $ 11.04 $ 12.34 $ 12.00 $ 12.00
-------- -------- -------- -------- -------- --------
Net Investment Income
After Bennington expense subsidy(2) 0.71 0.67 0.71 0.65 0.56 0.36
Before Bennington expense subsidy 0.71 0.67 0.71 0.64 0.52 0.30
Realized and Unrealized Gain (Loss)
on Investment 0.29 (0.39) 1.25 (1.28) 0.57 0.15
Total from Investment Operations 1.00 0.28 1.96 (0.63) 1.13 0.51
Dividends from Net Investment Income (0.71) (0.67) (0.71) (0.65) (0.56) (0.36)
Capital Gains Distributions 0.00 0.00 0.00 (0.02) (0.23) (0.15)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
Total Distributions (0.71) (0.67) (0.71) (0.67) (0.79) (0.51)
Net Asset Value at End of Period $ 12.19 $ 11.90 $ 12.29 $ 11.04 $ 12.34 $ 12.00
======== ======== ======== ======== ======== ========
Total Return(3) 8.62% 2.56% 18.26% (5.24%) 9.53% 4.26%
Net Assets, End of Period (000 Omitted) $55,197 $52,248 $36,878 $31,405 $26,642 $10,901
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(2) 0.84% 0.88% 0.96% 1.24% 1.06% 0.85%*
Before Bennington expense subsidy 0.84% 0.88% 0.96% 1.28% 1.35% 1.50%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(2) 5.88% 5.79% 6.07% 5.65% 4.62% 5.33%*
Before Bennington expense subsidy 5.88% 5.79% 6.07% 5.61% 4.33% 4.68%*
Portfolio Turnover Rate(4) 84.35% 94.69% 187.62% 255.11% 265.06% 100.57%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Smith Barney Capital Management was the Money Manager for the
Intermediate Fixed-Income Portfolio from inception of the Portfolio
through April 30, 1998, when the Money Manager Agreement with Smith
Barney was terminated. Bennington has invested the total assets of the
Intermediate Fixed-Income Portfolio since May 1, 1998.
(2) Effective March 1, 1994, Bennington discontinued subsidizing operating
expenses other than Bennington's and the Money Managers' fees ("Other
Expenses") of the Intermediate Fixed-Income Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "Redemption of Portfolio Shares."
(4) See discussion of portfolio turnover rates in "Portfolio Transaction
Policies."
* Annualized.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Short-Intermediate Fixed-Income Portfolio (1)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Period from 6/16/92
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $12.16 $12.32 $11.62 $12.29 $12.16 $12.00
------ ------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(2) 0.64 0.59 0.60 0.50 0.46 0.33
Before Bennington expense subsidy 0.64 0.59 0.60 0.49 0.45 0.29
Realized and Unrealized Gain (Loss)
on Investments 0.11 (0.16) 0.70 (0.67) 0.22 0.16
------ ------ ------ ------ ------ ------
Total from Investment Operations 0.75 0.43 1.30 (0.17) 0.68 0.49
------ ------ ------ ------ ------ ------
Dividends from Net Investment Income (0.64) (0.59) (0.60) (0.50) (0.46) (0.33)
Capital Gains Distributions 0.00 0.00 0.00 0.00 (0.07) 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 (0.02) 0.00
Total Distributions (0.64) (0.59) (0.60) (0.50) (0.55) (0.33)
------ ------ ------ ------ ------ ------
Net Asset Value at End of Period $12.27 $12.16 $12.32 $11.62 $12.29 $12.16
====== ====== ====== ====== ====== ======
Total Return(3) 6.33% 3.63% 11.42% (1.42%) 5.62% 4.12%
Net Assets, End of Period (000 Omitted) $40,942 $36,701 $35,272 $32,233 $32,568 $13,365
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(2) 0.86% 0.93% 0.94% 1.18% 1.05% 0.83%*
Before Bennington expense subsidy 0.86% 0.93% 0.94% 1.22% 1.12% 1.42%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(2) 5.20% 4.89% 4.99% 4.17% 3.78% 4.40%*
Before Bennington expense subsidy 5.20% 4.89% 4.99% 4.13% 3.71% 3.81%*
Portfolio Turnover Rate(4) 53.30% 31.12% 41.93% 36.54% 88.28% 107.26%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Bankers Trust Company was the Money Manager for the Short-Intermediate
Fixed-Income Portfolio from inception of the Portfolio through April
30, 1998, when the Money Manager Agreement with Bankers Trust Company
was terminated. Bennington has invested the total assets of the
Short-Intermediate Fixed-Income Portfolio since May 1, 1998.
(2) Effective March 1, 1994, Bennington discontinued subsidizing Other
Expenses of the Short-Intermediate Fixed-Income Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "Redemption of Portfolio Shares."
(4) See discussion of portfolio turnover rates in "Portfolio Transaction
Policies."
* Annualized.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
Mortgage Securities Portfolio
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Period from 6/16/92
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $12.23 $ 12.38 $ 11.36 $ 12.17 $ 12.02 $ 12.00
------ ------ ------ ------ ------ ------
Net Investment Income
After Bennington expense subsidy(1) 0.72 0.73 0.76 0.60 0.55 0.34
Before Bennington expense subsidy 0.72 0.73 0.76 0.60 0.53 0.30
Realized and Unrealized
Gain on Investments 0.42 (0.15) 1.02 (0.80) 0.31 0.13
------ ------ ------ ------ ------ ------
Total from Investment Operations 1.14 0.58 1.78 (0.20) 0.86 0.47
------ ------ ------ ------ ------ ------
Dividends from Net Investment Income (0.72) (0.73) (0.76) (0.60) (0.55) (0.34)
Capital Gains Distributions (0.05) 0.00 0.00 (0.01) (0.16) (0.03)
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00 (0.08)
Total Distributions (0.77) (0.73) (0.76) (0.61) (0.71) (0.45)
------- --------- --------- --------- --------- ---------
Net Asset Value at End of Period $12.60 $ 12.23 $ 12.38 $ 11.36 $ 12.17 $ 12.02
======= ========= ========= ========= ========= =========
Total Return(2) 9.53% 4.95% 16.03% (1.65%) 7.26% 3.93%
Net Assets, End of Period (000 Omitted $109,747 $73,862 $49,830 $32,975 $29,731 $15,356
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(1) 0.84% 0.95% 1.03% 1.31% 1.03% 0.84%*
Before Bennington expense subsidy 0.84% 0.95% 1.03% 1.35% 1.18% 1.40%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(1) 5.93% 6.08% 6.41% 5.18% 4.55% 4.68%*
Before Bennington expense subsidy 5.93% 6.08% 6.41% 5.14% 4.40% 4.12%*
Portfolio Turnover Rate (3) 211.66% 356.23% 422.56% 603.51% 399.19% 114.04%*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective March 1, 1994, Bennington discontinued subsidizing Other
Expenses of the Mortgage Portfolio.
(2) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent will charge a processing fee of $10.00
for redemptions made by check, which are not reflected in the total
return. See "Redemption of Portfolio Shares."
(3) See discussion of portfolio turnover rates in "Portfolio Transaction
Policies".
* Annualized.
-7-
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each of the Periods Indicated)
The following information on financial highlights for the periods
presented below have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon was unqualified. This information should be read
in conjunction with the financial statements and notes thereto and auditors'
reports that appear in the Fund's Annual Reports to Shareholders for those
periods. The Annual Report to Shareholders for the year ended December 31, 1997,
is incorporated by reference into and, unless previously provided, is delivered
together with the Statement of Additional Information dated May 1, 1998.
U.S. Government Money Portfolio (1)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Period from 6/16/92
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 to 12/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----- ----- ------- ------- ------- -------
Net Investment Income
After Bennington expense subsidy(2) 0.05 0.05 0.05 0.04 0.03 0.02
Before Bennington expense subsidy 0.05 0.05 0.05 0.03 0.03 0.02
Realized and Unrealized Gain on Investments 0.00 0.00 0.00 0.00 0.00 0.00
Total from Investment Operations 0.05 0.05 0.05 0.04 0.03 0.02
---- ---- ---- ---- ---- ----
Dividends from Net Investment Income (0.05) (0.05) (0.05) (0.04) (0.03) (0.02)
Capital Gains Distributions 0.00 0.00 0.00 0.00 0.00 0.00
Distributions in Excess of Capital Gains 0.00 0.00 0.00 0.00 0.00 0.00
Total Distributions (0.05) (0.05) (0.05) (0.04) (0.03) (0.02)
----- ----- ----- ----- ----- -----
Net Asset Value at End of Period $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===== ===== ======= ======= ======= =======
Total Return(3) 5.07% 4.78% 5.33% 3.70% 2.81% 2.40%
Net Assets, End of Period (000 Omitted) $50,910 $61,672 $41,882 $12,008 $26,693 $51,145
Ratio of Expenses to Average Net Assets
After Bennington expense subsidy(2) 0.54% 0.59% 0.53% 0.45% 0.45% 0.32%*
Before Bennington expense subsidy 0.54% 0.59% 0.78% 1.27% 0.77% 0.39%*
Ratio of Net Investment Income to
Average Net Assets
After Bennington expense subsidy(2) 4.96% 4.73% 5.14% 3.51% 2.71% 3.25%*
Before Bennington expense subsidy 4.96% 4.73% 4.89% 2.69% 2.39% 3.18%*
Portfolio Turnover Rate -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) State Street Bank and Trust Company ("State Street") was the Money
Manager for the U.S. Government Money Portfolio from inception of the
Portfolio through September 6, 1994, when the Money Manager Agreement
with State Street was terminated. Bennington has invested the total
assets of the U.S. Government Money Portfolio since September 7, 1994.
(2) Effective September 15, 1995, Bennington discontinued subsidizing Other
Expenses for the U.S. Government Money Portfolio.
(3) Total return is calculated assuming a purchase of shares at net asset
value per share on the first day and a sale at net asset value per
share on the last day of each period reported. Distributions are
assumed, for purposes of this calculation, to be reinvested at the net
asset value per share on the respective payment dates of each
Portfolio. The Transfer Agent charges a processing fee of $10.00 for
each redemption check requested by a shareholder, which is not
reflected in the total return. See "Redemption of Portfolio Shares."
* Annualized.
-8-
<PAGE>
PORTFOLIO MANAGEMENT
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios. At the present time, Bennington is
responsible for the selection of individual portfolio securities for all of the
assets of the U.S. Government Money Portfolio, Intermediate Fixed-Income
Portfolio and Short-Intermediate Fixed-Income Portfolio. 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. For the Portfolios covered by this prospectus, a separate Money
Manager currently manages the assets of the Mortgage Securities Portfolio.
References to the Money Manager or Money Managers throughout this prospectus
refer to the Money Manager for the Mortgage Securities Portfolio and any Money
Managers that may be hired from time to time for the other Portfolios.
Bennington allocates the assets within a Portfolio among any Money Managers
selected. See "Money Manager Profile" and "The Money Managers."
Although Bennington's activities are subject to general oversight by
the Board of Directors and the officers of the Fund, neither the Board nor the
officers evaluate the investment merits of Bennington's or any Money Manager's
individual security selections. The Board of Directors will review regularly the
Portfolios' performance compared to the applicable indices and also will review
the Portfolios' compliance with their investment objectives and policies. See
"General Management of the Portfolios."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as a
multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. Each portfolio
issues two classes of shares, Advisor Class Shares and Investor Class Shares.
This Prospectus covers only the Advisor Class Shares of the four fixed-income
Portfolios of the Fund. The Investor Class Shares of the four fixed-income
Portfolios of the Fund as well as the Advisor Class Shares and Investor Class
Shares of the Fund's other four portfolios, which are designed for investment in
equity securities, are intended to be offered through separate prospectuses.
Each Portfolio's assets are invested by Bennington and/or a Money Manager that
has been analyzed, evaluated and recommended by Bennington. Bennington also
operates and administers the Fund and monitors the performance of the Money
Manager. Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio, as defined in
the Investment Company Act. Other policies reflect current practices of the
Portfolios, and may be changed by the Portfolios without the approval of
shareholders. This section of the Prospectus describes each Portfolio's
investment objective, policies and restrictions. A more detailed discussion
appears in the Statement of Additional Information and includes a list of the
Portfolios' investment restrictions.
Under normal circumstances, each Portfolio will invest at least 65% and
generally more than 80% of its total assets in the types of securities
identified in its statement of objective as principal investments. Bennington
will attempt to have each Portfolio (other than the U.S. Government Money
Portfolio) managed so that the Portfolio's investment performance equals or
exceeds the total return performance of a relevant index (the "Benchmark
Index"), as set forth below.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate Fixed-Income Lehman Brothers Government/Corporate
1-5 Year Index
Mortgage Securities Lehman Brothers Mortgage-Backed Securities
Index
See Appendix A for a description of these Benchmark Indices. A change in a
Benchmark Index may be effected with the approval of only the Board of Directors
and does not require the approval of shareholders. Each Portfolio (other than
the U.S. Government Money Portfolio) may have up to 20% of its total assets
invested in money market instruments to provide liquidity. If, in the opinion of
Bennington or a Money Manager, market or economic conditions warrant, the
Portfolio may adopt a temporary defensive strategy. In that event, the Portfolio
may hold assets as cash reserves without limit. See "Investment
Policies--Liquidity Reserves." Also, under these economic or market conditions,
the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio may deviate from their designated average dollar weighted duration
ranges. See "Investment Objectives and Investment Policies --Intermediate
Fixed-Income Portfolio," and "--Short-Intermediate Fixed-Income Portfolio."
There can be no assurance that the investment objective for any Portfolio will
be realized.
No Portfolio will invest in fixed-income securities, including
convertible securities, rated less than A by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in unrated securities
judged by Bennington or a Money Manager to be of a lesser credit quality than
those designations. The Portfolios will sell securities that they have purchased
in a prudent and orderly fashion when ratings drop below these minimum ratings.
See Appendix A in the Statement of Additional Information for a description of
securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity and
debt securities. No assurance can be given that the Portfolios will achieve
their investment objectives.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. See "Investment Policies--Risks of Investing
in Foreign Securities." Certain Portfolios also may be subject to certain risks
in using investment techniques and strategies such as entering into repurchase
agreements and trading futures contracts and options on futures contracts. See
"DESCRIPTION OF THE PORTFOLIOS--Investment Policies". The use of options and
futures by a Portfolio entails certain risks, including the risk that to the
extent the Money Manager's views as to certain market movements are incorrect,
the use of such instruments could result in losses greater than if they had not
been used. Such instruments may also force sales or purchases of Portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount the Portfolio could realize on its investments or cause the
Portfolio to hold a security it might otherwise sell. Also, when used for
hedging existing positions, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Portfolio could create the possibility that losses on the
hedging instrument will be greater than gains in the value of the Portfolio's
position, thereby reducing the Portfolio's net asset value. In addition, the
Bond Portfolios will invest in U.S. Government stripped mortgage-related
securities which, due to changes in interest rates, may be more speculative and
subject to greater fluctuations in value than securities that pay interest
currently. See "DESCRIPTION OF THE PORTFOLIOS--Investment Policies" and
"Investment Restrictions, Policies and Risk Considerations--Investment
Restrictions" in the Statement of Additional Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Managers may increase a Portfolio's portfolio
turnover rate, realization of gains or losses, and brokerage commissions. High
portfolio turnover may involve correspondingly greater brokerage commissions and
transaction costs, which will be borne by the Portfolios and may result in
increased short-term capital gains which, when distributed to shareholders, are
treated as ordinary income. See "PORTFOLIO TRANSACTION POLICIES" and "TAXES."
With respect to the Intermediate Fixed-Income and Short-Intermediate
Fixed-Income Portfolios, Bennington or a Money Manager may adopt a temporary
defensive strategy under abnormal market or economic conditions. During these
times, one or more Portfolios may make investments which result in the
Portfolios' average dollar weighted duration rising above their designated
ranges. Such a strategy differs from other defensive strategies in that it
involves greater rather than less risk to the Portfolios. See "Investment
Objectives and Investment Policies --Intermediate Fixed-Income Portfolio," and
"--Short-Intermediate Fixed-Income Portfolio."
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot be
changed without the approval of the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Statement of Additional
Information. The other investment policies and practices of each Portfolio,
unless otherwise noted, are not fundamental and may therefore be changed by a
vote of the Board of Directors without shareholder approval. For a more detailed
discussion regarding the Benchmark Indices, see Appendix A.
The INTERMEDIATE FIXED-INCOME PORTFOLIO seeks generation of current
income by investing primarily in fixed-income securities with durations of
between three and ten years and a dollar weighted average portfolio duration
that does not vary more or less than 20% from that of the Lehman Brothers
Government/Corporate Index or another relevant index approved by the Board of
Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of between three and ten years. The Portfolio invests principally in
bonds, debentures and other fixed-income securities with durations of between
three and ten years, including: obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; U.S. dollar-denominated corporate
debt securities of domestic or foreign issuers; mortgage- and other asset-backed
securities including stripped mortgage-backed securities; variable and floating
rate debt securities; U.S. dollar-denominated obligations of foreign governments
and foreign governmental agencies; and convertible securities. See "Investment
Policies--Risks of Investing in Foreign Securities."
Investment selections will be based on fundamental economic, market and
other factors leading to variation by sector, maturity, quality and such other
criteria as are appropriate to meet the stated objectives. Bennington and/or the
Money Manager will attempt to equal or exceed the total return performance of
the Lehman Brothers Government/Corporate Index (the "LBGC Index"). In approving
the LBGC Index, the Board of Directors took into consideration the substantial
similarity between the securities expected to be held by the Portfolio and the
LBGC Index securities with respect to the following factors, among others: the
duration, credit ratings and volatility risk. The Portfolio may utilize options
on U.S. Government securities, interest rate futures contracts and options on
interest rate futures contracts to reduce certain risks of its investments and
to attempt to enhance income, but not for speculation. See "Investment
Policies--Options" and "--Futures Contracts."
The SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO seeks preservation of
capital and generation of current income by investing primarily in fixed-income
securities with durations of between one and five years and a dollar weighted
average portfolio duration that does not vary more or less than 20% from that of
the Lehman Brothers 1-5 Year Government/Corporate Index or another relevant
index approved by the Board of Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of not less than two years nor more than five years.
The Portfolio invests principally in fixed-income securities of the
type permitted for investment by the Intermediate Fixed-Income Portfolio but
with a shorter dollar weighted average portfolio duration. Bennington and/or the
Money Manager will attempt to equal or exceed the total return performance of
the Lehman Brothers Government/Corporate 1-5 Year Index (the "LBGC5 Index"). In
approving the LBGC5 Index, the Board of Directors took into consideration the
substantial similarities between the securities expected to be held by the
Portfolio and the LBGC5 Index securities, which include among others: duration,
credit ratings and volatility risk. The Portfolio may utilize options on U.S.
Government securities, interest rate futures contracts and options on interest
rate futures contracts to reduce certain risks of its investments and to attempt
to enhance income, but not for speculation. See "Investment Policies--Options"
and "--Futures Contracts."
The MORTGAGE SECURITIES PORTFOLIO seeks generation of current income by
investing primarily in mortgage-related securities with an aggregate dollar
weighted average portfolio duration that does not vary outside of a band of plus
or minus 20% from that of the Lehman Brothers Mortgage-Backed Securities Index
(the "LBM Index") or another relevant index approved by the Board of Directors.
The market value of these securities can and will fluctuate as interest
rates and market conditions change. Fixed-rate mortgages decline in value during
periods of rising interest rates. Adjustable rate mortgage securities allow the
Portfolio to participate in increases in interest rates through periodic
adjustments in the coupons of the underlying mortgages. See "Investment
Policies--Mortgage-Related Securities." Under normal market conditions, the
Portfolio seeks to achieve this objective by investing at least 65% and
generally more than 80% of its total assets in mortgage related securities, and
the Portfolio's principal investments will be mortgage-related securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. Up to
50% of the Portfolio's net assets may be invested in collateralized mortgage
obligations ("CMOs"), real estate mortgage investment conduits ("REMICs") or
asset-backed securities. See "Investment Policies--Asset-Backed Securities" and
"--Risks of Investing in Asset-Backed and Mortgage-Related Securities" in this
Prospectus and "Investment Restrictions, Policies and Risk
Considerations--Investment Policies--Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs")" in the
Statement of Additional Information. Bennington and/or the Money Manager will
attempt to equal or exceed the total return performance of the LBM Index. In
approving the LBM Index, the Board of Directors took into consideration factors
such as the substantial similarity between the securities expected to be held by
the Portfolio and those in the LBM Index and that the index would have a risk
level appropriate to the objective of this Portfolio. The Portfolio also may
utilize options on U.S. Government securities, interest rate futures and options
thereon for hedging purposes and to attempt to enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures Contracts."
The U.S. GOVERNMENT MONEY PORTFOLIO seeks maximum current income
consistent with the preservation of principal and liquidity by investing
primarily in short-term obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. See "Investment Policies--U.S. Government
Securities."
The dollar weighted average portfolio maturity of the Portfolio will
not exceed 90 days. Under normal market conditions, the Portfolio seeks to
achieve this objective by investing at least 65% and generally more than 80% of
a Portfolio's total assets in fixed-income securities. The Portfolio limits its
Portfolio investments to those which mature in 13 months or less from the date
of purchase, present minimal credit risks and are of "eligible quality" as
determined by the Portfolio's manager under the supervision of the Board of
Directors. See "Investment Policies--Money Market Instruments." The Portfolio
may enter into repurchase agreements collateralized by U.S. Government
securities. See "Investment Policies--Repurchase Agreements." While the U.S.
Government Money Portfolio intends to maintain its net asset value at $1.00 per
share, an investment in this Portfolio is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share. See "VALUATION OF
PORTFOLIO SHARES."
Investment Policies
Duration. Duration is used in the Bond Portfolios by Bennington and/or
the Money Manager, as applicable, in security selection. Duration, which is one
of the fundamental tools used by money managers in security selection, is a
measure of the price sensitivity of a security or a portfolio to relative
changes in interest rates. For instance, a duration of "one" means that a
portfolio's or security's price would be expected to change by approximately one
percent with a one percent change in interest rates. Assumptions generally
accepted by the industry concerning the probability of early payment and other
factors may be used in the calculation of duration for debt securities that
contain put or call provisions, sometimes resulting in a duration different from
the stated maturity of the security.
With respect to certain mortgage-backed securities, duration is likely
to be substantially less than the stated maturity of the mortgages in the
underlying pools. The maturity of a security measures only the time until final
payment is due and, in the case of a mortgage-backed security, does not take
into account the factors included in duration. Under normal market conditions
(in the opinion of Bennington or a Money Manager, if applicable), the average
dollar-weighted maturity of the Intermediate Fixed-Income Portfolio will be
between three and 10 years and the average dollar-weighted maturity of the
Short-Intermediate Fixed-Income Portfolio will be between two and five years.
A Portfolio's duration directly impacts the degree to which asset
values fluctuate with changes in interest rates. For every one percent change in
interest rate, a Portfolio's net asset value is expected to change inversely by
approximately one percent for each year of duration. For example, a one percent
increase in interest rate would be expected to cause a fixed-income portfolio
with an average dollar weighted duration of five years, to decrease in value by
approximately five percent (one percent interest rate increase multiplied by the
five year duration). Since the Portfolios' objective is to provide high current
income, the Portfolios will invest in obligations with an emphasis on income
rather than stability of the Portfolios' net asset value.
If, in the opinion of Bennington and/or the Money Manager, as
applicable, market or economic conditions warrant, these Portfolios may adopt a
temporary defensive strategy. During these times, the average dollar weighted
duration of the Intermediate Fixed-Income Portfolio may fall below three years,
or rise to as high as fifteen years and the Short-Intermediate Fixed-Income
Portfolio may fall below one year, or rise to as high as fifteen years. In such
event, the Portfolios will be subject to greater or less risk depending on
whether average dollar weighted duration is increased or decreased. At any time
that these Portfolios' average dollar weighted duration is increased, the
Portfolios are subject to greater risk, since at higher durations a Portfolio's
asset value is more significantly impacted by changes in prevailing interest
rates than at lower durations. Likewise, when the Portfolio's average dollar
weighted duration is decreased, the Portfolio is subject to less risk, since at
lower durations a Portfolio's asset value is less significantly impacted by
changes in prevailing interest rates than at higher durations. When Bennington
and/or the Money Manager determines that a temporary defensive strategy is no
longer needed, investments will be reallocated to return the Portfolios to their
designated average dollar weighted duration. Such reallocations are not expected
to be sudden, but will be made gradually over time.
Liquidity Reserves. Each Portfolio (other than the U.S. Government
Money Portfolio) is authorized to invest its cash reserves (funds awaiting
investment in the specific types of securities to be acquired by a Portfolio or
cash to provide for payment of the Portfolio's expenses or to permit the
Portfolio to meet redemption requests) in money market instruments or in debt
securities which are at least comparable in quality to the Portfolio's permitted
investments. Under normal circumstances, no more than 20% of a Portfolio's net
assets will be comprised of these instruments. The Portfolios (other than the U.
S. Government Money Portfolio) also may enter into financial futures contracts
in accordance with their investment objectives to minimize the impact of cash
balances. "GENERAL MANAGEMENT OF THE PORTFOLIOS" and "Investment
Policies--Liquidity Reserves" in the Statement of Additional Information.
Money Market Instruments. Each Portfolio (other than the U. S.
Government Money Portfolio) may invest up to 20% of its net assets in:
(i) Obligations (including certificates of deposit and
bankers' acceptances) maturing in 13 months or less of (a) banks
organized under the laws of the United States or any state thereof
(including foreign branches of such banks) or (b) U.S. branches of
foreign banks or (c) foreign banks and foreign branches thereof;
provided that such banks have, at the time of acquisition by the
Portfolio of such obligations, total assets of not less than $1 billion
or its equivalent. The term "certificates of deposit" includes both
Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not
a market. "Eurodollars" are dollars deposited in banks outside the
United States; the Portfolios may invest in Eurodollar instruments of
foreign and domestic banks; and
(ii) Commercial paper, variable amount demand master notes,
bills, notes and other obligations issued by a U.S. company, a foreign
company or a foreign government, its agencies or instrumentalities,
maturing in 13 months or less, denominated in U.S. dollars, and of
"eligible quality" as described below. If such obligations are
guaranteed or supported by a letter of credit issued by a bank, such
bank (including a foreign bank) must meet the requirements set forth in
paragraph (i) above. If such obligations are guaranteed or insured by
an insurance company or other non-bank entity, such insurance company
or other non-bank entity must represent a credit of high quality, as
determined by the Portfolio's Money Manager, under the supervision of
Bennington and the Board of Directors, or Bennington, as applicable.
"Eligible quality," for this purpose, means (i) a security rated (or
issued by an issuer that is rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security) in the highest short-term rating category (e.g.,
A-1/P-1) or one of the two highest long-term rating categories (e.g., AAA/Aaa or
AA/Aa) by at least two major rating agencies assigning a rating to the security
or issuer (or, if only one agency assigned a rating, that agency) or (ii) an
unrated security deemed of comparable quality by the Portfolio's Money Manager,
if applicable, or Bennington under the general supervision of the Board of
Directors. The purchase by the Portfolio of a security of eligible quality that
is rated by only one rating agency or is unrated must be approved or ratified by
the Board of Directors.
In selecting commercial paper and other corporate obligations for
investment by a Portfolio, Bennington and/or the Money Manager, as applicable,
also considers information concerning the financial history and condition of the
issuer and its revenue and expense prospects. Bennington monitors, and the Board
of Directors reviews on a quarterly basis, the credit quality of securities
purchased for the Portfolio. If commercial paper or another corporate obligation
held by a Portfolio is assigned a lower rating or ceases to be rated, the Money
Manager under the supervision of Bennington and the Board of Directors, or
Bennington, as applicable, will promptly reassess whether that security presents
minimal credit risks and whether the Portfolio should continue to hold the
security in its portfolio. If a portfolio security no longer presents minimal
credit risks or is in default, the Portfolio will dispose of the security as
soon as reasonably practicable unless Bennington and the Board of Directors
determine that to do so is not in the best interests of the Portfolio and its
shareholders. Variable amount demand master notes with demand periods of greater
than seven days will be deemed to be liquid only if they are determined to be so
in compliance with procedures approved by the Board of Directors.
U.S. Government Securities. Each Portfolio (including, in particular,
the U. S. Government Money Portfolio) may invest in United States Treasury
securities, including bills, notes, bonds and other debt securities issued by
the United States Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and their issue dates.
The Portfolios may invest in securities issued by agencies or
instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
Obligations of the Government National Mortgage Association ("GNMA"),
the Farmers Home Administration and the Export-Import Bank are backed by the
full faith and credit of the United States. Securities in which the Portfolios
may invest that are not backed by the full faith and credit of the United States
include obligations issued by (i) the Tennessee Valley Authority, the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service (each of these
issuers has the right to borrow from the United States Treasury to meet its
obligations) and (ii) the Federal Farm Credit Bank and the Federal Home Loan
Bank (each of these issuers may rely only on the individual credit of the
issuing agency to satisfy its obligations). No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the U.
S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
The U. S. Government Money Portfolio utilizes the amortized cost method
of valuation in accordance with regulations issued by the SEC. See "VALUATION OF
PORTFOLIO SHARES--Valuation of Portfolio Securities." Accordingly, the U. S.
Government Money Portfolio will limit its Portfolio investments to those
instruments with a maturity of 397 days or less, and which are issued by the
U.S. Government, its agencies and instrumentalities.
Types of Corporate Obligations. Debt obligations of corporations in
which the Portfolios may invest include (i) corporate debt securities, including
bonds, debentures, and notes; (ii) commercial paper (including variable-amount
master demand notes); (iii) repurchase agreements involving investment-grade
debt obligations; and (iv) convertible securities-debt obligations of
corporations convertible into or exchangeable for equity securities.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a bank or broker-dealer that agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified time (ordinarily a week
or less). If the party agreeing to repurchase should default and if the value of
the securities held by the Portfolio should fall below the repurchase price, the
Portfolio could incur a loss. Subject to the limitation on investing no more
than 15% of a Portfolio's net assets in illiquid securities, no Portfolio will
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days; provided, however, the
U.S. Government Money Portfolio will not invest more than 10% of its net assets
in illiquid securities (including repurchase agreements maturing in more than
seven days). See "Investment Policies--Illiquid Securities."
Repurchase agreements will at all times be fully collateralized by U.S.
Government obligations or other collateral in an amount at least equal to the
repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's Custodian, either
physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the other
party to the repurchase agreement becomes bankrupt or otherwise fails to deliver
the securities.
A Portfolio will enter into repurchase transactions only with parties
who meet creditworthiness standards approved by the Board of Directors.
Bennington or the Money Managers, as applicable, monitor the creditworthiness of
such parties under the general supervision of the Board of Directors. See
"Investment Policies--Repurchase Agreements" in the Statement of Additional
Information.
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio's entry
into reverse repurchase agreements and dollar rolls (except the U.S. Government
Money Portfolio), together with its other borrowings, is limited to 5% of its
net assets. See "Investment Policies--Reverse Repurchase Agreements and Dollar
Rolls" in the Statement of Additional Information.
Rights and Warrants. Each Portfolio (except the U.S. Government Money
Portfolio) may acquire up to 5% of its net assets in rights and warrants in
securities of issuers that meet the Portfolio's investment objective and
policies. See "Investment Restrictions" and "Investment Policies--Rights and
Warrants" in the Statement of Additional Information.
Privately-Issued STRIP Securities. The Portfolios may invest up to 5%
of their net assets in privately-issued STRIP securities. See "Investment
Policies--Privately-Issued STRIP Securities" in the Statement of Additional
Information.
Mortgage-Related Securities. The Bond Portfolios may invest in
mortgage-related securities. Mortgage loans made by banks, savings and loan
institutions and other lenders are often assembled into pools, the interests in
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Interests in such pools are called "mortgage-related
securities" or "mortgage-backed securities."
Most mortgage-related securities are pass-through securities, which
means that they provide investors with payments consisting of both principal and
interest as mortgages in the underlying mortgage pool are paid off by the
borrower. The dominant issuers or guarantors of mortgage-related securities
today are GNMA, FNMA and FHLMC. GNMA creates mortgage-related securities from
pools of Government-guaranteed or insured (Federal Housing Authority or Veterans
Administration) mortgages originated by mortgage bankers, commercial banks and
savings and loan associations. FNMA and FHLMC issue mortgage-related securities
from pools of conventional and federally insured or guaranteed residential
mortgages obtained from various entities, including savings and loan
associations, savings banks, commercial banks, credit unions and mortgage
bankers.
The mortgage-related securities either issued or guaranteed by GNMA,
FHLMC or FNMA ("Certificates") are called pass-through Certificates because a
pro rata share of both regular interest and principal payments (less GNMA's,
FHLMC's or FNMA's fees and any applicable loan servicing fees), as well as
unscheduled early prepayments on the underlying mortgage pool, are passed
through monthly to the holder of the Certificate (i.e., the Portfolio). The
principal and interest on GNMA securities are guaranteed by GNMA and backed by
the full faith and credit of the U.S. Government. FNMA guarantees full and
timely payment of all interest and principal, while FHLMC guarantees timely
payment of interest and ultimate collection of principal. Mortgage-related
securities from FNMA and FHLMC are not backed by the full faith and credit of
the United States; however, in the Fund's opinion, their close relationship with
the U.S. Government makes them high quality securities with minimal credit
risks. The yields provided by these mortgage-related securities have
historically exceeded the yields on other types of U.S. Government securities
with comparable maturities; however, these securities generally have the
potential for greater fluctuations in yields as their prices will not generally
fluctuate as much as more traditional fixed-rate debt securities.
The Bond Portfolios may invest in pass-through mortgage-related
securities, such as fixed-rate mortgage-related securities ("FRMs") and
adjustable rate mortgage-related securities ("ARMs"), which are collateralized
by fixed rate mortgages and adjustable rate mortgages, respectively. ARMs have a
specified maturity date and amortize principal much in the fashion of a
fixed-rate mortgage. As a result, in periods of declining interest rates there
is a reasonable likelihood that ARMs will behave like FRMs in that current
levels of prepayments of principal on the underlying mortgages could accelerate.
One difference between ARMs and FRMs is that, for certain types of ARMs, the
rate of amortization of principal, as well as interest payments, can and does
change in accordance with movements in a particular, pre-specified, published
interest rate index. The amount of interest due to an ARM security holder is
calculated by adding a specified additional amount, the "margin," to the index,
subject to limitations or "caps" on the maximum and minimum interest that is
charged to the mortgagor during the life of the mortgage or to maximum and
minimum changes to that interest rate during a given period.
In addition to GNMA, FNMA or FHLMC Certificates, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the Certificate, the Bond Portfolios also may invest in
pass-through mortgage-related securities where all interest payments go to one
class of holders ("Interest Only Securities" or "IOs") and all principal
payments go to a second class of holders ("Principal Only Securities" or "POs").
These securities are commonly referred to as mortgage-backed security strips or
MBS strips. Stripped mortgage-related securities have greater market volatility
than other types of mortgage-related securities in which the Bond Portfolios may
invest. The yields to maturity on IOs and POs are sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets and principal payments may have a material effect on yield to maturity.
If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Portfolio may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience less
than anticipated prepayments of principal, the yield on POs could be materially
adversely affected. The Bond Portfolios will treat IOs and POs as illiquid
securities except for (i) IOs and POs issued by U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by Bennington and the Money Managers for these Portfolios subject to the
supervision of the Board of Directors or (ii) where such securities can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share. See
"Investment Policies--Illiquid Securities."
Asset-Backed Securities. Each Portfolio (other than the U. S.
Government Money Portfolio) may invest in asset-backed securities offered
through trusts and special purpose subsidiaries in which various types of
assets, primarily home equity loans and automobile and credit card receivables,
are securitized in pass-through structures, which means that they provide
investors with payments consisting of both principal and interest as the loans
in the underlying asset pool are paid off by the borrowers. The Bond Portfolios
may invest in these and other types of asset-backed securities which may be
developed in the future.
Risks of Investing in Asset-Backed and Mortgage-Related Securities. The
yield characteristics of mortgage-related securities (including CMOs and REMICs)
and asset-backed securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if a Portfolio purchases such a security at a premium,
a prepayment rate that is faster than expected will reduce yield to maturity,
while a prepayment rate that is slower than expected will have the opposite
effect of increasing yield to maturity. Alternatively, if the Portfolio
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Although the extent of prepayments in a pool of mortgage loans depends
on various economic and other factors, as a general rule prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the Portfolio are likely to be greater
during a period of declining interest rates and, as a result, likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-related securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors
will predominate. Mortgage-related securities and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
the risk of prepayment
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, because asset-backed securities do not usually have
the type of security interest in the related collateral that mortgage-related
securities have. For example, credit card receivables generally are unsecured
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, some of which may reduce a creditor's ability to realize
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
Municipal Securities. The Portfolios may invest up to 5% of their net
assets in fixed-income securities issued by states, counties and other local
governmental jurisdictions, including agencies of such governmental
jurisdictions, within the United States. See "Investment Policies--Municipal
Securities" in the Statement of Additional Information.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio, pursuant to a securities lending agency agreement
between the lending agent and the Fund, may lend its portfolio securities to
brokers, dealers and financial institutions deemed creditworthy by Bennington
and the applicable lending agent. The outstanding loans may not exceed in the
aggregate the maximum amount of the value of the Portfolio's net assets allowed
by applicable law, currently 33-1/3%. Such loans are callable at any time by the
Portfolio and are at all times secured by cash or U.S. Government securities,
irrevocable letters of credit or such other acceptable collateral that is at
least equal to the market value, determined daily, of the loaned securities. The
Portfolio will receive the collateral in an amount equal to at least 102% (in
the case of domestic securities) or 105% (in the case of foreign securities) of
the current market value of the loaned securities plus accrued interest. Cash
collateral received by the Portfolio will be invested in any securities in which
the Fund is authorized to invest. A loan may be terminated by the borrower on
one business day's notice or by the Portfolio at any time. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of right in the collateral should the borrower of the securities fail
financially. The advantage of such loans is that the Portfolio continues to
receive interest and dividends on the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations. The risks of lending securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral or in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy as monitored by Bennington and the lending agent pursuant to
procedures approved by the Board of Directors. On termination of the loan, the
borrower is required to return the securities to the Portfolio, and any gain or
loss in the market price during the loan would be borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower. See "Investment Policies--Lending of Portfolio Securities" in the
Statement of Additional Information.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities; provided, however, the U.S. Government Money
Portfolio will not invest more than 10% of its net assets in illiquid
securities. Securities which are illiquid include repurchase agreements of more
than seven days duration, securities which lack a readily available market or
have legal or contractual restrictions on resale, certain IO/PO strips and
over-the-counter ("OTC") options. Restricted securities issued pursuant to Rule
144A under the Securities Act of 1933, as amended, that have a readily available
market are not deemed illiquid for purposes of this limitation, pursuant to
liquidity procedures that have been adopted by the Board of Directors. Investing
in Rule 144A securities could result in increasing the level of a Portfolio's
illiquidity if qualified institutional buyers become, for a time, uninterested
in purchasing these securities. Bennington and/or the Money Manager under the
supervision of Bennington and the Board of Directors, will monitor the liquidity
of such restricted securities.. See "Investment Policies--Illiquid Securities"
in the Statement of Additional Information.
Options. Each Portfolio (other than the U.S. Government Money
Portfolio) may purchase put and call options and may write (sell) "covered" put
and "covered" call options. The Bond Portfolios may purchase and write options
on U.S. Government securities. The Bond Portfolios may write covered put and
call options to generate additional income through the receipt of premiums, may
purchase put options in an effort to protect the value of securities in their
portfolios against a decline in market value and purchase call options in an
effort to protect against an increase in the price of securities they intend to
purchase. All options on U.S. Government securities purchased or sold by the
Bond Portfolios will be traded on U.S. securities exchanges or will result from
separate, privately negotiated transactions with a primary government securities
dealer recognized by the Board of Governors of the Federal Reserve System.
OTC options are privately negotiated with the counterparty to such
contract and are purchased from and sold to dealers, financial institutions or
other counterparties which have entered into direct agreements with the
Portfolios. If the counterparty fails to take delivery of the securities
underlying an option it has written, the Portfolios would lose the premium paid
for the option as well as any anticipated benefit of the transaction.
Consequently, the Portfolios must rely on the credit quality of the
counterparty. The staff of the SEC has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities subject to the 15% limitation described above in "Illiquid
Securities." Options on currencies are similar to options on stocks except that
there is no transfer of a security and settlement is in cash.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's Custodian, cash, U.S.
Government securities or other liquid assets with an aggregate value, measured
on a daily basis, at least sufficient to meet its obligations under the call
option, or if the Portfolio owns an offsetting call option. When a Portfolio
writes a call option, it receives a premium and gives the purchaser the right to
buy the underlying security at any time during the call period, at a fixed
exercise price regardless of market price changes during the call period. If the
call is exercised, the Portfolio forgoes any gain from an increase in the market
price of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities underlying
the option at the exercise price. A written put option is "covered" if a
Portfolio deposits with the Fund's Custodian, cash, U.S. Government securities
or other liquid assets with an aggregate value, measured on a daily basis, at
least equal to the exercise price of the put option.
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and the assets used as cover for written OTC
options. The SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities subject to
the 15% limitation described above in "Illiquid Securities." The U.S. Government
Money Portfolio will not invest more than 10% of its net assets in illiquid
securities. Furthermore, a Portfolio will not purchase or write put or call
options on securities or financial futures if the aggregate premiums paid on all
such options exceed 20% of the Portfolio's total net assets, subject to the
foregoing limitations.
When a Portfolio writes either a put or call option, the Portfolio is
required to deposit an initial margin with the Fund's Custodian for the benefit
of the options broker. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its option commitment. When the Portfolio writes
options and an adverse price movement occurs, the Portfolio may be called upon
to deposit an additional or variation margin. Both the initial and additional or
variation margin must be made in cash or U.S. Government securities. The
required margin amount is subject to change by the appropriate exchange or
regulatory authority.
Futures Contracts. Each Portfolio (other than the U. S. Government
Money Portfolio) is permitted to enter into financial futures contracts and
related options ("futures contracts") in accordance with its investment
objective. Futures contracts will be limited to hedging transactions to minimize
the impact of cash balances and for return enhancement and risk management
purposes in accordance with regulations of the Commodity Futures Trading
Commission.
A "financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as United States Treasury bonds, notes
and bills, commercial paper, bank certificates of deposit, an agreed amount of
currencies, or the cash value of a financial instrument index at a specified
future date at a price agreed upon when the contract is made. Substantially all
futures contracts are closed out before settlement date or called for cash
settlement. A futures contract is closed out by buying or selling an identical
offsetting contract which cancels the original contract to make or take
delivery.
The Portfolios may purchase and write options on futures contracts as
an alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures contracts are similar to options on the security
upon which the futures contracts are written except that options on financial
futures contracts give the purchaser the right to assume a position at a
specified price in a financial futures contract at any time during the life of
the option.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's Custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its futures commitment. The initial margin amount is
subject to change by the appropriate exchange or regulatory authority. The
Portfolio will also be required to settle any gains or losses on a daily basis
in cash (variation margin). If the Portfolio is unable to meet an additional
margin requirement, the Portfolio may be forced to close out its position at a
price that may be detrimental to the Portfolio. When trading futures contracts,
a Portfolio will not commit more than 5% of the market value of its total assets
as initial margins. See "Investment Policies--Futures Contracts" in the
Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies.
Participation in the options or futures markets involves investment risks and
transaction costs to which a Portfolio would not be subject absent the use of
these strategies. If the Money Manager's predictions of movements in the
direction of the securities and interest rate markets are inaccurate, the
adverse consequences to the Portfolio may leave the Portfolio in a worse
position than if such strategies were not used. Risks inherent in the use of
options and futures contracts and options on futures contracts include: (1)
dependence on Bennington and/or the Money Manager's ability to predict correctly
movements in the direction of interest rates and securities prices; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities being hedged; (3)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; (5) the possible
need to raise additional initial margin; (6) in the case of futures, the need to
meet daily margin in cash; and (7) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. See "Taxes" in the
Statement of Additional Information.
Risks of Investing in Foreign Securities. The Bond Portfolios may
invest in foreign securities. Foreign securities involve certain risks. These
risks include political or economic instability in the country of the issuer,
the difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. Generally,
outside the United States there is less government regulation of securities
exchanges, brokers and listed companies and, with respect to certain foreign
countries, there is a possibility of expropriation, confiscatory taxation or
diplomatic developments which could affect investments within such countries.
In many instances, foreign debt securities may provide higher yields
than securities of domestic issuers which have similar maturities and quality.
However, under certain market conditions, these investments may be less liquid
than investments in the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
Investment Restrictions
Each Portfolio is subject to investment restrictions which, as
described in more detail in the Statement of Additional Information, have been
adopted by the Fund on behalf of the Portfolios as fundamental policies that
cannot be changed with respect to a Portfolio without the approval of the
holders of a majority of such Portfolio's outstanding voting securities, as
defined in the Investment Company Act. Among other restrictions, the Portfolios
will not purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result (i) with respect to 75% of a
Portfolio's total assets, more than 5% of a Portfolio's total assets would then
be invested in securities of a single issuer, or (ii) 25% or more of a
Portfolio's total assets would be invested in one or more issuers having their
principal business activities in the same industry. See "Investment
Restrictions, Policies and Risk Considerations--Investment Restrictions" in the
Statement of Additional Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally the
operation of the Fund, including reviewing and approving the Fund's service
contracts with Bennington and any Money Managers. The Fund's officers, all of
whom are employed by Bennington, are responsible for the day-to-day management
and administration of the Fund's operations. The Money Managers are responsible
for the selection of individual portfolio securities for the assets assigned to
them by Bennington. Bennington is responsible for the selection of individual
portfolio securities for the assets of the Portfolios managed by it and does not
receive any fees beyond the fees paid pursuant to the Management Agreement.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, was organized
as a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. Bennington's general partners are
Northwest Advisors, Inc., Bennington Management Associates, Inc. and Bennington
Capital Management Investment Corp., all of which are Washington corporations.
The sole limited partner is Zions Investment Management, Inc., a wholly-owned
subsidiary of Zions First National Bank, N.A. Bennington Management Associates,
Inc., which is controlled by J. Anthony Whatley, III, is the managing general
partner of Bennington. Mr. Whatley, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. Ravindra
A. Deo, Vice President and Chief Investment Officer of Bennington, is primarily
responsible for the day-to-day management of the Portfolios either directly or
through interaction with each Portfolio's Money Manager and Mr. Deo is
responsible for managing the liquidity reserves of each Portfolio. Mr. Deo has
served Bennington in such capacity since January 1992. Prior thereto, he was
Senior Vice President at Leland O'Brien Rubenstein Associates Incorporated, an
investment manager, where he was employed from 1986 to 1991. See "Management of
the Fund" in the Statement of Additional Information.
Fund Manager Services and Fees. Pursuant to the Management Agreement
with the Fund, Bennington provides the following services: (i) provides or
oversees the provision of all general management, investment advisory and
portfolio management services for the Fund, including the transfer agent,
custodian, portfolio accounting and shareholder recordkeeping services for the
Fund; (ii) provides the Fund with office space, equipment and personnel
necessary to operate and administer the Fund's business; (iii) develops the
investment programs, selects Money Managers, allocates assets among Money
Managers, and monitors the Money Managers' investment programs and results; and
(iv) invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' other assets. For providing these services, Bennington is paid by
each Portfolio a fee equal on an annual basis to the following percentage of the
Portfolio's average daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
- --------- -------------------------
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Pursuant to the Transfer Agent Agreement effective December 1, 1995, as
amended February 19, 1998, between Bennington and the Fund, Bennington provides
transfer agent, registrar and dividend disbursing agent services as well as
certain other administrative, compliance and recordkeeping services to the Fund.
For providing these services, Bennington receives (i) a fee equal to 0.13% of
the average daily net assets of each Portfolio of the Fund, and (ii) a
transaction fee of $.50 per transaction.
Bennington may, out of its own resources, provide marketing and
promotional support on behalf of the Portfolios. Services provided by Bennington
are in addition to, and not duplicative of, the services provided by Service
Organizations to their clients.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington
and Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, for the Intermediate Fixed-Income Portfolio, Short-Intermediate
Fixed-Income Portfolio and U.S. Government Money Portfolio effective October 7,
1996, and for the Mortgage Securities Portfolio effective November 18, 1996,
under which Fifth Third provides certain Portfolio accounting and other
services, including maintenance of the books and records of the Portfolios
required under the Investment Company Act. As compensation for these services,
the Fund pays Fifth Third an annual fund accounting and service fee (the "Fee"),
to be calculated daily and paid monthly. The annual Fee for each Portfolio shall
be the greater of a monthly minimum or an asset based fee, as follows:
<TABLE>
<CAPTION>
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Intermediate Fixed-Income $2,000 0.03% 0.02% 0.01%
Short-Intermediate Fixed Income $2,000 0.03% 0.02% 0.01%
Mortgage Securities $2,000 0.03% 0.02% 0.01%
U.S. Government Money $1,500 0.03% 0.02% 0.01%
</TABLE>
The Fund pays an additional annual Fee of $2,000 per Portfolio for
other administrative services rendered, to be charged monthly. For additional
Classes of shares the Fund will pay an annual charge of $7,000 per additional
Class of shares per Portfolio, also to be charged monthly. Finally, the Fund
reimburses Fifth Third for its out-of-pocket expenses incurred in performing its
services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage. The total
costs for these additional fees are borne by each Portfolio based on the
proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement effective
October 4, 1996, pursuant to which Fifth Third acts as Custodian of the assets
of the Intermediate Fixed-Income Portfolio, Short-Intermediate Fixed-Income
Portfolio and U.S. Government Money Portfolio effective October 7, 1996, and of
the Mortgage Securities Portfolio effective November 18, 1996. Fifth Third holds
all portfolio securities and cash assets of the Portfolios and is authorized to
deposit securities in securities depositories or to use the services of
sub-custodians. Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors. As compensation for
its services rendered, the Fund pays Fifth Third an annual domestic custody fee
of 0.0025% of the average gross assets and an annual global custody fee of 0.08%
of the average gross assets, exclusive of transaction charges. The total costs
for the custodial fees are borne by each Portfolio based on the proportionate
net assets of each Portfolio.
Year 2000 Preparedness. The management and money management services
provided to the Fund by Bennington and the Money Managers and the services
provided by Fifth Third to the Fund, in part, depend on the reasonably
consistent operations of their computer systems. Many software programs and, to
a lesser extent, computer hardware in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. This
design flaw may a have negative impact on the handling of securities trades,
pricing and accounting services. Bennington and the Money Managers and Fifth
Third have been actively working on necessary changes to their computer systems
to deal with the year 2000 and reasonably believe that their systems will be
year 2000 compliant in time for that event.
Multi-Class Structure. The Fund has adopted a Rule 18f-3 Plan (the
"Multi-Class Plan") pursuant to Rule 18f-3 under the Investment Company Act.
Under the Multi-Class Plan, shares of each class of each Portfolio represent an
equal pro rata interest in such Portfolio and, generally, have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other. See "Multi-Class Structure" in the
Statement of Additional Information.
Distribution. Investment advisers, banks, insurance companies and other
entities that sell shares of the Fund may enter into a license agreement with
Bennington which permits them to use Bennington's proprietary asset allocation
software program, Alloset(R), pursuant to which such entities may recommend an
allocation of their clients' assets over a broad range of asset classes which
may include the various portfolios of the Fund. The Alloset(R) Model was
developed by Bennington. Investment advisers, banks, insurance companies and
other licensed entities may charge a fee, not for providing access to the Fund,
but for providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive any
portion of such fees and has no control over whether and in what amount such
fees are charged. Investors also may purchase shares of the Fund directly if
they do not wish to use any of the above services, in which case no service fees
or additional fees, beyond those borne by the shareholders of the Fund
generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R). Using
Alloset(R), assets may be allocated among the Fund's portfolios in a manner
intended to achieve the investment objectives and desired investment returns of
such entities' clients based upon the individual client's situation and
tolerance for risk and desire for return on investment. There can be no
assurance that the allocation recommended by the entities that use
Alloset(R)will meet any of the clients' investment objectives. The Money
Managers engaged by the Fund do not use Alloset(R)in investing any of the
Portfolios' assets under management.
THE MONEY MANAGERS
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios of the Fund. Bennington is also responsible
for allocating the assets within a Portfolio among any Money Managers selected.
Such allocation is reflected in the Money Manager Agreement among the Fund,
Bennington and any Money Manager, and can be changed at any time by Bennington.
The Board of Directors reviews and approves selections of Money Managers and
allocations of assets among any Money Managers. Money Managers may be added or
terminated by Bennington subject to the approval of the Board of Directors of
the Fund and appropriate notification to the shareholders of the Portfolio, as
discussed below. At the present time, Bennington manages directly the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income and U.S. Government
Money Portfolios and does not receive a fee in addition to the fees paid
pursuant to its Management Agreement with the Fund. There is a separate Money
Manager for the Mortgage Securities Portfolio. See "MONEY MANAGER PROFILES."
Money Managers are selected based on such factors as their experience,
the continuity of their portfolio management team, their security selection
process, the consistency and rigor with which they apply that process and their
demonstrated ability to add value to investment decisions. Short-term investment
performance is not a controlling factor in selecting or terminating Money
Managers. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance.
The Fund was issued an exemptive order by the Securities and Exchange
Commission on September 4, 1996 for an exemption (the "Exemption") from certain
provisions of the Investment Company Act which would otherwise require
Bennington to obtain formal shareholder approval prior to engaging and entering
into money manager agreements with Money Managers. The relief is based on the
conditions set forth in the Exemption that, among other things: (1) Bennington
will select, monitor, evaluate and allocate assets to the Money Managers and
oversee Money Managers compliance with the relevant Portfolio's investment
objective, policies and restrictions; (2) before a Portfolio may rely on the
Exemption, the Exemption must be approved by the shareholders of the Portfolios
operating under the Exemption; (3) the Fund will provide to shareholders certain
information about a new Money Manager and its money manager agreement within 60
days of the engagement of a new Money Manager; (4) the Fund will disclose in
this Prospectus the existence, substance and effect of the Exemption; and (5)
the Directors, including a majority of the "non-interested" Directors, must
approve each money manager agreement in the manner required under the Investment
Company Act. Any changes to the Management Agreement between the Fund and
Bennington would still require shareholder approval. As required by the
Exemption, the shareholders of each Portfolio determined, at a shareholders'
meeting held on August 15, 1995, to permit the Fund to replace or add Money
Managers and to enter into money manager agreements with Money Managers upon
approval of the Board of Directors but without formal shareholder approval.
Neither the Board of Directors nor the officers evaluate the investment
merits of Bennington's or any Money Manager's individual security selections.
However, the Board of Directors will review regularly each Portfolio's
performance compared to the applicable indices and also will review each
Portfolio's compliance with its investment objective and policies.
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are based on the portion of the assets of the respective Portfolio managed by it
(the "Account"), which excludes assets held by Bennington for circumstances such
as redemptions or other administrative purposes, and on the number of complete
calendar quarters of management by the Money Manager. During the first five
calendar quarters, the Money Manager fee has two components, the basic fee (the
"Basic Fee") and the portfolio management fee (the "Portfolio Management Fee").
The Money Manager Fee commencing with the sixth quarter consists of two
components, the Basic Fee and the performance fee (the "Performance Fee"), which
varies with a Portfolio's performance. Currently, the Money Manager for the
Mortgage Securities Portfolio has completed the first five calendar quarters of
management of its Account, and the Performance Fee is in effect. If at any time
the Money Manager should be replaced or a new Money Manager hired, the new Money
Manager for the applicable Portfolio will receive the fee set forth in "Money
Manager Fee Schedule For a Manager's First Five Calendar Quarters of Management"
and commencing with the sixth calendar quarter of management by the new Money
Manager, such Portfolio will pay its Money Manager based on the "Money Manager
Fee Schedule For a Manager From the Sixth Calendar Quarter of Management
Forward" (set out in the Statement of Additional Information).
MONEY MANAGER FEE SCHEDULE FOR A MANAGER OF
MORTGAGE SECURITIES PORTFOLIO
FROM THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
<TABLE>
<CAPTION>
Average Annualized Performance
Differential vs. Annualized
Basic Fee The Applicable Index Performance Fee
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Securities Portfolio 0.07% greater than or equal to 2.00% 0.18%
greater than or equal to 0.50% and less than 2.00% 0.16%
greater than or equal to 0.25% and less than 0.50% 0.12%
greater than or equal to -0.25% and less than 0.25% 0.08%
greater than or equal to -0.50% and less than -0.25% 0.04%
greater than or equal to -0.50% 0%
</TABLE>
The Performance Fee component is adjusted each quarter and paid quarterly based
on the annualized investment performance of a Money Manager relative to the
annualized investment performance of the Benchmark Index for that Portfolio. The
Mortgage Securities Portfolio's Benchmark Index is the Lehman Brothers
Mortgage-Backed Securities Index. See Appendix A for a description of the
current Benchmark Indices. As long as the Mortgage Securities Portfolio's
performance either exceeds the index, or trails the index by no more than 0.50%,
a Performance Fee will be paid to the Money Manager.
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable index is
recalculated at the end of each calendar quarter based on the Money Manager's
performance during all calendar quarters since commencement of investment
operations except that of the immediately preceding quarter. Commencing with the
14th calendar quarter of investment operations, the Money Manager's average
annual performance differential will be recalculated based on the Money
Manager's performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. A Money Manager's performance
will be calculated by Bennington in the same manner in which the total return
performance of the Portfolio's index is calculated, which is not the same method
used for calculating the Portfolios' performance for advertising purposes as
described under "Calculation of Portfolio Performance." See Appendix B to the
Statement of Additional Information for a discussion of how performance fees are
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
example, if an index has an average annual performance of 10%, the Mortgage
Securities Portfolio Account's average annual performance would have to be equal
to or greater than 12% for the Money Manager to receive an annual Performance
Fee of 0.18% (i.e., the difference in performance between the Account and the
index must be equal to or greater than 2% for the Money Manager to receive the
maximum performance fee.) Because the maximum Performance Fee for the Portfolios
applies whenever a Money Manager's performance exceeds the index by 2.00%, the
Money Manager for the Portfolio could receive a maximum Performance Fee even if
the performance of the Account is negative. A more detailed description of the
operation of each Performance Fee is contained in Appendix B to the Statement of
Additional Information.
The Money Manager has agreed to the foregoing fees, which are generally
lower than they charge to institutional accounts for which they serve as
investment adviser and perform all administrative functions associated with
serving in that capacity. These lower fees are in recognition of the reduced
administrative and client service responsibilities the Money Managers have
undertaken with respect to the Portfolios.
The following table lists the fees earned by the Money Managers of the
Portfolios for the current period:
MONEY MANAGER FEES EARNED FOR CURRENT PERIOD
<TABLE>
<CAPTION>
Number Of Quarters Performance Fee
Managed By Money Basic Fee (6th Quarter) Total
Portfolio Manager Period (All Quarters) Forward Fee
- --------- ------- ------ -------------- ------- ---
<S> <C> <C> <C> <C> <C>
Intermediate 20 2nd Quarter 1997 0.07% 0.08% 0.15%
Fixed-Income(1) 21 3rd Quarter 1997 0.07% 0.08% 0.15%
22 4th Quarter 1997 0.07% 0.08% 0.15%
23 1st Quarter 1998 0.07% 0.08% 0.15%
24 2nd Quarter 1998 0.07% 0.08% 0.15%
Short-Intermediate 20 2nd Quarter 1997 0.07% 0.08% 0.15%
Fixed-Income(2) 21 3rd Quarter 1997 0.07% 0.08% 0.15%
22 4th Quarter 1997 0.07% 0.08% 0.15%
23 1st Quarter 1998 0.07% 0.08% 0.15%
24 2nd Quarter 1998 0.07% 0.08% 0.15%
Mortgage 20 2nd Quarter 1997 0.07% 0.07% 0.15%
Securities 21 3rd Quarter 1997 0.07% 0.16% 0.23%
22 4th Quarter 1997 0.07% 0.16% 0.23%
23 1st Quarter 1998 0.07% 0.16% 0.23%
24 2nd Quarter 1998 0.07% 0.16% 0.23%
</TABLE>
(1) Smith Barney Capital Management was the Money Manager for the
Intermediate Fixed-Income Portfolio from inception of the Portfolio
through April 30, 1998, when the Money Manager Agreement with Smith
Barney Capital Management was terminated. Effective May 1, 1998,
Bennington began investing the total assets of the Intermediate
Fixed-Income Portfolio and will not earn a money management fee.
(2) Bankers Trust Company was the Money Manager for the Short-Intermediate
Fixed-Income Portfolio from inception of the Portfolio through April
30, 1998, when the Money Manager Agreement with Bankers Trust was
terminated. Effective May 1, 1998, Bennington began investing the total
assets of the Intermediate Fixed-Income Portfolio and will not earn a
money management fee.
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those
expressly assumed by Bennington, including, without limitation, Directors' fees
and fees for auditing, legal, custodian and shareholder services. All general
expenses of the Portfolios are allocated among and charged to the assets of the
respective Portfolios and between the classes of each Portfolio on a basis that
the Directors deem fair and equitable, which may be based on the relative net
assets of each Portfolio and class of shares, or the nature of the services
performed and relative applicability to each Portfolio and class of shares.
Class-specific expenses include distribution, administrative and service fees
payable with respect to the Investor Class Shares as described in the Fund's
distribution, shareholder service and administrative service plans on behalf of
Investor Class Shares. See "Multi-Class Structure" in the Statement of
Additional Information. Class-specific expenses may include certain other
expenses as permitted by the Fund's Multi-Class Plan adopted pursuant to Rule
18f-3 under the Investment Company Act and subject to review and approval by the
Directors. See "FINANCIAL HIGHLIGHTS" or the Annual Report for the period ended
December 31, 1997, for expense information related to the Fund's most recently
completed fiscal year for the Advisor Class Shares. The Board of Directors has
determined that it is appropriate to allocate certain expenses attributable to
more than one Portfolio among the Portfolios affected based on their relative
net assets. See "GENERAL MANAGEMENT OF THE PORTFOLIOS."
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers for
the assets assigned to them, and by Bennington for assets not assigned to a
Money Manager. Currently, Bennington invests all of the assets of the
Intermediate Fixed-Income Portfolio, Short-Intermediate Fixed-Income Portfolio
and U.S. Government Money Portfolio and invests any portion of the Mortgage
Securities Portfolio's other assets not assigned to the Money Manager. Only the
Mortgage Securities Portfolio currently has a Money Manager investing all or
part of its assets.
Each Money Manager or Bennington, as applicable, makes decisions to buy
or sell securities independently from other Money Managers. Thus, if there is
more than one Money Manager for a Portfolio, one Money Manager could be selling
a security when another Money Manager for the same Portfolio is purchasing the
same security. In addition, when a Money Manager's services are terminated and
another retained, the new Money Manager may significantly restructure the
Portfolio. These practices may increase the Portfolios' portfolio turnover
rates, realization of gains or losses, and brokerage commissions. The portfolio
turnover rates for the Portfolios may vary greatly from year to year as well as
within a year and may be affected by sales of investments necessary to meet cash
requirements for redemptions of shares. Historical portfolio turnover rates for
each Portfolio is listed under "Financial Highlights." These rates should not be
considered as limiting factors. A high rate of turnover involves correspondingly
greater expenses, increased brokerage commissions and other transaction costs,
which must be borne by the Portfolios and their shareholders. See "Investment
Advisory and Other Services--Portfolio Transaction Policies" in the Statement of
Additional Information. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income. See "TAXES."
Each Portfolio may effect portfolio transactions with or through
affiliates of the Fund, Bennington or any Money Manager or its affiliates, when
Bennington or the Money Manager, as appropriate, determines that the Portfolio
will receive the best net price and execution. This standard would allow
affiliates of Bennington and the Money Managers to receive no more than the
remuneration that would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to declare
dividends from net investment income for payment on the following schedule:
<TABLE>
<CAPTION>
Portfolio Declared Payable
- --------- -------- -------
<S> <C> <C>
U. S. Government Money Daily 1st business day of following month
Intermediate Fixed-Income Monthly, on last 1st business day of following month
Short-Intermediate Fixed-Income business day of
Mortgage Securities month
</TABLE>
The U. S. Government Money Portfolio determines net investment income
immediately prior to the daily determination of the Portfolio's net asset value
(currently close of New York Stock Exchange, normally 4:00 p.m. Eastern time).
Net investment income will be credited daily to the accounts of shareholders of
record prior to the net asset value calculation and paid monthly. Shareholders
of the U.S. Government Money Portfolio who place orders and wire investment
monies prior to 9:00 a.m. Pacific time are deemed "shareholders of record" for
that day's dividend payment. Each other Portfolio determines net investment
income immediately prior to the determination of the Portfolio's net asset value
on the dividend declaration day. The income will be credited to the shareholders
of record prior to the net asset value calculation and paid on the next business
day.
Capital Gains Distribution. The Board of Directors intends to declare
distributions from net capital gains annually, generally in mid-December. In
addition, in order to satisfy certain distribution requirements, a Portfolio may
declare special year-end dividend and capital gains distributions during
October, November or December. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on December 31 of the prior year.
Automatic Reinvestment. All dividends and distributions will be
automatically reinvested, at the net asset value per share at the close of
business on the record date, in additional shares of the same class of the
Portfolio paying the dividend or making the distribution unless a shareholder
elects to have dividends or distributions paid in cash. Shareholders may elect
to invest dividends and/or distributions paid by any portfolio in shares of the
same class of any other portfolio of the Fund at net asset value. The
shareholder must have an account existing in the portfolio selected and must
elect this option on the Account Application or on a form provided for that
purpose. For further information on this option, contact your broker or call
Bennington at (800) 759-3504. Any election may be changed by electronic
instruction if received by Bennington no later than the close of the New York
Stock Exchange, normally 4:00 p.m. Eastern time, on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for federal
income tax purposes and shareholders of each Portfolio will be entitled to the
amount of net investment income and net realized capital gains (if any) earned
by their Portfolio. The Board of Directors intends to distribute each year
substantially all of each Portfolio's net investment income and net realized
capital gains (if any), thereby eliminating virtually all federal income taxes
to each Portfolio (but not to its investors). The Portfolios may be subject to
nominal, if any, state and local taxes.
Dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholders, whether or not reinvested, and paid in cash or in additional
shares. However, depending upon the state tax rules pertaining to a shareholder,
a portion of the dividends paid by the Intermediate Fixed-Income Portfolio, the
Short-Intermediate Fixed-Income Portfolio, the U. S. Government Money Portfolio
and the Mortgage Securities Portfolio attributable to direct obligations of the
United States Treasury, U.S. governmental agencies or instrumentalities, states,
counties and other local jurisdictions may be exempt from state and local taxes.
Capital gain distributions declared by the Board of Directors and distributed to
the shareholders are taxed as long-term capital gains regardless of the length
of time a shareholder has held such shares. Recent legislation reduced the
maximum tax rate on capital gains to 20% for assets held by individuals for more
than 18 months on the date of the sale or exchange of those assets (a maximum
rate of 28% applies if the assets were held for more than one year and up to 18
months). A notice issued by the Internal Revenue Service provides that regulated
investment companies such as the Portfolios may, but are not required to,
designate which portion of a capital gain distribution qualifies for the reduced
capital gain rate. Dividends and distributions may otherwise also be subject to
state or local taxes. Shareholders should be aware that any loss realized upon
the sale, exchange or redemption of shares held for six months or less will be
treated as a long-term capital loss to the extent any capital gain dividends
have been paid with respect to such shares.
The sale of shares of a Portfolio is a taxable event and may result in
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series or portfolios of a mutual fund). Any gain or loss realized upon a sale,
exchange or redemption of shares of a Portfolio by a shareholder who is not a
dealer in securities will be treated generally as long-term capital gain or loss
taxable at a maximum rate of 20% if the shares in the Portfolio were held for
more than 18 months, "mid-term" capital gain taxable at a maximum rate of 28% if
the shares were held for more than one year and up to 18 months and otherwise as
short-term capital gain or loss. Any such loss, however, on shares that are held
for six months or less will be treated as long-term capital loss to the extent
of any capital gain distributions received by the shareholder.
However, all or a portion of this capital gain will be recharacterized
as ordinary income if the shareholder enters into a "conversion transaction." A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction and certain other criteria are satisfied. A
conversion transaction also includes a transaction that is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected return
from the transaction is "attributable to the time value of the taxpayer's net
investment in such transaction." The Secretary of the Treasury also is
authorized to promulgate regulations (which would apply only after they are
issued) which specify other transactions to be included in the definition of a
conversion transaction. Section 1258 of the Internal Revenue Code of 1986, as
amended (the "Code") contains many ambiguities and its scope is unclear; it may
be clarified or refined in future regulations or other official pronouncements.
Until further guidance is issued, it is unclear whether a purchase and
subsequent disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own tax
advisors concerning whether or not Section 1258 may apply to their transactions
in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will be
treated as long-term or mid-term capital gains or losses if the securities have
been held by it for more than 18 months or one year, respectively, except in
certain cases where the Portfolio acquires a put or writes a call thereon or the
transaction is treated as a "conversion transaction." Other gains or losses on
the sale of securities generally will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as "Section 1256 contracts" defined
below). If an option written by a Portfolio on securities lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will generally realize a capital
gain or loss. If securities are sold by the Portfolio pursuant to the exercise
of a call option written by it, the Portfolio will include the premium received
in the sale proceeds of the securities delivered in determining the amount of
gain or loss on the sale. Certain of the Portfolios' transactions may be subject
to wash sale and short sale provisions of the Code. In addition, debt securities
acquired by the Portfolios may be subject to original issue discount and market
discount rules.
Under the Code, special rules apply to the treatment of certain options
and future contracts (Section 1256 contracts). At the end of each year, such
investments held by the Portfolio will be required to be "marked to market" for
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales" and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Shareholders of the appropriate Portfolios will be notified after each
calendar year of the amounts of ordinary income and long-term capital gains
distributions, including any amounts which are deemed paid on December 31 of the
prior year; of the dividends which qualify for the 70% dividends-received
deduction available to corporations; and the percentages of income attributable
to U.S. Government securities in the case of the Intermediate Fixed-Income,
Short-Intermediate Fixed-Income, Mortgage Securities and U. S. Government Money
Portfolios.
Under United States Treasury Regulations, a Portfolio currently is
required to withhold and remit to the United States Treasury 31% of all taxable
dividends, distributions and redemption proceeds payable to any non-corporate
shareholder which does not provide the Fund with the shareholder's taxpayer
identification number on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) or required certification or which is subject to backup
withholding.
The tax discussion set forth above is included for general information
only and is based upon the current law as of the date of this Prospectus.
Shareholders are urged to consult their tax advisers for further information
regarding the federal, state and local tax consequences of an investment in the
shares of the Fund. See "Taxes" in the Statement of Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time the Fund may make available certain information about
the performance of the Advisor Class Shares of some or all of the Portfolios.
Information about a Portfolio's performance is based on that Portfolio's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance. From time to time, the yield and total return for each class of
shares of the Portfolios may be included in advertisements or reports to
shareholders or prospective investors. Quotations of yield for a Portfolio or
class will be based on the investment income per share (as defined by the
Securities and Exchange Commission) during a particular 30-day (or one-month)
period (including dividends and interest), less expenses accrued during the
period ("net investment income"), and will be computed by dividing net
investment income by the maximum public offering price per share on the last day
of the period.
The total return of Advisor Class Shares of all Portfolios may be
included in advertisements or other written material. When a Portfolio's total
return is advertised with respect to its Advisor Class Shares, it will be
calculated for the past year, the past five years, and the past ten years (or if
the Portfolio has been offered for a period shorter than one, five or ten years,
that period will be substituted) since the establishment of the Portfolio. Any
fees charged by Service Organizations directly to their customers in connection
with investments in the Advisor Class Shares of the Portfolios are not reflected
in the Portfolio's total return and such fees, if charged, will reduce the
actual return received by customers on their investment.
From time to time, the Portfolios (except for the U. S. Government
Money Portfolio) may advertise their performance in terms of average annual
total return, which is computed by finding the average annual compounded rates
of return over a period that would equate the initial amount invested to the
ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested on the reinvestment dates during the relevant time
period and accounts for all recurring fees. The Portfolios may also include in
advertisements data comparing performance with the performance of non-related
investment media, published editorial comments and performance rankings compiled
by independent organizations (such as Lipper Analytical Services, Inc. or
Morningstar, Inc.) or entities or organizations which track the performance of
investment companies or investment advisers and publications that monitor the
performance of mutual funds (such as Barron's, Business Week, Financial Times,
Forbes, Fortune, Inc., Institutional Investor, Investor's Business Daily, Money,
Morningstar, Inc., Mutual Fund Magazine, Smart Money and The Wall Street
Journal). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Portfolio performance may
be compared to well-known unmanaged indices of market performance or other
appropriate indices of investment securities or with data developed by the Fund
or Bennington derived from such indices. Unmanaged indices (i.e., other than
Lipper) generally do not reflect deductions for administrative and management
costs and expenses. Portfolio performance may also be compared, on a relative
basis, to other Portfolios of the Fund. This relative comparison, which may be
based upon historical or expected Portfolio performance, may be presented
numerically, graphically or in text. Portfolio performance may also be combined
or blended with other Portfolios of the Fund, and that combined or blended
performance may be compared to the same Benchmark Indices to which individual
Portfolios are compared. In addition, the Fund may from time to time compare the
expense ratio of its Advisor Class Shares to that of investment companies with
similar objectives and policies, based on data generated by Lipper or similar
investment services that monitor mutual funds,
The Bond Portfolios also may from time to time advertise their yields.
The yields are based on historical earnings. Yield for the Bond Portfolios is
calculated by dividing the net investment income per share earned during the
most recent 30-day (or one month) period by the maximum offering price per share
on the last day of the period. This income is then annualized. That is, the
amount of income generated by the investment during that calendar quarter is
assumed to be generated each month over a twelve-month period and is shown as a
percentage of the investment. For purposes of the yield calculation, interest
income is computed based on the yield to maturity of each debt obligation and
dividend income is computed based upon the stated dividend rate of each security
in a Portfolio's portfolio.
The U. S. Government Money Portfolio may advertise its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the U. S. Government
Money Portfolio refers to the income generated by an investment in the Portfolio
over a seven-day period (which period will be stated in the advertisement). This
yield is calculated by determining the net change, exclusive of capital changes,
in the value of a hypothetical preexisting account having a balance of one share
at the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base return. This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly, but when annualized, the income earned by an investment in
the U.S. Government Money Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
In reports or other communications to investors or in advertising, the
Fund may discuss relevant economic and market conditions affecting the Fund. In
addition, the Fund, Bennington and the Money Managers may render updates of Fund
investment activity, which may include, among other things, discussion or
quantitative statistical or comparative analysis of portfolio composition and
significant portfolio holdings including analysis of holdings by sector,
industry, country or geographic region, credit quality and other
characteristics. The Fund may also describe the general biography, work
experience and/or investment philosophy or style of the Money Managers of the
Fund and may include quotations attributable to the Money Managers describing
approaches taken in managing the Fund's investments, research methodology
underlying stock selection or the Fund's investment objectives. The Fund may
also discuss measures of risk, including those based on statistical or
econometric analyses, the continuum of risk and return relating to different
investments and the potential impact of foreign stocks on a portfolio otherwise
composed of domestic securities.
Any performance information related to the Portfolios, should be
considered in light of the Portfolios' investment objectives and policies,
characteristics and quality of the portfolio, and the market conditions during
the time period indicated. It is important to note that yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. The value of Fund shares when redeemed may be more or less than
their original cost. The Statement of Additional Information describes the
method used to determine a Portfolio's yield and total return. In reports or
other communications to shareholders or in advertising material, a Portfolio may
quote yield and total return figures that do not reflect recurring fees
(provided that these figures are accompanied by standardized yield and total
return figures calculated as described above), as well as compare its
performance with that of other mutual funds as listed in the rankings prepared
by Morningstar, Inc. or similar independent services that monitor the
performance of mutual funds or with other appropriate indices of investment
securities or other industry publications.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share of each class
of the Portfolios is calculated on each business day on which shares are offered
or orders to redeem are tendered by dividing the value of the Portfolio's net
assets represented by such class (i.e., the value of its assets less
liabilities) by the total number of shares of such class outstanding. See
"Valuation of Portfolio Shares" in the Statement of Additional Information. A
business day is one on which the New York Stock Exchange, Fifth Third and
Bennington are open for business. Non-business days in 1997 will be: New Year's
Day, Presidents' Day, Martin Luther King Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day. Net
asset value per share is computed for a Portfolio by dividing the current value
of the Portfolio's assets and other assets attributable to that class, less its
liabilities, by the number of shares of the class of the Portfolio outstanding,
and rounding to the nearest cent. All Portfolios determine net asset value as of
the close of the New York Stock Exchange, normally 4:00 p.m. Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below, the
Portfolios value portfolio securities at "fair market value." This generally
means that equity securities and fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of the
last sale price or, lacking any sales, at the closing bid price on the exchange
on which the security is primarily traded. United States equity and fixed-income
securities traded principally OTC, options and futures contracts are valued on
the basis of the closing bid price.
Because many fixed-income securities do not trade each day, last sale
or bid prices are frequently not available. Fixed-income securities therefore
may be valued based on prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
International securities traded over-the-counter are valued on the
basis of the mean of bid and asked prices. In the absence of a last sale or mean
bid and asked price, respectively, such securities may be valued on the basis of
prices provided by a pricing service if those prices are believed to reflect the
fair value of such securities.
Securities held by the U. S. Government Money Portfolio and money
market instruments maturing within 60 days of the valuation date held by
Portfolios other than the U. S. Government Money Portfolio are valued at
"amortized cost" unless the Board of Directors determines that amortized cost
does not represent fair value. The U. S. Government Money Portfolio uses its
best efforts to maintain a $1.00 per share net asset value. The "amortized cost"
valuation procedure initially prices an instrument at its cost and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
The Portfolios value securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the Portfolios
with no sales charge or commission. Investors may also purchase shares of the
Portfolios from intermediaries, such as a broker-dealer, bank or other financial
institution. Such intermediaries may be required to register as a dealer
pursuant to certain states' securities laws and may charge the investor a
reasonable service fee, no part of which will be paid to the Portfolios. Shares
of the Portfolios will be sold at the net asset value next determined after an
order is received and accepted, provided that payment has been received by 12:00
p.m. Eastern Time on the following business day. Net asset value is determined
as set forth above under "Valuation of Portfolio Shares." All purchases must be
made in U.S. dollars. The minimum initial investment requirements for Advisor
Class Shares of each Portfolio are $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investments are $1,000 per
Portfolio or $2,000 in aggregate across the portfolios of the Fund. The minimum
initial investment requirement for an IRA Account is an aggregate amount of
$2,000 in the portfolios of the Fund. The subsequent investment requirement for
an IRA Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The Fund reserves the right to accept smaller purchases or reject any purchase
order in its sole discretion.
Orders are accepted on each business day. If Bennington receives a
purchase order for shares of the U.S. Government Money Portfolio and investment
monies are wired prior to 9:00 a.m. Pacific time, the shareholder will be
entitled to receive that day's dividend. See "Dividends and Distributions."
Neither the Fund nor the Transfer Agent will be responsible for delays of wired
proceeds due to heavy wire traffic over the Federal Reserve System. Orders to
purchase Portfolio shares must be received by Bennington prior to close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time, on the day shares of
those Portfolios are offered and orders accepted, or the orders will not be
accepted and invested in the particular Portfolio until the next day on which
shares of that Portfolio are offered. Payment must be received by 12:00 p.m.
Eastern time on the next business day. Purchases by telephone may only be made
as set out in the telephone transaction procedures set forth in "Purchase of
Portfolio Shares--Telephone Transactions." No fees are currently charged
shareholders by the Fund directly in connection with purchases.
The Fund reserves the right to suspend the offering of shares for a
period of time. The Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be refused
if, in Bennington's opinion, they would disrupt management of the Fund. The Fund
also reserves the right to refuse exchange purchases by any person or group if,
in Bennington's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Purchases through Intermediaries. Advisor Class Shares of the
Portfolios may be available through Service Organizations. Certain features of
the Advisor Class Shares, such as the initial and subsequent investment
minimums, redemption fees and certain trading restrictions, may be modified or
waived by Service Organizations. Service Organizations may impose transaction or
administrative charges or other direct charges, which charges or fees would not
be imposed if Advisor Class Shares are purchased directly from the Fund.
Therefore, a client or customer should contact the Service Organization acting
on their behalf concerning the fees (if any) charged in connection with a
purchase or redemption of Advisor Class Shares and should read this prospectus
in light of the terms governing their accounts with the Service Organization.
Service Organizations are responsible for transmitting to their customers a
schedule of any such fees and conditions. Service Organizations will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Fund in accordance with their agreements with clients or
customers.
Order and Payment Procedures. Investments in the Portfolios may be made
as follows:
Federal Funds Wire. Purchases may be made on any business day
by wiring federal funds to Seattle First National Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check
drawn on a foreign bank will not be accepted). If an investor has
purchased Portfolio shares by check and subsequently submits a
redemption request, the redemption request will be honored at the net
asset value next calculated after receipt of the request, however, the
redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. See "REDEMPTION
OF PORTFOLIO SHARES.
Please call the Fund for further information at (800)
759-3504.
Purchases in Kind. The Portfolios may accept certain types of
securities in lieu of wired funds as consideration for Portfolio
shares. Under no circumstances will a Portfolio accept any securities
the holding or acquisition of which conflicts with the Portfolio's
investment objective, policies and restrictions or which Bennington or
the applicable Money Manager believes should not be included in the
applicable Portfolio's portfolio on an indefinite basis. Securities
accepted in consideration for a Portfolio's shares will be valued in
the same manner as the Portfolio's portfolio securities in connection
with its determination of net asset value. A transfer of securities to
a Portfolio in consideration for Portfolio shares will be treated as a
sale or exchange of such securities for federal income tax purposes. A
shareholder will recognize gain or loss on the transfer in an amount
equal to the difference between the value of the securities and the
shareholder's tax basis in such securities. Shareholders who transfer
securities in consideration for a Portfolio's shares should consult
their tax advisers as to the federal, state and local tax consequences
of such transfers. See "Purchases in Kind" in the Statement of
Additional Information.
IRA Accounts. The Fund has established an Individual
Retirement Custodial Account Plan under which investors may set up IRA
Accounts that invest in the Fund. Fifth Third serves as Custodian for
the IRA Accounts. The Transfer Agent charges an annual account fee of
$25 to each IRA Account with an aggregate balance of less than $10,000
on December 31. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The subsequent investment requirement for an IRA Account is an
aggregate amount of $2,000 in the portfolios of the Fund. Please refer
to the IRA Account plan documents: the IRA Disclosure Statement, IRA
Custodial Account Agreement and IRA Application and Adoption Agreement
Form for additional information, copies of which may be obtained from
Bennington free of charge at (800) 759-3504.
Exchange Privilege. Shares of any class of any Portfolio of the Fund
may be exchanged for shares of any other class of any of the other portfolios
offered by the Fund to the extent the shareholder meets the investment
requirements of such shares and such shares are offered for sale in the
investor's state of residence, on the basis of current net asset values per
share at the time of the exchange. Other than the Advisor Class Shares of the
Portfolios offered by this Prospectus, the portfolios of the Fund also include
the Investor Class Shares of the Portfolios and Advisor Class and Investor Class
Shares of the Growth Portfolio, Value and Income Portfolio, Small to Mid Cap
Portfolio and the International Equity Portfolio. Advisor Class Shares and
Investor Class Shares are expected to be available to qualified investors as
described in the applicable prospectuses. Investor Class Shares are expected to
be offered primarily through Service Organizations. Generally, fund
supermarket-type programs require customers to pay either no or low transaction
fees in connection with purchases or redemptions. Advisor Class Shares and
Investor Class Shares may also be offered through certain Service Organizations
that charge their customers transaction or other fees with respect to their
customers' investments in the portfolios of the Fund. The minimum initial
investment in Investor Class Shares is $5,000 per Portfolio or $10,000 in
aggregate across the portfolios of the Fund and subsequent investments are
$1,000 per Portfolio or $2,000 in aggregate across the portfolios of the Fund.
Investor Class Shares may have different distribution and other expenses, which
may affect performance. The Advisor Class Shares are not subject to shareholder
service, administrative service and/or 12b-1 fees as are the Investor Class
Shares. As a result, the Advisor Class Shares are expected to achieve higher
investment returns than the Investor Class Shares.
Under certain circumstances, the per share net asset value of the
Investor Class Shares of the Portfolios may be lower than the per share net
asset value of the Advisor Class Shares as a result of the daily expense
accruals of the shareholder service and/or administrative service and/or
distribution fees applicable to the Investor Class Shares. Generally, for
Portfolios that pay income dividends, those dividends are expected to differ
over time by approximately the amount of the expense accrual differential
between the classes. See "Valuation of Portfolio Shares" in the Statement of
Additional Information.
If the exchanging shareholder does not currently own shares of the
portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and authorized
dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures guaranteed
by an eligible guarantor institution as defined below under "REDEMPTION OF
PORTFOLIO SHARES" and "ADDITIONAL INFORMATION--Signature Guarantees." For
additional information, contact the Fund. A shareholder should obtain and read
the prospectus relating to any other portfolios of the Fund before making an
exchange.
An exchange other than between classes in the same portfolio is a
redemption of the shares and is treated as a sale for federal income tax
purposes, and a short- or long-term capital gain or loss may be realized. The
exchange privilege may be modified or terminated at any time on 60 days' notice
to shareholders. Exchanges are available only in states where exchanges may
legally be made. Exchanges may be made by faxing instructions to Bennington at
(206) 224-4274 or mailing instructions to Bennington at 1420 Fifth Avenue, Suite
3130, Seattle, WA 98101. Exchanges may only be made by telephone as set out in
the telephone transaction procedures set forth in "PURCHASE OF PORTFOLIO
SHARES--Telephone Transactions" and "ADDITIONAL INFORMATION--Signature
Guarantees." No fees are currently charged shareholders by the Fund directly in
connection with exchanges.
Telephone Transactions. A shareholder of the Fund with an aggregate
account balance of $1 million or more may request purchases, redemptions or
exchanges of shares of a Portfolio by telephone at the appropriate toll free
number provided in this Prospectus. It may be difficult to implement redemptions
or exchanges by telephone in times of drastic economic or market changes. In an
effort to prevent unauthorized or fraudulent redemption or exchange requests by
telephone, the Fund employs reasonable procedures specified by the Board of
Directors to confirm that such instructions are genuine. Telephone transaction
procedures include the following measures: requiring the appropriate telephone
transaction election be made on the telephone transaction authorization form
sent to shareholders upon request; requiring the caller to provide the names of
the account owners, the account owner's social security number or tax
identification number and name of Portfolio, all of which must match the Fund's
records; requiring that a service representative of Bennington, acting as
Transfer Agent, complete a telephone transaction form listing all of the above
caller identification information; requiring that redemption proceeds be sent by
wire only to the owners of record at the bank account of record or by check to
the address of record; sending a written confirmation for each telephone
transaction to the owners of record at the address of record within five (5)
business days of the call; and maintaining tapes of telephone transactions for
six months, if the Fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or
an attorney-in-fact (under a power of attorney), additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. The Fund may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund may be liable for any loss due to unauthorized or fraudulent transactions.
In all other cases, neither the Fund, the Portfolio nor Bennington will be
responsible for authenticity of redemption or exchange instructions received by
telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net asset
value next determined after the receipt of a redemption request in proper form.
Payment will ordinarily be made within seven days and will be wire-transferred
by automatic clearing house funds or other bank wire to the account designated
for the shareholder at a domestic commercial bank that is a member of the
Federal Reserve System. If Bennington receives a redemption request in good
order from a shareholder of the U.S. Government Money Portfolio by 9:00 a.m.
Pacific time, the shareholder will be entitled to receive redemption proceeds by
wire on the same day. Shareholders of the U.S. Government Money Portfolio who
elect this option should be aware that their account will not be credited with
the daily dividend on that day. Neither the Fund nor the Transfer Agent will be
responsible for delays of wired proceeds due to heavy wire traffic over the
Federal Reserve System. If requested in writing, payment will be made by check
to the account owners of record at the address of record. The Transfer Agent
charges a processing fee of $10.00 for each redemption check requested by a
shareholder, which processing fee may be waived by the Transfer Agent at its
discretion. If an investor has purchased Portfolio shares by check and
subsequently submits a redemption request, the redemption request will be
honored at the net asset value next calculated after receipt of the request,
however, the redemption proceeds will not be transmitted until the check used
for investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire transfer.
If a shareholder requests a redemption check or wire made payable to
someone other than the registered owner of the shares and/or sent to an address
other than the address of record, the request to redeem must (1) be made in
writing; (2) include an instruction to make the redemption proceeds payable to
someone other than the registered owner of the shares and/or send them it to an
address other than the address of record; and (3) be signed by all registered
owners with their signatures guaranteed. See "ADDITIONAL INFORMATION--Signature
Guarantees."
Portfolio shares may be redeemed by faxing instructions to Bennington
at (206) 224-4274, or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Redemptions of the Portfolios' shares may be effected on
any business day on which the New York Stock Exchange, Fifth Third, and
Bennington are open, as long as instructions are received by Bennington by close
of business of the New York Stock Exchange, normally 4:00 p.m. Eastern Time. In
periods of severe market or economic conditions, the electronic redemption of
shares may be difficult due to an increase in the amount of electronic
transmissions. Use of the mail may result in the redemption request being
processed at a later time than it would have been if a instructions had been
sent by facsimile transmission. During the delay, the Portfolios' net asset
value may fluctuate.
Portfolio shares also may be redeemed through Service Organizations who
have made arrangements with the Fund permitting them to redeem such shares by
telephone or facsimile transmission and who may charge a fee for this service.
Advisor Class Shares of the Portfolios may be available through certain Service
Organizations that may charge a fee to their customers.
If the Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole or
in part by a distribution in kind of securities from the investment portfolio of
the Portfolio, in lieu of cash, in conformity with any applicable rules of the
SEC. Securities will be readily marketable and will be valued in the same manner
as in a regular redemption. See "VALUATION OF PORTFOLIO SHARES." If shares are
redeemed in kind, the redeeming shareholders would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Portfolio during any 90-day period for any one
shareholder.
The Fund reserves the right to redeem the shares of any shareholder
whose account balance is less than $500 per portfolio or whose aggregate account
is less than $2,000, and who is not part of an Automatic Investment Plan. The
Fund, however, will not redeem shares based solely on market reductions in net
asset value. The Fund will give sixty (60) days prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption or
postpone the date of payment for the Portfolios if the unlikely emergency
conditions that are specified in the Investment Company Act or determined by the
SEC should exist. Shareholders uncertain of requirements for redemption should
telephone the Fund at (206) 224-7420 or (800) 759-3504. Redemptions by telephone
may only be made as set out in the telephone transaction procedures set forth in
"PURCHASE OF PORTFOLIO SHARES-- Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly withdrawal
on the Systematic Withdrawal Plan is $500.00 in aggregate) on a monthly basis on
the 15th (or first business day before the 15th) and/or on the last business day
of each month. An application for automatic withdrawal can be obtained from
Bennington or the Fund and must be received by Bennington ten calendar days
before the first scheduled withdrawal date. Automatic withdrawal may be ended at
any time by the investor or the Fund. The Systematic Withdrawal Plan may be
discontinued at any time by the Fund or Bennington. The Fund reserves the right
to reject any Systematic Withdrawal Plan application. Purchases of additional
shares concurrently with withdrawals generally are undesirable. Funds will be
disbursed according to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101,
is the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also the transfer agent, registrar and dividend
disbursing agent for the Portfolios, and provides other administrative,
recordkeeping and compliance services to the Fund pursuant to a Transfer Agent
Agreement with the Fund.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, acts as
Custodian of the Portfolios' assets and may employ sub-custodians outside the
United States which have been approved by the Board of Directors. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third holds all portfolio securities and cash assets of the Portfolios and
is authorized to deposit securities in securities depositories or to use the
services of sub-custodians. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Independent Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 are
the Fund's independent auditors. Shareholders will receive an unaudited
semi-annual and an audited annual financial statements.
Fund Counsel
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 serves as
the Fund's outside counsel.
Shareholder Servicing Arrangements
From time to time, Bennington may enter into arrangements with certain
Service Organizations to provide shareholder services or other administrative
services to persons who beneficially own shares of the Advisor Class Shares of
the Portfolios. Such organizations, rather than their customers, may be the
shareholder of record of the shares. Such organizations may also charge a fee
for this service and may require different minimum initial and subsequent
investments than the Fund. Such organizations may also impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. The Fund is not responsible for the failure of any such
organization to carry out its obligations to its customers. The Fund does not
pay any portion of the fees paid by Bennington, and Bennington does not receive
any portion of any fee such Service Organizations charge their customers.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and the
Portfolios against fraudulent transactions by unauthorized persons. In certain
instances, such as transfer of ownership or when the registered shareholder(s)
requests that redemption proceeds be sent to a different name or address than
the registered name and address of record on the shareholder account, the Fund
will require that the shareholder's signature be guaranteed. When a signature
guarantee is required, each signature must be guaranteed by a domestic bank or
trust company, credit union, broker, dealer, national securities exchange,
registered securities association, clearing agency or savings association as
defined by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and be
signed in the name of the guarantor by an authorized person with that person's
title and the date. The Fund may reject a signature guarantee if the guarantor
is not a member of or participant in a signature guarantee program. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular transaction, to require a signature guarantee at its
discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The Fund is
authorized to issue 15 billion shares of common stock of $0.001 par value per
share, currently divided into eight Portfolios, each with two classes of shares,
the Advisor Class Shares and the Investor Class Shares. Investor Class Shares
may have different distribution and other expenses, which may affect
performance. The Advisor Class Shares are not subject to shareholder service,
administrative service and/or 12b-1 fees as are the Investor Class Shares. As a
result, the Advisor Class Shares are expected to achieve higher investment
returns than the Investor Class Shares. Please contact your sales
representative, or the Fund at (800) 759-3504, for additional information about
the Investor Class Shares for the Portfolios or the Investor Class Shares and
Advisor Class Shares of the Equity Portfolios. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine. Shareholders of a class of shares or Portfolio have separate voting
rights with respect to matters that only that affect that class or Portfolio.
See "Other Information--Voting Rights" in the Statement of Additional
Information.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Fund's
outstanding shares for the purpose of voting on the removal of one or more
Directors or to transact any other business. Any proposals by shareholders to be
presented at an annual meeting must be received by the Fund for inclusion in its
proxy statement and form of proxy relating to that meeting at least 120 calendar
days in advance of the date of the Fund's proxy statement released in connection
with the previous year's annual meeting, if any. If there was no annual meeting
held in the previous year or the date of the annual meeting has changed by more
than 30 days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made. See "Multi-Class Structure".
As of April 24, 1998, the following persons were the owners of record
of 25% or more of the Portfolios of the Fund:
<TABLE>
<CAPTION>
Intermediate Intermediate Mortgage U.S. Government
Beneficial Owner Fixed-Income Fixed-Income Securities Money
- ---------------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Zions First National Bank 42.33% 46.30% 65.44%
One South Main Street
Salt Lake City, UT 84130
One Valley Bank NA 30.73%
P. O. Box 1793
Charleston, WV 25326
Marshall & Ilsley Trust Co. 31.92%
1000 N. Water Street, TR14
Milwaukee, WI 53202
</TABLE>
As of April 24, 1998, the Directors and officers of the Fund, as a
group, beneficially owned less than 1% of the shares of each Portfolio. The
fiscal year end for each Portfolio is December 31.
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing further
information about performance, is available without charge from the Fund.
Inquiries regarding the Portfolios and requests for Annual Reports should be
addressed to the Fund at P. O. Box 1748, Seattle, Washington 98111-9865, or by
telephone at (206) 224-7420 or (800) 759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally prohibit
banks that are members of the Federal Reserve System from engaging in the
business of underwriting, selling, distributing securities or engaging in
investment advisory activities. To the extent that banks or subsidiaries of
banks are deemed to be performing any such activities, the Fund believes such
entities may engage in such activities for the Portfolios without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. However,
it is possible that future changes in either Federal or state statutes and
regulations concerning the permissible activities of banks or trust companies,
as well as further judicial or administrative decisions and interpretations of
present and future statutes and regulations, might prevent such entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself of any services
then being provided. The Board of Directors does not expect that shareholders of
the Fund would suffer any adverse financial consequences as a result of these
occurrences but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
MONEY MANAGER PROFILE
The following information as to the Money Manager for the Mortgage
Securities Portfolio has been supplied by that Money Manager. The Statement of
Additional Information contains further information concerning the Money
Manager, including a description of its business history and identification of
its controlling persons.
Mortgage Securities Portfolio
BlackRock, Inc., 345 Park Avenue, 29th Floor, New York, NY 10154
("BlackRock"), is the Money Manager of the Mortgage Securities Portfolio.
BlackRock (formerly BlackRock Financial Management, Inc.) is a Delaware
corporation, jointly owned by its employees and PNC Bank, N.A. ("PNC").
Approximately 20% of BlackRock is owned by its 37 managing directors and the
remaining 80% by PNC. PNC is a commercial bank whose principal office is in
Pittsburgh, PA and is wholly-owned by PNC Bank Corp., a bank holding company.
BlackRock is a registered investment adviser and is organized such that
day-to-day management and investment decisions are made by a committee and no
one person is primarily responsible for making recommendations to that
committee. BlackRock serves as investment adviser to fixed-income and equity
investors in the United States and overseas through funds and institutional
accounts.
<PAGE>
APPENDIX A
The following information as to each index has been supplied by the
respective preparer of the index or has been obtained from other
publicly-available information.
DESCRIPTION OF INDICES
Lehman Brothers Government/Corporate Index (Intermediate Fixed-Income Portfolio)
Lehman Brothers Government/Corporate 1-5 Year Index (Short-Intermediate
Fixed-Income Portfolio)
Lehman Brothers Mortgage-Backed Securities Index (Mortgage Securities Portfolio)
The Lehman Brothers Bond Indices include fixed-rate debt issues rated
investment grade or higher by Moody's, S&P, or Fitch Investors Service, Inc. All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for U.S. Government issues and $25 million for all others.
Price, coupon and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value weighted inclusive of accrued
interest.
The Lehman Brothers Government/Corporate Index is made up of the
Government and Corporate Bond Indices.
The Government Bond Index is made up of the Treasury Bond Index (all
public obligations of the United States Treasury, excluding flower bonds and
foreign targeted issues) and the Agency Bond Index (all publicly issued debt of
U.S. Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government). The Government Bond Index also includes the
1-3 Year Government Index, composed of Agency and Treasury securities with
maturities of one to three years, and the 20 Year Treasury Index, comprising
Treasury issues with 20 years or more to maturity.
The Corporate Bond Index includes all publicly issued, fixed-rate,
nonconvertible investment grade domestic corporate debt. Also included are
Yankee bonds, which are dollar-denominated SEC registered public, nonconvertible
debt issued or guaranteed by foreign sovereign governments, municipalities or
governmental agencies, or international agencies.
The 1-5 Year Government/Corporate Index is composed of Agency and
Treasury securities and corporate securities of the type referred to in the
preceding paragraph, all with maturities of one to five years.
The Mortgage-Backed Securities Index covers all fixed-rate securities
backed by mortgage pools of the Government National Mortgage Association (GNMA),
Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage
Association (FNMA). Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not.
<PAGE>
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state to any person to whom it is unlawful to make such an offer. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Portfolios, Bennington or the Money Managers since the date
hereof; however, if any material change occurs while this Prospectus is required
by law to be delivered, this Prospectus will be amended or supplemented
accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington Capital
Management L.P.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
EQUITY PORTFOLIOS--Investor Class Shares Seattle, WA 98101
PROSPECTUS - May 1, 1998 (800) 759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services (206) 224-7420
- --------------------------------------------------------------------------------
ACCESSOR(R)FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. Each portfolio intends to offers two classes
of shares, Advisor Class Shares and Investor Class Shares. This Prospectus
pertains only to the Investor Class Shares of the following four equity
portfolios of the Fund (individually, a "Portfolio" and collectively, the
"Portfolios"):
GROWTH PORTFOLIO
VALUE AND INCOME PORTFOLIO
SMALL TO MID CAP PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
and sets forth concisely the information about the Portfolios that a prospective
investor should know before investing. Through a separate prospectus, the Fund
intends to offer an additional class of shares, the Advisor Class Shares, for
the Portfolios and through separate prospectuses, the Fund intends to offer
Investor Class Shares and Advisor Class Shares for the four fixed-income
portfolios of the Fund. Advisor Class Shares have different expenses that would
affect performance. Investors desiring to obtain information about the Advisor
Class Shares should call (800) 759-3504 or ask their sales representative. See
"Description of the Fund --Multiple Classes of Shares."
The Fund has filed a Statement of Additional Information, dated May 1, 1998,
with the Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, containing further information about the portfolios and
the Fund that may be of interest to investors, is incorporated herein by
reference in its entirety. A free copy may be obtained by writing or calling the
Fund at the address or phone number shown above. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS, INCLUDING
THE POSSIBLE LOSS OF THE PRINICIPAL AMOUNT INVESTED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY.......................................................................3
FEES AND PORTFOLIO EXPENSES...................................................7
PORTFOLIO MANAGEMENT..........................................................9
DESCRIPTION OF THE PORTFOLIOS.................................................9
GENERAL..............................................................9
RISK FACTORS AND SPECIAL CONSIDERATIONS.............................10
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES.......................10
INVESTMENT POLICIES.................................................12
INVESTMENT RESTRICTIONS.............................................20
GENERAL MANAGEMENT OF THE PORTFOLIOS.........................................20
THE MONEY MANAGERS...........................................................24
EXPENSES OF THE PORTFOLIOS...................................................29
PORTFOLIO TRANSACTION POLICIES...............................................29
DIVIDENDS AND DISTRIBUTIONS..................................................30
TAXES........................................................................30
CALCULATION OF PORTFOLIO PERFORMANCE.........................................32
VALUATION OF PORTFOLIO SHARES................................................34
PURCHASE OF PORTFOLIO SHARES.................................................35
REDEMPTION OF PORTFOLIO SHARES...............................................38
ADDITIONAL INFORMATION.......................................................39
SERVICE PROVIDERS...................................................39
OTHER ARRANGEMENTS..................................................39
SIGNATURE GUARANTEES................................................40
ORGANIZATION, CAPITALIZATION AND VOTING.............................40
SHAREHOLDER INQUIRIES AND REPORTS TO SHAREHOLDERS...................41
GLASS-STEAGALL ACT..................................................41
MONEY MANAGER PROFILES.......................................................41
GROWTH PORTFOLIO....................................................41
VALUE AND INCOME PORTFOLIO..........................................41
SMALL TO MID CAP PORTFOLIO..........................................42
INTERNATIONAL PORTFOLIO.............................................42
DESCRIPTION OF INDICES......................................................A-1
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX .................A-1
S&P/BARRA GROWTH INDEX.............................................A-1
S&P/BARRA VALUE INDEX..............................................A-1
WILSHIRE 4500 INDEX................................................A-2
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE + EMF INDEX..............A-2
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<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end, management
investment company, known as a mutual fund. The Fund currently consists of eight
diversified investment portfolios, each with its own investment objective and
policies.
Multi-Class Structure. Each portfolio intends to offer two classes of
shares, the Advisor Class Shares and the Investor Class Shares through different
prospectuses. The shares of each Portfolio existing prior to May 1, 1998, when
the multi-class structure was established, are redesignated as Advisor Class
Shares. The Investor Class Shares are primarily available through financial
institutions, retirement plans, broker-dealers, depository institutions,
institutional shareholders of record, registered investment advisers, and other
financial intermediaries and through the various brokerage firms or other
industry recognized service providers of fund supermarkets or similar programs
(collectively, "Service Organizations") that may impose additional or different
conditions on purchase or redemption of Fund shares and may charge transaction
or account fees. Service Organizations are responsible for transmitting to their
customers a schedule of any such fees and conditions. Generally fund
supermarket-type programs require customers to pay either no or low transaction
fees in connection with purchases or redemptions, while other Service
Organizations may charge a fee for their services. Service Organizations may
enter into written agreements with the Fund on behalf of the Investor Class
Shares, which allow reimbursements or payments directly by the Fund for
administrative services, shareholder services and distribution-related services.
See the "Distribution Plan", "Shareholder Service Plan" and "Administrative
Services Plan" and the "Multi-Class Structure" in the Statement of Additional
Information for more detailed information about the Investor Class Shares.
Advisor Class Shares are primarily available directly from the Fund. Advisor
Class Shares are also available from Service Organizations, which may charge a
fee for their services. Service Organizations are responsible for transmitting
to their customers a schedule of any such fees and conditions.
Bennington may enter into arrangements with Service Organizations and
pay such organizations directly for services provided by Service Organizations.
See "Additional Information--Other Arrangements".
Equity Portfolios--Investor Class Shares Prospectus. This Prospectus
pertains only to the Investor Class Shares of the Fund's Growth Portfolio, Value
and Income Portfolio, Small to Mid Cap Portfolio (collectively, the "Domestic
Equity Portfolios") and the International Equity Portfolio (the "International
Portfolio"). See "Description of the Portfolios--General" "--Investment
Objectives and Investment Policies", " and "--Multi-Class Structure".
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from the investment
policies and strategies of other portfolios of the Fund. The investment
objective and the name of the investment management organization (individually,
the "Money Manager" and collectively, the "Money Managers") for each of the
Portfolios are described below:
0 GROWTH PORTFOLIO -- Geewax, Terker & Co.1-- seeks capital growth
through investing primarily in equity securities with greater than
average growth characteristics selected from the 500 U.S. issuers which
make up the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500").
0 VALUE AND INCOME PORTFOLIO -- Martingale Asset Management, L.P. --
seeks generation of current income and capital growth by investing
primarily in income-producing equity securities selected from the 500
U.S. issuers which make up the S&P 500.
0 SMALL TO MID CAP PORTFOLIO2 -- Symphony Asset Management, Inc.3 --
seeks capital growth through investing primarily in equity securities
of small to medium capitalization issuers.
0 INTERNATIONAL EQUITY PORTFOLIO -- Nicholas-Applegate Capital Management
-- seeks capital growth by investing primarily in equity securities of
companies domiciled in countries other than the United States and
traded on foreign stock exchanges.
Management. Bennington Capital Management L.P., a Washington limited
partnership ("Bennington"), is the manager and administrator of the Fund
pursuant to its Management Agreement with the Fund. As such, Bennington provides
or oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. See "General Management
of the Portfolios."
Purchase and Redemption of Shares. Investor Class Shares offered by
this Prospectus are intended to be purchased and redeemed by shareholders either
(i) directly from the Portfolios, or (ii) through Service Organizations that may
charge a transaction or account fee for their services, at net asset value next
determined after an order for purchase or redemption has been received. The
Service Organizations are responsible for promptly transmitting client or
customer purchase and redemption orders to the Fund in accordance with their
agreements with clients or customers. The minimum initial investment for
Investor Class Shares of the Portfolios is $5,000 per Portfolio or $10,000 in
aggregate across the portfolios of the Fund and subsequent investments are
$1,000 per Portfolio or $2,000 in aggregate across the portfolios of the Fund.
See "Purchase of Portfolio Shares" and "Redemption of Portfolio Shares."
Risk Factors and Special Considerations. The Fund is designed to
provide diverse opportunities in equity and debt securities. There can be no
assurance that the investment objective for any Portfolio will be achieved. See
"Description of the Portfolios--Risk Factors and Special Considerations."
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. Up to 20% of the net assets of the Growth,
Value and Income and Small to Mid Cap Portfolios and up to 100% of the net
assets of the International Portfolio may be held in securities denominated in
one or more foreign currencies, which will result in that Portfolio bearing the
risk that those currencies may lose value in relation to the U.S. dollar.
Certain Portfolios also may be subject to certain risks in using investment
techniques and strategies such as entering into forward currency contracts and
repurchase agreements and trading futures contracts and options on futures
contracts. In particular, emerging markets are associated with substantial
investment risks. These risks include market volatility, investment illiquidity,
currency risk, political instability and unexpected changes in economic policy
including capital controls, expropriation, taxes and hyper-inflation. Emerging
markets may exhibit substantially greater volatility than the U.S. and more
developed foreign markets. See "Description of the Portfolios--Investment
Objectives and Investment Policies", "Investment Policies--Risks of Investing in
Foreign Securities--Special Risks of Investing in Foreign Securities of Emerging
Countries" and "Investment Restrictions, Policies and Risk
Considerations--Investment Restrictions" in the Statement of Additional
Information.
Dividends and Distributions. Each Portfolio intends to distribute at
least annually to its shareholders substantially all of its net investment
income and its net realized long- and short-term capital gains. Dividends from
the net investment income of the Domestic Equity Portfolios will be declared and
paid quarterly. Dividends from the net investment income of the International
Portfolio will be declared and paid annually. See "Dividends and Distributions."
Taxation. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company for federal income tax purposes. As
such, the Fund anticipates that no Portfolio will be subject to federal income
tax on income and gains that are distributed to shareholders. See "Taxes."
Service Providers.
Bennington is the manager and administrator of the Fund, as described
above. Bennington provides or oversees the provision of all general management,
administration, investment advisory and portfolio management services for the
Fund. Bennington provides transfer agent, registrar, dividend disbursing agent,
recordkeeping, administrative and compliance services to the Fund, pursuant to
its Transfer Agency and Administrative Agreement (the "Transfer Agent
Agreement") with the Fund.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts
as custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan ("IRA
Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel. See
"Additional Information--Service Providers."
- --------
1 Formerly managed by State Street Bank and Trust Company. See Statement
of Additional Information for more detailed information.
2 Formerly the "Small Cap Portfolio." See Statement of Additional
Information for more detailed information.
3 Effective July 1, 1998, Symphony Asset Management LLC, an affiliate of
Symphony Asset Management, Inc., will become the Money Manager. See
"Money Manager Profiles".
-3-
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor should
expect to incur as a shareholder of Investor Class Shares of each of the
Portfolios based on projected annual operating expenses.
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
---------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees(c) None None None None
- ----------
(a) Shares of the Portfolios are expected to be sold primarily through
Service Organizations that may charge shareholders a fee. See "General
Management of the Portfolios--Distribution."
(b) An annual maintenance fee of $25.00 may be charged by the Transfer
Agent to each IRA Account with an aggregate balance of less than
$10,000 on December 31 of each year.
(c) The Transfer Agent may charge a processing fee of $10.00 for each
redemption check requested by a shareholder. See "Redemption of
Portfolio Shares."
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
(as a percentage of average daily net assets)-----------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -----------
Management Fees(b) 0.65% 0.77% 1.02% 1.15%
12b-1 Fees(c) 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.33% 0.36% 0.28% 0.50%
Administrative Fees(d) 0.25% 0.25% 0.25% 0.25%
Total Other Expenses 0.58% 0.61% 0.53% 0.75%
Total Portfolio Operating Expenses 1.48% 1.63% 1.80% 2.15%
==== ==== ==== ====
- ----------
(a) The table data reflects fees and expenses expected to be incurred
during the fiscal year ended December 31, 1998, not actual expenses.
For actual expenses of the Portfolios, prior to establishing the
multi-class structure incurred during the fiscal year ended December
31, 1997, see "Fees and Portfolio Expenses" in the Equity
Portfolios--Advisor Class Shares Prospectus or the Annual Report for
the period ended December 31, 1997.
(b) Management fees consist of the management fee paid to Bennington and
the Money Manager fee paid to each Portfolio's Money Manager. See
"General Management of the Portfolios--Fund Manager Services and Fees"
and "The Money Managers--Money Manager Fees."
(c) The Distribution Plan for Investor Class Shares has been adopted in
conformity with the requirements set forth under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"). In addition, a Shareholder Service Plan has been adopted for the
Investor Class Shares. The combination of the fees paid pursuant to the
Distribution Plan and the Shareholder Service Plan, may be no more than
.25% per annum. See "General Management of the Portfolios--Distribution
Plan."
(d) An Administrative Services Plan has been adopted for Investor 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 Investor Class Shares of the
Portfolios. The Administrative Service Fee is not for distribution
related activities.
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Portfolios
-----------------------------------------------------------------
Value Small to
Growth and Income Mid Cap International
------ ---------- ------- -------------
One Year $15 $17 $18 $22
Three Years $47 $51 $57 $67
Five Years $81 $89 $97 $115
Ten Years $177 $193 $212 $248
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 Investor 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 Investor Class Shares of the
Portfolios will bear directly or indirectly. For a more complete description of
the various costs and expenses, see "Expenses of the Portfolios" in the
Statement of Additional Information.
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<PAGE>
PORTFOLIO MANAGEMENT
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios. Bennington allocates the assets within a
Portfolio among any Money Managers selected. Bennington, in conjunction with the
Board of Directors, reviews Money Managers' performance. Bennington may add or
terminate a Money Manager at any time, subject to approval by the Board of
Directors and prompt notification of the applicable Portfolio's shareholders. A
separate Money Manager currently manages the assets of each Portfolio. See
"Money Manager Profiles" and "The Money Managers."
Although Bennington's activities are subject to general oversight by
the Board of Directors and the officers of the Fund, neither the Board nor the
officers evaluate the investment merits of Bennington's or any Money Manager's
individual security selections. The Board of Directors will review regularly the
Portfolios' performance compared to the applicable indices and also will review
the Portfolios' compliance with their investment objectives and policies. See
"General Management of the Portfolios."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as a
multi-managed, no load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. Each portfolio
issues two classes of shares, Advisor Class Shares and Investor Class Shares.
This Prospectus covers only the Investor Class Shares of the four equity
Portfolios of the Fund. The Advisor Class Shares of the four equity Portfolios
of the Fund as well as the Advisor Class Shares and Investor Class Shares of the
Fund's other four portfolios, which are designed for investment in fixed-income
securities, are intended to be offered through separate prospectuses. Each
Portfolio's assets are invested by Bennington and/or a Money Manager that has
been analyzed, evaluated and recommended by Bennington. Bennington also operates
and administers the Fund and monitors the performance of the Money Managers.
Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio, as defined in
the Investment Company Act. Other policies reflect current practices of the
Portfolios, and may be changed by the Portfolios without the approval of
shareholders. This section of the Prospectus describes each Portfolio's
investment objective, policies and restrictions. A more detailed discussion
appears in the Statement of Additional Information and includes a list of the
Portfolios' investment restrictions.
Under normal circumstances, each Portfolio will invest more than 80% of
its total assets in the types of securities identified in its statement of
objective as principal investments. Bennington will attempt to have each
Portfolio managed so that the Portfolio's investment performance equals or
exceeds the total return performance of a relevant index (each a "Benchmark
Index" and collectively the "Benchmark Indices"). See Appendix A for a
description of the Benchmark Indices. Each Portfolio may have up to 20% of its
total assets invested in money market instruments to provide liquidity. If, in
the opinion of Bennington or a Money Manager, market or economic conditions
warrant, any Portfolio may adopt a temporary defensive strategy. In that event,
a Portfolio may hold assets as cash reserves without limit. See "Investment
Policies--Liquidity Reserves." There can be no assurance that the investment
objective for any Portfolio will be realized.
No Portfolio will invest in fixed-income securities, including
convertible securities, rated less than A by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in unrated securities
judged by Bennington or a Money Manager to be of a lesser credit quality than
those designations. The Portfolios will sell securities that they have purchased
in a prudent and orderly fashion when ratings drop below these minimum ratings.
See Appendix A in the Statement of Additional Information for a description of
securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity and
debt securities. No assurance can be given that the Portfolios will achieve
their investment objectives.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. See "Investment Policies--Risks of Investing
in Foreign Securities" and "--Special Risks of Investing in Foreign Securities
of Emerging Countries." Up to 20% of the net assets of the Domestic Equity
Portfolios and up to 100% of the net assets of the International Portfolio may
be held in securities denominated in one or more foreign currencies, which will
result in that Portfolio bearing the risk that those currencies may lose value
in relation to the U.S. dollar. Certain Portfolios also may be subject to
certain risks in using investment techniques and strategies such as entering
into forward currency contracts and repurchase agreements and trading futures
contracts and options on futures contracts. See "Description of the Portfolios
Investment Policies." The use of options and futures transactions by a Portfolio
entails certain risks, including the risk that to the extent the Money Manager's
views as to certain market movements are incorrect, the use of such instruments
could result in losses greater than if they had not been used. Such instruments
may also force sales or purchases of portfolio securities at inopportune times
or for prices higher than (in the case of put options) or lower than (in the
case of call options) current market values, limit the amount the Portfolio
could realize on its investments or cause the Portfolio to hold a security it
might otherwise sell. Also, when used for hedging existing positions, the
variable degree of correlation between price movements of futures contracts and
price movements in the related portfolio position of the Portfolio could create
the possibility that losses on the hedging instrument will be greater than gains
in the value of the Portfolio's position, thereby reducing the Portfolio's net
asset value. See "Description of the Portfolios--Investment Policies" and
"Investment Restrictions, Policies and Risk Considerations--Investment
Restrictions" in the Statement of Additional Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Manager may increase a Portfolio's portfolio
turnover rate, realization of gains or losses, and brokerage commissions. High
portfolio turnover may involve correspondingly greater brokerage commissions and
transaction costs, which will be borne by the Portfolios and may result in
increased short-term capital gains which, when distributed to shareholders, are
treated as ordinary income. See "Portfolio Transaction Policies" and "Taxes."
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot be
changed without the approval of the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Statement of Additional
Information. The other investment policies and practices of each Portfolio,
unless otherwise noted, are not fundamental and may therefore be changed by a
vote of the Board of Directors without shareholder approval. For a more detailed
discussion regarding the benchmark indices, see Appendix A.
The GROWTH PORTFOLIO seeks capital growth through investing primarily
in equity securities with greater than average growth characteristics selected
from the S&P 500.
The Portfolio seeks to achieve this objective by investing principally
in common and preferred stocks, securities convertible into common stocks, and
rights and warrants of such issuers. The Money Manager will attempt to equal or
exceed the total return performance of the S&P/BARRA Growth Index over a market
cycle of five years by investing primarily in stocks of companies that are
expected to experience higher than average growth of earnings or growth of stock
price. Current income will not be a primary objective. Since the prices of
growth stocks tend to be more volatile and more sensitive to economic and market
swings than those of average stocks, Bennington expects that the Portfolio will
underperform the overall U.S. stock market during periods of general market
weakness, although this is not inconsistent with the goal of outperforming the
S&P/BARRA Growth Index over a market cycle. Under normal circumstances, up to
20% of the Portfolio's net assets may be invested in common stocks of foreign
issuers with large market capitalizations whose securities have greater than
average growth characteristics. The Portfolio may engage in various portfolio
strategies to reduce certain risks of its investments and may thereby enhance
income, but not for speculation. See "Investment Policies--Options" and
"--Futures Contracts."
The VALUE AND INCOME PORTFOLIO seeks generation of current income and
capital growth by investing primarily in income-producing equity securities
selected from the S&P 500.
The Portfolio seeks to achieve this objective by investing principally
in common and preferred stocks, convertible securities, and rights and warrants
of companies whose stocks have higher than average dividend yield relative to
other stocks of issuers in the same industry, or whose stocks have lower price
multiples (either price/earnings or price/book value) than others in their
industries, or which, in the opinion of the Money Manager, have improving
fundamentals (such as growth of earnings and dividends). The Money Manager will
attempt to equal or exceed the total return performance of the S&P/BARRA Value
Index over a market cycle of five years. Because the prices of value stocks tend
to be less volatile and less sensitive to economic and market swings than those
of average stocks, Bennington expects that the Value and Income Portfolio will
underperform the overall U.S. stock market during periods of general market
strength and will lose less value than the overall U.S. stock market during
times of general market decline, although this is not inconsistent with the goal
of outperforming the S&P/BARRA Value Index over a market cycle. Under normal
circumstances, up to 20% of the Portfolio's net assets may be invested in
income-producing equity securities of foreign issuers with large market
capitalizations. The Portfolio may engage in various portfolio strategies to
reduce certain risks of its investments and to enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures Contracts."
The SMALL TO MID CAP PORTFOLIO seeks capital growth through investing
primarily in equity securities of small to medium capitalization issuers.
Under normal market conditions, the Portfolio seeks to achieve this
objective by investing at least 65% of the value of its total assets in equity
securities of small and medium capitalization issuers. Small capitalization
issuers are issuers which have a capitalization of $1 billion or less at the
time of investment whereas medium capitalization issuers have a capitalization
ranging from $1 billion to $5 billion at the time of investment. The Portfolio
invests principally in common and preferred stocks, securities convertible into
common stocks, and rights and warrants of such issuers. The Money Manager will
attempt to equal or exceed the total return performance of the Wilshire 4500
Index over a market cycle of five years by investing primarily in stocks of
companies that are expected to experience higher than average growth of earnings
or growth of stock price. Current income will not be a primary objective. Since
the prices of small to medium capitalization growth stocks tend to be more
volatile and more sensitive to economic and market swings than those of stocks
comprising the S&P 500, Bennington expects that the Small to Mid Cap Portfolio
will underperform the S&P 500 during periods of general market weakness,
although this is not inconsistent with the goal of outperforming the Wilshire
4500 Index over a market cycle. Under normal circumstances, up to 20% of the
Portfolio's net assets may be invested in common stocks of foreign issuers with
small market capitalizations. The Portfolio may engage in various portfolio
strategies to reduce certain risks of its investments and may thereby enhance
income, but not for speculation. See "Investment Policies--Options" and
"--Futures Contracts."
The INTERNATIONAL EQUITY PORTFOLIO seeks capital growth by investing
primarily in equity securities of companies domiciled in countries other than
the United States and traded on foreign stock exchanges.
The Portfolio seeks to achieve this objective by investing at least 65%
of its total assets principally in equity securities issued by companies
domiciled in Europe (including Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden,
Switzerland and the United Kingdom) and the Pacific Rim (including Australia,
Hong Kong, Japan, Malaysia, New Zealand and Singapore). The Portfolio may also
invest in securities of countries generally considered to be emerging or
developing countries by the World Bank, the International Finance Corporation,
the United Nations or its authorities ("Emerging Countries"). The International
Portfolio considers an issuer to be located in an Emerging Country if (i) the
issuer derives 50% or more of its total revenues from either goods produced,
sales made or services performed in Emerging Countries or (ii) the issuer is
organized under the laws of, and has a principal office in, an Emerging Country.
See " Investment Policies--Special Risks of Investing in Foreign Securities of
Emerging Countries." The Portfolio intends to maintain investments in at least
three different countries outside the United States. The Portfolio will treat
securities issued by any one foreign government, its agencies and
instrumentalities as if they are securities having their principal business
activities in the same industry. The Portfolio will not purchase securities
issued by any one foreign government if as a result 25% or more of the
Portfolio's total assets would be invested in securities issued by that one
foreign government. The Portfolio may invest up to 20% of its net assets in
fixed-income securities, including instruments issued by foreign governments and
their agencies, and in securities of U.S. companies which derive, or are
expected to derive, a significant portion of their revenues from their foreign
operations. The Money Manager will attempt to equal or exceed the net yield
(after withholding taxes) of the Morgan Stanley Capital International ("MSCI")
EAFE(R) + EMF Index. See "The Money Managers--Benchmark Indices." The Portfolio
may invest in securities denominated in currencies other than U.S. dollars.
The securities markets of most countries the International Portfolio
can invest in have substantially less trading volume than the securities markets
of the United States and Japan, and the securities traded in those countries are
less liquid and more volatile than securities of comparable U.S. companies. As a
result, these markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is the case in the United States. In addition, these
securities markets generally are not as highly regulated as U.S. markets.
Consequently, there may be limited liquidity for certain securities and the
prices at which the Portfolio may acquire investments may be affected by the
trading of others on material non-public information. Some countries impose
substantial restrictions on investments in their capital markets by foreign
entities such as the Portfolio, but this is not anticipated to limit the Money
Manager's ability to make suitable investments for the Portfolio. See
"Investment Policies--Risks of Investing in Foreign Securities" and "--Special
Risks of Investing in Foreign Securities of Emerging Countries." The Portfolio
may use options on stocks and currencies, forward foreign currency exchange
contracts and financial futures contracts to reduce certain risks of its
investments and may thereby enhance income, but not for speculation. See
"Investment Policies--Forward Foreign Currency Exchange Contracts," "--Options"
and "--Futures Contracts."
Investment Policies
Liquidity Reserves. Each Portfolio is authorized to invest its cash
reserves (funds awaiting investment in the specific types of securities to be
acquired by a Portfolio or cash to provide for payment of the Portfolio's
expenses or to permit the Portfolio to meet redemption requests) in money market
instruments or in debt securities which are at least comparable in quality to
the Portfolio's permitted investments. Under normal circumstances, no more than
20% of a Portfolio's net assets will be comprised of these instruments. The
Portfolios also may enter into financial futures contracts in accordance with
their investment objectives to minimize the impact of cash balances. See
"General Management of the Portfolios" and "Investment Policies--Liquidity
Reserves" in the Statement of Additional Information.
Money Market Instruments. Each Portfolio may invest up to 20% of its
net assets in:
(i) Obligations (including certificates of deposit and
bankers' acceptances) maturing in 13 months or less of (a) banks
organized under the laws of the United States or any state thereof
(including foreign branches of such banks) or (b) U.S. branches of
foreign banks or (c) foreign banks and foreign branches thereof;
provided that such banks have, at the time of acquisition by the
Portfolio of such obligations, total assets of not less than $1 billion
or its equivalent. The term "certificates of deposit" includes both
Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not
a market. "Eurodollars" are dollars deposited in banks outside the
United States; the Portfolios may invest in Eurodollar instruments of
foreign and domestic banks; and
(ii) Commercial paper, variable amount demand master notes,
bills, notes and other obligations issued by a U.S. company, a foreign
company or a foreign government, its agencies or instrumentalities,
maturing in 13 months or less, denominated in U.S. dollars, and of
"eligible quality" as described below. If such obligations are
guaranteed or supported by a letter of credit issued by a bank, such
bank (including a foreign bank) must meet the requirements set forth in
paragraph (i) above. If such obligations are guaranteed or insured by
an insurance company or other non-bank entity, such insurance company
or other non-bank entity must represent a credit of high quality, as
determined by the Portfolio's Money Manager under the supervision of
Bennington and the Board of Directors.
"Eligible quality," for this purpose, means (i) a security rated (or
issued by an issuer that is rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security) in the highest short-term rating category (e.g.,
A-1/P-1) or one of the two highest long-term rating categories (e.g., AAA/Aaa or
AA/Aa) by at least two major rating agencies assigning a rating to the security
or issuer (or, if only one agency assigned a rating, that agency) or (ii) an
unrated security deemed of comparable quality by the Portfolio's Money Manager
or Bennington under the general supervision of the Board of Directors. The
purchase by the Portfolio of a security of eligible quality that is rated by
only one rating agency or is unrated must be approved or ratified by the Board
of Directors.
In selecting commercial paper and other corporate obligations for
investment by a Portfolio, the Money Manager also considers information
concerning the financial history and condition of the issuer and its revenue and
expense prospects. Bennington monitors, and the Board of Directors reviews on a
quarterly basis, the credit quality of securities purchased for the Portfolio.
If commercial paper or another corporate obligation held by a Portfolio is
assigned a lower rating or ceases to be rated, the Money Manager under the
supervision of Bennington and the Board of Directors will promptly reassess
whether that security presents minimal credit risks and whether the Portfolio
should continue to hold the security in its portfolio. If a portfolio security
no longer presents minimal credit risks or is in default, the Portfolio will
dispose of the security as soon as reasonably practicable unless Bennington and
the Board of Directors determine that to do so is not in the best interests of
the Portfolio and its shareholders. Variable amount demand master notes with
demand periods of greater than seven days will be deemed to be liquid only if
they are determined to be so in compliance with procedures approved by the Board
of Directors.
U.S. Government Securities. Each Portfolio may invest in United States
Treasury securities, including bills, notes, bonds and other debt securities
issued by the United States Treasury. These instruments are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and credit"
of the United States. They differ primarily in their interest rates, the lengths
of their maturities and their issue dates.
The Portfolios may invest in securities issued by agencies or
instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
Obligations of the Government National Mortgage Association ("GNMA"),
the Farmers Home Administration and the Export-Import Bank are backed by the
full faith and credit of the United States. Securities in which the Portfolios
may invest that are not backed by the full faith and credit of the United States
include obligations issued by (i) the Tennessee Valley Authority, the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service (each of these
issuers has the right to borrow from the United States Treasury to meet its
obligations) and (ii) the Federal Farm Credit Bank and the Federal Home Loan
Bank (each of these issuers may rely only on the individual credit of the
issuing agency to satisfy its obligations). No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the U.
S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a bank or broker-dealer that agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified time (ordinarily a week
or less). If the party agreeing to repurchase should default and if the value of
the securities held by the Portfolio should fall below the repurchase price, the
Portfolio could incur a loss. Subject to the limitation on investing no more
than 15% of a Portfolio's net assets in illiquid securities, no Portfolio will
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days. See "Investment
Policies--Illiquid Securities."
Repurchase agreements will at all times be fully collateralized by U.S.
Government obligations or other collateral in an amount at least equal to the
repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's Custodian, either
physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the other
party to the repurchase agreement becomes bankrupt or otherwise fails to deliver
the securities.
A Portfolio will enter into repurchase transactions only with parties
who meet creditworthiness standards approved by the Board of Directors.
Bennington or the Money Managers monitor the creditworthiness of such parties
under the general supervision of the Board of Directors. See "Investment
Policies--Repurchase Agreements" in the Statement of Additional Information.
Rights and Warrants. Each Portfolio may acquire up to 5% of its net
assets in rights and warrants in securities of issuers that meet each
Portfolio's investment objective and policies. See "Investment Restrictions" and
"Investment Policies--Rights and Warrants" in the Statement of Additional
Information.
Privately-Issued STRIP Securities. The Portfolios may invest up to 5%
of their net assets in privately-issued STRIP securities. See "Investment
Policies--Privately-Issued STRIP Securities" in the Statement of Additional
Information.
Reverse Repurchase Agreements. Each Portfolio's entry into reverse
repurchase agreements, together with its other borrowings, is limited to 5% of
its net assets. See "Investment Policies--Reverse Repurchase Agreements" in the
Statement of Additional Information.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio, pursuant to a securities lending agency agreement
between the lending agent and the Fund, may lend its portfolio securities to
brokers, dealers and financial institutions deemed creditworthy by Bennington
and the applicable lending agent. The outstanding loans may not exceed in the
aggregate the maximum amount of the value of the Portfolio's net assets allowed
by applicable law, currently 33-1/3% Such loans are callable at any time by the
Portfolio and are at all times secured by cash or U.S. Government securities,
irrevocable letters of credit or such other acceptable collateral that is at
least equal to the market value, determined daily, of the loaned securities. The
Portfolio will receive the collateral in an amount equal to at least 102% (in
the case of domestic securities) or 105% (in the case of foreign securities) of
the current market value of the loaned securities plus accrued interest. Cash
collateral received by the Portfolio will be invested in any securities in which
the Fund is authorized to invest. A loan may be terminated by the borrower on
one business day's notice or by the Portfolio at any time. As with any
extensions of credit, there are risks of delay in recovery and in some cases
loss of right in the collateral should the borrower of the securities fail
financially. The advantage of such loans is that the Portfolio continues to
receive interest and dividends on the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations. The risks of lending securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral or in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy as monitored by Bennington and the lending agent pursuant to
procedures approved by the Board of Directors. On termination of the loan, the
borrower is required to return the securities to the Portfolio, and any gain or
loss in the market price during the loan would be borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower. See "Investment Policies--Lending of Portfolio Securities" in the
Statement of Additional Information.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities. Securities which are illiquid include repurchase
agreements of more than seven days duration, securities which lack a readily
available market or have legal or contractual restrictions on resale, certain
interest only/principal only strips and over-the-counter ("OTC") options.
Restricted securities issued pursuant to Rule 144A under the Securities Act of
1933, as amended, that have a readily available market are not deemed illiquid
for purposes of this limitation, pursuant to liquidity procedures that have been
adopted by the Board of Directors. Investing in Rule 144A securities could
result in increasing the level of a Portfolio's illiquidity if qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. The International Portfolio will treat investments of the
International Portfolio that are subject to repatriation restrictions of more
than seven (7) days as illiquid securities. See "Investment Policies--Special
Risks of Investing in Foreign Securities of Emerging Countries--Political and
Economic Factors." Each Money Manager will monitor the liquidity of such
restricted securities under the supervision of Bennington and the Board of
Directors. See "Investment Policies--Illiquid Securities" in the Statement of
Additional Information.
Forward Foreign Currency Exchange Contracts. The International
Portfolio may enter into forward foreign currency exchange contracts for hedging
purposes. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market directly
between currency traders (typically large commercial banks) and their customers.
A forward contract generally has no deposit requirements and no commissions are
charged for such trades.
When the International Portfolio invests in foreign securities, it may
enter into forward foreign currency exchange contracts in several circumstances
to protect its value against a decline in exchange rates, or to protect against
a rise in exchange rates for securities it intends to purchase, but it will not
use such contracts for speculation. The International Portfolio may not use
forward contracts to generate income, although the use of such contracts may
incidentally generate income. There is no limitation on the value of forward
contracts into which the International Portfolio may enter. When effecting
forward foreign currency contracts, cash or liquid assets of the International
Portfolio of a dollar amount having an aggregate value, measured on a daily
basis, at least sufficient to make payment for the portfolio securities to be
purchased will be segregated on the International Portfolio's records at the
trade date and maintained until the transaction is settled.
Options. Each Portfolio may purchase put and call options and write
(sell) "covered" put and "covered" call options. The Domestic Equity Portfolios
may purchase and write options on stocks and stock indices. These options may be
traded on national securities exchanges or in the OTC market. Options on a stock
index are similar to options on stocks except that there is no transfer of a
security and settlement is in cash. The Domestic Equity Portfolios may write
covered put and call options to generate additional income through the receipt
of premiums, purchase put options in an effort to protect the value of a
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in the price of securities
it intends to purchase.
The International Portfolio may purchase and write options on
currencies. Currency options may be either listed on an exchange or traded OTC.
OTC options are privately negotiated with the counterparty to such contract and
are purchased from and sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Portfolios. If
the counterparty fails to take delivery of the securities underlying an option
it has written, the Portfolios must rely on the credit quality of the
counterparty. The staff of the SEC has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities subject to the 15% limitation described above in "Illiquid
Securities." Options on currencies are similar to options on stocks except that
there is no transfer of a security and settlement is in cash. The International
Portfolio may write covered put and call options on currencies to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a currency that it owns against a decline in
value and purchase call options in an effort to protect against an increase in
the price of currencies it intends to purchase. The currency options are traded
on national currency exchanges, the OTC market and by large international banks.
The International Portfolio may trade options on international stocks or
international stock indices in a manner similar to that described above.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's Custodian, cash, U.S.
Government securities or other liquid assets with an aggregate value, measured
on a daily basis, at least sufficient to meet its obligations under the call
option, or if the Portfolio owns an offsetting call option. When a Portfolio
writes a call option, it receives a premium and gives the purchaser the right to
buy the underlying security at any time during the call period, at a fixed
exercise price regardless of market price changes during the call period. If the
call is exercised, the Portfolio foregoes any gain from an increase in the
market price of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. A written put option is "covered"
if a Portfolio deposits with the Fund's Custodian, cash, U.S. Government
securities or other liquid assets with an aggregate value, measured on a daily
basis, at least equal to the exercise price of the put option.
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and the assets used as cover for written OTC
options. The SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities subject to
the 15% limitation described above in "Illiquid Securities." Furthermore, the
Portfolios will not purchase or write put or call options on securities, stock
index futures or financial futures if the aggregate premiums paid on all such
options exceed 20% of the Portfolio's total net assets, subject to the foregoing
limitations.
When a Portfolio writes either a put or call option, the Portfolio is
required to deposit an initial margin with the Fund's Custodian for the benefit
of the options broker. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its option commitment. When the Portfolio writes
options and an adverse price movement occurs, the Portfolio may be called upon
to deposit an additional or variation margin. Both the initial and additional or
variation margin must be made in cash or U.S. Government securities. The
required margin amount is subject to change by the appropriate exchange or
regulatory authority.
Futures Contracts. Each Portfolio is permitted to enter into financial
futures contracts, stock index futures contracts and related options ("futures
contracts") in accordance with its investment objective. The International
Portfolio also may purchase and write futures contracts on foreign currencies.
Futures contracts will be limited to hedging transactions to minimize the impact
of cash balances and for return enhancement and risk management purposes in
accordance with regulations of the Commodity Futures Trading Commission.
A "financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as United States Treasury bonds, notes
and bills, commercial paper, bank certificates of deposit, an agreed amount of
currencies, or the cash value of a financial instrument index at a specified
future date at a price agreed upon when the contract is made. Substantially all
futures contracts are closed out before settlement date or called for cash
settlement. A futures contract is closed out by buying or selling an identical
offsetting contract which cancels the original contract to make or take
delivery.
The Portfolios may purchase and write options on futures contracts as
an alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures contracts are similar to options on the security
upon which the futures contracts are written except that options on stock index
futures contracts give the purchaser the right to assume a position at a
specified price in a stock index futures contract at any time during the life of
the option.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's Custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its futures commitment. The initial margin amount is
subject to change by the appropriate exchange or regulatory authority. The
Portfolio will also be required to settle any gains or losses on a daily basis
in cash (variation margin). If the Portfolio is unable to meet an additional
margin requirement, the Portfolio may be forced to close out its position at a
price that may be detrimental to the Portfolio. When trading futures contracts,
a Portfolio will not commit more than 5% of the market value of its total assets
as initial margins. See "Investment Policies--Futures Contracts" in the
Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies.
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which a
Portfolio would not be subject absent the use of these strategies. If the Money
Manager's predictions of movements in the direction of the securities, foreign
currency and interest rate markets are inaccurate, the adverse consequences to
the Portfolio may leave the Portfolio in a worse position than if such
strategies were not used. Risks inherent in the use of options, foreign currency
and futures contracts and options on futures contracts include: (1) dependence
on the Money Manager's ability to predict correctly movements in the direction
of interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities being hedged; (3) the fact
that skills needed to use these strategies are different from those needed to
select portfolio securities; (4) the possible absence of a liquid secondary
market for any particular instrument at any time; (5) the possible need to raise
additional initial margin; (6) in the case of futures, the need to meet daily
margin in cash; and (7) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences. See "Taxes" in the Statement of
Additional Information.
Risks of Investing in Foreign Securities. The Portfolios may invest in
foreign securities. Foreign securities involve certain risks. These risks
include political or economic instability in the country of the issuer, the
difficulty of predicting international trade patterns, the possibility of
imposition of exchange controls and the risk of currency fluctuations. Such
securities may be subject to greater fluctuations in price than securities
issued by U.S. corporations or issued or guaranteed by the U.S. Government, its
instrumentalities or agencies. Generally, outside the United States there is
less government regulation of securities exchanges, brokers and listed companies
and, with respect to certain foreign countries, there is a possibility of
expropriation, confiscatory taxation or diplomatic developments which could
affect investments within such countries.
In many instances, foreign debt securities may provide higher yields
than securities of domestic issuers which have similar maturities and quality.
However, under certain market conditions, these investments may be less liquid
than investments in the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
If a security is denominated in a foreign currency, such security will
be affected by changes in currency exchange rates and in exchange control
regulations, and costs will be incurred in connection with conversions between
currencies. A change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of the
Portfolio's securities denominated in that currency. Such changes also will
affect the Portfolio's income and distributions to shareholders. In addition,
although the Portfolio will receive income in such currencies, the Portfolio
will be required to compute and distribute its income in U.S. dollars.
Therefore, if the exchange rate for any such currency declines after the
Portfolio's income has been accrued and translated into U.S. dollars, the
Portfolio could be required to liquidate portfolio securities to make such
distributions, particularly when the amount of income the Portfolio is required
to distribute is not immediately reduced by the decline in such security.
Similarly, if an exchange rate declines between the time the Portfolio incurs
expenses in U.S. dollars and the time such expenses are paid, the amount of such
currency which must be converted into U.S. dollars to pay such expenses in U.S.
dollars will be greater than the equivalent amount in any such currency of such
expenses at the time they were incurred.
Special Risks of Investing in Foreign Securities of Emerging Countries.
Political and Economic Factors. Investing in Emerging Countries
involves potential risks relating to political and economic developments abroad.
Governments of many Emerging Countries have exercised and continue to exercise
substantial influence over many aspects of the private sector. Accordingly,
government actions in the future could have a significant effect on economic
conditions in Emerging Countries, which could affect the value of securities in
the Portfolios. The value of the investments made by the Portfolios will be
affected by commodity prices, inflation, interest rates, taxation, social
instability, and other political, economic or diplomatic developments in or
affecting the Emerging Countries in which the Portfolios have invested. In
addition, there is a possibility of expropriation or confiscatory taxation,
imposition of withholding taxes on dividend or interest payments, or other
similar developments which could affect investments in those countries. While
the Money Managers intend to manage the Portfolios in a manner that will
minimize the exposure to such risks, there can be no assurance that adverse
political changes will not cause the Portfolios to suffer a loss of interest or
principal on any of its holdings. The Portfolios will treat investments of the
Portfolios that are subject to repatriation restrictions of more than seven (7)
days as illiquid securities.
Foreign Exchange Risk. The value of non-U.S. dollar denominated
securities of issuers in Emerging Countries is affected by changes in currency
exchange rates or exchange control regulations. Foreign currency exchange rates
are determined by forces of supply and demand on the foreign exchange markets.
These forces are affected by the international balance of payments, economic and
financial conditions, government intervention, speculation and other factors.
Many of the currencies of Emerging Countries have experienced significant
devaluations relative to the U.S. dollar and major adjustments have been made in
certain of them at times.
Investing in Securities Markets of Emerging Countries. Certain of the
risks associated with investments generally are heightened for investments in
Emerging Countries. For example, securities markets in Emerging Countries may be
less liquid, more volatile and less subject to governmental regulation than U.S.
securities markets. There may be less publicly available information about
issuers in Emerging Countries than about domestic issuers. Emerging Country
issuers are not generally subject to accounting, auditing and financial
reporting standards comparable to those applicable to domestic issuers. Markets
in Emerging Countries also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Portfolios are uninvested and no
return is earned thereon. Inability to dispose of securities due to settlement
problems could result in losses to the Portfolios due to subsequent declines in
value of securities or, if the Portfolios have entered into a contract to sell
securities, could result in possible liability to the purchaser.
Certain Emerging Countries require prior governmental approval of
investments by foreign persons, limit the amount of investment by foreign
persons in a particular company, limit the investment by foreign persons only to
a specific class of securities of a company that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain Emerging Countries
may also restrict investment opportunities in issuers in industries deemed
important to national interests.
Certain Emerging Countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
Emerging Country's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Portfolios
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Portfolios of any restrictions on investments.
Costs associated with transactions in securities of companies in
Emerging Countries are generally higher than costs associated with transactions
in U.S. securities. There are three basic components to such transaction costs,
which include brokerage fees, market impact costs (i.e., the increase or
decrease in market prices which may result when a Portfolio purchases or sells
thinly traded securities), and the difference between the bid-ask spread. Each
one of these components may be significantly more expensive in Emerging
Countries than in the U.S. or other developed markets because of less
competition among brokers, lower utilization of technology by exchanges and
brokers, the lack of derivative instruments and less liquid markets. In addition
to these transaction costs, the cost of maintaining custody of foreign
securities generally exceeds custodian costs for U.S. securities.
Throughout the last decade many Emerging Countries have experienced and
continue to experience high rates of inflation. In certain countries, inflation
has at times accelerated rapidly to hyperinflationary levels, creating a
negative interest rate environment and sharply eroding the value of outstanding
financial assets in those countries. See "Redemption of Portfolio Shares."
Investment Restrictions
Each Portfolio is subject to investment restrictions which, as
described in more detail in the Statement of Additional Information, have been
adopted by the Fund on behalf of the Portfolios as fundamental policies that
cannot be changed with respect to a Portfolio without the approval of the
holders of a majority of such Portfolio's outstanding voting securities, as
defined in the Investment Company Act. Among other restrictions, the Portfolios
will not purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result (i) with respect to 75% of a
Portfolio's total assets, more than 5% of a Portfolio's total assets would then
be invested in securities of a single issuer, or (ii) 25% or more of a
Portfolio's total assets would be invested in one or more issuers having their
principal business activities in the same industry. See "Investment
Restrictions, Policies and Risk Considerations--Investment Restrictions" in the
Statement of Additional Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally the
operation of the Fund, including reviewing and approving the Fund's service
contracts with Bennington and the Money Managers. The Fund's officers, all of
whom are employed by Bennington, are responsible for the day-to-day management
and administration of the Fund's operations. The Money Managers are responsible
for the selection of individual portfolio securities for the assets assigned to
them by Bennington.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, was organized
as a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. Bennington's general partners are
Northwest Advisors, Inc., Bennington Management Associates, Inc. and Bennington
Capital Management Investment Corp., all of which are Washington corporations.
The sole limited partner is Zions Investment Management, Inc., a wholly-owned
subsidiary of Zions First National Bank, N.A. Bennington Management Associates,
Inc., which is controlled by J. Anthony Whatley, III, is the managing general
partner of Bennington. Mr. Whatley, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. Ravindra
A. Deo, Vice President and Chief Investment Officer of Bennington, is primarily
responsible for the day-to-day management of the Portfolios through interaction
with each Portfolio's Money Manager and Mr. Deo is responsible for managing the
liquidity reserves of each Portfolio. Mr. Deo has served Bennington in such
capacity since January 1992. Prior thereto, he was Senior Vice President at
Leland O'Brien Rubenstein Associates Incorporated, an investment manager, where
he was employed from 1986 to 1991. See "Management of the Fund" in the
Statement of Additional Information.
Fund Manager Services and Fees. Pursuant to the Management Agreement
with the Fund, Bennington provides the following services: (i) provides or
oversees the provision of all general management, investment advisory and
portfolio management services for the Fund, including the transfer agent,
custodian, portfolio accounting and shareholder recordkeeping services for the
Fund; (ii) provides the Fund with office space, equipment and personnel
necessary to operate and administer the Fund's business; (iii) develops the
investment programs, selects Money Managers, allocates assets among Money
Managers, and monitors the Money Managers' investment programs and results; and
(iv) invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' other assets. For providing these services, Bennington is paid by
each Portfolio a fee equal on an annual basis to the following percentage of the
Portfolio's average daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
- --------- -------------------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Pursuant to the Transfer Agent Agreement effective December 1, 1995, as amended
February 19, 1998, between Bennington and the Fund, Bennington provides transfer
agent, registrar and dividend disbursing agent services as well as certain other
administrative, compliance and recordkeeping services to the Fund. For providing
these services, Bennington receives (i) a fee equal to 0.13% of the average
daily net assets of each Portfolio of the Fund, and (ii) a transaction fee of
$.50 per transaction.
Bennington may, out of its own resources, provide marketing and
promotional support on behalf of the Portfolios. Services provided by Bennington
are in addition to, and not duplicative of, the services provided by Service
Organizations to their clients.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington
and Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, effective November 18, 1996, under which Fifth Third provides
certain portfolio accounting and other services, including maintenance of the
books and records of the Portfolios required under the Investment Company Act.
As compensation for these services, the Fund pays Fifth Third an annual fund
accounting and service fee (the "Fee ), to be calculated daily and paid monthly.
The annual Fee for each Portfolio shall be the greater of a monthly minimum or
an asset based fee, as follows:
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ------- ------------ ------------ ------------
Growth $1,500 0.03% 0.02% 0.01%
Value and Income $1,500 0.03% 0.02% 0.01%
Small to Mid Cap $1,500 0.03% 0.02% 0.01%
International Equity $3,000 0.04% 0.03% 0.02%
The Fund pays an additional annual Fee of $2,000 per Portfolio for
other administrative services rendered, to be charged monthly. For additional
Classes of shares the Fund will pay an annual charge of $7,000 per additional
Class of shares per Portfolio, also to be charged monthly. Finally, the Fund
reimburses Fifth Third for its out-of-pocket expenses incurred in performing its
services under this Agreement, including, but not limited to: postage and
mailing, telephone, facsimile, overnight courier services and outside
independent pricing service charges, and record retention/storage. The total
costs for these additional fees are borne by each Portfolio based on the
proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement on October
4, 1996, effective November 18, 1996, under which Fifth Third acts as Custodian
of the Portfolios' assets. As compensation for its services rendered, the Fund
pays Fifth Third an annual domestic custody fee of: .0025% of the average gross
assets and an annual global custody fee of .08% of the average gross assets,
exclusive of transaction charges. The total costs for the custodial fees are
borne by each Portfolio based on the proportionate net assets of each Portfolio.
Year 2000 Preparedness. The management and money management services
provided to the Fund by Bennington and the Money Managers and the services
provided by Fifth Third to the Fund, in part, depend on the reasonably
consistent operations of their computer systems. Many software programs and, to
a lesser extent, computer hardware in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. This
design flaw may a have negative impact on the handling of securities trades,
pricing and accounting services. Bennington and the Money Managers and Fifth
Third have been actively working on necessary changes to their computer systems
to deal with the year 2000 and reasonably believe that their systems will be
year 2000 compliant in time for that event.
Multi-Class Structure. The Fund has adopted a Rule 18f-3 Plan (the
"Multi-Class Plan") pursuant to Rule 18f-3 under the Investment Company Act.
Under the Multi-Class Plan, shares of each class of each Portfolio represent an
equal pro rata interest in such Portfolio and, generally, have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other.
As described in the Multi-Class Plan, the Fund, on behalf of each
Portfolio's Investor Class Shares, has adopted a Shareholder Service Plan, a
Distribution Plan and an Administrative Services Plan, all as described below.
Pursuant to the appropriate plan, the Fund may enter into arrangements with
Service Organizations who may provide distribution services, shareholder
services and/or administrative and accounting services to or on behalf of their
clients or customers who beneficially own Investor Class Shares. Any Service
Organization may enter into agreements with the Fund under each plan.
Distribution. Investment advisors, banks, insurance companies and other
entities that sell shares of the Fund may enter into a license agreement with
Bennington which permits them to use Bennington's proprietary asset allocation
software program, Alloset(R), pursuant to which such entities may recommend an
allocation of their clients' assets over a broad range of asset classes, which
may include the various portfolios of the Fund. The Alloset(R) Model was
developed by Bennington. Investment advisors, banks, insurance companies and
other licensed entities may charge a fee, not for providing access to the Fund,
but for providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive any
portion of such fees and has no control over whether and in what amount such
fees are charged. Investors also may purchase shares of the Fund directly if
they do not wish to use any of the above services, in which case no service fees
or additional fees, beyond those borne by the shareholders of the Fund
generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R). Using
Alloset(R), assets may be allocated among the Fund's portfolios in a manner
intended to achieve the investment objectives and desired investment returns of
such entities' clients based upon the individual client's situation and
tolerance for risk and desire for return on investment. There can be no
assurance that the allocation recommended by the entities that use
Alloset(R)will meet any of the clients' investment objectives. The Money
Managers engaged by the Fund do not use Alloset(R)in investing any of the
Portfolio's assets under management.
Distribution Plan. The Fund has adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") of the Investment Company
Act with respect to the Investor Class Shares of each Portfolio. Under the terms
of the Distribution Plan, the Fund is permitted, out of the assets attributable
to the Investor Class Shares of each Portfolio (i) to make directly or cause to
be made, payments for costs and expenses to third parties or (ii) to reimburse
third parties for costs and expenses incurred in connection with providing
distribution services. Such distribution services, include but are not limited
to (a) costs of payments made to employees that engage in the distribution of
Investor Class Shares; (b) costs relating to the formulation and implementation
of marketing and promotional activities, including but not limited to, direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising; (c) costs of printing and distributing prospectuses, statements of
additional information and reports of the Fund to prospective holders of
Investor Class Shares; (d) costs involved in preparing, printing and
distributing sales literature pertaining to the Fund and (e) costs involved in
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that the Fund may, from time to time, deem advisable
and which are, directly or indirectly, intended to result in the sale of
Investor Class Shares (the "Distribution Services"). The Fund may enter into
arrangements with Service Organizations primarily intended to result in the sale
of Investor Class Shares. Subject to the limitations of applicable law and
regulations, including rules of NASD, the payments made directly to third
parties or the reimbursements for such distribution related costs or expenses,
shall be in combination with the service fee pursuant to the Shareholder Service
Plan. The total annual rate shall be up to but not more than 0.25% of the
average daily net assets of the Portfolios attributable to the Investor Class
Shares. Any expense payable hereunder may be carried forward for reimbursement
for up to twelve months beyond the date in which it is incurred, subject always
to the limit (in combination with the service fee pursuant to the Shareholder
Service Plan) that not more than 0.25% of the average daily net assets of the
Portfolios shall be attributable to Investor Class Shares. Investor Class Shares
shall incur no interest or carrying charges for expenses carried forward. In the
event the Distribution Plan is terminated, the Investor Class Shares shall have
no liability for expenses that were not reimbursed as of the date of
termination.
The Distribution Plan may be terminated with respect to the Fund by a
vote of a majority of the "non-interested" Directors who have no direct or
indirect financial interest in the operation of the Distribution Plan (the
"Qualified Directors") or by the vote of a majority of the outstanding voting
securities of the relevant class of the Fund. Any change in the Distribution
Plan that would materially increase the cost to the class of shares of the Fund
to which the Distribution Plan relates requires approval of the affected class
of shareholders of the Fund. The Distribution Plan requires the Board to review
and approve the Distribution Plan annually and, at least quarterly, to receive
and review written reports of the amounts expended under the Distribution Plan
and the purposes for which such expenditures were made. The Distribution Plan
may be terminated at any time upon a vote of the Qualified Directors.
Shareholder Service Plan. The Fund has adopted a Shareholder Service
Plan with respect to Investor Class Shares of each Portfolio. Under the
Shareholder Service Plan the Fund is authorized to enter into Shareholder
Service Agreements with Service Organizations who provide personal and/or
account maintenance services to their clients (the "Clients") who may from time
to time beneficially own Investor Class Shares of the Portfolios. Each Portfolio
will pay directly to Service Organizations a non distribution related
shareholder service fee under the Shareholder Service Plan at an annual rate of
up to 0.25% of the average daily net assets of the Portfolio attributable to the
Investor Class Shares beneficially owned by the clients of the Service
Organizations (the "Shareholder Service Fee"), subject always to the limit (in
combination with the distribution fee pursuant to the Distribution Plan) that
not more than 0.25% of the average daily net assets of the Portfolios shall be
attributable to Investor Class Shares. By way of example, such services may
include some or all of the following: (i) shareholder liaison services; (ii)
providing information periodically to Clients showing their positions in
Investor Class Shares and integrating such statements with those of other
transactions and balances in Clients' other accounts serviced by the Service
Organizations; (iii) responding to Client inquiries relating to the services
performed by the Service Organizations; (iv) responding to routine inquiries
from Clients concerning their investments in Investor Class Shares; and (v)
providing such other similar services to Clients as the Fund may reasonably
request to the extent the Service Organizations are permitted to do so under
applicable statutes, rules and regulations. The Shareholder Service Plan will
continue from year to year provided that it is reviewed and approved by the
Board of Directors of the Fund annually. In addition, the Board of Directors
will ratify all agreements entered into pursuant to this Shareholder Service
Plan and shall review at each quarterly meeting of the Directors the amounts
expended under the Shareholder Service Plan and the purposes for which those
expenditures were made. The Shareholder Service Plan may be terminated at any
time by a vote of the Qualified Directors.
Administrative Services Plan. The Fund has adopted an Administrative
Services Plan whereby the Fund is authorized to enter into Administrative
Service Agreements on behalf of the Investor Class Shares of the Portfolios (the
"Agreements"), the form of which has been approved by the Board of Directors of
the Fund (the "Board") and each Agreement will be ratified by the Board of
Directors at the next quarterly meeting after the arrangement has been entered
into. Each Portfolio will pay an administrative services fee under the
Administrative Services Plan at an annual rate of up to 0.25% of the average
daily net assets of the Investor Class Shares of the Portfolio (the
"Administrative Services Fee") beneficially owned by the clients of the Service
Organizations. Provided, however, that no Portfolio shall directly or indirectly
pay any distribution related amounts that will be allocated under the Fund's
Distribution Plan. Administrative Services Fees may be used for payments to
Service Organizations who provide administrative and support servicing to their
customers who may from time to time beneficially own Investor Class Shares of
the Fund, which, by way of example, may include: (i) establishing and
maintaining accounts and records relating to shareholders; (ii) processing
dividend and distribution payments from the Portfolio on behalf of shareholders;
(iii) providing information periodically to shareholders showing their positions
in shares and integrating such statements with those of other transactions and
balances in shareholders other accounts serviced by such financial institution;
(iv) arranging for bank wires; (v) providing transfer agent or sub-transfer
agent services, recordkeeping, custodian or subaccounting services with respect
to shares beneficially owned by shareholders, or the information to the
Portfolio necessary for such services; (vi) if required by law, forwarding
shareholder communications from the Portfolio (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to shareholders; (vii) assisting in processing purchase,
exchange and redemption requests from shareholders and in placing such orders
with our service contractors; or (viii) providing such other similar services,
which are not considered "service fees" as defined in the NASD Rule 2830(b)(9),
as the Portfolio may reasonably request to the extent the Service Organization
is permitted to do so under applicable laws, statutes, rules and regulations.
The Administrative Services Plan may be terminated at any time by a vote of the
Qualified Directors. The Directors shall review and approve the Administrative
Services Plan annually and quarterly shall receive a report with respect to the
amounts expended under the Administrative Services Plan and the purposes for
which those expenditures were made.
THE MONEY MANAGERS
Bennington is responsible for evaluating, selecting, and recommending
Money Managers needed to manage all or part of the assets of the Portfolios of
the Fund. Bennington is also responsible for allocating the assets within a
Portfolio among any Money Managers selected. Such allocation is reflected in the
Money Manager Agreement among the Fund, Bennington and any Money Manager, and
can be changed at any time by Bennington. The Board of Directors reviews and
approves selections of Money Managers and allocations of assets among any Money
Managers. Money Managers may be added or terminated by Bennington subject to the
approval of the Board of Directors of the Fund and appropriate notice to the
shareholders of the applicable Portfolio, as discussed below.
Money Managers are selected based on such factors as their experience,
the continuity of their portfolio management team, their security selection
process, the consistency and rigor with which they apply that process and their
demonstrated ability to add value to investment decisions. Short-term investment
performance is not a controlling factor in selecting or terminating Money
Managers. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance. A separate Money Manager currently manages the assets of
each Portfolio. See "Money Manager Profiles."
The Fund was issued an exemptive order by the SEC on September 4, 1996
for an exemption (the "Exemption") from certain provisions of the Investment
Company Act, which would otherwise require Bennington to obtain formal
shareholder approval prior to engaging and entering into money manager
agreements with Money Managers. The relief is based on the conditions set forth
in the Exemption that, among other things: (1) Bennington will select, monitor,
evaluate and allocate assets to the Money Managers and oversee Money Managers
compliance with the relevant Portfolio's investment objective, policies and
restrictions; (2) before a Portfolio may rely on the Exemption, the Exemption
must be approved by the shareholders of the Portfolios operating under the
Exemption; (3) the Fund will provide to shareholders certain information about a
new Money Manager and its money manager agreement within 60 days of the
engagement of a new Money Manager; (4) the Fund will disclose in this Prospectus
the existence, substance and effect of the Exemption; and (5) the Directors,
including the Qualified Directors, must approve each money manager agreement in
the manner required under the Investment Company Act. Any changes to the
Management Agreement between the Fund and Bennington would still require
shareholder approval. As required by the Exemption, the shareholders of each
Portfolio determined, at a shareholders' meeting held on August 15, 1995, to
permit the Fund to replace or add Money Managers and to enter into money manager
agreements with Money Managers upon approval of the Board of Directors but
without formal shareholder approval.
Neither the Board of Directors nor the officers evaluate the investment
merits of any Money Manager's individual security selections. However, the Board
of Directors will review regularly each Portfolio's performance compared to the
applicable indices and also will review each Portfolio's compliance with its
investment objective and policies.
Money Manager Fees. The Money Manager fee of a Portfolio is paid to the
Money Manager of a Portfolio pursuant to a Money Manager Agreement among the
Fund, Bennington and the respective Money Manager. The Money Manager fee is
based on the assets of the Portfolio and on the number of complete calendar
quarters of management by the Money Manager on the portion of the assets of its
respective Portfolio managed by it (the "Account"). The fee structure for the
Money Manager fee paid to the Money Managers of the Growth, Value and Income and
International Portfolios differs from that paid to the Money Manager for the
Small to Mid Cap Portfolio, as described below.
Money Manager Fees - Growth Portfolio, Value and Income Portfolio and
International Portfolio. The Money Manager fee for each Money Manager has two
components during the first five calendar quarters, the basic fee (the "Basic
Fee") and the portfolio management fee (the "Portfolio Management Fee") for the
Growth, Value and Income and International Equity Portfolios. The Money Manager
for the Growth Portfolio has not completed five complete calendars and will
receive a Basic Fee of 0.10% and a Portfolio Management Fee of 0.10%. The Money
Managers for the Value and Income and International Equity Portfolios, have
completed the first five calendar quarters of management of their respective
Accounts. If at any time a Money Manager should be replaced, the new Money
Manager for the applicable Portfolio will receive the fee set forth in the table
"Money Manager Fee Schedule For a Manager's First Five Calendar Quarters of
Management" during the first five calendar quarters of such new Money Manager's
management of the relevant Portfolio. See "Money Manager Fees--Money Manager Fee
Schedule For a Manager's First Five Calendar Quarters of Management" in the
Statement of Additional Information for a complete description of the schedule
for the first five calendar quarters.
Commencing with the sixth calendar quarter of management by a Money
Manager of the Growth Portfolio, Value and Income Portfolio and International
Equity Portfolio, such Portfolio will pay its Money Manager based on the "Money
Manager Fee Schedule For A Manager From the Sixth Calendar Quarter of Management
Forward." The Money Manager Fee commencing with the sixth quarter consists of
two components, the Basic Fee and the performance fee (the "Performance Fee"),
which varies with a Portfolio's performance.
MONEY MANAGER FEE SCHEDULE FOR A MANAGER FROM THE
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Growth and 0.10% greater than or equal to 2.00% 0.22%
Value and Income greater than or equal to 1.00% and less than 2.00% 0.20%
greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
International 0.20% greater than or equal to 4.00% 0.40%
greater than or equal to 2.00% and less than 4.00% 0.30%
greater than or equal to 0.00% and less than 2.00% 0.20%
greater than or equal to -2.00% and less than 0.00% 0.10%
less than -2.00% 0%
</TABLE>
The Performance Fee component will be adjusted each quarter and paid quarterly
based on the annualized investment performance of each Money Manager relative to
the annualized investment performance of the Benchmark Indices set forth below.
A description of each Benchmark Index is contained in Appendix A. A change in a
Benchmark Index may be effected with the approval of only the Board of Directors
and does not require the approval of shareholders. As long as the Growth or
Value and Income Portfolio's performance either exceeds its Benchmark Index, or
trails its Benchmark Index by no more than .50%, a Performance Fee will be paid
to the Money Manager. As long as the International Portfolio's performance
either exceeds its Benchmark Index, or trails its Benchmark Index by no more
than 2%, a Performance Fee will be paid to the Money Manager. A Money Manager's
performance is measured on the Account.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Growth S&P/BARRA Growth Index
Value and Income S&P/BARRA Value Index
International Morgan Stanley Capital International EAFE(R) + EMF Index
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable Benchmark
Index is recalculated at the end of each calendar quarter based on the Money
Manager's performance during all calendar quarters since commencement of
investment operations except that of the immediately preceding quarter.
Commencing with the 14th calendar quarter of investment operations, the Money
Manager's average annual performance differential will be recalculated based on
the Money Manager's performance during the preceding 12 calendar quarters (other
than the immediately preceding quarter) on a rolling basis. A Money Manager's
performance will be calculated by Bennington in the same manner in which the
total return performance of the Portfolio's index is calculated, which is not
the same method used for calculating the Portfolios' performance for advertising
purposes as described under "Calculation of Portfolio Performance." See Appendix
B to the Statement of Additional Information for a discussion of how performance
fees are calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
example, currently if a Benchmark Index has an average annual performance of
10%, the Growth or Value and Income Portfolio Account's average annual
performance would have to be equal to or greater than 12% for the Money Manager
to receive an annual Performance Fee of 0.22% (i.e., the difference in
performance between the Account and the index must be equal to or greater than
2% for the Portfolios' Money Managers to receive the maximum Performance Fee.)
Because the maximum Performance Fee for the Growth and Value and Income
Portfolios applies whenever a Money Manager's performance exceeds the index by
2.00% or more, the Money Managers for those Portfolios could receive a maximum
Performance Fee even if the performance of the Account is negative. Also,
because the maximum Performance Fee for the International Portfolio applies
whenever a Money Manager s performance exceeds the index by 4.00% or more, the
Money Manager for the International Portfolio could receive a maximum
Performance Fee even if the performance of the Account is negative. A more
detailed description of the operation of each Performance Fee is contained in
Appendix B to the Statement of Additional Information.
The Money Managers have agreed to the foregoing fees, which are
generally lower than they charge to institutional accounts for which they serve
as investment adviser and perform all administrative functions associated with
serving in that capacity. These lower fees are in recognition of the reduced
administrative and client service responsibilities the Money Managers have
undertaken with respect to the Portfolios.
The combined fees payable to Bennington and the Money Manager for the
International Portfolio may at times be higher than those paid by other mutual
funds. The Board of Directors believes that the fees payable by International
Portfolio are appropriate, in light of its investment objective and policies and
the nature of the securities in which it invests. The following table lists the
fees earned by the Money Managers of the Portfolios for the current period.
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
For Growth, Value and Income and International Portfolio
Number of Portfolio
Quarters Management Performance
Managed by Basic Fee Fee Fee
Money (All (1st 5 (6th Quarter Total
Portfolio Manager Period Quarters) Quarters) Forward) Fee
- --------- ------- ------ --------- --------- -------- -----
State
Growth* Street/ 3rd Quarter 1997 0.10% N/A 0% 0.10%
Geewax 3rd Quarter 1997 0.10% 0.10% N/A 0.20%
2 4th Quarter 1997 0.10% 0.10% 0% 0.20%
3 1st Quarter 1998 0.10% 0.10% 0% 0.20%
4 2nd Quarter 1998 0.10% 0.10% 0% 0.20%
Value 20 3rd Quarter 1997 0.10% N/A 0.20% 0.30%
and Income 21 4th Quarter 1997 0.10% N/A 0.22% 0.32%
22 1st Quarter 1998 0.10% N/A 0.22% 0.32%
23 2nd Quarter 1998 0.10% N/A 0.22% 0.32%
International 11 3rd Quarter 1997 0.20% N/A 0.40% 0.60%
12 4th Quarter 1997 0.20% N/A 0.40% 0.60%
13 1st Quarter 1998 0.20% N/A 0.40% 0.60%
14 2nd Quarter 1998 0.20% N/A 0.40% 0.60%
- ----------
*State Street Bank and Trust Company was the Money Manager of the Growth
Portfolio from inception through July 20, 1997, and was entitled to earn a
Performance Fee, but did not. Effective July 21, 1997, Geewax, Terker & Co.
became the Money Manager, and has not completed the first five calendar quarters
of investment operations.
Money Manager Fees - Small to Mid Cap Portfolio. For the period May 1,
1998 through June 30, 1998, the Money Manager fee for the Money Manager of the
Small to Mid Cap Portfolio has two components, the basic fee (the "Basic Fee")
and the performance fee (the "Performance Fee"). The Basic Fee is 0.10% and the
Performance Fee is 0.22%. The Money Manager for the Small to Mid Cap Portfolio
has completed over five calendar quarters of management of its Account and is
being paid a Performance Fee under the following structure:
MONEY MANAGER FEE SCHEDULE FOR Small to Mid Cap
Portfolio For the Period from May 1, 1998 through
June 30, 1998
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Small to Mid Cap 0.10% greater than or equal to 2.00% 0.22%
greater than or equal to 1.00% and less than 2.00% 0.20%
greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
</TABLE>
The Performance Fee component is adjusted each quarter and paid quarterly based
on the annualized investment performance of the Money Manager relative to the
annualized investment performance of the Wilshire 4500 Index, the Benchmark
Index for the Small to Mid Cap Portfolio. A description of the Benchmark Index
is contained in Appendix A. A change in the Benchmark Index may be effected with
the approval of only the Board of Directors and does not require the approval of
shareholders. As long as the Small to Mid Cap Portfolio's performance either
exceeds the Benchmark Index, or trails the Benchmark Index by no more than .50%,
a Performance Fee will be paid to the Money Manager.
Beginning July 1, 1998, the new Money Manager Agreement among the Fund,
Bennington and the Money Manager for the Small to Mid Cap Portfolio has a
different fee structure. See the "Money Manaers" in the Statement of Additional
Information-- for a description of the "Money Manager Fees--Money Manager Fee
Schedule For a Manager's First Five Calendar Quarters of Management". The Money
Manager of the Small to Mid Cap Portfolio has completed five calendar quarters
of management. From July 1, 1998, the Money Manager Fee schedule from the sixth
calendar quarter of management forward will be as follows:
MONEY MANAGER FEE SCHEDULE FOR
Small to Mid Cap Portfolio from July 1, 1998, for
THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average annualized Annualized
performance differential vs. the Benchmark Index Money Manager 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 Money Manager Fee will be adjusted each quarter and paid quarterly based on
the annualized investment performance of the Small to Mid Cap Money Manager
relative to the annualized investment performance of the Benchmark Index as
described above. As long as the Small to Mid Cap Portfolio's performance either
exceeds its Benchmark Index, or trails its Benchmark Index by no more than
1.50%, a Money Manager Fee will be paid to the Money Manager. The Money
Manager's performance is measured on the Account.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
the Small to Mid Cap Portfolio, if the Benchmark Index has an average annual
performance of 10%, the Account's average annual performance would have to be
equal to or greater than 13% for the Money Manager to receive an annual Money
Manager Fee of 0.42% (i.e., the difference in performance between the Account
and the index must be equal to or greater than 3.00% for the Money Manager to
receive the maximum Money Manager Fee). Because the maximum Money Manager Fee
for the Small to Mid Cap Portfolio applies whenever its Money Manager's
performance exceeds its Benchmark Index by 3.00% or more, the Small to Mid Cap
Portfolio Money Manager could receive the maximum Money Manager 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%, the Small
to Mid Cap Portfolio Money Manager would earn the maximum incentive fee.
The combined fees payable to Bennington and the Money Manager for the
Small to Mid Cap Portfolio may at times be higher than those paid by other
mutual funds. The Board of Directors believes that the fees payable by the Small
to Mid Cap Portfolio are appropriate, in light of its investment objective and
policies and the nature of the securities in which it invests. The following
table lists the fees earned by the Money Manager of the Portfolio for the
current period.
MONEY MANAGER FEES EARNED DURING CURRENT PERIOD
For Small to Mid Cap Portfolio
------------------------------
Number of Portfolio
Quarters Management Performance
Managed by Basic Fee Fee Fee
Money (All (1st 5 (6th Quarter Total
Portfolio Manager Period Quarters) Quarters) Forward) Fee
- --------- ------- ------ --------- --------- -------- ---
Small to Mid 8 3rd Quarter 1997 0.10% N/A 0.22% 0.32%
Cap
9 4th Quarter 1997 0.10% N/A 0.22% 0.32%
10 1st Quarter 1998 0.10% N/A 0.22% 0.32%
11 2nd Quarter 1998 0.10% N/A 0.22% 0.32%
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those
expressly assumed by Bennington, including, without limitation, Directors' fees
and fees for auditing, legal, custodian and shareholder services. All general
expenses of the Portfolios are allocated among and charged to the assets of the
respective Portfolios and between the classes of each Portfolio on a basis that
the Directors deem fair and equitable, which may be based on the relative net
assets of each Portfolio and class of shares, or the nature of the services
performed and relative applicability to each Portfolio and class of shares.
Class-specific expenses include distribution, shareholder service and
administrative services fees payable with respect to the Investor Class Shares
as described in the Fund's distribution, shareholder service and administrative
plans on behalf of the Investor Class Shares. See "Distribution Plan",
"Shareholder Service Plan" and "Administrative Services Plan". Class-specific
expenses may include certain other expenses as permitted by the Fund's
Multi-Class Plan adopted pursuant to Rule 18f-3 under the Investment Company Act
and subject to review and approval by the Directors. See "FINANCIAL HIGHLIGHTS"
in the Equity Portfolios--Advisor Class Shares Prospectus, the Statement of
Additional Information, or the Annual Report for the period ended December 31,
1997, for expense information related to the Fund's most recently completed
fiscal year for the Advisor Class Shares. The Board of Directors has determined
that it is appropriate to allocate certain expenses attributable to more than
one Portfolio among the Portfolios affected based on their relative net assets.
See "General Management of the Portfolios."
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers for
the assets assigned to them and by Bennington for assets not assigned to a Money
Manager. Currently, each Portfolio has one Money Manager. Bennington invests the
Portfolios' liquidity reserves and all or any portion of the Portfolios' assets
not assigned to a Money Manager.
Each Money Manager, or Bennington, as applicable, makes decisions to
buy or sell securities independently from other Money Managers. Thus, if there
is more than one Money Manager for a Portfolio, one Money Manager could be
selling a security when another Money Manager for the same Portfolio is
purchasing the same security. In addition, when a Money Manager's services are
terminated and another retained, the new Money Manager may significantly
restructure the Portfolio. These practices may increase the Portfolios'
portfolio turnover rates, realization of gains or losses, and brokerage
commissions. The portfolio turnover rates for the Portfolios may vary greatly
from year to year as well as within a year and may be affected by sales of
investments necessary to meet cash requirements for redemptions of shares.
Historical portfolio turnover rates for the Portfolios are listed under
"Financial Highlights." It is expected that the annual portfolio turnover rate
for each Portfolio, under normal market conditions, will not exceed 100%. These
rates should not be considered as limiting factors. A high rate of turnover
involves correspondingly greater expenses, increased brokerage commissions and
other transaction costs, which must be borne by the Portfolios and their
shareholders. See "Investment Advisory and Other Services--Portfolio Transaction
Policies" in the Statement of Additional Information. In addition, high
portfolio turnover may result in increased short-term capital gains, which, when
distributed to shareholders, are treated as ordinary income. See "Taxes."
Each Portfolio may effect portfolio transactions with or through
affiliates of the Fund, Bennington or any Money Manager or its affiliates, when
Bennington or the Money Manager, as appropriate, determines that the Portfolio
will receive the best net price and execution. This standard would allow
affiliates of Bennington and the Money Managers to receive no more than the
remuneration that would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to declare
dividends from net investment income for payment on the following schedule:
Portfolio Declared Payable
- --------- -------- -------
Growth Quarterly, on last 1st business day
Value and Income business day of following end of
Small to Mid Cap quarter calendar quarter
International Annually, 2nd to last Last business day
business day of of calendar year
calendar year
The Portfolios determine net investment income immediately prior to the
determination of a Portfolio's net asset value on the dividend declaration day.
The income will be credited to the shareholders of record prior to the net asset
value calculation and paid on the next business day.
Capital Gains Distribution. The Board of Directors intends to declare
distributions from net capital gains annually, generally in mid-December. In
addition, in order to satisfy certain distribution requirements, a Portfolio may
declare special year-end dividend and capital gains distributions during
October, November or December. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on December 31 of the prior year.
Automatic Reinvestment. All dividends and distributions will be
automatically reinvested, at the net asset value per share at the close of
business on the record date, in additional shares of the same class of the
Portfolio paying the dividend or making the distribution unless a shareholder
elects to have dividends or distributions paid in cash. Shareholders may elect
to invest dividends and/or distributions paid by any portfolio in shares of the
same class of any other portfolio of the Fund at net asset value. The
shareholder must have an account existing in the portfolio selected and must
elect this option on the Account Application or on a form provided for that
purpose. For further information on this option, contact your broker or call
Bennington at (800) 759-3504. Any election may be changed by electronic
instruction if received by Bennington no later than the close of the New York
Stock Exchange, normally 4:00 p.m. Eastern time on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for federal
income tax purposes and shareholders of each Portfolio will be entitled to the
amount of net investment income and net realized capital gains (if any) earned
by their Portfolio. The Board of Directors intends to distribute each year
substantially all of each Portfolio's net investment income and net realized
capital gains (if any), thereby eliminating virtually all federal income taxes
to each Portfolio (but not to its investors). The Portfolios may be subject to
nominal, if any, state and local taxes.
Dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholders, whether or not reinvested, and paid in cash or in additional
shares. Capital gain distributions declared by the Board of Directors and
distributed to the shareholders are taxed as long-term capital gains regardless
of the length of time a shareholder has held such shares. Recent legislation
reduced the maximum tax rate on capital gains to 20% for assets held by
individuals for more than 18 months on the date of the sale or exchange of those
assets (a maximum rate of 28% applies if the assets were held for more than one
year and up to 18 months). A notice issued by the Internal Revenue Service
provides that regulated investment companies such as the Portfolios may, but are
not required to, designate which portion of a capital gain distribution
qualifies for the reduced capital gain rate. Dividends and distributions may
otherwise also be subject to state or local taxes. Shareholders should be aware
that any loss realized upon the sale, exchange or redemption of shares held for
six months or less will be treated as a long-term capital loss to the extent any
capital gain dividends have been paid with respect to such shares.
The International Portfolio will receive dividends and interest paid by
non-U.S. issuers which will frequently be subject to withholding taxes by
non-U.S. governments. Bennington expects that at the end of each taxable year
the International Portfolio will hold more than 50% of the value of its total
assets in non-U.S. securities and will file specified elections with the
Internal Revenue Service which will permit its shareholders either to deduct
such foreign taxes in computing taxable income, or to use these withheld foreign
taxes as credits against U.S. income taxes. If the International Portfolio
elects to "pass-through" the foreign taxes, shareholders will be required to:
(i) include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign income taxes paid by the International
Portfolio; and (ii) treat their pro rata share of foreign income taxes as paid
by them. However, shareholders who have held their shares in the International
Portfolio for 16 days or more during the 30 day period beginning 15 days before
shares in the International Portfolio become ex-dividend may be able to treat
their pro rata share of foreign taxes as either an itemized deduction or a
foreign tax credit against U.S. income taxes (but not both) on their federal
income tax return.
The sale of shares of a Portfolio is a taxable event and may result in
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series or portfolios of a mutual fund). Any gain or loss realized upon a sale,
exchange or redemption of shares of a Portfolio by a shareholder who is not a
dealer in securities will be treated generally as long-term capital gain or loss
taxable at a maximum rate of 20% if the shares in the Portfolio were held for
more than 18 months, "mid-term" capital gain taxable at a rate of 28% if the
shares were held for more than one year and up to 18 months and otherwise as
short-term capital gain or loss. Any such loss, however, on shares that are held
for six months or less will be treated as long-term capital loss to the extent
of any capital gain distributions received by the shareholder.
However, all or a portion of this capital gain will be recharacterized
as ordinary income if the shareholder enters into a "conversion transaction." A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction and certain other criteria are satisfied. A
conversion transaction also includes a transaction which is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected return
from the transaction is "attributable to the time value of the taxpayer's net
investment in such transaction." The Secretary of the Treasury also is
authorized to promulgate regulations (which would apply only after they are
issued) which specify other transactions to be included in the definition of a
conversion transaction. Section 1258 of the Internal Revenue Code of 1986, as
amended (the "Code") contains many ambiguities and its scope is unclear; it may
be clarified or refined in future regulations or other official pronouncements.
Until further guidance is issued, it is unclear whether a purchase and
subsequent disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own tax
advisors concerning whether or not Section 1258 may apply to their transactions
in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will be
treated as long-term or mid-term capital gains or losses if the securities have
been held by it for more than 18 months or one year, respectively, except in
certain cases where the Portfolio acquires a put or writes a call thereon or the
transaction is treated as a "conversion transaction." Other gains or losses on
the sale of securities generally will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as "Section 1256 contracts" defined
below). If an option written by a Portfolio on securities lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will generally realize a capital
gain or loss. If securities are sold by the Portfolio pursuant to the exercise
of a call option written by it, the Portfolio will include the premium received
in the sale proceeds of the securities delivered in determining the amount of
gain or loss on the sale. Certain of the Portfolios' transactions may be subject
to wash sale and short sale provisions of the Code. In addition, debt securities
acquired by the Portfolios may be subject to original issue discount and market
discount rules.
Under the Code, special rules apply to the treatment of certain options
and future contracts (Section 1256 contracts). At the end of each year, such
investments held by the Portfolio will be required to be "marked to market" for
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales" and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Shareholders of the appropriate Portfolios will be notified after each
calendar year of the amounts of ordinary income and long-term capital gains
distributions, including any amounts which are deemed paid on December 31 of the
prior year; of the dividends which qualify for the 70% dividends-received
deduction available to corporations and of the foreign taxes withheld and
foreign source income per country of the International Portfolio.
Under United States Treasury Regulations, a Portfolio currently is
required to withhold and remit to the United States Treasury 31% of all taxable
dividends, distributions and redemption proceeds payable to any non-corporate
shareholder which does not provide the Fund with the shareholder's taxpayer
identification number on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) or required certification or which is subject to backup
withholding.
The tax discussion set forth above is included for general information
only and is based upon the current law as of the date of this Prospectus.
Shareholders are urged to consult their tax advisers for further information
regarding the federal, state and local tax consequences of an investment in the
shares of the Fund. See "Taxes" in the Statement of Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time the Fund may make available certain information about
the performance of the Investor Class Shares of some or all of the Portfolios.
Information about a Portfolio's performance is based on that Portfolio's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance. From time to time, the yield and total return for each class of
shares of the Portfolios may be included in advertisements or reports to
shareholders or prospective investors. Quotations of yield for a Portfolio or
class will be based on the investment income per share (as defined by the SEC)
during a particular 30-day (or one-month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Total return of Investor Class Shares of the Portfolios, will be
calculated for the past year, the past five years, and the past ten years (or if
the Portfolio has been offered for a period shorter than one, five or ten years,
that period will be substituted) since the establishment of the Portfolio.
Consistent with SEC rules and informal guidance, for periods prior to the
initial offering date of Investor Class Shares (May 1, 1998), total return
presentations for the Investor Class Shares will be based on the historical
performance of the Advisor Class Shares of the Portfolio restated, as necessary,
to reflect any different operating expenses, such as the distribution,
shareholder service and administrative services fees associated with Investor
Class Shares. All other things being equal, any higher expenses of Investor
Class Shares would have reduced total return for Investor Class Shares if the
Investor Class Shares had been issued since the inception of the Portfolio by
the amount of such higher expenses, compounded over the relevant period. Total
return is measured by comparing the value of an investment in Investor Class
Shares of the Portfolio at the beginning of the relevant period to the
redemption value of the investment in the Portfolio at the end of the period
(assuming immediate reinvestment of any dividends or capital gains distributions
at net asset value). Total return may be advertised using alternative methods
that reflect all elements of return, but that may be adjusted to reflect the
cumulative impact of alternative fee and expense structures, such as the
currently effective advisory and administrative fees for Investor Class Shares
of the Portfolios. Any fees charged by Service Organizations directly to their
customers in connection with investments in the Investor Class Shares of the
Portfolios are not reflected in the Portfolio's total return and such fees, if
charged, will reduce the actual return received by customers on their
investment.
From time to time, the Portfolios may advertise their performance in
terms of average annual total return, which is computed by finding the average
annual compounded rates of return over a period that would equate the initial
amount invested to the ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested on the reinvestment dates during the
relevant time period and accounts for all recurring fees. The Portfolios may
also include in advertisements data comparing performance with the performance
of non-related investment media, published editorial comments and performance
rankings compiled by independent organizations (such as Lipper Analytical
Services, Inc. or Morningstar, Inc.) or entities or organizations which track
the performance of investment companies or investment advisers and publications
that monitor the performance of mutual funds (such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, Inc., Mutual Fund Magazine, Smart Money and
The Wall Street Journal). Performance information may be quoted numerically or
may be presented in a table, graph or other illustration. In addition, Portfolio
performance may be compared to well-known unmanaged indices of market
performance or other appropriate indices of investment securities or with data
developed by the Fund or Bennington derived from such indices. Unmanaged indices
(i.e., other than Lipper) generally do not reflect deductions for administrative
and management costs and expenses. Portfolio performance may also be compared,
on a relative basis, to other Portfolios of the Fund. This relative comparison,
which may be based upon historical or expected Portfolio performance, may be
presented numerically, graphically or in text. Portfolio performance may also be
combined or blended with other Portfolios of the Fund, and that combined or
blended performance may be compared to the same Benchmark Indices to which
individual Portfolios are compared. In addition, the Fund may from time to time
compare the expense ratio of its Investor Class Shares to that of investment
companies with similar objectives and policies, based on data generated by
Lipper or similar investment services that monitor mutual funds . In reports or
other communications to investors or in advertising, the Fund may discuss
relevant economic and market conditions affecting the Fund. In addition, the
Fund, Bennington and the Money Managers may render updates of Fund investment
activity, which may include, among other things, discussion or quantitative
statistical or comparative analysis of portfolio composition and significant
portfolio holdings including analysis of holdings by sector, industry, country
or geographic region, credit quality and other characteristics. The Fund may
also describe the general biography, work experience and/or investment
philosophy or style of the Money Managers of the Fund and may include quotations
attributable to the Money Managers describing approaches taken in managing the
Fund's investments, research methodology underlying stock selection or the
Fund's investment objectives. The Fund may also discuss measures of risk,
including those based on statistical or econometric analyses, the continuum of
risk and return relating to different investments and the potential impact of
foreign stocks on a portfolio otherwise composed of domestic securities.
Any performance information related to the Portfolios, should be
considered in light of the Portfolios' investment objectives and policies,
characteristics and quality of the portfolio, and the market conditions during
the time period indicated. It is important to note that total return figures are
based on historical earnings and are not intended to indicate future
performance. The value of Fund shares when redeemed may be more or less than
their original cost. The Statement of Additional Information describes the
method used to determine a Portfolio's total return. In reports or other
communications to shareholders or in advertising material, a Portfolio may quote
total return figures that do not reflect recurring fees (provided that these
figures are accompanied by standardized total return figures calculated as
described above), as well as compare its performance with that of other mutual
funds as listed in the rankings prepared by Morningstar, Inc. or similar
independent services that monitor the performance of mutual funds or with other
appropriate indices of investment securities or other industry publications.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share of each class
of the Portfolios is calculated on each business day on which shares are offered
or orders to redeem are tendered by dividing the value of the Portfolio's net
assets represented by such class (i.e., the value of its assets less
liabilities) by the total number of shares of such class outstanding. See
Valuation of Portfolio Shares in the Statement of Additional Information. A
business day is one on which the New York Stock Exchange, Fifth Third and
Bennington are open for business. Non-business days in 1998 will be: New Year's
Day, Presidents' Day, Martin Luther King Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day. Net
asset value per share is computed for a Portfolio by dividing the current value
of the Portfolio's assets and other assets attributable to that class, less its
liabilities, by the number of shares of the class of the Portfolio outstanding,
and rounding to the nearest cent. All Portfolios determine net asset value as of
the close of the New York Stock Exchange, normally 4:00 p.m. Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below, the
Portfolios value portfolio securities at "fair market value." This generally
means that equity securities and fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of the
last sale price or, lacking any sales, at the closing bid price on the exchange
on which the security is primarily traded. United States equity and fixed-income
securities traded principally OTC, options and futures contracts are valued on
the basis of the closing bid price.
Because many fixed-income securities do not trade each day, last sale
or bid prices are frequently not available. Fixed-income securities therefore
may be valued based on prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
International equity securities traded on a securities exchange are
valued on the basis of the last sale price. International securities traded
over-the-counter are valued on the basis of the mean of bid and asked prices. In
the absence of a last sale or mean bid and asked price, respectively, such
securities may be valued on the basis of prices provided by a pricing service if
those prices are believed to reflect the fair value of such securities. The risk
also exists that an emergency situation may arise in one or more Emerging
Countries as a result of which trading of securities may cease or may be
substantially curtailed and prices for the International Portfolio's securities
in such markets may not be readily available. The Fund may suspend or postpone
redemption of the shares of the International Portfolio for any period during
which an emergency exists, as determined by the SEC. Accordingly, if the
International Portfolio believes that appropriate circumstances exist, the Board
of Directors or Bennington will promptly apply to the SEC for a determination
that an emergency is present. During the period commencing from the
International Portfolio's identification of such condition until the date of the
SEC action, the International Portfolio's securities in the affected markets
will be valued at fair value determined in good faith by or under the direction
of the Board of Directors. See "Investment Policies--Special Risks of Investing
in Foreign Securities of Emerging Countries.
Money market instruments maturing within 60 days of the valuation date
held by Portfolios are valued at "amortized cost" unless the Board of Directors
determines that amortized cost does not represent fair value. The "amortized
cost" valuation procedure initially prices an instrument at its cost and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The Portfolios value securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the Portfolios
with no sales charge or commission. Investors may also purchase shares of the
Portfolios from intermediaries, such as a broker-dealer, bank or other financial
institution. Such intermediaries may be required to register as a dealer
pursuant to certain states' securities laws and may charge the investor a
reasonable service fee, no part of which will be paid to the Portfolios. Shares
of the Portfolios will be sold at the net asset value next determined after an
order is received and accepted, provided that payment has been received by 12:00
p.m. Eastern Time on the following business day. Net asset value is determined
as set forth above under "Valuation of Portfolio Shares." All purchases must be
made in U.S. dollars. The minimum initial investment requirements for Investor
Class Shares of each Portfolio are $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investments for each Portfolio
are $1,000 per Portfolio or $2,000 in aggregate across the portfolios of the
Fund. The minimum initial investment requirement for an IRA Account is an
aggregate amount of $2,000 in the portfolios of the Fund. The subsequent
investment requirement for an IRA Account is an aggregate amount of $2,000 in
the portfolios of the Fund. The Fund reserves the right to accept smaller
purchases or reject any purchase order in its sole discretion.
Orders are accepted on each business day. Orders to purchase Portfolio
shares must be received by Bennington prior to close of the New York Stock
Exchange, normally 4:00 p.m. Eastern time, on the day shares of those Portfolios
are offered and orders accepted, or the orders will not be accepted and invested
in the particular Portfolio until the next day on which shares of that Portfolio
are offered. Payment must be received by 12:00 p.m. Eastern time the next
business day. Purchases by telephone may only be made as described in the
telephone transaction procedures set forth in "Purchase of Portfolio
Shares--Telephone Transactions." No fees are currently charged shareholders by
the Fund directly in connection with purchases.
The Fund reserves the right to suspend the offering of shares for a
period of time. The Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be refused
if, in Bennington's opinion, they would disrupt management of the Fund. The Fund
also reserves the right to refuse exchange purchases by any person or group if,
in Bennington's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Purchases through Intermediaries. Investor Class Shares of the
Portfolios are expected to be available through Service Organizations. Generally
industry recognized service providers of fund supermarkets or similar programs
require customers to pay either no or low transaction fees in connection with
purchases or redemptions. Certain features of the Investor Class Shares, such as
the initial and subsequent investment minimums, redemptions fees and certain
trading restrictions, may be modified or waived by Service Organizations.
Service Organizations may impose transaction or administrative charges or other
direct charges, which charges or fees would not be imposed if Investor Class
Shares are purchased directly from the Fund. Therefore, a client or customer
should contact the Service Organization acting on their behalf concerning the
fees (if any) charged in connection with a purchase or redemption of Investor
Class Shares and should read this prospectus in light of the terms governing
their accounts with the Service Organization. Service Organizations are
responsible for transmitting to their customers a schedule of any such fees and
conditions. Service Organizations will be responsible for promptly transmitting
client or customer purchase and redemption orders to the Fund in accordance with
their agreements with clients or customers.
For non-distribution related administration, subaccounting, transfer
agency and/or other services, the Fund may pay Service Organizations and certain
recordkeeping organizations with whom they have entered into agreements pursuant
to the Shareholder Service Plan and/or the Administrative Services Plan. See
"Distribution--Shareholder Service Plan", "Distribution--Administrative Services
Plan". The fees payable to any one Service Organization or recordkeeper is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the fee schedule of the Service Organization or recordkeeper.
Order and Payment Procedures. Investments in the Portfolios may be made
as follows:
Federal Funds Wire. Purchases may be made on any business day
by wiring federal funds to Seattle First National Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check
drawn on a foreign bank will not be accepted). If an investor has
purchased Portfolio shares by check and subsequently submits a
redemption request, the redemption request will be honored at the net
asset value next calculated after receipt of the request, however, the
redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. See "Redemption
of Portfolio Shares.
Please call the Fund for further information at (800) 759-3504.
Purchases in Kind. The Portfolios may accept certain types of
securities in lieu of wired funds as consideration for Portfolio
shares. Under no circumstances will a Portfolio accept any securities
the holding or acquisition of which conflicts with the Portfolio's
investment objective, policies and restrictions or which Bennington or
the applicable Money Manager believes should not be included in the
applicable Portfolio's portfolio on an indefinite basis. Securities
accepted in consideration for a Portfolio's shares will be valued in
the same manner as the Portfolio's portfolio securities in connection
with its determination of net asset value. A transfer of securities to
a Portfolio in consideration for Portfolio shares will be treated as a
sale or exchange of such securities for federal income tax purposes. A
shareholder will recognize gain or loss on the transfer in an amount
equal to the difference between the value of the securities and the
shareholder's tax basis in such securities. Shareholders who transfer
securities in consideration for a Portfolio's shares should consult
their tax advisers as to the federal, state and local tax consequences
of such transfers. See "Purchases in Kind" in the Statement of
Additional Information.
IRA Accounts. The Fund has established an Individual
Retirement Custodial Account Plan under which investors may set up IRA
Accounts that invest in the Fund. Fifth Third serves as Custodian for
the IRA Accounts. The Transfer Agent charges an annual account fee of
$25 to each IRA Account with an aggregate balance of less than $10,000
on December 31. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The subsequent investment requirement for an IRA Account is an
aggregate amount of $2,000 in the portfolios of the Fund. Please refer
to the IRA Account plan documents: the IRA Disclosure Statement, IRA
Custodial Account Agreement and IRA Application and Adoption Agreement
Form for additional information, copies of which may be obtained from
Bennington free of charge at (800) 759-3504.
Exchange Privilege. Shares of any class of any Portfolio of the Fund
may be exchanged for shares of any other class of any of the other portfolios
offered by the Fund to the extent the shareholder meets the investment
requirements of such shares and such shares are offered for sale in the
investor's state of residence, on the basis of current net asset values per
share at the time of the exchange. Other than the Investor Class Shares of the
Portfolios offered by this Prospectus, the portfolios of the Fund also include
Advisor Class Shares of the Portfolios and Advisor Class and Investor Class
Shares of the Intermediate Fixed-Income Portfolio, Short-Intermediate
Fixed-Income Portfolio, Mortgage Securities Portfolio and the U.S. Government
Money Portfolio. Advisor Class Shares and Investor Class Shares are expected to
be available to qualified investors as described in the applicable prospectuses.
Advisor Class Shares are offered primarily through the Fund and may be available
through certain Service Organizations that charge their customers transaction or
other fees with respect to the customers' investments in the Funds. The minimum
initial investment in Advisor Class Shares is $5,000 per Portfolio or $10,000 in
aggregate across the portfolios of the Fund and subsequent investments are
$1,000 per Portfolio or $2,000 in aggregate across the portfolios of the Fund.
The Advisor Class Shares are not subject to shareholder service, administrative
services and/or 12b-1 fees as are the Investor Class Shares. Investor Class
Shares may have different distribution and other expenses, which may affect
performance. As a result, the Advisor Class Shares are expected to achieve
higher investment returns than the Investor Class Shares.
Under certain circumstances, the per share net asset value of the
Investor Class Shares of the Portfolios may be lower than the per share net
asset value of the Advisor Class Shares as a result of the daily expense
accruals of the shareholder service, administrative services and/or distribution
fees applicable to the Investor Class Shares. Generally, for Portfolios that pay
income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the
classes. See "Valuation of Portfolio Shares" in the Statement of Additional
Information.
If the exchanging shareholder does not currently own shares of the
portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and authorized
dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures guaranteed
by an eligible guarantor institution as defined below under "Redemption of
Portfolio Shares" and in "Additional Information--Shareholder Servicing
Arrangements." For additional information, contact the Fund. A shareholder
should obtain and read the prospectus relating to any other portfolio of the
Fund before making an exchange.
An exchange other than between classes in the same portfolio is a
redemption of the shares and is treated as a sale for federal income tax
purposes, and a short- or long-term capital gain or loss may be realized. The
exchange privilege may be modified or terminated at any time on 60 days' notice
to shareholders. Exchanges are available only in states where exchanges may
legally be made. Exchanges may be made by faxing instructions to Bennington at
(206) 224-4274 or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Exchanges may only be made by telephone as set out in
the telephone transaction procedures set forth in "Purchase of Portfolio
Shares--Telephone Transactions" and "Additional Information--Shareholder
Servicing Arrangements." No fees are currently charged shareholders by the Fund
directly in connection with exchanges.
Telephone Transactions. A shareholder of the Fund with an aggregate
account balance of $1 million or more may request purchases, redemptions or
exchanges of shares of a Portfolio by telephone at the appropriate toll free
number provided in this Prospectus. It may be difficult to implement redemptions
or exchanges by telephone in times of drastic economic or market changes. In an
effort to prevent unauthorized or fraudulent redemption or exchange requests by
telephone, the Fund employs reasonable procedures specified by the Board of
Directors to confirm that such instructions are genuine. Telephone transaction
procedures include the following measures: requiring the appropriate telephone
transaction election be made on the telephone transaction authorization form
sent to shareholders upon request; requiring the caller to provide the names of
the account owners, the account owner's social security number or tax
identification number and name of Portfolio, all of which must match the Fund's
records; requiring that a service representative of Bennington, acting as
Transfer Agent complete a telephone transaction form listing all of the above
caller identification information; requiring that redemption proceeds be sent by
wire only to the owners of record at the bank account of record or by check to
the address of record; sending a written confirmation for each telephone
transaction to the owners of record at the address of record within five (5)
business days of the call; and maintaining tapes of telephone transactions for
six months, if the Fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or
an attorney-in-fact (under a power of attorney), additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. The Fund may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund may be liable for any loss due to unauthorized or fraudulent transactions.
In all other cases, neither the Fund, the Portfolio nor Bennington will be
responsible for authenticity of redemption or exchange instructions received by
telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net asset
value next determined after the receipt of a redemption request in proper form.
Payment will ordinarily be made within seven days and will be wire-transferred
by automatic clearing house funds or other bank wire to the account designated
for the shareholder at a domestic commercial bank that is a member of the
Federal Reserve System. If requested in writing, payment will be made by check
to the account owners of record at the address of record. The Transfer Agent
charges a processing fee of $10.00 for each redemption check requested by a
shareholder, which processing fee may be waived by the Transfer Agent at its
discretion. If an investor has purchased Portfolio shares by check and
subsequently submits a redemption request, the redemption request will be
honored at the net asset value next calculated after receipt of the request,
however, the redemption proceeds will not be transmitted until the check used
for investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire transfer.
If a shareholder requests a redemption check or wire made payable to
someone other than the registered owner of the shares and/or sent to an address
other than the address of record, the request to redeem must (1) be made in
writing; (2) include an instruction to make the redemption proceeds payable to
someone other than the registered owner of the shares and/or send them to an
address other than the address of record; and (3) be signed by all registered
owners with their signatures guaranteed. See "Additional Information--Signature
Guarantees."
Portfolio shares may be redeemed by faxing instructions to Bennington
at (206) 224-4274 or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Redemptions of the Portfolios' shares may be effected on
any business day on which the New York Stock Exchange, Fifth Third and
Bennington are open, as long as instructions are received by Bennington by the
close of business of the New York Stock Exchange, normally 4:00 p.m. Eastern
time. In periods of severe market or economic conditions, the electronic
redemption of shares may be difficult due to an increase in the amount of
electronic transmissions. Use of the mail may result in the redemption request
being processed at a later time than it would have been if a instructions had
been sent by facsimile transmission. During the delay, the Portfolios' net asset
value may fluctuate.
Portfolio shares also may be redeemed through Service Organizations who
have made arrangements with the Fund permitting them to redeem such shares by
telephone or facsimile transmission and who may charge a fee for this service.
Investor Class Shares of the Portfolios are intended to be available through
Service Organizations. Generally fund supermarket-type programs or organizations
require customers to pay either no or low transaction fees in connection with
purchases or redemptions.
If the Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole or
in part by a distribution in kind of securities from the investment portfolio of
the Portfolio, in lieu of cash, in conformity with any applicable rules of the
SEC. Securities will be readily marketable and will be valued in the same manner
as in a regular redemption. See "Valuation of Portfolio Shares." If shares are
redeemed in kind, the redeeming shareholders would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Portfolio during any 90-day period for any one
shareholder.
The Fund reserves the right to redeem the shares of any shareholder
whose account balance is less than $500 per portfolio or whose aggregate account
is less than $2,000, and who is not part of an Automatic Investment Plan. The
Fund, however, will not redeem shares based solely on market reductions in net
asset value. The Fund will give sixty (60) days prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption or
postpone the date of payment for the Portfolios if the unlikely emergency
conditions which are specified in the Investment Company Act or determined by
the SEC should exist. Shareholders uncertain of requirements for redemption
should telephone the Fund at (206) 224-7420 or (800) 759-3504. Redemptions by
telephone may only be made as set out in the telephone transaction procedures
set forth in "Purchase of Portfolio Shares-- Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly withdrawal
on the Systematic Withdrawal Plan is $500.00 in aggregate) on a monthly basis on
the 15th (or the first business day before the 15th) and/or on the last business
day of each month. An application for automatic withdrawal can be obtained from
Bennington or the Fund and must be received by Bennington ten calendar days
before the first scheduled withdrawal date. Automatic withdrawal may be ended at
any time by the investor or the Fund. The Systematic Withdrawal Plan may be
discontinued at any time by the Fund or Bennington. The Fund reserves the right
to reject any Systematic Withdrawal Plan application. Purchases of additional
shares concurrently with withdrawals generally are undesirable. Funds will be
disbursed according to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101,
is the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also the transfer agent, registrar and dividend
disbursing agent for the Portfolios and provides other administrative,
recordkeeping and compliance services to the Fund pursuant to a Transfer Agent
Agreement between Bennington and the Fund.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45264, acts as
Custodian of the Portfolios' assets and may employ sub-custodians outside the
United States, which have been approved by the Board of Directors. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third holds all portfolio securities and cash assets of the Portfolios and
is authorized to deposit securities in securities depositories or to use the
services of sub-custodians. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Independent Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 are
the Fund's independent auditors. Shareholders will receive an unaudited
semi-annual and an audited annual financial statements.
Fund Counsel
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 serves as
the Fund's outside counsel.
Other Arrangements
From time to time, Bennington may enter into arrangements with certain
Service Organizations to provide other services to persons who beneficially own
shares of the Investor Class Shares of the Portfolios. Such Service
Organizations, rather than their customers, may be the shareholder of record of
the shares. Such Service Organizations may also charge a fee for this service.
Such Service Organizations may also impose other charges or restrictions
different from those applicable to shareholders who invest in the Fund directly.
The Fund is not responsible for the failure of any such organization to carry
out its obligations to its customers. The Fund does not pay any portion of the
fees paid by Bennington, and Bennington does not receive any portion of any fee
such Service Organizations charge their customers.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and the
Portfolios against fraudulent transactions by unauthorized persons. In certain
instances, such as transfer of ownership or when the registered shareholder(s)
requests that redemption proceeds be sent to a different name or address than
the registered name and address of record on the shareholder account, the Fund
will require that the shareholder's signature be guaranteed. When a signature
guarantee is required, each signature must be guaranteed by a domestic bank or
trust company, credit union, broker, dealer, national securities exchange,
registered securities association, clearing agency or savings association as
defined by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and be
signed in the name of the guarantor by an authorized person with that person's
title and the date. The Fund may reject a signature guarantee if the guarantor
is not a member of or participant in a signature guarantee program. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular transaction, to require a signature guarantee at its
discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The Fund is
authorized to issue 15 billion shares of common stock of $0.001 par value per
share, currently divided into eight Portfolios, each with two classes of shares,
the Advisor Class Shares and the Investor Class Shares. Investor Class Shares
may have different distribution and other expenses, which may affect
performance. The Advisor Class Shares are not subject to shareholder service,
administrative services and/or 12b-1 fees as are the Investor Class Shares. As a
result, the Advisor Class Shares are expected to achieve different investment
returns than the Investor Class Shares. Please contact your sales
representative, or the Fund at (800) 759-3504, for additional information about
the Advisor Class Shares for the Portfolios or the Advisor Class Shares and
Investor Class Shares of the Fixed-Income Portfolios. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board of Directors
may determine. Shareholders of a class of shares or Portfolio have separate
voting rights with respect to matters that only that affect that class or
Portfolio. See "Other Information--Voting Rights" in the Statement of Additional
Information.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Fund's
outstanding shares for the purpose of voting on the removal of one or more
Directors or to transact any other business. Any proposals by shareholders to be
presented at an annual meeting must be received by the Fund for inclusion in its
proxy statement and form of proxy relating to that meeting at least 120 calendar
days in advance of the date of the Fund's proxy statement released in connection
with the previous year's annual meeting, if any. If there was no annual meeting
held in the previous year or the date of the annual meeting has changed by more
than 30 days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made. See "Multi-Class Structure".
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing further
information about performance, is available without charge from the Fund.
Inquiries regarding the Portfolios and requests for Annual Reports should be
addressed to the Fund at 1420 Fifth Avenue, Suite 3130, Seattle, Washington
98101, or by telephone at (206) 224-7420 or (800) 759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally prohibit
banks that are members of the Federal Reserve System from engaging in the
business of underwriting, selling, distributing securities or engaging in
investment advisory activities. To the extent that banks or subsidiaries of
banks are deemed to be performing any such activities, the Fund believes such
entities may engage in such activities for the Portfolios without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. However,
it is possible that future changes in either Federal or state statutes and
regulations concerning the permissible activities of banks or trust companies,
as well as further judicial or administrative decisions and interpretations of
present and future statutes and regulations, might prevent such entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself of any services
then being provided. The Board of Directors does not expect that shareholders of
the Fund would suffer any adverse financial consequences as a result of these
occurrences but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
MONEY MANAGER PROFILES
The following information as to each Money Manager has been supplied by
the respective Money Managers. The Statement of Additional Information contains
further information concerning each Money Manager, including a description of
its business history and identification of its controlling persons.
Growth Portfolio
Geewax, Terker & Company, 99 Starr Street, Phoenixville, PA 19460, is a
Pennsylvania partnership and registered investment adviser whose general
partners are John J. Geewax and Bruce E. Terker. John J. Geewax, MBA, JD, is
primarily responsible for the day-to-day management and investment decisions for
the Growth Portfolio and is supported by Christopher P. Ouimet who assists in
the management of the Growth Portfolio. Mr. Geewax founded Geewax Terker in
1982. Mr. Ouimet joined Geewax Terker in 1994. Prior to that, Mr. Ouimet was at
The Vanguard Group as a quantitative analyst from 1992 to 1994 and as a
marketing analyst from 1990 to 1992.
Value and Income Portfolio
Martingale Asset Management, L.P., 222 Berkeley Street, Boston, MA
02116 ("Martingale"), is the Money Manager of the Value and Income Portfolio.
Martingale is a Delaware limited partnership, which consists of two general
partners, Martingale Asset Management Corporation ("Martingale Corp.), a
Massachusetts corporation, and Commerz Asset Management USA Corporation ("CAM"),
a Delaware corporation, and four limited partners. Arnold S. Wood and William E.
Jacques each own 32.26% of Martingale Corp. CAM is a wholly-owned subsidiary of
Commerz International Capital Management GmbH ("CICM") headquartered in
Frankfurt, Germany. Commerzbank AG is the parent company of CICM. William E.
Jacques, CFA, Executive Vice President and Chief Investment Officer of
Martingale, is primarily responsible for the investment decisions for the Value
and Income Portfolio. Mr. Jacques joined Martingale in 1987. Douglas E. Stark,
CFA, Senior Vice President and Director of US Equity Management and Research is
primarily responsible for the day-to-day management of the Value and Income
Portfolio. Mr. Stark joined Martingale in 1996. Prior to joining Martingale, Mr.
Stark was Senior Vice President and Portfolio Manager at InterCoast Capital
Company from 1994 to 1996. Prior to that, he was Vice President and managed
international stock portfolios at State Street Global Advisors, an area of State
Street Bank and Trust Company, from 1990 until 1994.
Small to Mid Cap Portfolio
Symphony Asset Management, Inc., 555 California Street, San Francisco,
CA 94104 ("Symphony Inc."), is the Money Manager of the Small to Mid Cap
Portfolio until July 1, 1998. After July 1, 1998, the Money Manager for the
Small to Mid Cap Portfolio will be Symphony Asset Management LLC ("Symphony
LLC"). Symphony Inc. is a California corporation founded in March, 1994.
Symphony Inc. is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"), and the
California Department of Corporations. Symphony Inc. is a wholly-owned
subsidiary of BARRA, Inc. ("BARRA"), a California corporation and registered
investment adviser under the Investment Advisers Act and the California
Department of Corporations, and as a publicly traded corporation under Section
12(g) of the Securities Exchange Act of 1934, as amended. BARRA is one of the
world's leading suppliers of analytical financial software and has pioneered
many of the techniques used in systematic investment management, including
active management based on so-called factor return predictions. 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 by Jeffrey L.
Skelton, Neil L. Rudolph, Praveen K. Gottipalli and Michael J. Henman, each of
whom hold management rolls with Symphony LLC.
Praveen K. Gottipalli, Director of Investments of Symphony Inc. and
Symphony LLC, is primarily responsible for the day-to-day management and
investment decisions for the Small to Mid Cap Portfolio. Mr. Gottipalli has been
Director of Investments with Symphony Inc. since March, 1994 and Symphony LLC
since July 1996. From 1985 to 1994, he was with BARRA, Inc., where, prior to
joining Symphony, he was Director of the Active Strategies Group for BARRA, Inc.
Mr. Gottipalli has worked on a number of different investment management
strategies including valuation models for global equities, global tilt funds and
aggressive market neutral strategies that combine quantitative and qualitative
analysis. He has been actively involved with design, analysis, implementation
and enhancement of these strategies.
International Portfolio
Nicholas-Applegate Capital Management, ("Nicholas-Applegate"), 600 West
Broadway, 29th Floor, San Diego, CA 92101, is the Money Manager for the
International Portfolio. Nicholas-Applegate is a California limited partnership
and registered investment adviser whose general partner is Nicholas-Applegate
Capital Management Holdings, L.P., a California limited partnership controlled
by Arthur E. Nicholas. Senior members of the seven member international
portfolio team include: Catherine Somhegyi, Lawrence S. Speidell and Loretta J.
Morris. The senior members are primarily responsible for making the day-to-day
management and investment decisions for the International Portfolio. Mr.
Nicholas, Managing Partner, founded Nicholas-Applegate in 1984. Catherine
Somhegyi, Chief Investment Officer, Global Equity Management, joined
Nicholas-Applegate in 1987. Mr. Speidell, Partner and Director of Global and
Systematic Portfolio Management, joined Nicholas-Applegate in 1994. From 1983 to
1994, Mr. Speidell was a portfolio manager for Batterymarch Financial
Management. Ms. Morris, Partner and Senior Portfolio Manager, International,
joined Nicholas-Applegate in 1990. From 1981 to 1989, Ms. Morris was responsible
for research, client service and operations at Collins Associates, a pension
consulting firm.
-5-
<PAGE>
APPENDIX A
DESCRIPTION OF INDICES
The following information as to each index has been supplied by the
respective preparer of the index or has been obtained from other
publicly-available information.
Standard & Poor's 500 Composite Stock Price Index 1
The purpose of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500") is to portray the pattern of common stock price movement.
Construction of the index proceeds from industry groups to the whole. Currently
there are four groups: 400 Industrials, 40 Utilities, 20 Transportation and 40
Financial. Since some industries are characterized by companies of relatively
small stock capitalization, the index does not comprise the 500 largest
companies listed on the New York Stock Exchange.
Component stocks are chosen solely with the aim of achieving a
distribution by broad industry groupings that approximates the distribution of
these groupings in the New York Stock Exchange common stock population, taken as
the assumed model for the composition of the total market. Each stock added to
the index must represent a viable enterprise and must be representative of the
industry group to which it is assigned. Its market price movements must in
general be responsive to changes in industry affairs.
The formula adopted by S&P is generally defined as a "base-weighted
aggregative" expressed in relatives with the average value for the base period
(1941-1943) equal to 10. Each component stock is weighted so that it will
influence the index in proportion to its respective market importance. The most
suitable weighting factor for this purpose is the number of shares outstanding.
The price of any stock multiplied by number of shares outstanding gives the
current market value for that particular issue. This market value determines the
relative importance of the security.
Market values for individual stocks are added together to obtain their
particular group market value. These group values are expressed as a relative,
or index number, to the base period (1941-1943) market value. As the base period
market value is relatively constant, the index number reflects only fluctuations
in current market values.
S&P/BARRA Growth Index
S&P/BARRA Value Index
BARRA, in collaboration with Standard and Poor's Corporation, has
constructed the S&P/BARRA Growth Index (the "Growth Index") and S&P/BARRA Value
Index (the "Value Index") to separate the S&P 500 into value stocks and growth
stocks.
The Growth and Value Indices are constructed by dividing the stocks in
the S&P 500 according to their price-to-book ratios. The Value Index contains
firms with lower price-to-book ratios and has 50 percent of the capitalization
of the S&P 500. The Growth Index contains the remaining members of the S&P 500.
Each of the indices is capitalization-weighted and is rebalanced semi-annually
on January 1 and July 1 of each year.
Although the Value Index is created based on price-to-book ratios, the
companies in the index generally have other characteristics associated with
"value" stocks: low price-to-earnings ratios, high dividend yields, and low
historical and predicted earnings growth. Because of these characteristics, the
Value Index historically has had higher weights in the Energy, Utility, and
Financial sectors than the S&P 500.
Companies in the Growth Index tend to have opposite characteristics
from those in the Value Index: high earnings-to-price ratios, low dividend
yields, and high earnings growth. Historically, the Growth Index has been more
concentrated in Electronics, Computers, Health Care and Drugs than the S&P 500.
As of December 31, 1996 there were 339 companies in the Value Index;
consequently there are 161 companies in the Growth Index.
Wilshire 4500 Index 2
While the S&P 500 Index includes the preponderance of large market
capitalization stocks, it excludes most of the medium and small size companies
which comprise the remaining 33% of the capitalization of the U.S. stock market.
The Wilshire 4500 Index (an unmanaged index) consists of all U.S. stocks that
are not in the S&P 500 and that trade regularly on the New York and American
Stock Exchanges as well as in the NASDAQ over-the-counter market. The Wilshire
4500 Index is constructed from the Wilshire 5000 Equity Index, which measures
the performance of all U.S. headquartered equity securities with readily
available price data. Approximately 6500 capitalization weighted security
returns are used to adjust the Wilshire 5000 Equity Index. The Wilshire 5000
Equity Index was created by Wilshire Associates in 1974 to aid in performance
measurement. The Wilshire 4500 Index consists of the Wilshire 5000 Equity Index
after excluding the companies in the S&P 500.
Wilshire Associates view the performance of the Wilshire 5000's
securities several ways. Price and total return indices using both capital and
equal weightings are computed. The unit value of these four indices was set to
1.0 on December 31, 1970.
Morgan Stanley Capital International EAFE(R) + EMF Index3
The Morgan Stanley Capital International ("MSCI") EAFE(R)+ EMF Index is
a market capitalization weighted index composed of companies representative of
the market structure of 41 Developed and Emerging Market countries. The index is
calculated without dividends or with gross dividends reinvested, in both U.S.
Dollars and local currencies.
MSCI EAFE(R)Index is a market capitalization weighted index composed of
companies representative of the market structure of 19 Developed Market
countries in Europe, Australasia and the Far East. The index is calculated
without dividends, with net or with gross dividends reinvested, in both U.S.
Dollars and local currencies.
MSCI Emerging Markets Free ("EMF") Index is a market capitalization
weighted index composed of companies representative of the market structure of
26 Emerging Market countries in Europe, Latin America and the Pacific Basin. The
MSCI EMF Index excludes closed markets and those shares in otherwise free
markets which are not purchasable by foreigners.
The MSCI indices reflect stock market trends by representing the
evolution of an unmanaged portfolio containing a broad selection of domestically
listed companies. A dynamic optimization process which involves maximizing float
and liquidity, reflecting accurately the market's size and industry profiles,
and minimizing cross ownership is used to determine index constituents. Stock
selection also takes into consideration the trading capabilities of foreigners
in emerging market countries.
As of March 31, 1997, the MSCI EAFE(R)+ EMF Index consisted of 2,032 companies
traded on stock markets in 45 countries. The weighting of the MSCI EAFE(R)+ EMF
Index by country was as follows:
Developed Markets: Australia 2.60%, Austria 0.36%, Belgium 1.12%, Denmark 0.84%,
Finland 0.63%, France 6.48%, Germany 8.07%, Hong Kong 3.11%, Ireland 0.30%,
Italy 2.78%, Japan 25.28%, Netherlands 4.44%, New Zealand 0.33%, Norway 0.51%,
Singapore 1.43%, Spain 1.97%, Sweden 2.33%, Switzerland 5.43%, United Kingdom
16.94%.
Emerging Markets: Argentina 0.51%, Brazil 2.08%, Chile 0.56%, China Free 0.08%,
Colombia 0.12%, Czech Republic 0.17%, Greece 0.22%, Hungary 0.07%, India 0.07%,
Indonesia 0.80%, Israel 0.77%, Jordan 0.31%, Korea Free 0.58%, Malaysia 2.32%,
Mexico Free 1.20%, Pakistan 0.10%, Peru 0.16%, Philippines Free 0.49%, Poland
0.07%, Portugal 0.31%, South Africa 1.73%, Sri Lanka 0.01%, Taiwan 1.36%,
Thailand 0.57%, Turkey 0.28%, Venezuela Free 0.15%.
Unlike other broad-based indices, the number of stocks included in MSCI
EAFE(R)+ EMF Index is not fixed and may vary to enable the Index to continue to
reflect the primary home markets of the constituent countries. Changes in the
Index will be announced when made. MSCI EAFE(R)+ EMF Index is a
capitalization-weighted index calculated by Morgan Stanley Capital International
based on the official closing prices for each stock in its primary local or home
market. The base value of the MSCI EAFE(R)+
EMF Index was equal to 100.0 on January 1, 1988. As of March month-end 1997, the
current value of the MSCI EAFE(R)+ EMF Index was 188.5 (with gross dividends
reinvested).
- --------
1 "Standard & Poor's," "S&P" and "S&P 500" are trademarks of Standard and
Poor's, a division of The McGraw-Hill Companies, Inc. The Growth and
Value and Income Portfolios are not sponsored, endorsed, sold or
promoted by Standard & Poor's.
2 "Wilshire 4500" and "Wilshire 5000" are registered trademarks of
Wilshire Associates. The Small to Mid Cap Portfolio is not sponsored,
endorsed, sold or promoted by Wilshire Associates.
3 "EAFE" is a registered trademark of Morgan Stanley Capital
International. The International Portfolio is not sponsored, endorsed,
sold or promoted by Morgan Stanley Capital International.
A-1
<PAGE>
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state to any person to whom it is unlawful to make such an offer. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Portfolios, Bennington or the Money Managers since the date
hereof; however, if any material change occurs while this Prospectus is required
by law to be delivered, this Prospectus will be amended or supplemented
accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington Capital
Management L.P.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
FIXED-INCOME PORTFOLIOS--Investor Class Shares Seattle, WA 98101
PROSPECTUS - May 1, 1998 (800) 759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services (206) 224-7420
- --------------------------------------------------------------------------------
ACCESSOR(R)FUNDS, INC. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. Each portfolio intends to offers two classes
of shares, Advisor Class Shares and Investor Class Shares. This Prospectus
pertains only to the Investor Class Shares of the following four fixed-income
portfolios of the Fund (individually, a "Portfolio" and collectively, the
"Portfolios"):
INTERMEDIATE FIXED-INCOME PORTFOLIO
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO
U.S. GOVERNMENT MONEY PORTFOLIO
and sets forth concisely the information about the Portfolios that a prospective
investor should know before investing. Through a separate prospectus, the Fund
intends to offer an additional class of shares, the Advisor Class Shares, for
the Portfolios and through separate prospectuses, the Fund intends to offer
Investor Class Shares and Advisor Class Shares for the four equity portfolios of
the Fund. Advisor Class Shares have different expenses that would affect
performance. Investors desiring to obtain information about the Advisor Class
Shares should call (800) 759-3504 or ask their sales representative. See
"Description of the Fund --Multiple Classes of Shares."
The Fund has filed a Statement of Additional Information, dated May 1, 1998,
with the Securities and Exchange Commission (the "SEC"). The Statement of
Additional Information, containing further information about the portfolios and
the Fund that may be of interest to investors, is incorporated herein by
reference in its entirety. A free copy may be obtained by writing or calling the
Fund at the address or phone number shown above. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
THIS PROSPECTUS SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
INVESTMENTS IN THE U.S. GOVERNMENT MONEY PORTFOLIO ARE NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE U.S. GOVERNMENT MONEY PORTFOLIO
INTENDS TO MAINTAIN ITS NET ASSET VALUE AT $1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO DO SO. SEE "VALUATION OF PORTFOLIO
SHARES."
INVESTMENTS IN THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK. FURTHER, INVESTMENTS IN THE PORTFOLIOS ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE PORTFOLIOS ENTAILS RISK OF LOSS, INCLUDING
THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY........................................................................3
FEES AND PORTFOLIO EXPENSES....................................................6
PORTFOLIO MANAGEMENT...........................................................8
DESCRIPTION OF THE PORTFOLIOS..................................................8
General...............................................................8
Risk Factors and Special Considerations...............................9
Investment Objectives and Investment Policies........................10
Investment Policies..................................................12
Investment Restrictions..............................................20
GENERAL MANAGEMENT OF THE PORTFOLIOS..........................................20
THE MONEY MANAGERS............................................................25
EXPENSES OF THE PORTFOLIOS....................................................27
PORTFOLIO TRANSACTION POLICIES................................................28
DIVIDENDS AND DISTRIBUTIONS...................................................28
TAXES.........................................................................29
CALCULATION OF PORTFOLIO PERFORMANCE..........................................31
VALUATION OF PORTFOLIO SHARES.................................................33
PURCHASE OF PORTFOLIO SHARES..................................................34
REDEMPTION OF PORTFOLIO SHARES................................................37
ADDITIONAL INFORMATION........................................................38
Service Providers....................................................38
Other Arrangements...................................................39
Signature Guarantees.................................................39
Organization, Capitalization and Voting..............................40
Shareholder Inquiries and Reports to Shareholders....................40
Glass-Steagall Act...................................................41
MONEY MANAGER PROFILE.........................................................41
Mortgage Securities Portfolio........................................41
DESCRIPTION OF INDICES.......................................................A-1
-2-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus.
The Fund. The Fund is a multi-managed, no-load, open-end management
investment company, known as a mutual fund. The Fund currently consists of eight
diversified investment portfolios, each with its own investment objective and
policies.
Multi-Class Structure. Each Portfolio intends to offer two classes of
shares, the Advisor Class Shares and the Investor Class Shares through different
prospectuses. The shares of each Portfolio existing prior to May 1, 1998, when
the multi-class structure was established, are redesignated as Advisor Class
Shares. The Investor Class Shares are primarily available through financial
institutions, retirement plans, broker-dealers, depository institutions,
institutional shareholders of record, registered investment advisers, and other
financial intermediaries and through the various brokerage firms or other
industry recognized service providers of fund supermarkets or similar programs
(collectively, "Service Organizations") that may impose additional or different
conditions on purchase or redemption of Fund shares and may charge transaction
or account fees. Service Organizations are responsible for transmitting to their
customers a schedule of any such fees and conditions. Generally fund
supermarket-type programs require customers to pay either no or low transaction
fees in connection with purchases or redemptions, while other Service
Organizations may charge a fee for their services. Service Organizations may
enter into written agreements with the Fund on behalf of the Investor Class
Shares, which allow reimbursements or payments directly by the Fund for
administrative services, shareholder services and distribution-related services.
See the "Distribution Plan", "Shareholder Service Plan" and "Administrative
Services Plan" and the "Multi-Class Structure" in the Statement of Additional
Information for more detailed information about the Investor Class Shares.
Advisor Class Shares are primarily available directly from the Fund. Advisor
Class shares are also available from Service Organizations, which may charge a
fee for their services. Service Organizations are responsible for transmitting
to their customers a schedule of any such fees and conditions.
Bennington may enter into arrangements with Service Organizations and
pay such organizations directly for services provided by Service Organizations.
See "Additional Information--Other Arrangements".
Fixed-Income Portfolios--Investor Class Shares Prospectus. This
Prospectus pertains only to the Investor Class Shares of the Fund's Intermediate
Fixed-Income Portfolio, Short-Intermediate Fixed-Income Portfolio, Mortgage
Securities Portfolio (collectively, the "Bond Portfolios") and the U.S.
Government Money Portfolio. See "DESCRIPTION OF THE PORTFOLIOS--General" and
"--Investment Objectives and Investment Policies" And "Multi-Class Structure".
Each Portfolio seeks to achieve its investment objective by using
investment policies and strategies which are distinct from the investment
policies and strategies of other portfolios of the Fund. The investment
objective of the Portfolios managed by Bennington are set forth below:
o INTERMEDIATE FIXED-INCOME PORTFOLIO -- Bennington Capital Management L.P.1
-- seeks generation of current income by investing primarily in
fixed-income securities with durations of between three and ten years.
Under normal market conditions, the Portfolio will have a dollar weighted
average duration of not less than three years nor more than ten years.
o SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO -- Bennington Capital Management
L.P.2 -- seeks preservation of capital and generation of current income by
investing primarily in fixed-income securities with durations of between
one and five years. Under normal market conditions, the Portfolio will have
a dollar weighted average duration of not less than two years nor more than
five years.
o U. S. GOVERNMENT MONEY PORTFOLIO -- Bennington Capital Management L.P. --
seeks maximum current income consistent with the preservation of principal
and liquidity by investing primarily in short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The investment objective and the name of the investment management organization
(the "Money Manager") for the Mortgage Securities Portfolio is described below:
o MORTGAGE SECURITIES PORTFOLIO -- BlackRock, Inc. -- seeks generation of
current income by investing primarily in mortgage-related securities.
Management. Bennington Capital Management L.P., a Washington limited
partnership ("Bennington"), is the manager and administrator of the Fund
pursuant to its Management Agreement with the Fund. As such, Bennington provides
or oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. See "GENERAL MANAGEMENT
OF THE PORTFOLIOS."
Purchase and Redemption of Shares. Investor Class Shares offered by
this Prospectus are intended to be purchased and redeemed by shareholders either
(i) directly from the Portfolios, or (ii) through Service Organizations, who may
charge a transaction or account fee for their services, at net asset value next
determined after an order for purchase or redemption has been received. The
Service Organizations are responsible for promptly transmitting client or
customer purchase and redemption orders to the Fund in accordance with their
agreements with clients or customers. The minimum initial investment for
Investor Class Shares of the Portfolios is $5,000 per Portfolio or $10,000 in
aggregate across the Investor Class Shares of the portfolios of the Fund and
subsequent investments are $1,000 per Portfolio or $2,000 in aggregate across
the Investor Class Shares of the portfolios of the Fund. See "PURCHASE OF
PORTFOLIO SHARES" and "REDEMPTION OF PORTFOLIO SHARES."
Risk Factors and Special Considerations. The Fund is designed to
provide diverse opportunities in equity and debt securities. There can be no
assurance that the investment objective for any Portfolio will be achieved.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, involves risks that go beyond the usual risks
inherent in a mutual fund limiting its holdings to domestic investments. See
"DESCRIPTION OF THE PORTFOLIOS--Risk Factors and Special Considerations."
Dividends and Distributions. Each Portfolio intends to distribute at
least annually to its shareholders substantially all of its net investment
income and its net realized long- and short-term capital gains. Dividends from
the net investment income of the U.S. Government Money Portfolio will be
declared daily and paid monthly. Dividends from the net investment income of the
Bond Portfolios will be declared and paid monthly. See "DIVIDENDS AND
DISTRIBUTIONS."
Taxation. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company for federal income tax purposes. As
such, the Fund anticipates that no Portfolio will be subject to federal income
tax on income and gains that are distributed to shareholders. See "TAXES."
Service Providers.
Bennington is the manager and administrator of the Fund, as described
above. Bennington provides or oversees the provision of all general management,
administration, investment advisory and portfolio management services for the
Fund. Bennington also provides transfer agent, registrar, dividend disbursing
agent, recordkeeping, administrative and compliance services to the Fund,
pursuant to its Transfer Agency and Administrative Agreement (the "Transfer
Agent Agreement") with the Fund.
The Fifth Third Bank, an Ohio banking corporation ("Fifth Third"), acts
as custodian (the "Custodian") of the Portfolios' assets, including accounts
established under the Fund's Individual Retirement Custodial Account Plan (the
"IRA Accounts"). Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors (the "Board of
Directors"). Fifth Third also performs accounting, recordkeeping, and other
services for the Fund (the "Fund Accounting Agent").
Deloitte & Touche LLP are the Fund's independent auditors.
Mayer, Brown & Platt serves as the Fund's outside legal counsel. See
"ADDITIONAL INFORMATION--Service Providers."
- --------
1 Managed by Smith Barney Capital Management from inception through April
30, 1998. See Statement of Additional Information for more detailed
information.
2 Managed by Bankers Trust Company from inception through April 30, 1998.
See Statement of Additional Information for more detailed information.
-3-
<PAGE>
FEES AND PORTFOLIO EXPENSES
The following table lists the fees and expenses that an investor should
expect to incur as a shareholder of Investor Class Shares of each of the
Portfolios based on projected annual operating expenses.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES(a) Portfolios(b)
-------------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Sales Load on Purchases None None None None
Sales Load on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees/Exchange Fees(c) None None None None
- -----------
</TABLE>
(a) Shares of the Portfolios are expected to be sold primarily through
Service Organizations that may charge shareholders a fee. See "GENERAL
MANAGEMENT OF THE PORTFOLIOS--Distribution."
(b) An annual maintenance fee of $25.00 may be charged by the Transfer
Agent to each IRA Account with an aggregate balance of less than
$10,000 on December 31 of each year.
(c) The Transfer Agent may charge a processing fee of $10.00 for each
redemption check requested by a shareholder. See "REDEMPTION OF
PORTFOLIO SHARES."
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES(a) Portfolios
---------------------------------------------------------------
(as a percentage of average daily net assets) Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C>
Management Fees (b) 0.36% 0.36% 0.59% 0.25%
12b-1 Fees(c) 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.38% 0.40% 0.32% 0.34%
Administrative Fee(d) 0.25% 0.25% 0.25% 0.25%
----- ----- ----- -----
Total Other Expenses 0.65% 0.65% 0.57% 0.59%
Total Portfolio Operating Expenses 1.24% 1.26% 1.41% 1.09%
=====
</TABLE>
(a) The table data reflects fees and expenses expected to be incurred
during the fiscal year ended December 31, 1998, not actual expenses.
For actual expenses of the Portfolios, prior to establishing the
multi-class structure, incurred during the fiscal year ended December
31, 1997, see "Financial Highlights" in the Fixed-Income
Portfolios--Advisor Class Shares Prospectus and the Annual Report for
the period ended December 31, 1997.
(b) Management fees consist of the management fee paid to Bennington and
the Money Manager fee paid to BlackRock, Inc. for the Mortgage
Securities Portfolio. Bennington receives only the management fee and
not a Money Manager fee for the Portfolios that it manages directly.
See "GENERAL MANAGEMENT OF THE PORTFOLIOS--Fund Manager Services and
Fees" and "THE MONEY MANAGERS--Money Manager Fees."
(c) The Distribution Plan for Investor Class Shares has been adopted in
conformity with the requirements set forth under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"). In addition, a Shareholder Service Plan has been adopted for the
Investor Class Shares. The combination of the fees paid pursuant to the
Distribution Plan and the Shareholder Service Plan, may be no more than
0.25% of the annual net assets attributable to Investor Class Shares.
See "GENERAL MANAGEMENT OF THE PORTFOLIOS--Distribution Plan."
(d) An Administrative Services Plan has been adopted for the Investor 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 Investor Class Shares of the
Portfolios. The Administrative Service Fee (as defined herein) is not
for distribution related activities.
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
Portfolios
---------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------ ---------- ---------------
One Year $13 $13 $14 $11
Three Years $39 $40 $45 $35
Five Years $68 $69 $77 $60
Ten Years $150 $152 $169 $133
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 Investor Class Shares
of the Fund may pay more in 12b-1 and distribution related fees 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 Investor Class Shares of the
Portfolios will bear directly or indirectly. For a more complete description of
the various costs and expenses, see "Expenses of the Portfolios" in the
Statement of Additional Information.
-4-
<PAGE>
PORTFOLIO MANAGEMENT
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios. At the present time, Bennington is
responsible for the selection of individual portfolio securities for all of the
assets of the U.S. Government Money Portfolio, Intermediate Fixed-Income
Portfolio and Short-Intermediate Fixed-Income Portfolio. 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. For the Portfolios covered by this prospectus, a separate Money
Manager currently manages the assets of the Mortgage Securities Portfolio.
References to the Money Manager or Money Managers throughout this prospectus
refer to the Money Manager for the Mortgage Securities Portfolio and any Money
Managers that may be hired from time to time for the other Portfolios.
Bennington allocates the assets within a Portfolio among any Money Managers
selected. See "MONEY MANAGER PROFILE" and "THE MONEY MANAGERS."
Although Bennington's activities are subject to general oversight by
the Board of Directors and the officers of the Fund, neither the Board nor the
officers evaluate the investment merits of Bennington's or any Money Manager's
individual security selections. The Board of Directors will review regularly the
Portfolios' performance compared to the applicable indices and also will review
the Portfolios' compliance with their investment objectives and policies. See
"GENERAL MANAGEMENT OF THE PORTFOLIOS."
DESCRIPTION OF THE PORTFOLIOS
General
The Fund is a Maryland corporation and was organized in June 1991 as a
multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. Each portfolio
issues two classes of shares, Advisor Class Shares and Investor Class Shares.
This Prospectus covers only the Investor Class Shares of the four fixed-income
Portfolios of the Fund. The Advisor Class Shares of the four fixed-income
Portfolios of the Fund as well as the Advisor Class Shares and Investor Class
Shares of the Fund's other four portfolios, which are designed for investment in
equity securities, are intended to be offered through separate prospectuses.
Each Portfolio's assets are invested by Bennington and/or a Money Manager that
has been analyzed, evaluated and recommended by Bennington. Bennington also
operates and administers the Fund and monitors the performance of the Money
Managers. Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio, as defined in
the Investment Company Act. Other policies reflect current practices of the
Portfolios, and may be changed by the Portfolios without the approval of
shareholders. This section of the Prospectus describes each Portfolio's
investment objective, policies and restrictions. A more detailed discussion
appears in the Statement of Additional Information and includes a list of the
Portfolios' investment restrictions.
Under normal circumstances, each Portfolio will invest at least 65% and
generally more than 80% of its total assets in the types of securities
identified in its statement of objective as principal investments. Bennington
will attempt to have each Portfolio (other than the U.S. Government Money
Portfolio) managed so that the Portfolio's investment performance equals or
exceeds the total return performance of a relevant index (the "Benchmark
Index"), as set forth below.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate Fixed-Income Lehman Brothers Government/Corporate
1-5 Year Index
Mortgage Securities Lehman Brothers Mortgage-Backed Securities
Index
See Appendix A for a description of the Benchmark Indices. A change in a
Benchmark Index may be effected with the approval of only the Board of Directors
and does not require the approval of shareholders. Each Portfolio (other than
the U.S. Government Money Portfolio) may have up to 20% of its total assets
invested in money market instruments to provide liquidity. If, in the opinion of
Bennington or a Money Manager, market or economic conditions warrant, the
Portfolio may adopt a temporary defensive strategy. In that event, the Portfolio
may hold assets as cash reserves without limit. See "Investment
Policies--Liquidity Reserves." Also, under these economic or market conditions,
the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio may deviate from their designated average dollar weighted duration
ranges. See "Investment Objectives and Investment Policies --Intermediate
Fixed-Income Portfolio," and "--Short-Intermediate Fixed-Income Portfolio."
There can be no assurance that the investment objective for any Portfolio will
be realized.
No Portfolio will invest in fixed-income securities, including
convertible securities, rated less than A by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's"), or in unrated securities
judged by Bennington or a Money Manager to be of a lesser credit quality than
those designations. The Portfolios will sell securities that they have purchased
in a prudent and orderly fashion when ratings drop below these minimum ratings.
See Appendix A in the Statement of Additional Information for a description of
securities ratings.
Risk Factors and Special Considerations
The Fund is designed to provide diverse opportunities in equity and
debt securities. No assurance can be given that the Portfolios will achieve
their investment objectives.
Investing in a mutual fund that purchases securities of companies and
governments of foreign countries, particularly developing countries, involves
risks that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. See "Investment Policies--Risks of Investing
in Foreign Securities." Certain Portfolios also may be subject to certain risks
in using investment techniques and strategies such as entering into repurchase
agreements and trading futures contracts and options on futures contracts. See
"DESCRIPTION OF THE PORTFOLIOS--Investment Policies". The use of options and
futures by a Portfolio entails certain risks, including the risk that to the
extent the Money Manager's views as to certain market movements are incorrect,
the use of such instruments could result in losses greater than if they had not
been used. Such instruments may also force sales or purchases of Portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount the Portfolio could realize on its investments or cause the
Portfolio to hold a security it might otherwise sell. Also, when used for
hedging existing positions, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Portfolio could create the possibility that losses on the
hedging instrument will be greater than gains in the value of the Portfolio's
position, thereby reducing the Portfolio's net asset value. In addition, the
Bond Portfolios will invest in U.S. Government stripped mortgage-related
securities which, due to changes in interest rates, may be more speculative and
subject to greater fluctuations in value than securities that pay interest
currently. See "DESCRIPTION OF THE PORTFOLIOS--Investment Policies" and
"Investment Restrictions, Policies and Risk Considerations--Investment
Restrictions" in the Statement of Additional Information.
The use of multiple Money Managers in any given Portfolio or the
replacement of a Portfolio's Money Managers may increase a Portfolio's portfolio
turnover rate, realization of gains or losses, and brokerage commissions. High
portfolio turnover may involve correspondingly greater brokerage commissions and
transaction costs, which will be borne by the Portfolios and may result in
increased short-term capital gains which, when distributed to shareholders, are
treated as ordinary income. See "PORTFOLIO TRANSACTION POLICIES" and "TAXES."
With respect to the Intermediate Fixed-Income and Short-Intermediate
Fixed-Income Portfolios, Bennington or a Money Manager may adopt a temporary
defensive strategy under abnormal market or economic conditions. During these
times, one or more Portfolios may make investments which result in the
Portfolios' average dollar weighted duration rising above their designated
ranges. Such a strategy differs from other defensive strategies in that it
involves greater rather than less risk to the Portfolios. See "Investment
Objectives and Investment Policies --Intermediate Fixed-Income Portfolio," and
"--Short-Intermediate Fixed-Income Portfolio."
Investment Objectives and Investment Policies
The investment objective of each Portfolio is fundamental and cannot be
changed without the approval of the holders of a majority of the Portfolio's
outstanding voting securities, as defined in the Statement of Additional
Information. The other investment policies and practices of each Portfolio,
unless otherwise noted, are not fundamental and may therefore be changed by a
vote of the Board of Directors without shareholder approval. For a more detailed
discussion regarding the Benchmark Indices, see Appendix A.
The INTERMEDIATE FIXED-INCOME PORTFOLIO seeks generation of current
income by investing primarily in fixed-income securities with durations of
between three and ten years and a dollar weighted average portfolio duration
that does not vary more or less than 20% from that of the Lehman Brothers
Government/Corporate Index or another relevant index approved by the Board of
Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of between three and ten years. The Portfolio invests principally in
bonds, debentures and other fixed-income securities with durations of between
three and ten years, including: obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; U.S. dollar-denominated corporate
debt securities of domestic or foreign issuers; mortgage- and other asset-backed
securities including stripped mortgage-backed securities; variable and floating
rate debt securities; U.S. dollar-denominated obligations of foreign governments
and foreign governmental agencies; and convertible securities. See "Investment
Policies--Risks of Investing in Foreign Securities."
Investment selections will be based on fundamental economic, market and
other factors leading to variation by sector, maturity, quality and such other
criteria as are appropriate to meet the stated objectives. Bennington and/or the
Money Manager will attempt to equal or exceed the total return performance of
the Lehman Brothers Government/Corporate Index (the "LBGC Index"). In approving
the LBGC Index, the Board of Directors took into consideration the substantial
similarity between the securities expected to be held by the Portfolio and the
LBGC Index securities with respect to the following factors, among others: the
duration, credit ratings and volatility risk. The Portfolio may utilize options
on U.S. Government securities, interest rate futures contracts and options on
interest rate futures contracts to reduce certain risks of its investments and
to attempt to enhance income, but not for speculation. See "Investment
Policies--Options" and "--Futures Contracts."
The SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO seeks preservation of
capital and generation of current income by investing primarily in fixed-income
securities with durations of between one and five years and a dollar weighted
average portfolio duration that does not vary more or less than 20% from that of
the Lehman Brothers 1-5 Year Government/Corporate Index or another relevant
index approved by the Board of Directors.
Under normal market conditions, the Portfolio seeks to achieve its
objective by investing at least 65% and generally more than 80% of its total
assets in fixed-income securities and will have a dollar weighted average
duration of not less than two years nor more than five years.
The Portfolio invests principally in fixed-income securities of the
type permitted for investment by the Intermediate Fixed-Income Portfolio but
with a shorter dollar weighted average portfolio duration. Bennington and/or the
Money Manager will attempt to equal or exceed the total return performance of
the Lehman Brothers Government/Corporate 1-5 Year Index (the "LBGC5 Index"). In
approving the LBGC5 Index, the Board of Directors took into consideration the
substantial similarities between the securities expected to be held by the
Portfolio and the LBGC5 Index securities, which include among others: duration,
credit ratings and volatility risk. The Portfolio may utilize options on U.S.
Government securities, interest rate futures contracts and options on interest
rate futures contracts to reduce certain risks of its investments and to attempt
to enhance income, but not for speculation. See "Investment Policies--Options"
and "--Futures Contracts."
The MORTGAGE SECURITIES PORTFOLIO seeks generation of current income by
investing primarily in mortgage-related securities with an aggregate dollar
weighted average portfolio duration that does not vary outside of a band of plus
or minus 20% from that of the Lehman Brothers Mortgage-Backed Securities Index
(the "LBM Index") or another relevant index approved by the Board of Directors.
The market value of these securities can and will fluctuate as interest
rates and market conditions change. Fixed-rate mortgages decline in value during
periods of rising interest rates. Adjustable rate mortgage securities allow the
Portfolio to participate in increases in interest rates through periodic
adjustments in the coupons of the underlying mortgages. See "Investment
Policies--Mortgage-Related Securities." Under normal market conditions, the
Portfolio seeks to achieve this objective by investing at least 65% and
generally more than 80% of its total assets in mortgage related securities, and
the Portfolio's principal investments will be mortgage-related securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. Up to
50% of the Portfolio's net assets may be invested in collateralized mortgage
obligations ("CMOs"), real estate mortgage investment conduits ("REMICs") or
asset-backed securities. See "Investment Policies--Asset-Backed Securities" and
"--Risks of Investing in Asset-Backed and Mortgage-Related Securities" in this
Prospectus and "Investment Restrictions, Policies and Risk
Considerations--Investment Policies--Collateralized Mortgage Obligations
("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs")" in the
Statement of Additional Information. Bennington and/or the Money Manager will
attempt to equal or exceed the total return performance of the LBM Index. In
approving the LBM Index, the Board of Directors took into consideration factors
such as the substantial similarity between the securities expected to be held by
the Portfolio and those in the LBM Index and that the index would have a risk
level appropriate to the objective of this Portfolio. The Portfolio also may
utilize options on U.S. Government securities, interest rate futures and options
thereon for hedging purposes and to attempt to enhance income, but not for
speculation. See "Investment Policies--Options" and "--Futures Contracts."
The U.S. GOVERNMENT MONEY PORTFOLIO seeks maximum current income
consistent with the preservation of principal and liquidity by investing
primarily in short-term obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. See "Investment Policies--U.S. Government
Securities."
The dollar weighted average portfolio maturity of the Portfolio will
not exceed 90 days. Under normal market conditions, the Portfolio seeks to
achieve this objective by investing at least 65% and generally more than 80% of
a Portfolio's total assets in fixed-income securities. The Portfolio limits its
Portfolio investments to those which mature in 13 months or less from the date
of purchase, present minimal credit risks and are of "eligible quality" as
determined by the Portfolio's manager under the supervision of the Board of
Directors. See "Investment Policies--Money Market Instruments." The Portfolio
may enter into repurchase agreements collateralized by U.S. Government
securities. See "Investment Policies--Repurchase Agreements." While the U.S.
Government Money Portfolio intends to maintain its net asset value at $1.00 per
share, an investment in this Portfolio is neither insured nor guaranteed by the
U.S. Government, and there can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share. See "VALUATION OF
PORTFOLIO SHARES."
Investment Policies
Duration. Duration is used in the Bond Portfolios by Bennington and/or
the Money Manager, as applicable, in security selection. Duration, which is one
of the fundamental tools used by money managers in security selection, is a
measure of the price sensitivity of a security or a portfolio to relative
changes in interest rates. For instance, a duration of "one" means that a
portfolio's or security's price would be expected to change by approximately one
percent with a one percent change in interest rates. Assumptions generally
accepted by the industry concerning the probability of early payment and other
factors may be used in the calculation of duration for debt securities that
contain put or call provisions, sometimes resulting in a duration different from
the stated maturity of the security.
With respect to certain mortgage-backed securities, duration is likely
to be substantially less than the stated maturity of the mortgages in the
underlying pools. The maturity of a security measures only the time until final
payment is due and, in the case of a mortgage-backed security, does not take
into account the factors included in duration. Under normal market conditions
(in the opinion of Bennington or a Money Manager, if applicable), the average
dollar-weighted maturity of the Intermediate Fixed-Income Portfolio will be
between three and 10 years and the average dollar-weighted maturity of the
Short-Intermediate Fixed-Income Portfolio will be between two and five years.
A Portfolio's duration directly impacts the degree to which asset
values fluctuate with changes in interest rates. For every one percent change in
interest rate, a Portfolio's net asset value is expected to change inversely by
approximately one percent for each year of duration. For example, a one percent
increase in interest rate would be expected to cause a fixed-income portfolio
with an average dollar weighted duration of five years, to decrease in value by
approximately five percent (one percent interest rate increase multiplied by the
five year duration). Since the Portfolios' objective is to provide high current
income, the Portfolios will invest in obligations with an emphasis on income
rather than stability of the Portfolios' net asset value.
If, in the opinion of Bennington and/or the Money Manager, as
applicable, market or economic conditions warrant, these Portfolios may adopt a
temporary defensive strategy. During these times, the average dollar weighted
duration of the Intermediate Fixed-Income Portfolio may fall below three years,
or rise to as high as fifteen years and the Short-Intermediate Fixed-Income
Portfolio may fall below one year, or rise to as high as fifteen years. In such
event, the Portfolios will be subject to greater or less risk depending on
whether average dollar weighted duration is increased or decreased. At any time
that these Portfolios' average dollar weighted duration is increased, the
Portfolios are subject to greater risk, since at higher durations a Portfolio's
asset value is more significantly impacted by changes in prevailing interest
rates than at lower durations. Likewise, when the Portfolio's average dollar
weighted duration is decreased, the Portfolio is subject to less risk, since at
lower durations a Portfolio's asset value is less significantly impacted by
changes in prevailing interest rates than at higher durations. When Bennington
and/or the Money Manager determines that a temporary defensive strategy is no
longer needed, investments will be reallocated to return the Portfolios to their
designated average dollar weighted duration. Such reallocations are not expected
to be sudden, but will be made gradually over time.
Liquidity Reserves. Each Portfolio (other than the U.S. Government
Money Portfolio) is authorized to invest its cash reserves (funds awaiting
investment in the specific types of securities to be acquired by a Portfolio or
cash to provide for payment of the Portfolio's expenses or to permit the
Portfolio to meet redemption requests) in money market instruments or in debt
securities which are at least comparable in quality to the Portfolio's permitted
investments. Under normal circumstances, no more than 20% of a Portfolio's net
assets will be comprised of these instruments. The Portfolios (other than the U.
S. Government Money Portfolio) also may enter into financial futures contracts
in accordance with their investment objectives to minimize the impact of cash
balances. "GENERAL MANAGEMENT OF THE PORTFOLIOS" and "Investment
Policies--Liquidity Reserves" in the Statement of Additional Information.
Money Market Instruments. Each Portfolio (other than the U. S.
Government Money Portfolio) may invest up to 20% of its net assets in:
(i) Obligations (including certificates of deposit and
bankers' acceptances) maturing in 13 months or less of (a) banks
organized under the laws of the United States or any state thereof
(including foreign branches of such banks) or (b) U.S. branches of
foreign banks or (c) foreign banks and foreign branches thereof;
provided that such banks have, at the time of acquisition by the
Portfolio of such obligations, total assets of not less than $1 billion
or its equivalent. The term "certificates of deposit" includes both
Eurodollar certificates of deposit, for which there is generally a
market, and Eurodollar time deposits, for which there is generally not
a market. "Eurodollars" are dollars deposited in banks outside the
United States; the Portfolios may invest in Eurodollar instruments of
foreign and domestic banks; and
(ii) Commercial paper, variable amount demand master notes,
bills, notes and other obligations issued by a U.S. company, a foreign
company or a foreign government, its agencies or instrumentalities,
maturing in 13 months or less, denominated in U.S. dollars, and of
"eligible quality" as described below. If such obligations are
guaranteed or supported by a letter of credit issued by a bank, such
bank (including a foreign bank) must meet the requirements set forth in
paragraph (i) above. If such obligations are guaranteed or insured by
an insurance company or other non-bank entity, such insurance company
or other non-bank entity must represent a credit of high quality, as
determined by the Portfolio's Money Manager, under the supervision of
Bennington and the Board of Directors, or Bennington, as applicable.
"Eligible quality," for this purpose, means (i) a security rated (or
issued by an issuer that is rated with respect to a class of short-term debt
obligations, or any security within that class, that is comparable in priority
and security with the security) in the highest short-term rating category (e.g.,
A-1/P-1) or one of the two highest long-term rating categories (e.g., AAA/Aaa or
AA/Aa) by at least two major rating agencies assigning a rating to the security
or issuer (or, if only one agency assigned a rating, that agency) or (ii) an
unrated security deemed of comparable quality by the Portfolio's Money Manager,
if applicable, or Bennington under the general supervision of the Board of
Directors. The purchase by the Portfolio of a security of eligible quality that
is rated by only one rating agency or is unrated must be approved or ratified by
the Board of Directors.
In selecting commercial paper and other corporate obligations for
investment by a Portfolio, Bennington and/or the Money Manager, as applicable,
also considers information concerning the financial history and condition of the
issuer and its revenue and expense prospects. Bennington monitors, and the Board
of Directors reviews on a quarterly basis, the credit quality of securities
purchased for the Portfolio. If commercial paper or another corporate obligation
held by a Portfolio is assigned a lower rating or ceases to be rated, the Money
Manager under the supervision of Bennington and the Board of Directors, or
Bennington, as applicable, will promptly reassess whether that security presents
minimal credit risks and whether the Portfolio should continue to hold the
security in its portfolio. If a portfolio security no longer presents minimal
credit risks or is in default, the Portfolio will dispose of the security as
soon as reasonably practicable unless Bennington and the Board of Directors
determine that to do so is not in the best interests of the Portfolio and its
shareholders. Variable amount demand master notes with demand periods of greater
than seven days will be deemed to be liquid only if they are determined to be so
in compliance with procedures approved by the Board of Directors.
U.S. Government Securities. Each Portfolio (including, in particular,
the U. S. Government Money Portfolio) may invest in United States Treasury
securities, including bills, notes, bonds and other debt securities issued by
the United States Treasury. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the "full faith and credit" of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and their issue dates.
The Portfolios may invest in securities issued by agencies or
instrumentalities of the U.S. Government. These obligations, including those
which are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. In the case of
securities not backed by the full faith and credit of the United States, the
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
Obligations of the Government National Mortgage Association ("GNMA"),
the Farmers Home Administration and the Export-Import Bank are backed by the
full faith and credit of the United States. Securities in which the Portfolios
may invest that are not backed by the full faith and credit of the United States
include obligations issued by (i) the Tennessee Valley Authority, the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") and the United States Postal Service (each of these
issuers has the right to borrow from the United States Treasury to meet its
obligations) and (ii) the Federal Farm Credit Bank and the Federal Home Loan
Bank (each of these issuers may rely only on the individual credit of the
issuing agency to satisfy its obligations). No assurance can be given that the
U.S. Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law.
Obligations issued or guaranteed as to principal and interest by the U.
S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
The U. S. Government Money Portfolio utilizes the amortized cost method
of valuation in accordance with regulations issued by the SEC. See "VALUATION OF
PORTFOLIO SHARES--Valuation of Portfolio Securities." Accordingly, the U. S.
Government Money Portfolio will limit its Portfolio investments to those
instruments with a maturity of 397 days or less, and which are issued by the
U.S. Government, its agencies and instrumentalities.
Types of Corporate Obligations. Debt obligations of corporations in
which the Portfolios may invest include (i) corporate debt securities, including
bonds, debentures, and notes; (ii) commercial paper (including variable-amount
master demand notes); (iii) repurchase agreements involving investment-grade
debt obligations; and (iv) convertible securities-debt obligations of
corporations convertible into or exchangeable for equity securities.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a bank or broker-dealer that agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified time (ordinarily a week
or less). If the party agreeing to repurchase should default and if the value of
the securities held by the Portfolio should fall below the repurchase price, the
Portfolio could incur a loss. Subject to the limitation on investing no more
than 15% of a Portfolio's net assets in illiquid securities, no Portfolio will
invest more than 15% of its net assets (taken at current market value) in
repurchase agreements maturing in more than seven days; provided, however, the
U.S. Government Money Portfolio will not invest more than 10% of its net assets
in illiquid securities (including repurchase agreements maturing in more than
seven days). See "Investment Policies--Illiquid Securities."
Repurchase agreements will at all times be fully collateralized by U.S.
Government obligations or other collateral in an amount at least equal to the
repurchase price, including accrued interest earned on the underlying
securities. Such collateral will be held by the Fund's Custodian, either
physically or in a book-entry account.
Repurchase agreements carry certain risks associated with direct
investments in securities, including possible declines in the market value of
the underlying securities and delays and costs to the Portfolio if the other
party to the repurchase agreement becomes bankrupt or otherwise fails to deliver
the securities.
A Portfolio will enter into repurchase transactions only with parties
who meet creditworthiness standards approved by the Board of Directors.
Bennington or the Money Manager, as applicable, monitor the creditworthiness of
such parties under the general supervision of the Board of Directors. See
"Investment Policies--Repurchase Agreements" in the Statement of Additional
Information.
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio's entry
into reverse repurchase agreements and dollar rolls (except the U.S. Government
Money Portfolio), together with its other borrowings, is limited to 5% of its
net assets. See "Investment Policies--Reverse Repurchase Agreements and Dollar
Rolls" in the Statement of Additional Information.
Rights and Warrants. Each Portfolio (except the U.S. Government Money
Portfolio) may acquire up to 5% of its net assets in rights and warrants in
securities of issuers that meet the Portfolio's investment objective and
policies. See "Investment Restrictions" and "Investment Policies--Rights and
Warrants" in the Statement of Additional Information.
Privately-Issued STRIP Securities. The Portfolios may invest up to 5%
of their net assets in privately-issued STRIP securities. See "Investment
Policies--Privately-Issued STRIP Securities" in the Statement of Additional
Information.
Mortgage-Related Securities. The Bond Portfolios may invest in
mortgage-related securities. Mortgage loans made by banks, savings and loan
institutions and other lenders are often assembled into pools, the interests in
which are issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Interests in such pools are called "mortgage-related
securities" or "mortgage-backed securities."
Most mortgage-related securities are pass-through securities, which
means that they provide investors with payments consisting of both principal and
interest as mortgages in the underlying mortgage pool are paid off by the
borrower. The dominant issuers or guarantors of mortgage-related securities
today are GNMA, FNMA and FHLMC. GNMA creates mortgage-related securities from
pools of Government-guaranteed or insured (Federal Housing Authority or Veterans
Administration) mortgages originated by mortgage bankers, commercial banks and
savings and loan associations. FNMA and FHLMC issue mortgage-related securities
from pools of conventional and federally insured or guaranteed residential
mortgages obtained from various entities, including savings and loan
associations, savings banks, commercial banks, credit unions and mortgage
bankers.
The mortgage-related securities either issued or guaranteed by GNMA,
FHLMC or FNMA ("Certificates") are called pass-through Certificates because a
pro rata share of both regular interest and principal payments (less GNMA's,
FHLMC's or FNMA's fees and any applicable loan servicing fees), as well as
unscheduled early prepayments on the underlying mortgage pool, are passed
through monthly to the holder of the Certificate (i.e., the Portfolio). The
principal and interest on GNMA securities are guaranteed by GNMA and backed by
the full faith and credit of the U.S. Government. FNMA guarantees full and
timely payment of all interest and principal, while FHLMC guarantees timely
payment of interest and ultimate collection of principal. Mortgage-related
securities from FNMA and FHLMC are not backed by the full faith and credit of
the United States; however, in the Fund's opinion, their close relationship with
the U.S. Government makes them high quality securities with minimal credit
risks. The yields provided by these mortgage-related securities have
historically exceeded the yields on other types of U.S. Government securities
with comparable maturities; however, these securities generally have the
potential for greater fluctuations in yields as their prices will not generally
fluctuate as much as more traditional fixed-rate debt securities.
The Bond Portfolios may invest in pass-through mortgage-related
securities, such as fixed-rate mortgage-related securities ("FRMs") and
adjustable rate mortgage-related securities ("ARMs"), which are collateralized
by fixed rate mortgages and adjustable rate mortgages, respectively. ARMs have a
specified maturity date and amortize principal much in the fashion of a
fixed-rate mortgage. As a result, in periods of declining interest rates there
is a reasonable likelihood that ARMs will behave like FRMs in that current
levels of prepayments of principal on the underlying mortgages could accelerate.
One difference between ARMs and FRMs is that, for certain types of ARMs, the
rate of amortization of principal, as well as interest payments, can and does
change in accordance with movements in a particular, pre-specified, published
interest rate index. The amount of interest due to an ARM security holder is
calculated by adding a specified additional amount, the "margin," to the index,
subject to limitations or "caps" on the maximum and minimum interest that is
charged to the mortgagor during the life of the mortgage or to maximum and
minimum changes to that interest rate during a given period.
In addition to GNMA, FNMA or FHLMC Certificates, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the Certificate, the Bond Portfolios also may invest in
pass-through mortgage-related securities where all interest payments go to one
class of holders ("Interest Only Securities" or "IOs") and all principal
payments go to a second class of holders ("Principal Only Securities" or "POs").
These securities are commonly referred to as mortgage-backed security strips or
MBS strips. Stripped mortgage-related securities have greater market volatility
than other types of mortgage-related securities in which the Bond Portfolios may
invest. The yields to maturity on IOs and POs are sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets and principal payments may have a material effect on yield to maturity.
If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Portfolio may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience less
than anticipated prepayments of principal, the yield on POs could be materially
adversely affected. The Bond Portfolios will treat IOs and POs as illiquid
securities except for (i) IOs and POs issued by U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by Bennington and the Money Managers for these Portfolios subject to the
supervision of the Board of Directors or (ii) where such securities can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share. See
"Investment Policies--Illiquid Securities."
Asset-Backed Securities. Each Portfolio (other than the U. S.
Government Money Portfolio) may invest in asset-backed securities offered
through trusts and special purpose subsidiaries in which various types of
assets, primarily home equity loans and automobile and credit card receivables,
are securitized in pass-through structures, which means that they provide
investors with payments consisting of both principal and interest as the loans
in the underlying asset pool are paid off by the borrowers. The Bond Portfolios
may invest in these and other types of asset-backed securities which may be
developed in the future.
Risks of Investing in Asset-Backed and Mortgage-Related Securities. The
yield characteristics of mortgage-related securities (including CMOs and REMICs)
and asset-backed securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if a Portfolio purchases such a security at a premium,
a prepayment rate that is faster than expected will reduce yield to maturity,
while a prepayment rate that is slower than expected will have the opposite
effect of increasing yield to maturity. Alternatively, if the Portfolio
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Although the extent of prepayments in a pool of mortgage loans depends
on various economic and other factors, as a general rule prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the Portfolio are likely to be greater
during a period of declining interest rates and, as a result, likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-related securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors
will predominate. Mortgage-related securities and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
the risk of prepayment
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, because asset-backed securities do not usually have
the type of security interest in the related collateral that mortgage-related
securities have. For example, credit card receivables generally are unsecured
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, some of which may reduce a creditor's ability to realize
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
Municipal Securities. The Portfolios may invest up to 5% of their net
assets in fixed-income securities issued by states, counties and other local
governmental jurisdictions, including agencies of such governmental
jurisdictions, within the United States. See "Investment Policies--Municipal
Securities" in the Statement of Additional Information.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio, pursuant to a securities lending agency agreement
between the lending agent and the Fund, may lend its portfolio securities to
brokers, dealers and financial institutions deemed creditworthy by Bennington
and the applicable lending agent. The outstanding loans may not exceed in the
aggregate the maximum amount of the value of the Portfolio's net assets allowed
by applicable law, currently 33- 1/3%. Such loans are callable at any time by
the Portfolio and are at all times secured by cash or U.S. Government
securities, irrevocable letters of credit or such other acceptable collateral
that is at least equal to the market value, determined daily, of the loaned
securities. The Portfolio will receive the collateral in an amount equal to at
least 102% (in the case of domestic securities) or 105% (in the case of foreign
securities) of the current market value of the loaned securities plus accrued
interest. Cash collateral received by the Portfolio will be invested in any
securities in which the Fund is authorized to invest. A loan may be terminated
by the borrower on one business day's notice or by the Portfolio at any time. As
with any extensions of credit, there are risks of delay in recovery and in some
cases loss of right in the collateral should the borrower of the securities fail
financially. The advantage of such loans is that the Portfolio continues to
receive interest and dividends on the loaned securities, while at the same time
earning interest either directly from the borrower or on the collateral which
will be invested in short-term obligations. The risks of lending securities, as
with other extensions of secured credit, consist of possible delay in receiving
additional collateral or in recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy as monitored by Bennington and the lending agent pursuant to
procedures approved by the Board of Directors. On termination of the loan, the
borrower is required to return the securities to the Portfolio, and any gain or
loss in the market price during the loan would be borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower. See "Investment Policies--Lending of Portfolio Securities" in the
Statement of Additional Information.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities; provided, however, the U.S. Government Money
Portfolio will not invest more than 10% of its net assets in illiquid
securities. Securities which are illiquid include repurchase agreements of more
than seven days duration, securities which lack a readily available market or
have legal or contractual restrictions on resale, certain IO/PO strips and
over-the-counter ("OTC") options. Restricted securities issued pursuant to Rule
144A under the Securities Act of 1933, as amended, that have a readily available
market are not deemed illiquid for purposes of this limitation, pursuant to
liquidity procedures that have been adopted by the Board of Directors. Investing
in Rule 144A securities could result in increasing the level of a Portfolio's
illiquidity if qualified institutional buyers become, for a time, uninterested
in purchasing these securities. Bennington and/or the Money Manager under the
supervision of Bennington and the Board of Directors will monitor the liquidity
of such restricted securities. See "Investment Policies--Illiquid Securities" in
the Statement of Additional Information.
Options. Each Portfolio (other than the U.S. Government Money
Portfolio) may purchase put and call options and may write (sell) "covered" put
and "covered" call options. The Bond Portfolios may purchase and write options
on U.S. Government securities. The Bond Portfolios may write covered put and
call options to generate additional income through the receipt of premiums, may
purchase put options in an effort to protect the value of securities in their
portfolios against a decline in market value and purchase call options in an
effort to protect against an increase in the price of securities they intend to
purchase. All options on U.S. Government securities purchased or sold by the
Bond Portfolios will be traded on U.S. securities exchanges or will result from
separate, privately negotiated transactions with a primary government securities
dealer recognized by the Board of Governors of the Federal Reserve System.
OTC options are privately negotiated with the counterparty to such
contract and are purchased from and sold to dealers, financial institutions or
other counterparties which have entered into direct agreements with the
Portfolios. If the counterparty fails to take delivery of the securities
underlying an option it has written, the Portfolios would lose the premium paid
for the option as well as any anticipated benefit of the transaction.
Consequently, the Portfolios must rely on the credit quality of the
counterparty. The staff of the SEC has taken the position that purchased OTC
options and the assets used as cover for written OTC options are illiquid
securities subject to the 15% limitation described above in "Illiquid
Securities." Options on currencies are similar to options on stocks except that
there is no transfer of a security and settlement is in cash.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's Custodian, cash, U.S.
Government securities or other liquid assets with an aggregate value, measured
on a daily basis, at least sufficient to meet its obligations under the call
option, or if the Portfolio owns an offsetting call option. When a Portfolio
writes a call option, it receives a premium and gives the purchaser the right to
buy the underlying security at any time during the call period, at a fixed
exercise price regardless of market price changes during the call period. If the
call is exercised, the Portfolio forgoes any gain from an increase in the market
price of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities underlying
the option at the exercise price. A written put option is "covered" if a
Portfolio deposits with the Fund's Custodian, cash, U.S. Government securities
or other liquid assets with an aggregate value, measured on a daily basis, at
least equal to the exercise price of the put option.
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and the assets used as cover for written OTC
options. The SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities subject to
the 15% limitation described above in "Illiquid Securities." The U.S. Government
Money Portfolio will not invest more than 10% of its net assets in illiquid
securities. Furthermore, a Portfolio will not purchase or write put or call
options on securities or financial futures if the aggregate premiums paid on all
such options exceed 20% of the Portfolio's total net assets, subject to the
foregoing limitations.
When a Portfolio writes either a put or call option, the Portfolio is
required to deposit an initial margin with the Fund's Custodian for the benefit
of the options broker. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its option commitment. When the Portfolio writes
options and an adverse price movement occurs, the Portfolio may be called upon
to deposit an additional or variation margin. Both the initial and additional or
variation margin must be made in cash or U.S. Government securities. The
required margin amount is subject to change by the appropriate exchange or
regulatory authority.
Futures Contracts. Each Portfolio (other than the U. S. Government
Money Portfolio) is permitted to enter into financial futures contracts and
related options ("futures contracts") in accordance with its investment
objective. Futures contracts will be limited to hedging transactions to minimize
the impact of cash balances and for return enhancement and risk management
purposes in accordance with regulations of the Commodity Futures Trading
Commission.
A "financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as United States Treasury bonds, notes
and bills, commercial paper, bank certificates of deposit, an agreed amount of
currencies, or the cash value of a financial instrument index at a specified
future date at a price agreed upon when the contract is made. Substantially all
futures contracts are closed out before settlement date or called for cash
settlement. A futures contract is closed out by buying or selling an identical
offsetting contract which cancels the original contract to make or take
delivery.
The Portfolios may purchase and write options on futures contracts as
an alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures contracts are similar to options on the security
upon which the futures contracts are written except that options on financial
futures contracts give the purchaser the right to assume a position at a
specified price in a financial futures contract at any time during the life of
the option.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's Custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. The initial margin serves as a "good faith" deposit that
the Portfolio will honor its futures commitment. The initial margin amount is
subject to change by the appropriate exchange or regulatory authority. The
Portfolio will also be required to settle any gains or losses on a daily basis
in cash (variation margin). If the Portfolio is unable to meet an additional
margin requirement, the Portfolio may be forced to close out its position at a
price that may be detrimental to the Portfolio. When trading futures contracts,
a Portfolio will not commit more than 5% of the market value of its total assets
as initial margins. See "Investment Policies--Futures Contracts" in the
Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies.
Participation in the options or futures markets involves investment risks and
transaction costs to which a Portfolio would not be subject absent the use of
these strategies. If the Money Manager's predictions of movements in the
direction of the securities and interest rate markets are inaccurate, the
adverse consequences to the Portfolio may leave the Portfolio in a worse
position than if such strategies were not used. Risks inherent in the use of
options and futures contracts and options on futures contracts include: (1)
dependence on Bennington and/or the Money Manager's ability to predict correctly
movements in the direction of interest rates and securities prices; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities being hedged; (3)
the fact that skills needed to use these strategies are different from those
needed to select portfolio securities; (4) the possible absence of a liquid
secondary market for any particular instrument at any time; (5) the possible
need to raise additional initial margin; (6) in the case of futures, the need to
meet daily margin in cash; and (7) the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. See "Taxes" in the
Statement of Additional Information.
Risks of Investing in Foreign Securities. The Bond Portfolios may
invest in foreign securities. Foreign securities involve certain risks. These
risks include political or economic instability in the country of the issuer,
the difficulty of predicting international trade patterns and the possibility of
imposition of exchange controls. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. Generally,
outside the United States there is less government regulation of securities
exchanges, brokers and listed companies and, with respect to certain foreign
countries, there is a possibility of expropriation, confiscatory taxation or
diplomatic developments which could affect investments within such countries.
In many instances, foreign debt securities may provide higher yields
than securities of domestic issuers which have similar maturities and quality.
However, under certain market conditions, these investments may be less liquid
than investments in the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
Investment Restrictions
Each Portfolio is subject to investment restrictions which, as
described in more detail in the Statement of Additional Information, have been
adopted by the Fund on behalf of the Portfolios as fundamental policies that
cannot be changed with respect to a Portfolio without the approval of the
holders of a majority of such Portfolio's outstanding voting securities, as
defined in the Investment Company Act. Among other restrictions, the Portfolios
will not purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result (i) with respect to 75% of a
Portfolio's total assets, more than 5% of a Portfolio's total assets would then
be invested in securities of a single issuer, or (ii) 25% or more of a
Portfolio's total assets would be invested in one or more issuers having their
principal business activities in the same industry. See "Investment
Restrictions, Policies and Risk Considerations--Investment Restrictions" in the
Statement of Additional Information.
GENERAL MANAGEMENT OF THE PORTFOLIOS
The Board of Directors is responsible for overseeing generally the
operation of the Fund, including reviewing and approving the Fund's service
contracts with Bennington and any Money Managers. The Fund's officers, all of
whom are employed by Bennington, are responsible for the day-to-day management
and administration of the Fund's operations. The Money Managers are responsible
for the selection of individual portfolio securities for the assets assigned to
them by Bennington. Bennington is responsible for the selection of individual
portfolio securities for the assets of the Portfolios managed by it and does not
receive any fees beyond the fees paid pursuant to the Management Agreement.
Bennington, 1420 Fifth Avenue, Seattle, Washington 98101, was organized
as a Washington general partnership on April 25, 1991 and restructured into a
Washington limited partnership on August 17, 1993. Bennington and its partners
were formed for the purpose of providing investment advisory services to the
Fund and acting as the Fund's manager. Bennington's general partners are
Northwest Advisors, Inc., Bennington Management Associates, Inc. and Bennington
Capital Management Investment Corp., all of which are Washington corporations.
The sole limited partner is Zions Investment Management, Inc., a wholly-owned
subsidiary of Zions First National Bank, N.A. Bennington Management Associates,
Inc., which is controlled by J. Anthony Whatley, III, is the managing general
partner of Bennington. Mr. Whatley, the Executive Director of Bennington Capital
Management and the Chairman of the Board and Principal Executive Officer of the
Fund, has had over 20 years of experience in the securities industry. Ravindra
A. Deo, Vice President and Chief Investment Officer of Bennington, is primarily
responsible for the day-to-day management of the Portfolios either directly or
through interaction with each Portfolio's Money Manager and Mr. Deo is
responsible for managing the liquidity reserves of each Portfolio. Mr. Deo has
served Bennington in such capacity since January 1992. Prior thereto, he was
Senior Vice President at Leland O'Brien Rubenstein Associates Incorporated, an
investment manager, where he was employed from 1986 to 1991. See "Management of
the Fund" in the Statement of Additional Information.
Fund Manager Services and Fees. Pursuant to the Management Agreement
with the Fund, Bennington provides the following services: (i) provides or
oversees the provision of all general management, investment advisory and
portfolio management services for the Fund, including the transfer agent,
custodian, portfolio accounting and shareholder recordkeeping services for the
Fund; (ii) provides the Fund with office space, equipment and personnel
necessary to operate and administer the Fund's business; (iii) develops the
investment programs, selects Money Managers, allocates assets among Money
Managers, and monitors the Money Managers' investment programs and results; and
(iv) invests the Portfolios' liquidity reserves and all or any portion of the
Portfolios' other assets. For providing these services, Bennington is paid by
each Portfolio a fee equal on an annual basis to the following percentage of the
Portfolio's average daily net assets:
Management Fee
(as a percentage of
Portfolio average daily net assets)
- --------- -------------------------
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Pursuant to the Transfer Agent Agreement effective December 1, 1995, as
amended February 19, 1998, between Bennington and the Fund, Bennington provides
transfer agent, registrar and dividend disbursing agent services as well as
certain other administrative, compliance and recordkeeping services to the Fund.
For providing these services, Bennington receives (i) a fee equal to 0.13% of
the average daily net assets of each Portfolio of the Fund, and (ii) a
transaction fee of $.50 per transaction.
Bennington may, out of its own resources, provide marketing and
promotional support on behalf of the Portfolios. Services provided by Bennington
are in addition to, and not duplicative of, the services provided by Service
Organizations to their clients.
Custodian and Fund Accounting Services and Fees. The Fund, Bennington
and Fifth Third entered into a Fund Accounting and Other Services Agreement on
October 4, 1996, for the Intermediate Fixed-Income Portfolio, Short-Intermediate
Fixed-Income Portfolio and U.S. Government Money Portfolio effective October 7,
1996, and for the Mortgage Securities Portfolio effective November 18, 1996,
under which Fifth Third provides certain Portfolio accounting and other
services, including maintenance of the books and records of the Portfolios
required under the Investment Company Act. As compensation for these services,
the Fund pays Fifth Third an annual fund accounting and service fee (the "Fee"),
to be calculated daily and paid monthly. The annual Fee for each Portfolio shall
be the greater of a monthly minimum or an asset based fee, as follows:
<TABLE>
<CAPTION>
Monthly First Next Assets over
Portfolio Minimum OR $100,000,000 $150,000,000 $250,000,000
- --------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Intermediate Fixed-Income $2,000 0.03% 0.02% 0.01%
Short-Intermediate Fixed Income $2,000 0.03% 0.02% 0.01%
Mortgage Securities $2,000 0.03% 0.02% 0.01%
U.S. Government Money $1,500 0.03% 0.02% 0.01%
</TABLE>
The Fund pays an additional annual Fee of $2,000 per Portfolio for
other administrative services rendered, to be charged monthly. For additional
Classes of shares, the Fund will pay an annual charge of $7,000 per Portfolio
per additional Class of shares for the Investor Class Shares, also to be charged
monthly. Finally, the Fund reimburses Fifth Third for its out-of-pocket expenses
incurred in performing its services under this Agreement, including, but not
limited to: postage and mailing, telephone, facsimile, overnight courier
services and outside independent pricing service charges, and record
retention/storage. The total costs for these administrative fees are borne by
each Portfolio based on the proportionate net assets of each Portfolio.
The Fund and Fifth Third entered into a Custodian Agreement effective
October 4, 1996, pursuant to which Fifth Third acts as Custodian of the assets
of the Intermediate Fixed-Income Portfolio, Short-Intermediate Fixed-Income
Portfolio and U.S. Government Money Portfolio effective October 7, 1996, and of
the Mortgage Securities Portfolio effective November 18, 1996. Fifth Third holds
all portfolio securities and cash assets of the Portfolios and is authorized to
deposit securities in securities depositories or to use the services of
sub-custodians. Fifth Third may employ sub-custodians outside the United States
which have been approved by the Fund's Board of Directors. As compensation for
its services rendered, the Fund pays Fifth Third an annual domestic custody fee
of 0.0025% of the average gross assets and an annual global custody fee of 0.08%
of the average gross assets, exclusive of transaction charges. The total costs
for the custodial fees are borne by each Portfolio based on the proportionate
net assets of each Portfolio.
Year 2000 Preparedness. The management and money management services
provided to the Fund by Bennington and the Money Manager and the services
provided by Fifth Third to the Fund, in part, depend on the reasonably
consistent operations of their computer systems. Many software programs and, to
a lesser extent, computer hardware in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. This
design flaw may a have negative impact on the handling of securities trades,
pricing and accounting services. Bennington and the Money Managers and Fifth
Third have been actively working on necessary changes to their computer systems
to deal with the year 2000 and reasonably believe that their systems will be
year 2000 compliant in time for that event.
Multi-Class Structure. The Fund has adopted a Rule 18f-3 Plan (the
"Multi-Class Plan") pursuant to Rule 18f-3 under the Investment Company Act.
Under the Multi-Class Plan, shares of each class of each Portfolio represent an
equal pro rata interest in such Portfolio and, generally, have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other. See "Multi-Class Structure" in the
Statement of Additional Information.
As described in the Multi-Class Plan, the Fund, on behalf of each
Portfolio's Investor Class Shares, has adopted a Shareholder Service Plan, a
Distribution Plan and an Administrative Services Plan, all as described below.
Pursuant to the appropriate plan, the Fund may enter into arrangements with
Service Organizations who may provide distribution services, shareholder
services and/or administrative and accounting services to or on behalf of their
clients or customers who beneficially own Investor Class Shares. Any Service
Organization may enter into agreements with the Fund under each plan.
Distribution. Investment advisers, banks, insurance companies and other
entities that sell shares of the Fund may enter into a license agreement with
Bennington which permits them to use Bennington's proprietary asset allocation
software program, Alloset(R), pursuant to which such entities may recommend an
allocation of their clients' assets over a broad range of asset classes which
may include the various portfolios of the Fund. The Alloset(R) Model was
developed by Bennington. Investment advisers, banks, insurance companies and
other licensed entities may charge a fee, not for providing access to the Fund,
but for providing to their clients services such as Alloset(R), performance
reporting, fund selection and account monitoring. The Fund does not receive any
portion of such fees and has no control over whether and in what amount such
fees are charged. Investors also may purchase shares of the Fund directly if
they do not wish to use any of the above services, in which case no service fees
or additional fees, beyond those borne by the shareholders of the Fund
generally, would be incurred.
The Fund bears no cost associated with the use of Alloset(R). Using
Alloset(R), assets may be allocated among the Fund's portfolios in a manner
intended to achieve the investment objectives and desired investment returns of
such entities' clients based upon the individual client's situation and
tolerance for risk and desire for return on investment. There can be no
assurance that the allocation recommended by the entities that use
Alloset(R)will meet any of the clients' investment objectives. T he Money
Managers engaged by the Fund do not use Alloset(R)in investing any of the
Portfolios' assets under management.
Distribution Plan. The Fund has adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") of the Investment Company
Act with respect to the Investor Class Shares of each Portfolio. Under the terms
of the Distribution Plan, the Fund is permitted, out of the assets attributable
to the Investor Class Shares of each Portfolio (i) to make directly or cause to
be made, payments for costs and expenses to third parties or (ii) to reimburse
third parties for costs and expenses incurred in connection with providing
services. Such distribution services, include but are not limited to (a) costs
of payments made to employees that engage in the distribution of Investor Class
Shares; (b) costs relating to the formulation and implementation of marketing
and promotional activities, including but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (c)
costs of printing and distributing prospectuses, statements of additional
information and reports of the Fund to prospective holders of Investor Class
Shares; (d) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund and (e) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that the Fund may, from time to time, deem advisable and which are,
directly or indirectly, intended to result in the sale of Investor Class Shares
(the "Distribution Services"). The Fund may enter into arrangements with Service
Organizations primarily intended to result in the sale of Investor Class Shares.
Subject to the limitations of applicable law and regulations, including rules of
the NASD, the payments made directly to third parties or the reimbursements for
such distribution related costs or expenses, shall be in combination with the
service fee pursuant to the Shareholder Service Plan. The total annual rate
shall be up to but not more than 0.25% of the average daily net assets of the
Portfolios attributable to the Investor Class Shares. Any expense payable
hereunder may be carried forward for reimbursement for up to twelve months
beyond the date in which it is incurred, subject always to the limit (in
combination with the service fee pursuant to the Shareholder Service Plan) that
not more than 0.25% of the average daily net assets of the Portfolios shall be
attributable to Investor Class Shares. Investor Class Shares shall incur no
interest or carrying charges for expenses carried forward. In the event the
Distribution Plan is terminated, the Investor Class Shares shall have no
liability for expenses that were not reimbursed as of the date of termination.
The Distribution Plan may be terminated with respect to the Fund by a
vote of a majority of the "non-interested" Directors who have no direct or
indirect financial interest in the operation of the Distribution Plan (the
"Qualified Directors") or by the vote of a majority of the outstanding voting
securities of the relevant class of the Fund. Any change in the Distribution
Plan that would materially increase the cost to the class of shares of the Fund
to which the Distribution Plan relates requires approval of the affected class
of shareholders of the Fund. The Distribution Plan requires the Board to review
and approve the Distribution Plan annually and, at least quarterly, to receive
and review written reports of the amounts expended under the Distribution Plan
and the purposes for which such expenditures were made. The Distribution Plan
may be terminated at any time upon a vote of the Qualified Directors.
Shareholder Service Plan. The Fund has adopted a Shareholder Service
Plan with respect to Investor Class Shares of each Portfolio. Under the
Shareholder Service Plan, the Fund is authorized to enter into Shareholder
Service Agreements with Service Organizations who provide personal and/or
account maintenance services to their clients (the "Clients") who may from time
to time beneficially own Investor Class Shares of the Portfolios. Each Portfolio
will pay directly to Service Organizations a no distribution related shareholder
service fee under the Shareholder Service Plan at an annual rate of up to 0.25%
of the average daily net assets of the Portfolio attributable to the Investor
Class Shares beneficially owned by the clients of the Service Organizations (the
"Shareholder Service Fee"), subject always to the limit (in combination with the
distribution fee pursuant to the Distribution Plan) that not more than 0.25% of
the average daily net assets of the Portfolios shall be attributable to Investor
Class Shares. By way of example, such services may include some or all of the
following: (i) shareholder liaison services; (ii) providing information
periodically to Clients showing their positions in Investor Class Shares and
integrating such statements with those of other transactions and balances in
Clients' other accounts serviced by the Service Organizations; (iii) responding
to Client inquiries relating to the services performed by the Service
Organizations; (iv) responding to routine inquiries from Clients concerning
their investments in Investor Class Shares; and (v) providing such other similar
services to Clients as the Fund may reasonably request to the extent the Service
Organizations are permitted to do so under applicable statutes, rules and
regulations. The Shareholder Service Plan will continue from year to year
provided that it is reviewed and approved by the Board of Directors of the Fund
annually. In addition, the Board of Directors will ratify all agreements entered
into pursuant to the Shareholder Service Plan and shall review at each quarterly
meeting of the Directors the amounts expended under the Shareholder Service Plan
and the purposes for which those expenditures were made. The Shareholder Service
Plan may be terminated at any time by a vote of the Qualified Directors.
Administrative Services Plan. The Fund has adopted an Administrative
Services Plan whereby the Fund is authorized to enter into Administrative
Service Agreements on behalf of the Investor Class Shares of the Portfolios (the
"Agreements"), the form of which has been approved by the Board of Directors of
the Fund (the "Board") and each Agreement will be ratified by the Board of
Directors at the next quarterly meeting after the arrangement has been entered
into. Each Portfolio will pay an administrative services fee under the
Administrative Services Plan at an annual rate of up to 0.25% of the average
daily net assets of the Investor Class Shares of the Portfolio (the
"Administrative Services Fee") beneficially owned by the clients of the Service
Organizations. Provided, however, that no Portfolio shall directly or indirectly
pay any distribution related amounts that will be allocated under the Fund's
Distribution Plan. Administrative Services Fees may be used for payments to
Service Organizations who provide administrative and support servicing to their
customers who may from time to time beneficially own Investor Class Shares of
the Fund, which, by way of example, may include: (i) establishing and
maintaining accounts and records relating to shareholders; (ii) processing
dividend and distribution payments from the Portfolio on behalf of shareholders;
(iii) providing information periodically to shareholders showing their positions
in shares and integrating such statements with those of other transactions and
balances in shareholders other accounts serviced by such financial institution;
(iv) arranging for bank wires; (v) providing transfer agent or sub-transfer
agent services, recordkeeping, custodian or subaccounting services with respect
to shares beneficially owned by shareholders, or the information to the
Portfolio necessary for such services; (vi) if required by law, forwarding
shareholder communications from the Portfolio (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to shareholders; (vii) assisting in processing purchase,
exchange and redemption requests from shareholders and in placing such orders
with our service contractors; or (viii) providing such other similar services,
which are not considered "service fees" as defined in the NASD Rule 2830(b)(9),
as the Portfolio may reasonably request to the extent the Service Organization
is permitted to do so under applicable laws, statutes, rules and regulations.
The Administrative Services Plan may be terminated at any time by a vote of the
Qualified Directors. The Directors shall review and approve the Administrative
Services Plan annually and quarterly shall receive a report with respect to the
amounts expended under the Administrative Services Plan and the purposes for
which those expenditures were made.
THE MONEY MANAGERS
Bennington is the manager and administrator of the Fund pursuant to its
Management Agreement with the Fund. As such, Bennington provides or oversees the
provision of all general management, administration, investment advisory and
portfolio management services for the Fund. Bennington is responsible for
evaluating, selecting, and recommending Money Managers needed to manage all or
part of the assets of the Portfolios of the Fund. Bennington is also responsible
for allocating the assets within a Portfolio among any Money Managers selected.
Such allocation is reflected in the Money Manager Agreement among the Fund,
Bennington and any Money Manager, and can be changed at any time by Bennington.
The Board of Directors reviews and approves selections of Money Managers and
allocations of assets among any Money Managers. Money Managers may be added or
terminated by Bennington subject to the approval of the Board of Directors of
the Fund and appropriate notification to the shareholders of the Portfolio, as
discussed below. At the present time, Bennington manages directly the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income and U.S. Government
Money Portfolios and does not receive a fee in addition to the fees paid
pursuant to its Management Agreement with the Fund. There is a separate Money
Manager for the Mortgage Securities Portfolio. See "MONEY MANAGER PROFILES."
Money Managers are selected based on such factors as their experience,
the continuity of their portfolio management team, their security selection
process, the consistency and rigor with which they apply that process and their
demonstrated ability to add value to investment decisions. Short-term investment
performance is not a controlling factor in selecting or terminating Money
Managers. Bennington, in conjunction with the Board of Directors, reviews Money
Managers' performance.
The Fund was issued an exemptive order by the SEC on September 4, 1996
for an exemption (the "Exemption") from certain provisions of the Investment
Company Act which would otherwise require Bennington to obtain formal
shareholder approval prior to engaging and entering into money manager
agreements with Money Managers. The relief is based on the conditions set forth
in the Exemption that, among other things: (1) Bennington will select, monitor,
evaluate and allocate assets to the Money Managers and oversee Money Managers
compliance with the relevant Portfolio's investment objective, policies and
restrictions; (2) before a Portfolio may rely on the Exemption, the Exemption
must be approved by the shareholders of the Portfolios operating under the
Exemption; (3) the Fund will provide to shareholders certain information about a
new Money Manager and its money manager agreement within 60 days of the
engagement of a new Money Manager; (4) the Fund will disclose in this Prospectus
the existence, substance and effect of the Exemption; and (5) the Directors,
including the Qualified Directors, must approve each money manager agreement in
the manner required under the Investment Company Act. Any changes to the
Management Agreement between the Fund and Bennington would still require
shareholder approval. As required by the Exemption, the shareholders of each
Portfolio determined, at a shareholders' meeting held on August 15, 1995, to
permit the Fund to replace or add Money Managers and to enter into money manager
agreements with Money Managers upon approval of the Board of Directors but
without formal shareholder approval.
Neither the Board of Directors nor the officers evaluate the investment
merits of Bennington's or any Money Manager's individual security selections.
However, the Board of Directors will review regularly each Portfolio's
performance compared to the applicable indices and also will review each
Portfolio's compliance with its investment objective and policies.
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are based on the portion of the assets of the respective Portfolio managed by it
(the "Account"), which excludes assets held by Bennington for circumstances such
as redemptions or other administrative purposes, and on the number of complete
calendar quarters of management by the Money Manager. During the first five
calendar quarters, the Money Manager fee has two components, the basic fee (the
"Basic Fee") and the portfolio management fee (the "Portfolio Management Fee").
The Money Manager Fee commencing with the sixth quarter consists of two
components, the Basic Fee and the performance fee (the "Performance Fee"), which
varies with a Portfolio's performance. Currently, the Money Manager for the
Mortgage Securities Portfolio has completed the first five calendar quarters of
management of its Account, and the Performance Fee is in effect. If at any time
the Money Manager should be replaced or a new Money Manager hired, the new Money
Manager for the applicable Portfolio will receive the fee set forth in "Money
Manager Fee Schedule For a Manager's First Five Calendar Quarters of Management"
and commencing with the sixth calendar quarter of management by the new Money
Manager, such Portfolio will pay its Money Manager based on the "Money Manager
Fee Schedule For a Manager From the Sixth Calendar Quarter of Management
Forward" (set out in the Statement of Additional Information).
<TABLE>
<CAPTION>
MONEY MANAGER FEE SCHEDULE FOR A MANAGER OF
MORTGAGE SECURITIES PORTFOLIO
FROM THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average Annualized Performance
Differential vs. Annualized
Basic Fee The Applicable Index Performance Fee
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Securities Portfolio 0.07% greater than or equal to 2.00% 0.18%
greater than or equal to 0.50% and less than 2.00% 0.16%
greater than or equal to 0.25% and less than 0.50% 0.12%
greater than or equal to -0.25% and less than 0.25% 0.08%
greater than or equal to -0.50% and less than -0.25% 0.04%
greater than or equal to -0.50% 0%
</TABLE>
The Performance Fee component is adjusted each quarter and paid
quarterly based on the annualized investment performance of a Money Manager
relative to the annualized investment performance of the Benchmark Index for
that Portfolio. The Mortgage Securities Portfolio's Benchmark Index is the
Lehman Brothers Mortgage-Backed Securities Index. See Appendix A for a
description of the current Benchmark Indices. As long as the Mortgage Securities
Portfolio's performance either exceeds the index, or trails the index by no more
than 0.50%, a Performance Fee will be paid to the Money Manager.
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable index is
recalculated at the end of each calendar quarter based on the Money Manager's
performance during all calendar quarters since commencement of investment
operations except that of the immediately preceding quarter. Commencing with the
14th calendar quarter of investment operations, the Money Manager's average
annual performance differential will be recalculated based on the Money
Manager's performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. A Money Manager's performance
will be calculated by Bennington in the same manner in which the total return
performance of the Portfolio's index is calculated, which is not the same method
used for calculating the Portfolios' performance for advertising purposes as
described under "Calculation of Portfolio Performance." See Appendix B to the
Statement of Additional Information for a discussion of how performance fees are
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
example, if an index has an average annual performance of 10%, the Mortgage
Securities Portfolio Account's average annual performance would have to be equal
to or greater than 12% for the Money Manager to receive an annual Performance
Fee of 0.18% (i.e., the difference in performance between the Account and the
index must be equal to or greater than 2% for the Money Manager to receive the
maximum performance fee.) Because the maximum Performance Fee for the Portfolio
applies whenever a Money Manager's performance exceeds the index by 2.00%, the
Money Manager for the Portfolio could receive a maximum Performance Fee even if
the performance of the Account is negative. A more detailed description of the
operation of each Performance Fee is contained in Appendix B to the Statement of
Additional Information.
The Money Manager has agreed to the foregoing fees, which are generally
lower than they charge to institutional accounts for which they serve as
investment adviser and perform all administrative functions associated with
serving in that capacity. These lower fees are in recognition of the reduced
administrative and client service responsibilities the Money Manager have
undertaken with respect to the Portfolio.
The following table lists the fees earned by the Money Managers of the
Portfolios for the current period:
MONEY MANAGER FEES EARNED FOR CURRENT PERIOD
<TABLE>
<CAPTION>
Number Of Quarters Performance Fee
Managed By Money Basic Fee (6th Quarter) Total
Portfolio Manager Period (All Quarters) Forward Fee
- --------- ------- ------ -------------- ------- ---
<S> <C> <C> <C> <C> <C>
Intermediate 20 2nd Quarter 1997 0.07% 0.08% 0.15%
Fixed-Income(1) 21 3rd Quarter 1997 0.07% 0.08% 0.15%
22 4th Quarter 1997 0.07% 0.08% 0.15%
23 1st Quarter 1998 0.07% 0.08% 0.15%
24 2nd Quarter 1998 0.07% 0.08% 0.15%
Short-Intermediate 20 2nd Quarter 1997 0.07% 0.08% 0.15%
Fixed-Income(2) 21 3rd Quarter 1997 0.07% 0.08% 0.15%
22 4th Quarter 1997 0.07% 0.08% 0.15%
23 1st Quarter 1998 0.07% 0.08% 0.15%
24 2nd Quarter 1998 0.07% 0.08% 0.15%
Mortgage 20 2nd Quarter 1997 0.07% 0.07% 0.15%
Securities 21 3rd Quarter 1997 0.07% 0.16% 0.23%
22 4th Quarter 1997 0.07% 0.16% 0.23%
23 1st Quarter 1998 0.07% 0.16% 0.23%
24 2nd Quarter 1998 0.07% 0.16% 0.23%
</TABLE>
(1) Smith Barney Capital Management was the Money Manager for the Intermediate
Fixed-Income Portfolio from inception of the Portfolio through April 30,
1998, when the Money Manager Agreement with Smith Barney Capital Management
was terminated. Effective May 1, 1998, Bennington began investing the total
assets of the Intermediate Fixed-Income Portfolio and will not earn a money
management fee.
(2) Bankers Trust Company was the Money Manager for the Short-Intermediate
Fixed-Income Portfolio from inception of the Portfolio through April 30,
1998, when the Money Manager Agreement with Bankers Trust was terminated.
Effective May 1, 1998, Bennington began investing the total assets of the
Intermediate Fixed-Income Portfolio and will not earn a money management
fee.
EXPENSES OF THE PORTFOLIOS
The Portfolios will pay all of their expenses except for those
expressly assumed by Bennington, including, without limitation, Directors' fees
and fees for auditing, legal, custodian and shareholder services. All general
expenses of the Portfolios are allocated among and charged to the assets of the
respective Portfolios and between the classes of each Portfolio on a basis that
the Directors deem fair and equitable, which may be based on the relative net
assets of each Portfolio and class of shares, or the nature of the services
performed and relative applicability to each Portfolio and class of shares.
Class-specific expenses include distribution, administrative and shareholder
service fees payable with respect to the Investor Class Shares as described in
the Fund's distribution, shareholder service and administrative services plans
on behalf of Investor Class Shares. See "Distribution Plan", "Shareholder
Service Plan" and "Administrative Services Plan". Class-specific expenses may
include certain other expenses as permitted by the Fund's Multi-Class Plan
adopted pursuant to Rule 18f-3 under the Investment Company Act and subject to
review and approval by the Directors. See "FINANCIAL HIGHLIGHTS" in the
Fixed-Income Portfolios Advisor Class Shares Prospectus, the Statement of
Additional Information, or the Annual Report for the period ended December 31,
1997, for expense information related to the Fund's most recently completed
fiscal year for the Advisor Class Shares. The Board of Directors has determined
that it is appropriate to allocate certain expenses attributable to more than
one Portfolio among the Portfolios affected based on their relative net assets.
See "GENERAL MANAGEMENT OF THE PORTFOLIOS."
PORTFOLIO TRANSACTION POLICIES
Decisions to buy and sell securities are made by the Money Managers for
the assets assigned to them, and by Bennington for assets not assigned to a
Money Manager. Currently, Bennington invests all of the assets of the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income and U.S. Government
Money Portfolios and invests any portion of Mortgage Securities Portfolio's
other assets not assigned to the Money Manager. Only the Mortgage Securities
Portfolio currently has one Money Manager investing all or part of its assets.
Each Money Manager or Bennington, as applicable, makes decisions to buy
or sell securities independently from other Money Managers. Thus, if there is
more than one Money Manager for a Portfolio, one Money Manager could be selling
a security when another Money Manager for the same Portfolio is purchasing the
same security. In addition, when a Money Manager's services are terminated and
another retained, the new Money Manager may significantly restructure the
Portfolio. These practices may increase the Portfolios' portfolio turnover
rates, realization of gains or losses, and brokerage commissions. The portfolio
turnover rates for the Portfolios may vary greatly from year to year as well as
within a year and may be affected by sales of investments necessary to meet cash
requirements for redemptions of shares. Historical portfolio turnover rates for
each Portfolio is listed under "Financial Highlights." These rates should not be
considered as limiting factors. A high rate of turnover involves correspondingly
greater expenses, increased brokerage commissions and other transaction costs,
which must be borne by the Portfolios and their shareholders. See "Investment
Advisory and Other Services--Portfolio Transaction Policies" in the Statement of
Additional Information. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income. See "TAXES."
Each Portfolio may effect portfolio transactions with or through
affiliates of the Fund, Bennington or any Money Manager or its affiliates, when
Bennington or the Money Manager, as appropriate, determines that the Portfolio
will receive the best net price and execution. This standard would allow
affiliates of Bennington and the Money Managers to receive no more than the
remuneration that would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction.
DIVIDENDS AND DISTRIBUTIONS
Income Dividends. The Board of Directors presently intends to declare
dividends from net investment income for payment on the following schedule:
<TABLE>
<CAPTION>
Portfolio Declared Payable
- --------- -------- -------
<S> <C> <C>
U. S. Government Money Daily 1st business day of following month
Intermediate Fixed-Income Monthly, on last 1st business day of following month
Short-Intermediate Fixed-Income business day of
Mortgage Securities month
</TABLE>
The U. S. Government Money Portfolio determines net investment income
immediately prior to the daily determination of the Portfolio's net asset value
(currently close of New York Stock Exchange, normally 4:00 p.m. Eastern time).
Net investment income will be credited daily to the accounts of shareholders of
record prior to the net asset value calculation and paid monthly. Shareholders
of the U.S. Government Money Portfolio who place orders and wire investment
monies prior to 9:00 a.m. Pacific time are deemed "shareholders of record" for
that day's dividend payment. Each other Portfolio determines net investment
income immediately prior to the determination of the Portfolio's net asset value
on the dividend declaration day. The income will be credited to the shareholders
of record prior to the net asset value calculation and paid on the next business
day.
Capital Gains Distribution. The Board of Directors intends to declare
distributions from net capital gains annually, generally in mid-December. In
addition, in order to satisfy certain distribution requirements, a Portfolio may
declare special year-end dividend and capital gains distributions during
October, November or December. Such distributions, if received by shareholders
by January 31, are deemed to have been paid by a Portfolio and received by
shareholders on December 31 of the prior year.
Automatic Reinvestment. All dividends and distributions will be
automatically reinvested, at the net asset value per share at the close of
business on the record date, in additional shares of the same class of the
Portfolio paying the dividend or making the distribution unless a shareholder
elects to have dividends or distributions paid in cash. Shareholders may elect
to invest dividends and/or distributions paid by any portfolio in shares of the
same class of any other portfolio of the Fund at net asset value. The
shareholder must have an account existing in the portfolio selected and must
elect this option on the Account Application or on a form provided for that
purpose. For further information on this option, contact your broker or call
Bennington at (800) 759-3504. Any election may be changed by electronic
instruction if received by Bennington no later than the close of the New York
Stock Exchange, normally 4:00 p.m. Eastern time, on the record date.
TAXES
Each Portfolio is treated as a separate taxable entity for federal
income tax purposes and shareholders of each Portfolio will be entitled to the
amount of net investment income and net realized capital gains (if any) earned
by their Portfolio. The Board of Directors intends to distribute each year
substantially all of each Portfolio's net investment income and net realized
capital gains (if any), thereby eliminating virtually all federal income taxes
to each Portfolio (but not to its investors). The Portfolios may be subject to
nominal, if any, state and local taxes.
Dividends out of net investment income, together with distributions of
net short-term capital gains, will be taxable as ordinary income to the
shareholders, whether or not reinvested, and paid in cash or in additional
shares. However, depending upon the state tax rules pertaining to a shareholder,
a portion of the dividends paid by the Intermediate Fixed-Income Portfolio, the
Short-Intermediate Fixed-Income Portfolio, the U. S. Government Money Portfolio
and the Mortgage Securities Portfolio attributable to direct obligations of the
United States Treasury, U.S. governmental agencies or instrumentalities, states,
counties and other local jurisdictions may be exempt from state and local taxes.
Capital gain distributions declared by the Board of Directors and distributed to
the shareholders are taxed as long-term capital gains regardless of the length
of time a shareholder has held such shares. Recent legislation reduced the
maximum tax rate on capital gains to 20% for assets held by individuals for more
than 18 months on the date of the sale or exchange of those assets (a maximum
rate of 28% applies if the assets were held for more than one year and up to 18
months). A notice issued by the Internal Revenue Service provides that regulated
investment companies such as the Portfolios may, but are not required to,
designate which portion of a capital gain distribution qualifies for the reduced
capital gain rate. Dividends and distributions may otherwise also be subject to
state or local taxes. Shareholders should be aware that any loss realized upon
the sale, exchange or redemption of shares held for six months or less will be
treated as a long-term capital loss to the extent any capital gain dividends
have been paid with respect to such shares.
The sale of shares of a Portfolio is a taxable event and may result in
capital gain or loss. A capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series or portfolios of a mutual fund). Any gain or loss realized upon a sale,
exchange or redemption of shares of a Portfolio by a shareholder who is not a
dealer in securities will be treated generally as long-term capital gain or loss
taxable at a maximum rate of 20% if the shares in the Portfolio were held for
more than 18 months, "mid-term" capital gain taxable at a maximum rate of 28% if
the shares were held for more than one year and up to 18 months and otherwise as
short-term capital gain or loss. Any such loss, however, on shares that are held
for six months or less will be treated as long-term capital loss to the extent
of any capital gain distributions received by the shareholder.
However, all or a portion of this capital gain will be recharacterized
as ordinary income if the shareholder enters into a "conversion transaction." A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction and certain other criteria are satisfied. A
conversion transaction also includes a transaction that is marketed or sold as
producing a capital gain if substantially all of a taxpayer's expected return
from the transaction is "attributable to the time value of the taxpayer's net
investment in such transaction." The Secretary of the Treasury also is
authorized to promulgate regulations (which would apply only after they are
issued) which specify other transactions to be included in the definition of a
conversion transaction. Section 1258 of the Internal Revenue Code of 1986, as
amended (the "Code") contains many ambiguities and its scope is unclear; it may
be clarified or refined in future regulations or other official pronouncements.
Until further guidance is issued, it is unclear whether a purchase and
subsequent disposition of Portfolio shares would be treated as a conversion
transaction under Section 1258. Shareholders should consult their own tax
advisors concerning whether or not Section 1258 may apply to their transactions
in Portfolio shares.
Gains or losses on sales of securities by a Portfolio generally will be
treated as long-term or mid-term capital gains or losses if the securities have
been held by it for more than 18 months or one year, respectively, except in
certain cases where the Portfolio acquires a put or writes a call thereon or the
transaction is treated as a "conversion transaction." Other gains or losses on
the sale of securities generally will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other termination of options on
securities will generally be treated as gains and losses from the sale of
securities (assuming they do not qualify as "Section 1256 contracts" defined
below). If an option written by a Portfolio on securities lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will generally realize a capital
gain or loss. If securities are sold by the Portfolio pursuant to the exercise
of a call option written by it, the Portfolio will include the premium received
in the sale proceeds of the securities delivered in determining the amount of
gain or loss on the sale. Certain of the Portfolios' transactions may be subject
to wash sale and short sale provisions of the Code. In addition, debt securities
acquired by the Portfolios may be subject to original issue discount and market
discount rules.
Under the Code, special rules apply to the treatment of certain options
and future contracts (Section 1256 contracts). At the end of each year, such
investments held by the Portfolio will be required to be "marked to market" for
federal income tax purposes; that is, treated as having been sold at market
value. Sixty percent of any gain or loss recognized on these "deemed sales" and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss. See "Taxes" in
the Statement of Additional Information.
Shareholders of the appropriate Portfolios will be notified after each
calendar year of the amounts of ordinary income and long-term capital gains
distributions, including any amounts which are deemed paid on December 31 of the
prior year; of the dividends which qualify for the 70% dividends-received
deduction available to corporations; and the percentages of income attributable
to U.S. Government securities in the case of the Intermediate Fixed-Income,
Short-Intermediate Fixed-Income, Mortgage Securities and U. S. Government Money
Portfolios.
Under United States Treasury Regulations, a Portfolio currently is
required to withhold and remit to the United States Treasury 31% of all taxable
dividends, distributions and redemption proceeds payable to any non-corporate
shareholder which does not provide the Fund with the shareholder's taxpayer
identification number on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) or required certification or which is subject to backup
withholding.
The tax discussion set forth above is included for general information
only and is based upon the current law as of the date of this Prospectus.
Shareholders are urged to consult their tax advisers for further information
regarding the federal, state and local tax consequences of an investment in the
shares of the Fund. See "Taxes" in the Statement of Additional Information.
CALCULATION OF PORTFOLIO PERFORMANCE
From time to time the Fund may make available certain information about
the performance of the Investor Class Shares of some or all of the Portfolios.
Information about a Portfolio's performance is based on that Portfolio's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance. From time to time, the yield and total return for each class of
shares of the Portfolios may be included in advertisements or reports to
shareholders or prospective investors. Quotations of yield for a Portfolio or
class will be based on the investment income per share (as defined by the SEC)
during a particular 30-day (or one-month) period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and will be computed by dividing net investment income by the maximum public
offering price per share on the last day of the period.
Total return of Investor Class Shares of the Portfolios will be
calculated for the past year, the past five years, and the past ten years (or if
the Portfolio has been offered for a period shorter than one, five or ten years,
that period will be substituted) since the establishment of the Portfolio.
Consistent with SEC rules and informal guidance, for periods prior to the
initial offering date of Investor Class Shares (May 1, 1998), total return
presentations for the Investor Class Shares will be based on the historical
performance of the Advisor Class Shares of the Portfolio restated, as necessary,
to reflect any different operating expenses, such as the distribution,
shareholder service and administrative services fees associated with Investor
Class Shares. All other things being equal, any higher expenses of Investor
Class Shares would have reduced total return for Investor Class Shares if the
Investor Class Shares had been issued since the inception of the Portfolio by
the amount of such higher expenses, compounded over the relevant period. Total
return is measured by comparing the value of an investment in Investor Class
Shares of the Portfolio at the beginning of the relevant period to the
redemption value of the investment in the Portfolio at the end of the period
(assuming immediate reinvestment of any dividends or capital gains distributions
at net asset value). Total return may be advertised using alternative methods
that reflect all elements of return, but that may be adjusted to reflect the
cumulative impact of alternative fee and expense structures, such as the
currently effective advisory and administrative fees for Investor Class Shares
of the Portfolios. Any fees charged by Service Organizations directly to their
customers in connection with investments in the Investor Class Shares of the
Portfolios are not reflected in the Portfolio's total return and such fees, if
charged, will reduce the actual return received by customers on their
investment. From time to time, the Portfolios (except for the U. S. Government
Money Portfolio) may advertise their performance in terms of average annual
total return, which is computed by finding the average annual compounded rates
of return over a period that would equate the initial amount invested to the
ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested on the reinvestment dates during the relevant time
period and accounts for all recurring fees. The Portfolios may also include in
advertisements data comparing performance with the performance of non-related
investment media, published editorial comments and performance rankings compiled
by independent organizations (such as Lipper Analytical Services, Inc. or
Morningstar, Inc.) or entities or organizations which track the performance of
investment companies or investment advisers and publications that monitor the
performance of mutual funds (such as Barron's, Business Week, Financial Times,
Forbes, Fortune, Inc., Institutional Investor, Investor's Business Daily, Money,
Morningstar, Inc., Mutual Fund Magazine, Smart Money and The Wall Street
Journal). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Portfolio performance may
be compared to well-known unmanaged indices of market performance or other
appropriate indices of investment securities or with data developed by the Fund
or Bennington derived from such indices. Unmanaged indices (i.e., other than
Lipper) generally do not reflect deductions for administrative and management
costs and expenses. Portfolio performance may also be compared, on a relative
basis, to other Portfolios of the Fund. This relative comparison, which may be
based upon historical or expected Portfolio performance, may be presented
numerically, graphically or in text. Portfolio performance may also be combined
or blended with other Portfolios of the Fund, and that combined or blended
performance may be compared to the same Benchmark Indices to which individual
Portfolios are compared. In addition, the Fund may from time to time compare the
expense ratio of its Investor Class Shares to that of investment companies with
similar objectives and policies, based on data generated by Lipper or similar
investment services that monitor mutual funds.
The Bond Portfolios also may from time to time advertise their yields.
The yields are based on historical earnings. Yield for the Bond Portfolios is
calculated by dividing the net investment income per share earned during the
most recent 30-day (or one month) period by the maximum offering price per share
on the last day of the period. This income is then annualized. That is, the
amount of income generated by the investment during that calendar quarter is
assumed to be generated each month over a twelve-month period and is shown as a
percentage of the investment. For purposes of the yield calculation, interest
income is computed based on the yield to maturity of each debt obligation and
dividend income is computed based upon the stated dividend rate of each security
in a Portfolio's portfolio.
The U. S. Government Money Portfolio may advertise its "yield" and
"effective yield." Both yield figures are based on historical earnings and are
not intended to indicate future performance. The "yield" of the U. S. Government
Money Portfolio refers to the income generated by an investment in the Portfolio
over a seven-day period (which period will be stated in the advertisement). This
yield is calculated by determining the net change, exclusive of capital changes,
in the value of a hypothetical preexisting account having a balance of one share
at the beginning of the period, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base return. This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly, but when annualized, the income earned by an investment in
the U.S. Government Money Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
In reports or other communications to investors or in advertising, the
Fund may discuss relevant economic and market conditions affecting the Fund. In
addition, the Fund, Bennington and the Money Managers may render updates of Fund
investment activity, which may include, among other things, discussion or
quantitative statistical or comparative analysis of portfolio composition and
significant portfolio holdings including analysis of holdings by sector,
industry, country or geographic region, credit quality and other
characteristics. The Fund may also describe the general biography, work
experience and/or investment philosophy or style of the Money Managers of the
Fund and may include quotations attributable to the Money Managers describing
approaches taken in managing the Fund's investments, research methodology
underlying stock selection or the Fund's investment objectives. The Fund may
also discuss measures of risk, including those based on statistical or
econometric analyses, the continuum of risk and return relating to different
investments and the potential impact of foreign stocks on a portfolio otherwise
composed of domestic securities.
Any performance information related to the Portfolios, should be
considered in light of the Portfolios' investment objectives and policies,
characteristics and quality of the portfolio, and the market conditions during
the time period indicated. It is important to note that yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. The value of Fund shares when redeemed may be more or less than
their original cost. The Statement of Additional Information describes the
method used to determine a Portfolio's yield and total return. In reports or
other communications to shareholders or in advertising material, a Portfolio may
quote yield and total return figures that do not reflect recurring fees
(provided that these figures are accompanied by standardized yield and total
return figures calculated as described above), as well as compare its
performance with that of other mutual funds as listed in the rankings prepared
by Morningstar, Inc. or similar independent services that monitor the
performance of mutual funds or with other appropriate indices of investment
securities or other industry publications.
VALUATION OF PORTFOLIO SHARES
Net Asset Value Per Share. The net asset value per share of each class
of the Portfolios is calculated on each business day on which shares are offered
or orders to redeem are tendered by dividing the value of the Portfolio's net
assets represented by such class (i.e., the value of its assets less
liabilities) by the total number of shares of such class outstanding. See
"Valuation of Portfolio Shares" in the STATEMENT OF ADDITIONAL INFORMATION. A
business day is one on which the New York Stock Exchange, Fifth Third and
Bennington are open for business. Non-business days in 1997 will be: New Year's
Day, Presidents' Day, Martin Luther King Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day. Net
asset value per share is computed for a Portfolio by dividing the current value
of the Portfolio's assets and other assets attributable to that class, less its
liabilities, by the number of shares of the class of the Portfolio outstanding,
and rounding to the nearest cent. All Portfolios determine net asset value as of
the close of the New York Stock Exchange, normally 4:00 p.m. Eastern time.
Valuation of Portfolio Securities. With the exceptions noted below, the
Portfolios value portfolio securities at "fair market value." This generally
means that equity securities and fixed-income securities listed and traded
principally on any national securities exchange are valued on the basis of the
last sale price or, lacking any sales, at the closing bid price on the exchange
on which the security is primarily traded. United States equity and fixed-income
securities traded principally OTC, options and futures contracts are valued on
the basis of the closing bid price.
Because many fixed-income securities do not trade each day, last sale
or bid prices are frequently not available. Fixed-income securities therefore
may be valued based on prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
International securities traded over-the-counter are valued on the
basis of the mean of bid and asked prices. In the absence of a last sale or mean
bid and asked price, respectively, such securities may be valued on the basis of
prices provided by a pricing service if those prices are believed to reflect the
fair value of such securities.
Securities held by the U. S. Government Money Portfolio and money
market instruments maturing within 60 days of the valuation date held by
Portfolios other than the U. S. Government Money Portfolio are valued at
"amortized cost" unless the Board of Directors determines that amortized cost
does not represent fair value. The U. S. Government Money Portfolio uses its
best efforts to maintain a $1.00 per share net asset value. The "amortized cost"
valuation procedure initially prices an instrument at its cost and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
The Portfolios value securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Directors.
PURCHASE OF PORTFOLIO SHARES
Shares of the Portfolios may be purchased directly from the Portfolios
with no sales charge or commission. Investors may also purchase shares of the
Portfolios from intermediaries, such as a broker-dealer, bank or other financial
institution. Such intermediaries may be required to register as a dealer
pursuant to certain states' securities laws and may charge the investor a
reasonable service fee, no part of which will be paid to the Portfolios. Shares
of the Portfolios will be sold at the net asset value next determined after an
order is received and accepted, provided that payment has been received by 12:00
p.m. Eastern Time on the following business day. Net asset value is determined
as set forth above under "Valuation of Portfolio Shares." All purchases must be
made in U.S. dollars. The minimum initial investment requirements for Investor
Class Shares of each Portfolio are $5,000 per Portfolio or $10,000 in aggregate
across the portfolios of the Fund and subsequent investments are $1,000 per
Portfolio or $2,000 in aggregate across the portfolios of the Fund. The minimum
initial investment requirement for an IRA Account is an aggregate amount of
$2,000 in the portfolios of the Fund. The subsequent investment requirement for
an IRA Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The Fund reserves the right to accept smaller purchases or reject any purchase
order in its sole discretion.
Orders are accepted on each business day. If Bennington receives a
purchase order for shares of the U.S. Government Money Portfolio and investment
monies are wired prior to 9:00 a.m. Pacific time, the shareholder will be
entitled to receive that day's dividend. See "Dividends and Distributions."
Neither the Fund nor the Transfer Agent will be responsible for delays of wired
proceeds due to heavy wire traffic over the Federal Reserve System. Orders to
purchase Portfolio shares must be received by Bennington prior to close of the
New York Stock Exchange, normally 4:00 p.m. Eastern time, on the day shares of
those Portfolios are offered and orders accepted, or the orders will not be
accepted and invested in the particular Portfolio until the next day on which
shares of that Portfolio are offered. Payment must be received by 12:00 p.m.
Eastern time on the next business day. Purchases by telephone may only be made
as set out in the telephone transaction procedures set forth in "Purchase of
Portfolio Shares--Telephone Transactions." No fees are currently charged
shareholders by the Fund directly in connection with purchases.
The Fund reserves the right to suspend the offering of shares for a
period of time. The Fund also reserves the right to reject any specific purchase
order, including certain purchases by exchange. Purchase orders may be refused
if, in Bennington's opinion, they would disrupt management of the Fund. The Fund
also reserves the right to refuse exchange purchases by any person or group if,
in Bennington's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
Purchases through Intermediaries. Investor Class Shares of the
Portfolios are expected to be available through Service Organizations. Generally
industry recognized service providers of fund supermarkets or similar programs
require customers to pay either no or low transaction fees in connection with
purchases or redemptions. Certain features of the Investor Class Shares, such as
the initial and subsequent investment minimums, redemption fees and certain
trading restrictions, may be modified or waived by Service Organizations.
Service Organizations may impose transaction or administrative charges or other
direct charges, which charges or fees would not be imposed if Investor Class
Shares are purchased directly from the Fund. Therefore, a client or customer
should contact the Service Organization acting on their behalf concerning the
fees (if any) charged in connection with a purchase or redemption of Investor
Class Shares and should read this prospectus in light of the terms governing
their accounts with the Service Organization. Service Organizations are
responsible for transmitting to their customers a schedule of any such fees and
conditions. Service Organizations will be responsible for promptly transmitting
client or customer purchase and redemption orders to the Fund in accordance with
their agreements with clients or customers.
For non-distribution related administration, subaccounting, transfer
agency and/or other services, the Fund may pay Service Organizations and certain
recordkeeping organizations with whom they have entered into agreements pursuant
to the Shareholder Service Plan and/or the Administrative Services Plan. See
"Distribution--Shareholder Service Plan", "Distribution--Administrative Services
Plan". The fees payable to any one Service Organization or recordkeeper is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the fee schedule of the Service Organization or recordkeeper.
Order and Payment Procedures. Investments in the Portfolios may be made
as follows:
Federal Funds Wire. Purchases may be made on any business day
by wiring federal funds to Seattle First National Bank, Seattle, WA.
Checks. Purchases may be made by check (except that a check
drawn on a foreign bank will not be accepted). If an investor has
purchased Portfolio shares by check and subsequently submits a
redemption request, the redemption request will be honored at the net
asset value next calculated after receipt of the request, however, the
redemption proceeds will not be transmitted until the check used for
investment has cleared, which may take up to 15 days. See "REDEMPTION
OF PORTFOLIO SHARES.
Please call the Fund for further information at (800)
759-3504.
Purchases in Kind. The Portfolios may accept certain types of
securities in lieu of wired funds as consideration for Portfolio
shares. Under no circumstances will a Portfolio accept any securities
the holding or acquisition of which conflicts with the Portfolio's
investment objective, policies and restrictions or which Bennington or
the applicable Money Manager believes should not be included in the
applicable Portfolio's portfolio on an indefinite basis. Securities
accepted in consideration for a Portfolio's shares will be valued in
the same manner as the Portfolio's portfolio securities in connection
with its determination of net asset value. A transfer of securities to
a Portfolio in consideration for Portfolio shares will be treated as a
sale or exchange of such securities for federal income tax purposes. A
shareholder will recognize gain or loss on the transfer in an amount
equal to the difference between the value of the securities and the
shareholder's tax basis in such securities. Shareholders who transfer
securities in consideration for a Portfolio's shares should consult
their tax advisers as to the federal, state and local tax consequences
of such transfers. See "Purchases in Kind" in the Statement of
Additional Information.
IRA Accounts. The Fund has established an Individual
Retirement Custodial Account Plan under which investors may set up IRA
Accounts that invest in the Fund. Fifth Third serves as Custodian for
the IRA Accounts. The Transfer Agent charges an annual account fee of
$25 to each IRA Account with an aggregate balance of less than $10,000
on December 31. The minimum initial investment requirement for an IRA
Account is an aggregate amount of $2,000 in the portfolios of the Fund.
The subsequent investment requirement for an IRA Account is an
aggregate amount of $2,000 in the portfolios of the Fund. Please refer
to the IRA Account plan documents: the IRA Disclosure Statement, IRA
Custodial Account Agreement and IRA Application and Adoption Agreement
Form for additional information, copies of which may be obtained from
Bennington free of charge at (800) 759-3504.
Exchange Privilege. Shares of any class of any Portfolio of the Fund
may be exchanged for shares of any other class of any of the other portfolios
offered by the Fund to the extent the shareholder meets the investment
requirements of such shares and such shares are offered for sale in the
investor's state of residence, on the basis of current net asset values per
share at the time of the exchange. Other than the Investor Class Shares of the
Portfolios offered by this Prospectus, the portfolios of the Fund also include
the Advisor Class Shares of the Portfolios and Advisor Class and Investor Class
Shares of the Growth Portfolio, Value and Income Portfolio, Small to Mid Cap
Portfolio and the International Equity Portfolio. Advisor Class Shares and
Investor Class Shares are expected to be are available to qualified investors as
described in the applicable prospectuses. Advisor Class Shares are offered
primarily through the Fund and may be available through certain Service
Organizations that charge their customers transaction or other fees with respect
to the customers' investments in the portfolios of the Fund. The minimum initial
investment in Advisor Class Shares is $5,000 per Portfolio or $10,000 in
aggregate across the portfolios of the Fund and subsequent investments are
$1,000 per Portfolio or $2,000 in aggregate across the portfolios of the Fund.
Investor Class Shares may have different distribution and other expenses, which
may affect performance. The Advisor Class Shares are not subject to sales
charges, 12b-1 fees, and/or levels of operating expenses as are the Investor
Class Shares. As a result, the Advisor Class Shares are expected to achieve
higher investment returns than the Investor Class Shares.
Under certain circumstances, the per share net asset value of the
Investor Class Shares of the Portfolios may be lower than the per share net
asset value of the Advisor Class Shares as a result of the daily expense
accruals of the service and/or distribution fees and/or administration fees
applicable to the Investor Class Shares. Generally, for Portfolios that pay
income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the
classes. See "Valuation of Portfolio Shares" in the Statement of Additional
Information.
If the exchanging shareholder does not currently own shares of the
portfolio whose shares are being acquired, a new account will be established
with the same registration, dividend and capital gain options and authorized
dealer of record as the account from which shares are exchanged, unless
otherwise specified in writing by the shareholder with all signatures guaranteed
by an eligible guarantor institution as defined below under "REDEMPTION OF
PORTFOLIO SHARES" and "ADDITIONAL INFORMATION--Signature Guarantees." For
additional information, contact the Fund. A shareholder should obtain and read
the prospectus relating to any other portfolios of the Fund before making an
exchange.
An exchange other than between classes in the same portfolio is a
redemption of the shares and is treated as a sale for federal income tax
purposes, and a short- or long-term capital gain or loss may be realized. The
exchange privilege may be modified or terminated at any time on 60 days' notice
to shareholders. Exchanges are available only in states where exchanges may
legally be made. Exchanges may be made by faxing instructions to Bennington at
(206) 224-4274 or mailing instructions to Bennington at 1420 Fifth Avenue, Suite
3130, Seattle, WA 98101. Exchanges may only be made by telephone as set out in
the telephone transaction procedures set forth in "PURCHASE OF PORTFOLIO
SHARES--Telephone Transactions" and "ADDITIONAL INFORMATION--Signature
Guarantees." No fees are currently charged shareholders by the Fund directly in
connection with exchanges.
Telephone Transactions. A shareholder of the Fund with an aggregate
account balance of $1 million or more may request purchases, redemptions or
exchanges of shares of a Portfolio by telephone at the appropriate toll free
number provided in this Prospectus. It may be difficult to implement redemptions
or exchanges by telephone in times of drastic economic or market changes. In an
effort to prevent unauthorized or fraudulent redemption or exchange requests by
telephone, the Fund employs reasonable procedures specified by the Board of
Directors to confirm that such instructions are genuine. Telephone transaction
procedures include the following measures: requiring the appropriate telephone
transaction election be made on the telephone transaction authorization form
sent to shareholders upon request; requiring the caller to provide the names of
the account owners, the account owner's social security number or tax
identification number and name of Portfolio, all of which must match the Fund's
records; requiring that a service representative of Bennington, acting as
Transfer Agent, complete a telephone transaction form listing all of the above
caller identification information; requiring that redemption proceeds be sent by
wire only to the owners of record at the bank account of record or by check to
the address of record; sending a written confirmation for each telephone
transaction to the owners of record at the address of record within five (5)
business days of the call; and maintaining tapes of telephone transactions for
six months, if the Fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or
an attorney-in-fact (under a power of attorney), additional documentation or
information regarding the scope of a caller's authority is required. Finally,
for telephone transactions in accounts held jointly, additional information
regarding other account holders is required. The Fund may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund may be liable for any loss due to unauthorized or fraudulent transactions.
In all other cases, neither the Fund, the Portfolio nor Bennington will be
responsible for authenticity of redemption or exchange instructions received by
telephone.
REDEMPTION OF PORTFOLIO SHARES
Portfolio shares may be redeemed on any business day at the net asset
value next determined after the receipt of a redemption request in proper form.
Payment will ordinarily be made within seven days and will be wire-transferred
by automatic clearing house funds or other bank wire to the account designated
for the shareholder at a domestic commercial bank that is a member of the
Federal Reserve System. If Bennington receives a redemption request in good
order from a shareholder of the U.S. Government Money Portfolio by 9:00 a.m.
Pacific time, the shareholder will be entitled to receive redemption proceeds by
wire on the same day. Shareholders of the U.S. Government Money Portfolio who
elect this option should be aware that their account will not be credited with
the daily dividend on that day. Neither the Fund nor the Transfer Agent will be
responsible for delays of wired proceeds due to heavy wire traffic over the
Federal Reserve System. If requested in writing, payment will be made by check
to the account owners of record at the address of record. The Transfer Agent
charges a processing fee of $10.00 for each redemption check requested by a
shareholder, which processing fee may be waived by the Transfer Agent at its
discretion. If an investor has purchased Portfolio shares by check and
subsequently submits a redemption request, the redemption request will be
honored at the net asset value next calculated after receipt of the request,
however, the redemption proceeds will not be transmitted until the check used
for investment has cleared, which may take up to 15 days. This procedure does
not apply to shares purchased by wire payment.
If a shareholder requests a redemption check or wire made payable to
someone other than the registered owner of the shares and/or sent to an address
other than the address of record, the request to redeem must (1) be made in
writing; (2) include an instruction to make the redemption proceeds payable to
someone other than the registered owner of the shares and/or send them it to an
address other than the address of record; and (3) be signed by all registered
owners with their signatures guaranteed. See "ADDITIONAL INFORMATION--Signature
Guarantees."
Portfolio shares may be redeemed by faxing instructions to Bennington
at (206) 224-4274, or by mailing instructions to Bennington at P. O. Box 1748,
Seattle, WA 98111-9865. Redemptions of the Portfolios' shares may be effected on
any business day on which the New York Stock Exchange, Fifth Third, and
Bennington are open, as long as instructions are received by Bennington by close
of business of the New York Stock Exchange, normally 4:00 p.m. Eastern Time. In
periods of severe market or economic conditions, the electronic redemption of
shares may be difficult due to an increase in the amount of electronic
transmissions. Use of the mail may result in the redemption request being
processed at a later time than it would have been if a instructions had been
sent by facsimile transmission. During the delay, the Portfolios' net asset
value may fluctuate.
Portfolio shares also may be redeemed through Service Organizations who
have made arrangements with the Fund permitting them to redeem such shares by
telephone or facsimile transmission and who may charge a fee for this service.
Investor Class Shares of the Portfolios are intended to be available through
Service Organizations. Generally fund supermarket-type programs or organizations
require customers to pay either no or low transaction fees in connection with
purchases or redemptions.
If the Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole or
in part by a distribution in kind of securities from the investment portfolio of
the Portfolio, in lieu of cash, in conformity with any applicable rules of the
SEC. Securities will be readily marketable and will be valued in the same manner
as in a regular redemption. See "VALUATION OF PORTFOLIO SHARES." If shares are
redeemed in kind, the redeeming shareholders would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, pursuant to which a Portfolio is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Portfolio during any 90-day period for any one
shareholder.
The Fund reserves the right to redeem the shares of any shareholder
whose account balance is less than $500 per portfolio or whose aggregate account
is less than $2,000, and who is not part of an Automatic Investment Plan. The
Fund, however, will not redeem shares based solely on market reductions in net
asset value. The Fund will give sixty (60) days prior written notice to
shareholders whose shares are being redeemed to allow them to purchase
sufficient additional shares of the Fund to avoid such redemption.
The Fund reserves the right to suspend the right of redemption or
postpone the date of payment for the Portfolios if the unlikely emergency
conditions that are specified in the Investment Company Act or determined by the
SEC should exist. Shareholders uncertain of requirements for redemption should
telephone the Fund at (206) 224-7420 or (800) 759-3504. Redemptions by telephone
may only be made as set out in the telephone transaction procedures set forth in
"PURCHASE OF PORTFOLIO SHARES-- Telephone Transactions."
Systematic Withdrawal Plan. Automatic withdrawal permits investors to
request withdrawal of a specified dollar amount (the minimum monthly withdrawal
on the Systematic Withdrawal Plan is $500.00 in aggregate) on a monthly basis on
the 15th (or first business day before the 15th) and/or on the last business day
of each month. An application for automatic withdrawal can be obtained from
Bennington or the Fund and must be received by Bennington ten calendar days
before the first scheduled withdrawal date. Automatic withdrawal may be ended at
any time by the investor or the Fund. The Systematic Withdrawal Plan may be
discontinued at any time by the Fund or Bennington. The Fund reserves the right
to reject any Systematic Withdrawal Plan application. Purchases of additional
shares concurrently with withdrawals generally are undesirable. Funds will be
disbursed according to the shareholder's standing redemption instructions.
ADDITIONAL INFORMATION
Service Providers
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent
Bennington, 1420 Fifth Avenue, Suite 3130, Seattle, Washington 98101,
is the manager and administrator of the Fund pursuant to a Management Agreement
with the Fund. Bennington is also the transfer agent, registrar and dividend
disbursing agent for the Portfolios, and provides other administrative,
recordkeeping and compliance services to the Fund pursuant to a Transfer Agent
Agreement with the Fund.
Custodian and Fund Accounting Agent
Fifth Third, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, acts as
Custodian of the Portfolios' assets and may employ sub-custodians outside the
United States which have been approved by the Board of Directors. Fifth Third
acts as Custodian for investors of the Portfolios with respect to IRA Accounts.
Fifth Third holds all portfolio securities and cash assets of the Portfolios and
is authorized to deposit securities in securities depositories or to use the
services of sub-custodians. Fifth Third also provides portfolio accounting and
recordkeeping services to the Fund.
Independent Auditors
Deloitte & Touche LLP, 1700 Courthouse Plaza, Dayton, Ohio 45402 are
the Fund's independent auditors. Shareholders will receive an unaudited
semi-annual and an audited annual financial statements.
Fund Counsel
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019 serves as
the Fund's outside counsel.
Other Arrangements
From time to time, Bennington may enter into arrangements with certain
Service Organizations to provide shareholder services or other administrative
services to persons who beneficially own shares of the Investor Class Shares of
the Portfolios. Such organizations, rather than their customers, may be the
shareholder of record of the shares. Such organizations may also charge a fee
for this service and may require different minimum initial and subsequent
investments than the Fund. Such organizations may also impose other charges or
restrictions different from those applicable to shareholders who invest in the
Fund directly. The Fund is not responsible for the failure of any such
organization to carry out its obligations to its customers. The Fund does not
pay any portion of the fees paid by Bennington, and Bennington does not receive
any portion of any fee such Service Organizations charge their customers.
Signature Guarantees
A signature guarantee is designed to protect the shareholders and the
Portfolios against fraudulent transactions by unauthorized persons. In certain
instances, such as transfer of ownership or when the registered shareholder(s)
requests that redemption proceeds be sent to a different name or address than
the registered name and address of record on the shareholder account, the Fund
will require that the shareholder's signature be guaranteed. When a signature
guarantee is required, each signature must be guaranteed by a domestic bank or
trust company, credit union, broker, dealer, national securities exchange,
registered securities association, clearing agency or savings association as
defined by federal law. The institution providing the guarantee must use a
signature ink stamp or medallion which states "Signature(s) Guaranteed" and be
signed in the name of the guarantor by an authorized person with that person's
title and the date. The Fund may reject a signature guarantee if the guarantor
is not a member of or participant in a signature guarantee program. Please note
that a notary public stamp or seal is not acceptable. The Fund reserves the
right to amend or discontinue its signature guarantee policy at any time and,
with regard to a particular transaction, to require a signature guarantee at its
discretion.
Organization, Capitalization and Voting
The Fund was incorporated in Maryland on June 10, 1991. The Fund is
authorized to issue 15 billion shares of common stock of $0.001 par value per
share, currently divided into eight Portfolios, each with two classes of shares,
the Advisor Class Shares and the Investor Class Shares. Investor Class Shares
may have different distribution and other expenses, which may affect
performance. The Advisor Class Shares are not subject to 12b-1 fees,
administrative service fees or shareholder service fees as are the Investor
Class Shares. As a result, the other class is expected to achieve higher
investment returns than the Investor Class Shares. Please contact your sales
representative, or the Fund at (800) 759-3504, for additional information about
the Advisor Class Shares for the Portfolios or the Advisor Class Shares and
Investor Class Shares of the Equity Portfolios. The Board of Directors may
increase or decrease the number of authorized shares without approval by
shareholders. Shares of the Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. All shares of
a Portfolio are equal as to earnings, assets and voting privileges. There are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of a Portfolio is entitled to its
portion of all of the Portfolio's assets after all debts and expenses of the
Portfolio have been paid. The Portfolios' shares do not have cumulative voting
rights for the election of Directors. Pursuant to the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine. Shareholders of a class of shares or Portfolio have separate voting
rights with respect to matters that only that affect that class or Portfolio.
See "Other Information--Voting Rights" in the Statement of Additional
Information.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless the election of Directors is required to be acted on by
shareholders under the Investment Company Act. Shareholders have certain rights,
including the right to call a meeting upon a vote of 10% of the Fund's
outstanding shares for the purpose of voting on the removal of one or more
Directors or to transact any other business. Any proposals by shareholders to be
presented at an annual meeting must be received by the Fund for inclusion in its
proxy statement and form of proxy relating to that meeting at least 120 calendar
days in advance of the date of the Fund's proxy statement released in connection
with the previous year's annual meeting, if any. If there was no annual meeting
held in the previous year or the date of the annual meeting has changed by more
than 30 days, a shareholder proposal shall have been received by the Fund a
reasonable time before the solicitation is made. See "Multi-Class Structure".
Shareholder Inquiries and Reports to Shareholders
The Fund's Annual Report to Shareholders, containing further
information about performance, is available without charge from the Fund.
Inquiries regarding the Portfolios and requests for Annual Reports should be
addressed to the Fund at P. O. Box 1748, Seattle, Washington 98111-9865, or by
telephone at (206) 224-7420 or (800) 759-3504.
Glass-Steagall Act
The Glass-Steagall Act and other applicable laws generally prohibit
banks that are members of the Federal Reserve System from engaging in the
business of underwriting, selling, distributing securities or engaging in
investment advisory activities. To the extent that banks or subsidiaries of
banks are deemed to be performing any such activities, the Fund believes such
entities may engage in such activities for the Portfolios without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. However,
it is possible that future changes in either Federal or state statutes and
regulations concerning the permissible activities of banks or trust companies,
as well as further judicial or administrative decisions and interpretations of
present and future statutes and regulations, might prevent such entities from
continuing to engage in such activities for the Portfolios. If such entities
were prohibited from acting in such capacities as a result of such future
changes, changes in the operation of the Fund might occur or a shareholder
serviced by such entity might no longer be able to avail itself of any services
then being provided. The Board of Directors does not expect that shareholders of
the Fund would suffer any adverse financial consequences as a result of these
occurrences but if such consequences result, it is expected that the Board of
Directors would direct the Fund to make other arrangements for the Fund or the
shareholders of the Fund.
MONEY MANAGER PROFILE
The following information as to the Money Manager for the Mortgage
Securities Portfolio has been supplied by that Money Manager. The Statement of
Additional Information contains further information concerning the Money
Manager, including a description of its business history and identification of
its controlling persons.
Mortgage Securities Portfolio
BlackRock, Inc., 345 Park Avenue, 29th Floor, New York, NY 10154
("BlackRock"), is the Money Manager of the Mortgage Securities Portfolio.
BlackRock (formerly BlackRock Financial Management, Inc.) is a Delaware
corporation, jointly owned by its employees and PNC Bank, N.A. ("PNC").
Approximately 20% of BlackRock is owned by its 37 managing directors and the
remaining 80% by PNC. PNC is a commercial bank whose principal office is in
Pittsburgh, PA and is wholly-owned by PNC Bank Corp., a bank holding company.
BlackRock is a registered investment adviser and is organized such that
day-to-day management and investment decisions are made by a committee and no
one person is primarily responsible for making recommendations to that
committee. BlackRock serves as investment adviser to fixed-income and equity
investors in the United States and overseas through funds and institutional
accounts.
-5-
<PAGE>
APPENDIX A
DESCRIPTION OF INDICES
The following information as to each index has been supplied by the
respective preparer of the index or has been obtained from other
publicly-available information.
Lehman Brothers Government/Corporate Index (Intermediate Fixed-Income Portfolio)
Lehman Brothers Government/Corporate 1-5 Year Index (Short-Intermediate
Fixed-Income Portfolio
Lehman Brothers Mortgage-Backed Securities Index (Mortgage Securities Portfolio)
The Lehman Brothers Bond Indices include fixed-rate debt issues rated
investment grade or higher by Moody's, S&P, or Fitch Investors Service, Inc. All
issues have at least one year to maturity and an outstanding par value of at
least $100 million for U.S. Government issues and $25 million for all others.
Price, coupon and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value weighted inclusive of accrued
interest.
The Lehman Brothers Government/Corporate Index is made up of the
Government and Corporate Bond Indices.
The Government Bond Index is made up of the Treasury Bond Index (all
public obligations of the United States Treasury, excluding flower bonds and
foreign targeted issues) and the Agency Bond Index (all publicly issued debt of
U.S. Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government). The Government Bond Index also includes the
1-3 Year Government Index, composed of Agency and Treasury securities with
maturities of one to three years, and the 20 Year Treasury Index, comprising
Treasury issues with 20 years or more to maturity.
The Corporate Bond Index includes all publicly issued, fixed-rate,
nonconvertible investment grade domestic corporate debt. Also included are
Yankee bonds, which are dollar-denominated SEC registered public, nonconvertible
debt issued or guaranteed by foreign sovereign governments, municipalities or
governmental agencies, or international agencies.
The 1-5 Year Government/Corporate Index is composed of Agency and
Treasury securities and corporate securities of the type referred to in the
preceding paragraph, all with maturities of one to five years.
The Mortgage-Backed Securities Index covers all fixed-rate securities
backed by mortgage pools of the Government National Mortgage Association (GNMA),
Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage
Association (FNMA). Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not.
A-1
<PAGE>
BENNINGTON CAPITAL MANAGEMENT L. P.
U.S. Bank Centre
1420 Fifth Avenue, Suite 3130
Seattle, Washington 98101
Telephone: 206/224-7420
800/759-3504
Facsimile: 206/224-4274
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information and representations must not
be relied upon. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
state to any person to whom it is unlawful to make such an offer. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Portfolios, Bennington or the Money Managers since the date
hereof; however, if any material change occurs while this Prospectus is required
by law to be delivered, this Prospectus will be amended or supplemented
accordingly.
Accessor(R) and Alloset(R) are registered trademarks of Bennington Capital
Management L.P.
<PAGE>
ACCESSOR FUNDS, INC.
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
(206) 224-7420/(800) 759-3504
Statement of Additional Information
Dated May 1, 1998
ACCESSOR FUNDS, INC. (the "Fund") is a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios (individually, a "Portfolio"
and collectively, the "Portfolios"), each with its own investment objective and
policies. The eight portfolios are the Growth, Value and Income, Small to Mid
Cap and International Equity Portfolios (the "Equity Portfolios") and the
Intermediate Fixed-Income, Short-Intermediate Fixed-Income, Mortgage Securities
and U.S. Government Money Portfolios (the "Fixed-Income Portfolios"). Each
Portfolio intends to offer two classes of shares, the Advisor Class Shares and
the Investor Class Shares, through four prospectuses: the "Equity
Portfolios--Advisor Class Shares Prospectus," the "Fixed-Income
Portfolios--Advisor Class Prospectus", the "Equity Portfolios--Investor Class
Prospectus" and the AFixed-Income Portfolios--Advisor Class Prospectus@ each
dated May 1, 1998 (collectively, the "Prospectuses"). A copy of the applicable
Prospectus may be obtained free of charge by writing or calling at the address
or telephone number listed above. This Statement of Additional Information is
not a prospectus and should be read in conjunction with the appropriate
Prospectuses.
The Fund currently includes the following Portfolios:
GROWTH PORTFOLIO -- seeks capital growth through investing primarily in equity
securities with greater than average growth characteristics selected from the
500 U.S. issuers which make up the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500").
VALUE AND INCOME PORTFOLIO -- seeks generation of current income and capital
growth by investing primarily in income-producing equity securities selected
from the 500 U.S. issuers which make up the S&P 500.
SMALL TO MID CAP PORTFOLIO(1) -- seeks capital growth through investing
primarily in equity securities of small to medium capitalization issuers.
INTERNATIONAL EQUITY PORTFOLIO -- seeks capital growth by investing primarily in
equity securities of companies domiciled in countries other than the United
States and traded on foreign stock exchanges.
INTERMEDIATE FIXED-INCOME PORTFOLIO -- seeks generation of current income by
investing primarily in fixed-income securities with durations of between three
and ten years and, under normal market conditions, will have a dollar weighted
average duration of not less than three years nor more than ten years which does
not vary more or less than 20% from that of the Lehman Brothers
Government/Corporate Index or another relevant index approved by the Fund's
Board of Directors (the "Board of Directors").
SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO -- seeks preservation of capital and
generation of current income by investing primarily in fixed-income securities
with durations of between one and five years and, under normal market
conditions, will have a dollar weighted average duration of not less than two
years nor more than five years which does not vary more or less than 20% from
that of the Lehman Brothers 1-5 Year Government/Corporate Index or another
relevant index approved by the Board of Directors.
MORTGAGE SECURITIES PORTFOLIO -- seeks generation of current income by investing
primarily in mortgage-related securities with an aggregate dollar weighted
average duration that does not vary outside of a band of plus or minus 20% from
the Lehman Brothers Mortgage-Backed Securities Index or another relevant index
approved by the Board of Directors.
U.S. GOVERNMENT MONEY PORTFOLIO -- seeks maximum current income consistent with
the preservation of principal and liquidity by investing primarily in short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
- --------
1 Formerly the "Small Cap Portfolio." Prior to September 15, 1995, the Small
Cap Portfolio sought to achieve its investment objective through investing
primarily in small capitalization issuers (selected from the 2,000 U.S.
issuers with the next largest market capitalization after (and excluding)
the 1,000 U.S. issuers with the largest market capitalization). On August
15, 1995, the shareholders of the Small Cap Portfolio approved a change in
the investment objective of the Small Cap Portfolio effective September 15,
1995, to permit the Small Cap Portfolio to also invest in medium
capitalization issuers. This change in investment objective coincided with
the change of the name of the Small Cap Portfolio to Small to Mid Cap
Portfolio and the commencement of management by a new Money Manager for the
Small to Mid Cap Portfolio.
B-1
<PAGE>
TABLE OF CONTENTS
Form N-1A
Item No.
<TABLE>
<CAPTION>
Cross Reference to pages in
Equity Fixed-Income Equity Fixed-Income
Portfolios- Portfolios Portfolios Portfolios
Advisor Advisor Investor Investor
Class Shares Class Shares Class Shares Class Shares
Page Prospectus Prospectus Prospectus Prospectus
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10. Cover Page B-1 1 1 1 1
11. Table of Contents B-3 2 2 2 2
12. General Information and History B-4 3, 11 3, 11 3, 8 3, 21
13. Investment Restrictions, Policies and
Risk Considerations B-4 12 12 9 9
Investment Restrictions B-4 22 23 19 20
Investment Policies B-5 14 15 11 12
14. Management of the Fund B-17 22 23 19 20
15. Control Persons and Principal Holders of
Securities B-19 41 41 -- --
16. Investment Advisory and Other Services
B-23
Service Providers B-23 5, 39 4, 35 5, 38 4, 35
Valuation of Portfolio Shares B-38 34 34 33 32
Portfolio Transaction Policies B-39 29 29 28 27
17. Brokerage Allocation and Other Practices
B-39 -- -- -- --
18. Capital Stock and Other Securities B-4 40 40 39 38
19. Purchase, Redemption and Pricing of
Securities Being Offered B-38 35-39 35-39 34-38 33-37
20. Code of Ethics B-43 -- -- -- --
21. Taxes B-43 30 30 29 28
22. Underwriters B-35 -- -- -- --
23. Calculation of Performance Data B-41 32 32 31 30
24. Financial Statements B-47 -- -- -- --
Appendix A - Ratings of Debt Instruments A-1 -- -- -- --
Appendix B - Calculation of Performance
Fees B-1 -- -- -- --
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
The Fund was incorporated in Maryland on June 10, 1991, as World Investment
Network Fund, Inc. On August 27, 1991, the Fund amended its Articles of
Incorporation to change its name to Accessor Funds, Inc. The Fund is authorized
to issue 15 billion shares of common stock, $.001 par value per share, and is
currently divided into eight Portfolios. Each Portfolio intends to offer two
classes of shares, the Advisor Class Shares and the Investor Class Shares. The
Board of Directors may increase or decrease the number of authorized shares
without the approval of shareholders. Shares of the Fund, when issued, are fully
paid, non-assessable, fully transferable and redeemable at the option of the
holder. Shares also are redeemable at the option of the Fund under certain
circumstances. All shares of a Portfolio are equal as to earnings, assets and
voting privileges. There are no conversion, preemptive or other subscription
rights. In the event of liquidation, each share of common stock of a Portfolio
is entitled to its portion of all of the Portfolio's assets after all debts and
expenses of the Portfolio have been paid. The Portfolios' shares do not have
cumulative voting rights for the election of Directors. Pursuant to the Fund's
Articles of Incorporation, the Board of Directors may authorize the creation of
additional series of common stock and classes within such series, with such
preferences, privileges, limitations and voting and vent dividend rights as the
Board of Directors may determine.
Bennington Capital Management L.P. ("Bennington"), a Washington limited
partnership, is the manager and administrator of the Fund, pursuant to a
Management Agreement with the Fund. Bennington is also the transfer agent,
registrar, dividend disbursing agent and provides recordkeeping, administrative
and compliance services pursuant to its Transfer Agency and Administrative
Agreement ("Transfer Agent Agreement") with the Fund.
INVESTMENT RESTRICTIONS, POLICIES AND RISK CONSIDERATIONS
Each Portfolio's investment objective and investment restrictions are
"fundamental" and may be changed only with the approval of the holders of a
majority of the outstanding voting securities of that Portfolio. As defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act"), a
majority of the outstanding voting securities of a Portfolio means the lesser of
(i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or represented by proxy or (ii) more
than 50% of the outstanding shares.
INVESTMENT RESTRICTIONS
Each Portfolio is subject to the following "fundamental" investment
restrictions. Unless otherwise noted, these restrictions apply on a
Portfolio-by-Portfolio basis at the time an investment is being made. No
Portfolio will:
1. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if as a result (i) with respect
to 75% of the Portfolio's total assets, more than 5% of the Portfolio's total
assets would then be invested in securities of a single issuer, or (ii) 25% or
more of the Portfolio's total assets would be invested in one or more issuers
having their principal business activities in the same industry. The U.S.
Government Money Portfolio may not purchase any security (other than obligations
of the U.S. Government, its agencies or instrumentalities) if as a result: (a)
more than 5% of the Portfolio's total assets would then be invested in
securities of a single issuer, or (b) 25% or more of the Portfolio's total
assets would be invested in one or more issuers having their principal business
activities in the same industry.
2. Issue senior securities, borrow money or pledge its assets, except
that a Portfolio may borrow up to 5% of the value of its total assets from banks
for temporary, extraordinary or emergency purposes and may pledge up to 10% of
the value of its total assets to secure such borrowings. In the event that the
asset coverage for the Portfolio's borrowings falls below 300%, the Portfolio
will reduce within three days the amount of its borrowings in order to provide
for 300% asset coverage. (For the purpose of this restriction, collateral
arrangements with respect to the writing of options, and, if applicable, futures
contracts, and collateral arrangements with respect to initial or variation
margin are not deemed to be a pledge of assets and neither such arrangements nor
the purchase or sale of futures is deemed to be the issuance of a senior
security).
3. Buy or sell commodities or commodity contracts, or real estate or
interests in real estate, although it may purchase and sell financial futures
contracts, stock index futures contracts and related options, securities which
are secured by real estate, securities of companies which invest or deal in real
estate and publicly traded securities of real estate investment trusts. No
Portfolio may purchase interests in real estate limited partnerships. The U.S.
Government Money Portfolio may not buy or sell commodities or commodity
contracts, or real estate or interests in real estate, except that the Portfolio
may purchase and sell securities which are secured by real estate and securities
of companies which invest or deal in real estate, other than securities of real
estate investment trusts and real estate limited partnerships.
4. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal and state securities laws.
5. Invest in interests in oil, gas or other mineral exploration or
development programs.
6. Make loans, except through repurchase agreements (repurchase
agreements with a maturity of longer than seven days together with other
illiquid securities being limited to 15% of the net assets of the Portfolio) and
except through the lending of its portfolio securities as described below under
"Investment Policies--Lending of Portfolio Securities."
7. Make investments for the purpose of exercising control of
management.
8. Acquire more than 5% of the outstanding voting securities, or 10% of
all of the securities, of any one issuer. The U.S. Government Money Portfolio
may not purchase common stock or other voting securities, preferred stock,
warrants or other equity securities, except as may be permitted by restriction
number 11.
9. Effect short sales (other than short sales against-the-box) or
purchase securities on margin (except that a Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases or sales
of securities, may trade in futures and related options, and may make margin
payments in connection with transactions in futures contracts and related
options).
10. Invest in securities, other than mortgage-related securities,
asset-backed securities or obligations of any U.S. Government agency or
instrumentality, of an issuer which, together with any predecessor, has been in
operation for less than three years if, as a result, more than 5% of the
Portfolio's total assets would then be invested in such securities.
11. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of its total assets would
be invested in such securities, or as part of a merger, consolidation or other
acquisition, or as set forth under "Investment Policies -- Collateralized
Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits
("REMICs")."
12. Purchase warrants if as a result the Portfolio would have more than
5% of its total assets invested in warrants or more than 2% of its total assets
invested in warrants not listed on the New York or American Stock Exchanges.
Warrants attached to other securities are not subject to this limitation. The
U.S. Government Money Portfolio may not purchase warrants.
INVESTMENT POLICIES
Liquidity Reserves. Each Portfolio (other than the U.S. Government
Money Portfolio) may have up to 20% of its assets in cash or cash equivalents to
meet redemption requests, and each Portfolio may hold cash reserves in an
unlimited amount for temporary defensive purposes when its Money Manager
believes that a more conservative approach is desirable. In addition, Bennington
or a Money Manager may create an equity or fixed-income exposure for cash
reserves through the use of options or futures contracts. This will enable the
Portfolios to hold cash while receiving a return on the cash which is similar to
holding equity or fixed-income securities.
Repurchase Agreements. Each Portfolio may enter into repurchase
agreements with a seller who agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified time (ordinarily a week or
less). The securities purchased by the Portfolio have a total value in excess of
the value of the repurchase agreement and are held by Fifth Third Bank, the
Portfolios' custodian (the "Custodian") until repurchased. The Portfolios'
repurchase agreements will at all times be fully collateralized by U.S.
Government securities or other collateral, such as cash, and the securities held
as collateral will be valued daily, and as the value of the securities declines,
the Portfolio will require additional collateral. If the seller defaults and the
value of the collateral securing the repurchase agreements declines, the
Portfolio may incur a loss. Repurchase agreements assist a Portfolio in being
invested fully while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. Each Portfolio will limit repurchase transactions to
commercial banks having at least $1 billion in total assets and broker-dealers
having a net worth of at least $5 million or total assets of at least $50
million, and will limit repurchase transactions to entities whose
creditworthiness is continually monitored and found satisfactory by Bennington
or the Portfolio's Money Manager under the supervision of the Board of
Directors. Subject to the limitation on investing not more than 15% of a
Portfolio's net assets in illiquid securities, no Portfolio will invest more
than 15% of its net assets (taken at current market value) in repurchase
agreements maturing in more than seven days; provided, however, the U.S.
Government Money Portfolio will not invest more than 10% of its net assets in
illiquid securities (including repurchase agreements maturing in more than seven
days). See "Investment Restrictions, Policies and Risk Considerations - Illiquid
Securities."
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio may
enter into reverse repurchase agreements to meet redemption requests where the
liquidation of portfolio securities is deemed by the Portfolio's Money Manager
to be inconvenient or disadvantageous. A reverse repurchase agreement has the
characteristics of borrowing and is a transaction whereby a Portfolio transfers
possession of a portfolio security to a bank or a broker-dealer in return for a
percentage of the portfolio security's market value. The Portfolio retains
record ownership of the security involved, including the right to receive
interest and principal payments. At an agreed upon future date, the Portfolio
repurchases the security by paying an agreed upon purchase price plus interest.
The Intermediate Fixed-Income Portfolio, the Short-Intermediate Fixed-Income
Portfolio and the Mortgage Securities Portfolio (collectively, the "Bond
Portfolios"), may also enter into dollar rolls in which the Portfolios sell
securities for delivery in the current month and simultaneously contract to
repurchase substantially similar (same type and coupon) securities on a
specified future date from the same party. During the roll period, the
Portfolios forego principal and interest paid on the securities. The Portfolios
are compensated by the difference between the current sales price and the
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale.
At the time a Portfolio enters into reverse repurchase agreements or
dollar rolls, the Portfolio will establish or maintain a segregated account with
a custodian approved by the Board of Directors, containing cash or liquid assets
of the Portfolio having an aggregate value, measured on a daily basis, at least
equal in value to the repurchase price including any accrued interest. Each
Portfolio's entry into reverse repurchase agreements and dollar rolls, together
with its other borrowings, is limited to 5% of its net assets. Reverse
repurchase agreements and dollar rolls involve the risk that the market value of
securities retained in lieu of sale may decline below the price of the
securities the Portfolio has sold but is obligated to repurchase. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
obligation to repurchase the securities, and the Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
decisions.
Reverse repurchase agreements and dollar rolls are considered
borrowings by the Portfolios for purposes of the percentage limitations
applicable to borrowings.
Real Estate-Related Securities. Each Portfolio may invest up to 5% of
its net assets in publicly-traded real estate investment trusts. Publicly-traded
real estate investment trusts generally engage in acquisition, development,
marketing, operating and long-term ownership of real property. Publicly-traded
real estate investment trust meeting certain asset income and distribution
requirements will generally not be subject to federal taxation on income
distributed to its shareholders.
Short Sales Against-the-Box. Although to date the Portfolios have made
no short sales against-the-box, and no Money Manager anticipates making short
sales against the box in the future, each Portfolio (other than the U.S.
Government Money Portfolio) may make short sales of securities against-the-box
or maintain a short position, provided that at all times when a short position
is open, the Portfolio owns an equal amount of such securities or securities
convertible or exchangeable for such securities without the payment of any
further consideration for the securities sold short. Not more than 25% of a
Portfolio's net assets (determined at the time of the short sale) may be subject
to such sales. Short sales against-the-box will be made primarily to defer
realization of gain or loss for federal income tax purposes.
Rights and Warrants. The Portfolios (except for the U.S. Government
Money Portfolio) may acquire up to 5% of their net assets in rights and warrants
in securities of issuers that meet the Portfolios= investment objective and
policies. Warrants are instruments which give the holder the right to purchase
the issuer's securities at a stated price during a stated term. Rights are
short-term warrants issued to shareholders in conjunction with new stock issues.
The prices of warrants do not necessarily move parallel to the prices of the
underlying securities. No Portfolio may purchase warrants (other than warrants
attached to other securities) if as a result the Portfolio would have more than
5% of its total assets invested in warrants or more than 2% of its total assets
invested in warrants not listed on the New York or American Stock Exchanges.
Warrants involve a risk of loss if the market price of the underlying securities
subject to the warrants never exceeds the exercise price of the warrants. See
"Investment Restrictions."
Mortgage-Related Securities. The Bond Portfolios may invest in
mortgage-related securities, and, in particular, mortgage pass-through
securities, Government National Mortgage Association ("GNMA") Certificates,
Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC") mortgage-backed obligations and mortgage-backed securities
of other issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers, and other secondary
market issuers). Some mortgage-related securities may be guaranteed by the U.S.
Government or an agency or instrumentality thereof; others are issued by
financial institutions such as commercial banks, savings and loan associations,
mortgage banks and securities broker-dealers (or affiliates of such institutions
established to issue these securities) in the form of mortgage-backed bonds and
are not guaranteed. Thus, credit risk among these instruments may vary. Payments
of principal and interest on Certificates issued by GNMA (but not the market
value of the Certificates themselves) are guaranteed by the full faith and
credit of the U.S. Government. Securities guaranteed by agencies or
instrumentalities of the U.S. Government, such as the FNMA or FHLMC, are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations. Mortgage-backed bonds are not guaranteed, although the
mortgage-related securities securing these obligations may be subject to U.S.
Government guarantee or third-party support. If the collateral securing the
privately issued obligation is insufficient to make payment on the obligation, a
holder could sustain a loss.
In the case of mortgage pass-through securities, such as GNMA
Certificates or FNMA and FHLMC mortgage-backed obligations, early repayment of
principal arising from prepayments of principal on the underlying mortgage loans
(due to the sale of the underlying property, the refinancing of the loan, or
foreclosure) may expose a Portfolio to a lower rate of return upon reinvestment
of the principal. For example, with respect to GNMA Certificates, although
mortgage loans in the pool will have maturities of up to 30 years, the actual
average life of a GNMA Certificate typically will be substantially less because
the mortgages will be subject to normal principal amortization and may be
prepaid prior to maturity. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of the
mortgage-backed security. Reinvestment of prepayments may occur at higher or
lower rates than the original yield on the Certificates.
In addition, tracking the "pass-through" payments on GNMA Certificates
and other mortgage-related and asset-backed securities may, at times, be
difficult. Expected payments may be delayed due to the delays in registering
newly traded paper securities. The Portfolios' Custodian's policies for
crediting missed payments while errant receipts are tracked down may vary. Some
mortgage-backed securities such as those of FHLMC and FNMA trade in book-entry
form and should not be subject to this risk of delays in timely payment of
income.
Asset-Backed Securities. The Bond Portfolios may invest in asset-backed
securities offered through trusts and special purpose subsidiaries in which
various types of assets, primarily home equity loans and automobile and credit
card receivables, are securitized in pass-through structures similar to the
mortgage pass-through structures described above or in a pay-through structure
similar to the collateralized mortgage structure. The Bond Portfolios may invest
in these and other types of asset-backed securities which may be developed in
the future.
Risks of Investing in Asset-Backed and Mortgage-Related Securities. The
yield characteristics of mortgage-related securities (including CMOs and REMICs)
and asset-backed securities differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other assets generally may be prepaid
at any time. As a result, if the Bond Portfolios purchase such a security at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Alternatively, if the Bond
Portfolios purchase these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.
Although the extent of prepayments in a pool of mortgage loans depends
on various economic and other factors, as a general rule prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Accordingly,
amounts available for reinvestment by the Bond Portfolios are likely to be
greater during a period of declining interest rates and, as a result, likely to
be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-related securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors
will predominate. Mortgage-related securities and asset-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
the risk of prepayment.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, because asset-backed securities do not usually have
the type of security interest in the related collateral that mortgage-related
securities have. For example, credit card receivables generally are unsecured
and the debtors are entitled to the protection of a number of state and federal
consumer credit laws, some of which may reduce a creditor's ability to realize
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs"). The Bond Portfolios may invest in CMOs and
REMICs. A CMO is a debt security that is backed by a portfolio of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. CMOs generally are partitioned into several classes
with a ranked priority as to the time that principal payments will be made with
respect to each of the classes. These Portfolios may invest only in
privately-issued CMOs that are collateralized by mortgage-backed securities
issued or guaranteed by GNMA, FHLMC or FNMA and in CMOs issued by FHLMC.
Currently, approximately 95% of all CMOs are issued by FHLMC.
The Bond Portfolios also may invest in REMICs. An issuer of REMICs may
be a trust, partnership, corporation, association or a segregated pool of
mortgages, or may be an agency of the U.S. Government and, in each case, must
qualify and elect treatment as such under the Internal Revenue Code of 1986, as
amended (the "Code"). A REMIC must consist of one or more classes of "regular
interests," some of which may be adjustable rate, and a single class of
"residual interests." To qualify as a REMIC, substantially all the assets of the
entity must be in assets directly or indirectly secured, principally by real
property. These Portfolios do not intend to invest in residual interests. The
United States Congress intended for REMICs to ultimately become the exclusive
vehicle for the issuance of multi-class securities backed by real estate
mortgages. If a trust or partnership that issues CMOs does not elect or qualify
for REMIC status, it will be taxed at the entity level as a corporation.
In reliance on a Securities and Exchange Commission (the "SEC") rule,
the Bond Portfolios' investments in certain qualifying CMOs, including CMOs that
have elected to be treated as REMICs, are not subject to the Investment Company
Act's limitation on acquiring interests in other investment companies. In
addition, in reliance on an earlier SEC interpretation, the Fund's investments
in certain other CMOs which cannot or do not rely on the rule, are also not
subject to the Investment Company Act's limitation on acquiring interests in
other investment companies. In order to be able to rely on the SEC's
interpretation, the CMOs and REMICs must be unmanaged, fixed-asset issuers that
(a) invest primarily in mortgage-backed securities, (b) do not issue redeemable
securities, (c) operate under general exemptive orders exempting them from all
provisions of the Investment Company Act, and (d) are not registered or
regulated under the Investment Company Act as investment companies. To the
extent that these Portfolios select CMOs or REMICs that do not satisfy the
requirements of the rule or meet the above requirements, the Portfolio may not
invest more than 10% of its assets in all such entities and may not acquire more
than 3% of the voting securities of any single such entity.
Municipal Securities. The Portfolios may invest in fixed-income
securities issued by states, counties and other local governmental
jurisdictions, including agencies of such governmental jurisdictions, within the
United States. Investments in municipal securities entail certain risks,
including adverse income and principal value fluctuation associated with general
economic conditions affecting the municipal securities markets, the issuers and
guarantors of municipal securities and the facilities financed by municipal
securities. The yields of municipal securities depend on, among other things,
conditions in the municipal bond market and fixed income markets generally, the
size of a particular offering, the maturity of the obligation, and the rating of
the issue. A general decline in interest rates will increase their market value
while a rise in interest rates tends to have the opposite effect.
A reduction in the federal income tax rates would reduce the tax
equivalent yield received by shareholders and would tend to reduce the value of
municipal securities. In addition, changes in federal law could adversely affect
the tax-exempt status of income derived from municipal securities which could
significantly affect the ability to acquire and dispose of municipal securities
at desirable yield and price levels. The value of municipal securities will
change in response to fluctuations in interest rates.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in illiquid securities; provided, however, the U.S. Government Money
Portfolio will not invest more than 10% of its net assets in illiquid
securities. Securities which are illiquid include securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable, repurchase agreements
having a maturity of longer than seven days, certain interest only
("IO")/principal only ("PO") strips and over-the-counter ("OTC") options.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the notice period. Securities which have not been registered under the
Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public by establishing a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers (as such term is defined under Rule 144A).
Bennington anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc. (the "NASD"). An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the Portfolios, however, could affect adversely the marketability of such
Portfolios= securities and, consequently, the Portfolios might be unable to
dispose of such securities promptly or at favorable prices. Bennington will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors.
Restricted securities issued pursuant to Rule 144A are not deemed to be
illiquid. The Money Manager will monitor the liquidity of such restricted
securities subject to the supervision of Bennington and the Board of Directors.
In reaching liquidity decisions, the Money Manager will consider, among other
things, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; (4) the number of other potential purchasers; and (5)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, each Portfolio may lend its portfolio securities to brokers,
dealers and financial institutions, provided that outstanding loans do not
exceed in the aggregate the maximum allowable percentage under the applicable
laws and regulations of the value of the Portfolio's net assets and provided
that such loans are callable at any time by the Portfolio and are at all times
secured by cash or equivalent collateral that is at least equal to the market
value, determined daily, of the loaned securities. The advantage of such loans
is that the Portfolio continues to receive interest and dividends on the loaned
securities, while at the same time earning interest either directly from the
borrower or on the collateral which will be invested in short-term obligations.
A loan may be terminated by the borrower on one business day's notice
or by the Portfolio at any time. If the borrower fails to maintain the requisite
amount of collateral, the loan automatically terminates, and the Portfolio could
use the collateral to replace the securities while holding the borrower liable
for any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases loss of rights in
the collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors. On
termination of the loan, the borrower is required to return the securities to
the Portfolio, and any gain or loss in the market price during the loan would be
borne by the Portfolio.
Since voting or consent rights which accompany loaned securities pass
to the borrower, the Portfolio will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit the exercise of such rights if
the matters involved would have a material effect on the Portfolio's investment
in the securities which are the subject of the loan. The Portfolio will pay
reasonable finders', administrative and custodial fees in connection with a loan
of its securities or may share the interest earned on collateral with the
borrower.
Forward Commitments. A Portfolio may make contracts to purchase
securities for a fixed price at a future date beyond customary settlement time
("forward commitments") consistent with the Portfolio's ability to manage its
investment portfolio and meet redemption requests. The Portfolio may dispose of
a commitment prior to settlement if it is appropriate to do so and realize
short-term profits or losses upon such sale. When effecting such transactions,
cash or liquid assets of the Portfolio of a dollar amount sufficient to make
payment for the portfolio securities to be purchased, measured on a daily basis,
will be segregated on the Portfolio's records at the trade date and maintained
until the transaction is settled, so that the purchase of securities on a
forward commitment basis is not deemed to be the issuance of a senior security.
Forward commitments involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date.
Options. The Portfolios' investment policies permit the Portfolios
(other than the U.S. Government Money Portfolio) to purchase put and call
options and write (sell) "covered" put and "covered" call options.
A call option is a contract whereby a purchaser pays a premium in
exchange for the right to buy the security on which the option is written at a
specified price during the term of the option. A written call option is
"covered" if the Portfolio owns the optioned securities or the Portfolio
maintains in a segregated account with the Fund's Custodian, cash, U.S.
Government securities or other liquid assets with a value sufficient to meet its
obligations under the call option, measured on a daily basis, or if the
Portfolio owns an offsetting call option. When a Portfolio writes a call option,
it receives a premium and gives the purchaser the right to buy the underlying
security at any time during the call period, at a fixed exercise price
regardless of market price changes during the call period. If the call is
exercised, the Portfolio forgoes any gain from an increase in the market price
of the underlying security over the exercise price.
The purchaser of a put option pays a premium and receives the right to
sell the underlying security at a specified price during the term of the option.
The writer of a put option, receives a premium and in return, has the
obligation, upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. A written put option is "covered"
if a Portfolio deposits with the Fund's Custodian, cash, U.S. Government
securities or other liquid assets with an aggregate value, measured on a daily
basis, at least equal to the exercised price of the put option.
The Portfolios may purchase and write covered put and covered call
options that are traded on United States or foreign securities exchanges or that
are listed on NASDAQ. Currency options may be either listed on an exchange or
traded OTC. Options on financial futures and stock indices are generally settled
in cash as opposed to the underlying securities.
Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are privately negotiated with the counterparty to such contract and
are purchased from and sold to dealers, financial institutions or other
counterparties which have entered into direct agreements with the Portfolios.
OTC options differ from exchange-traded options in that OTC options are
transacted with the counterparty directly and not through a clearing corporation
(which guarantees performance). If the counterparty fails to take delivery of
the securities underlying an option it has written, the Portfolios would lose
the premium paid for the option as well as any anticipated benefit of the
transaction. Consequently, the Portfolios must rely on the credit quality of the
counterparty and there can be no assurance that a liquid secondary market will
exist for any particular OTC options at any specific time. The SEC has taken the
position that purchased OTC options and the assets used as cover for written OTC
options are illiquid securities subject to the 15% limitation described in
"Illiquid Securities."
The Portfolios will not write covered put or covered call options on
securities if the obligations underlying the put options and the securities
underlying the call options written by the Portfolio exceed 25% of its net
assets other than OTC options and assets used as cover for written OTC options.
Furthermore, the Portfolios will not purchase or write put or call options on
securities, stock index futures or financial futures if the aggregate premiums
paid on all such options exceed 20% of the Portfolio's total net assets, subject
to the foregoing limitations.
If the writer of an option wishes to terminate the obligation, he or
she may effect a "closing purchase transaction." This is accomplished by buying
an option of the same series as the option previously written. The effect of the
purchase is that the writer's position will be canceled by the clearing
corporation. However, a writer may not effect a closing purchase transaction
after he or she has been notified of the exercise of an option. Similarly, an
investor who is the holder of an option may liquidate his or her position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously purchased. Each Portfolio
will realize a profit from a closing transaction if the price of the transaction
is less than the premium received from writing the option or is more than the
premium paid to purchase the option; the Portfolio will realize a loss from a
closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option.
There is no guarantee that either a closing purchase or a closing sale
transaction can be effected. To secure the obligation to deliver the underlying
security in the case of a call option, the writer of the option is generally
required to pledge for the benefit of the broker the underlying security or
other assets in accordance with the rules of the relevant exchange or
clearinghouse, such as The Options Clearing Corporation, an institution created
to interpose itself between buyers and sellers of options in the United States.
Technically, the clearinghouse assumes the other side of every purchase and sale
transaction on an exchange and, by doing so, guarantees the transaction.
Risks of Transactions in Options. An option position may be closed out
only on an exchange, board of trade or other trading facility which provides a
secondary market for an option of the same series. Although the Portfolios will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange or otherwise may exist. In
such event it might not be possible to effect closing transactions in particular
options, with the result that the Portfolio would have to exercise its options
in order to realize any profit and would incur brokerage commissions upon the
exercise of call options and upon the subsequent disposition of underlying
securities acquired through the exercise of call options or upon the purchase of
underlying securities for the exercise of put options. If the Portfolio as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders. The Portfolios intend to purchase and sell only those options which are
cleared by clearinghouses whose facilities are considered to be adequate to
handle the volume of options transactions.
Futures Contracts. Each Portfolio (other than the U.S. Government Money
Portfolio) is permitted to enter into financial futures contracts, stock index
futures contracts and related options thereon ("futures contracts") in
accordance with its investment objective.
A futures contract is the contractual obligation to acquire or sell the
securities called for by the contract at a specified price on a specified date.
Futures contracts are traded on "contract markets" designated by the Commodity
Futures Trading Commission. Trading is similar to the manner stock is traded on
an exchange, except that all contracts are cleared through and guaranteed to be
performed by a clearing corporation associated with the commodity exchange on
which the futures contract is traded.
Upon entering into a futures contract, a Portfolio is required to
deposit in a segregated account with the Fund's Custodian in the name of the
futures broker through whom the transaction was effected, initial margin
consisting of cash, U.S. government securities or other liquid assets having an
aggregate value, measured on a daily basis, at least equal to the amount of the
covered obligations. The initial margin is in the amount of cash or short-term
securities equal to a specified percentage of the futures amount (approximately
5% or more of the futures contract amount). Subsequent daily payments are made
between the Portfolio and futures broker to maintain the initial margin at the
specified percentage. The purchase and sale of futures contracts and collateral
arrangements with respect thereto are not deemed to be a pledge of assets and
such arrangements are not deemed to be a senior security.
A "short hedge" is taking a short position in the futures market (that
is, selling a financial instrument or a stock index futures contract for future
delivery on the contract market) as a temporary substitute for sale of the
financial instrument or common stock, respectively, in the cash market, when a
Portfolio holds and continues to hold the financial instrument necessary to make
delivery under the financial futures contract or holds common stocks in an
amount at least equal in value to the stock index futures contract.
A "long hedge" is taking a long position in the futures market (that
is, purchasing a financial instrument or a stock index futures contract for
future delivery on a contract market) as a temporary substitute for purchase of
the financial instrument or common stock, respectively, in the cash market when
the Portfolio holds and continues to hold segregated liquid assets sufficient to
take delivery of the financial instrument under the futures contract.
A "stock index futures contract" is a contract to buy or sell specified
units of a stock index at a specified future date at a price agreed upon when
the contract is made. A unit is the current value of the contract index. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Upon the termination of the contract,
settlement is the difference between the contract price and the actual level of
the stock index at the contract expiration and is paid in cash.
A "financial futures contract" (or an "interest rate futures contract")
is a contract to buy or sell a specified quantity of financial instruments such
as United States Treasury bonds, notes, bills, commercial paper and bank
certificates of deposit, an agreed amount of currencies, or the cash value of a
financial instrument index at a specified future date at a price agreed upon
when the contract is made. Substantially all futures contracts are closed out
before settlement date or call for cash settlement. A futures contract is closed
out by buying or selling an identical offsetting futures contract which cancels
the original contract to make or take delivery.
It is anticipated that the primary use of stock index futures contracts
will be for a long hedge in order to minimize the impact of cash balances. For
example, a Portfolio may sell stock when a Money Manager determines that it no
longer is a favorable investment, anticipating to invest the proceeds in
different stocks. Until the proceeds are reinvested in stocks, the Portfolio may
purchase a long position in a stock index futures contract.
The Portfolios may purchase options on futures contracts as an
alternative or in addition to buying or selling futures contracts for hedging
purposes. Options on futures are similar to options on the security upon which
the futures contracts are written except that options on stock index futures
contracts give the purchaser the right, in return for a premium paid, to assume
a position in a stock index futures contract at any time during the life of the
option at a specified price and options on financial futures contracts give the
purchaser the right, in return for a premium paid, to assume a position in a
financial futures contract at any time during the life of the option at a
specified price.
Stock index futures contracts may be used by the Equity Portfolios as a
hedge during or in anticipation of market decline. For example, if the market
was anticipated to decline, stock index futures contracts in a stock index with
a value that correlates with the declining stock value would be sold (short
hedge) which would have a similar effect as selling the stock. As the market
value declines, the stock index future's value decreases, partly offsetting the
loss in value on the stock by enabling the Portfolio to repurchase the futures
contract at a lower price to close out the position.
Financial futures contracts may be used by the Bond Portfolios as a
hedge during or in anticipation of interest rate changes. For example, if
interest rates were anticipated to rise, financial futures contracts would be
sold (short hedge) which have a similar effect as selling bonds. Once interest
rates increase, fixed-income securities held in a Portfolio's portfolio would
decline, but the futures contract value decreases, partly offsetting the loss in
value of the fixed-income security by enabling the Portfolio to repurchase the
futures contract at a lower price to close out the position.
The Portfolios may purchase a put option on a stock index futures
contract instead of selling a futures contract in anticipation of market
decline. Purchasing a call option on a stock index futures contract is used
instead of buying a futures contract in anticipation of a market advance, or to
temporarily create an equity exposure for cash balances until those balances are
invested in equities. Options on financial futures are used in similar manner in
order to hedge portfolio securities against anticipated changes in interest
rates.
There are certain investment risks in using futures contracts as a
hedging technique. One risk is the imperfect correlation between the price
movement of the futures contracts and the price movement of the portfolio
securities that are the subject of the hedge. The degree of imperfection of
correlation depends upon circumstances such as: variations in speculative market
demand for futures and for debt securities and currencies, and differences
between the financial instruments being hedged and the instruments underlying
the futures contracts available for trading with respect to interest rate levels
and maturities. Another risk is that a liquid secondary market may not exist for
a futures contract, causing a Portfolio to be unable to close out the futures
contract and thereby affecting a Portfolio's hedging strategy.
Limitations on Futures and Options Transactions. The Fund has filed a
notice of eligibility for exclusion from the definition of the term Acommodity
pool operator' with the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association, which regulate trading in the futures markets.
Pursuant to Section 4.5 of the regulations under the Commodity Exchange Act, the
notice of eligibility includes the following representations:
(a) The Fund will use commodity futures contracts and options solely
for bona fide hedging purposes within the meaning of CFTC regulations; provided
that the Fund may hold long positions in commodity futures contracts or options
that do not fall within the definition of bona fide hedging transactions if the
positions are used as part of the Fund management strategy and are incidental to
the Fund's activities in the underlying cash market, and the underlying
commodity value of the positions at all times will not exceed the sum of (i)
cash or U.S. dollar-denominated high quality short-term money market instruments
set aside in an identifiable manner, plus margin deposits, (ii) cash proceeds
from existing investments due in 30 days, and (iii) accrued profits on the
positions held by a futures commission merchant; and
(b) The Fund will not enter into any commodity futures contract or
options if, as a result, the sum of initial margin deposits on commodity futures
contracts or options the Fund has purchased, after taking into account
unrealized profits and losses on such contracts, would exceed 5% of the Fund's
total assets.
Foreign Currency Transactions. The International Equity Portfolio (the
AInternational Portfolio") may enter into foreign currency transactions. The
value of the assets of the International Portfolio as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the International Portfolio may
incur costs in connection with conversions between various currencies. The
International Portfolio will conduct foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days ("term") from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers.
The International Portfolio may enter into forward foreign currency
exchange contracts when the Money Manager determines that the best interests of
the International Portfolio will be served. When the International Portfolio
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to establish the U.S. dollar costs or proceeds.
By entering into a forward contract in U.S. dollars for the purchase or sale of
the amount of foreign currency involved in an underlying security transaction,
the International Portfolio will be able to protect against possible losses
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. Such contracts
may limit potential gains which might result from a possible change in the
relationship between the U.S. dollar and such foreign currency.
When a Money Manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the International Portfolio's portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and the successful execution of a
short-term hedging strategy is highly uncertain. The International Portfolio
will not enter into such forward contracts on a regular basis or continuous
basis if the International Portfolio would have more than 25% of its gross
assets denominated in the currency of the contract or 10% of the value of its
total assets committed to such contracts, where the International Portfolio
would be obligated to deliver an amount of foreign currency in excess of the
value of the International Portfolio's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies. The
International Portfolio's Custodian will segregate cash, equity or debt
securities in an amount not less than the value of the International Portfolio's
total assets committed to foreign currency exchange contracts entered into under
this second type of transaction.
It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the International Portfolio to purchase additional foreign
currency on the spot market (and bear the expense of such purchases) if the
market value of the security is less than the amount of foreign currency the
International Portfolio are obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the amount
of foreign currency the International Portfolio are obligated to deliver.
This method of protecting the value of the International Portfolio's
portfolio securities against a decline in the value of the currency does not
eliminate fluctuations in the underlying prices of the securities. It
establishes a rate of exchange which one can achieve at some future point in
time. Although such contracts tend to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
U.S. Government Obligations. The types of U.S. Government obligations
in which the Portfolios may at times invest include: (1) a variety of United
States Treasury obligations, which differ only in their interest rates,
maturities and times of issuance, i.e., United States Treasury bills having a
maturity of one year or less, United States Treasury notes having maturities of
one to ten years, and United States Treasury bonds generally having maturities
of greater than ten years; (2) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the United States Treasury (such as
GNMA Participation Certificates), (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the United States Treasury, (c)
discretionary authority of the U.S. Government agency or instrumentality, or (d)
the credit of the instrumentality (examples of agencies and instrumentalities
are: Federal Land Banks, Farmers Home Administration, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks and
FNMA). No assurance can be given that the U.S. Government will provide financial
support to such U.S. Government agencies or instrumentalities described in
(2)(b), (2)(c) and (2)(d) in the future, other than as set forth above, since it
is not obligated to do so by law. The Portfolios may purchase U.S. Government
obligations on a forward commitment basis.
Obligations issued or guaranteed as to principal and interest by the U.
S. Government may be acquired by a Portfolio in the form of custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain United States Treasury notes or bonds. These custodial receipts are
commonly referred to as U.S. Treasury STRIPS.
Variable and Floating Rate Securities. A floating rate security is one
whose terms provide for the automatic adjustment of interest rate whenever a
specified interest rate changes. A variable rate security is one whose terms
provide for the automatic establishment of a new interest rate on set dates. The
interest rate on floating rate securities is ordinarily tied to and is a
percentage of the prime rate of a specified bank or some similar objective
standard, such as the 90-day United States Treasury bill rate, and may change as
often as twice daily. Generally, changes in interest rates on floating rate
securities will reduce changes in the security's market value from the original
purchase price, resulting in the potential for capital appreciation or capital
depreciation being less than for fixed-income obligations with a fixed interest
rate.
The U.S. Government Money Portfolio may purchase variable rate U.S.
Government obligations which are instruments issued or guaranteed by the U.S.
Government, or any agency or instrumentality thereof, which have a rate of
interest subject to adjustment at regular intervals but less frequently than
annually. Variable rate U.S. Government obligations on which interest is
readjusted no less frequently than annually will be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
The Portfolios may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
397 days, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 397 days, in each case upon not
more than 30 days= notice. Variable rate demand notes include master demand
notes which are obligations that permit a Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Portfolio, as lender, and the borrower. The interest rates on these
notes fluctuate from time to time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days= notice to the holders of such obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank=s prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, such obligations are
collateralized by letters of credit or other credit support arrangements
provided by banks. Because these obligations are direct lending arrangements
between the lender and borrower it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary market
for these obligations, although they are redeemable at face value. Accordingly,
where these obligations are not secured by letters of credit or other credit
support arrangements, a Portfolio=s right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Such obligations
frequently are not rated by credit rating agencies and a portfolio may invest in
obligations which are not so rated only if its Money Manager determines that at
the time of investment the obligations are of comparable quality to the other
obligations in which the Portfolio may invest. The Money Manager of a Portfolio
will consider on an ongoing basis the creditworthiness of the issuers of the
floating and variable rate demand obligations held by the Portfolio.
Inverse Floaters. Although to date the Portfolios have not invested in
inverse floaters, and no Money Manager anticipates investing in inverse
floaters, the Bond Portfolios and the International Portfolio may invest up to
5% of their net assets in inverse floaters. Inverse floaters are securities with
a variable interest rate that varies in inverse proportion to the direction of
an interest rate, or interest rate index. Inverse floaters have significantly
greater risk than conventional fixed-income instruments. When interest rates are
declining, coupon payments will rise at periodic intervals. This rise in coupon
payments causes rapid dramatic increases in prices compared to those expected
from conventional fixed-income instruments of similar maturity. Conversely,
during times of rising interest rates, the coupon payments will fall at periodic
intervals. This fall in coupon payments causes rapid dramatic decreases in
prices compared to those expected from conventional fixed-income instruments of
similar maturity. If the Bond Portfolios or the International Portfolio invest
in inverse floaters, they will treat inverse floaters as illiquid securities
except for (i) inverse floaters issued by U.S. Government agencies and
instrumentalities backed by fixed-rate mortgages, whose liquidity is monitored
by Bennington and the Money Managers for the Portfolios subject to the
supervision of the Board of Directors or (ii) where such securities can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share.
Privately-Issued STRIP Securities. The Portfolios may invest in
principal portions or coupon portions of U.S. Government Securities that have
been separated (stripped) by banks, brokerage firms, or other entities
("privately-issued STRIPS"). Stripped securities are usually sold separately in
the form of receipts or certificates representing undivided interests in the
stripped portion and are not considered to be issued or guaranteed by the U.S.
Government. Stripped securities may be more volatile than non-stripped
securities. No Portfolio will invest more than 5% of its net assets in
privately-issued STRIPS.
MANAGEMENT OF THE FUND
The Board of Directors is responsible for overseeing generally the
operation of the Fund. The officers are responsible for the day-to-day
management and administration of the Fund's operations.
Name and Position with Principal Occupations
Address Age the Fund During Past Five Years
------- --- -------- ----------------------
* J. Anthony Whatley, III** 55 Director, President Executive Director,
1420 Fifth Avenue and Principal Bennington Capital
Seattle, WA Executive Officer Management L.P. since
April 1991; President,
Bennington Management
Associates, Inc. since
April 1991; President,
Northwest Advisors,
Inc. since 1990; Senior
Vice President and
Director of Sales and
Marketing, Frank
Russell Company (asset
strategy consultant)
from 1986 to 1990.
George G. Cobean, III 60 Director Partner, Martinson,
1607 South 341st Place Cobean & Associates,
Federal Way, WA P.S. (certified public
accountants) since
1973.
Geoffrey C. Cross 58 Director President, Geoffrey C.
252 Broadway Cross P.S., Inc.,
Tacoma, WA (general practice of
law) since 1970.
Ravindra A. Deo 35 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.
- ---------
* This Director is an "Interested Person" by virtue of his employment by
and/or indirect interest in Bennington.
** J. Anthony Whatley, III and Linda V. Whatley are husband and wife.
B-3
<PAGE>
Name and Position with Principal Occupations
Address Age the Fund During Past Five Years
------- --- -------- ----------------------
Linda V. Whatley** 40 Vice President Director, Secretary and
1420 Fifth Avenue and Assistant Treasurer of Northwest
Seattle, WA Secretary 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 54 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.
Christine J. Stansbery 46 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).
The following table shows the compensation paid by the Fund to the
Directors during the fiscal year ended December 31, 1997:
COMPENSATION TABLE
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from
Compensation as part of upon Fund Paid to
Director from the Fund Fund Expenses Retirement Board Members
-------- ------------- ------------- ---------- -------------
J. Anthony Whatley III None None None None
George G. Cobean III $10,000.00 None None $10,000.00
Geoffrey C. Cross $10,000.00 None None $10,000.00
Directors who are not "interested persons" of the Fund are paid fees of
$2,500(1) per meeting plus out-of-pocket costs associated with attending Board
meetings. Directors employed by Bennington have agreed that, if their employment
with Bennington is terminated for any reason, and a majority of the remaining
Directors of the Fund so request, they will be deemed to have resigned from the
Board of Directors upon being informed of such vote. The Fund's officers and
employees are paid by Bennington and receive no compensation from the Fund.
- --------
1 Until February 19, 1998, the Board of Directors received $2,000.00 per
meeting. Starting with the next meeting after February 19, 1998, the
Board of Directors will receive $2,500.00 per meeting.
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 24, 1998, the following persons were the owners of record
of 5% or more of the shares of the Portfolios of the Fund:
Equity Portfolios
Value
and Small to International
Beneficial Owner Growth Income Mid Cap Equity
- ---------------- ------ ------ ------- ------
Charles Schwab & Company 10.72% 6.73% 6.50%
101 Montgomery St.
San Francisco, CA 94104
EDRAYCO, account nominee for 19.69% 10.16%
Regions Bank
P. O. Box 937
Gainsville, GA 30503
Hubco Regions Bank, 12.07% 9.97%
account nominee for
Regions Bank
P. O. Box 10247
Birmingham, AL 35202
First Interstate Bank 5.60%
Attn: Trust Department
P. O. Box 30918
Billings, MT 59116
Kaw & Co., account 5.21% 5.20% 9.21%
nominee for
One Valley Bank NA
P. O. Box 1793
Charleston, WV 25326
One Valley Bank NA 8.00% 10.22% 12.44% 10.19%
P. O. Box 1793
Charleston, WV 25326
Lew & Co., Inc., 13.82%
account nominee for
Resource Trust Company
900 2nd Avenue South,
Suite 300
Minneapolis, MN 55402
Lighthouse & Co.,
account nominee for 4.26%
Johnson Heritage
Trust Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Rocco Trust & Co., 5.40% 6.80% 10.33%
account nominee for
Johnson Heritage Trust
Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Macbee & Co., account 7.02% 9.08% 6.04%
nominee for
Eastern Bank & Trust Co.
225 Essex St.
Salem, MA 01970
National Financial 7.14%%
Service Corp.
For the Exclusive
Benefit of its customers
P. O. Box 3908
Church Street Station
New York, NY 10008-3908
OneDun, account nominee 9.147%
for First American Bank
218 West Main Street
Dundee, IL 60118
Stap & Company, 28.69%
account nominee for
National Westminster Bankcorp.
2 Montgomery Street
Jersey City, NJ 07302
Zions First National Bank 6.59% 7.77% 5.86%
One South Main Street
Salt Lake City, UT 84130
Short U.S.
Intermediate Intermediate Mortgage Government
Beneficial Owner Fixed-Income Fixed-Income Securities Money
- ---------------- ------------ ------------ ---------- -----
Beneficial Owner
Anbee & Company,
account nominee for 10.12%
GreatBanc Trust Company
105 East Galena Blvd.
Aurora, IL 60505
Citizens Federal Bank 6.01%
One Citizens Federal Center
Dayton, OH 45402
Hubco Regions Bank,
account nominee for 14.30%
Regions Bank
P. O. Box 10247
Birmingham, AL 35202
Kaw & Co. account nominee for 7.83% 6.51%
One Valley Bank NA
P. O. Box 1793
Charleston, WV 25326
Lighthouse & Co.,
account nominee for 13.68%
Johnson Heritage
Trust Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Macbee & Co., account 5.56%
nominee for
Eastern Bank & Trust Co.
225 Essex St.
Salem, MA 01970
Mase & Co., account 7.34%
nominee for
Community First
National Bank
520 Main Avenue
Fargo, ND 58124
National Financial
Service Corp. 5.12%
For the Exclusive
Benefit of its customers
P. O. Box 3908
Church Street Station
New York, NY 10008-3908
North Carolina Trust Company 12.01%
301 North Elm Street
Greensboro, NC 27402-1108
One Valley Bank NA 14.72% 5.34% 30.73%
P. O. Box 1793
Charleston, WV 25326
Rocco Trust & Co., 18.24%
account nominee for
Johnson Heritage Trust Company c/o
Marshall & Ilsley Trust Co.
1000 N. Water Street, TR14
Milwaukee, WI 53202
Zions First National Bank 17.93% 42.33% 46.30% 65.44%
One South Main Street
Salt Lake City, UT 84130
As of April 24, 1998, none of the Directors and officers of the Fund,
as a group, beneficially owned more than 1% of the shares of each Portfolio.
If a meeting of the shareholders were called, the above-listed
shareholders, if voting together, may, as a practical matter, have sufficient
voting power to exercise control over the business, policies and affairs of the
Fund and, in general, determine certain corporate or other matters submitted to
the shareholders for approval, such as a change in the Portfolios= investment
policies or Money Manager, all of which may adversely affect the net asset value
of the Fund. As with any mutual fund, certain shareholders of a Portfolio could
control the results of voting in certain instances. For example, a vote by
certain majority shareholders changing the Portfolio=s investment objective
could result in dissenting minority shareholders withdrawing their investments
and a corresponding increase in costs and expenses for the remaining
shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
SERVICE PROVIDERS
The Portfolios' necessary day-to-day operations are performed by
separate business organizations under contract to the Fund. The principal
service providers are:
Manager, Administrator, Transfer Agent, Bennington Capital Management L.P.
Registrar and Dividend Disbursing Agent
Custodian and Fund Accounting Agent Fifth Third Bank
Money Managers Five professional discretionary
investment management organizations
and Bennington Capital Management
L.P.
Manager, Administrator, Transfer Agent, Registrar and Dividend
Disbursing Agent. Bennington is the manager and administrator of the Fund,
pursuant to a Management Agreement with the Fund. Bennington provides or
oversees the provision of all general management, administration, investment
advisory and portfolio management services for the Fund. Bennington provides the
Fund with office space and equipment, and the personnel necessary to operate and
administer the Portfolios' business and to supervise the provision of services
by third parties such as the Money Managers and Fifth Third Bank that serves as
the Custodian and Fund Accounting Agent. Bennington also develops the investment
programs for the Portfolios, selects Money Managers for certain Portfolios
(subject to approval by the Board of Directors), allocates assets among Money
Managers, monitors the Money Managers' investment programs and results, and may
exercise investment discretion over Portfolios and assets invested in the
Portfolios' liquidity reserves, or other assets not assigned to a Money Manager.
Bennington currently invests all the assets of the Intermediate Fixed-Income
Portfolio, Short-Intermediate Fixed-Income Portfolio and U.S. Government Money
Portfolio. Bennington also acts as the Transfer Agent, Registrar and Dividend
Disbursing Agent for the Fund and provides certain administrative and compliance
services to the Fund. See "Investment Restrictions, Policies and Risk
Considerations -- Investment Policies --Liquidity Reserves."
Under the Management Agreement, Bennington has agreed not to withdraw
from the Fund the use of the Fund's name. In addition, Bennington may not grant
the use of a name similar to that of the Fund to another investment company or
business enterprise without, among other things, first obtaining the approval of
the Fund's shareholders.
A Management Agreement containing the same provisions as the initial
contract but also providing for payment to Bennington by the Portfolios of a
management fee was approved by the Board of Directors including all of the
Directors who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the Management Agreement on June 17, 1992, by the
shareholder of the Growth, Value and Income, Small to Mid Cap (formerly referred
to as the Small Cap Portfolio) and International Equity Portfolios on June 17,
1992, and by the shareholders of the Short-Intermediate Fixed-Income,
Intermediate Fixed-Income, Mortgage Securities and U.S. Government Money
Portfolios on August 3, 1992. The Management Agreement was renewed by the Board
of Directors including all of the Directors who are not Ainterested persons@ of
the Fund and who have no direct or indirect financial interest in the Management
Agreement on May 24, 1994, May 16, 1995, May 29, 1996 and May 28, 1997.
The general partners of Bennington are Northwest Advisors, Inc.,
Bennington Management Associates, Inc. and Bennington Capital Management
Investment Corp., all of which are Washington corporations. The sole limited
partner of Bennington Capital Management L.P. is Zions Investment Management,
Inc., a wholly-owned subsidiary of Zions First National Bank, N.A. The managing
general partner of Bennington Capital Management, L.P. is Bennington Management
Associates, Inc., which is controlled by J. Anthony Whatley, III. The mailing
address of Bennington is 1420 Fifth Avenue, Suite 3130, Seattle, Washington
98101.
Bennington's Fees. The schedule below shows fees payable to Bennington
as manager and administrator of the Fund, pursuant to a Management Agreement
between Bennington and the Fund. Each Portfolio pays Bennington a fee equal on
an annual basis to the following percentage of the Portfolio's average daily net
assets.
FEE SCHEDULE FOR PAYMENTS TO BENNINGTON UNDER MANAGEMENT AGREEMENT
Management Fee (as a
percentage of average
Portfolio daily net assets)
--------- -----------------
Growth 0.45%
Value and Income 0.45%
Small to Mid Cap 0.60%
International 0.55%
Intermediate Fixed-Income 0.36%
Short-Intermediate Fixed-Income 0.36%
Mortgage Securities 0.36%
U.S. Government Money 0.25%
Bennington has received the following fees under its Management
Agreement with the Fund, since inception:
FEES PAID TO DATE TO BENNINGTON UNDER MANAGEMENT AGREEMENT
1/1/95- 1/1/96- 1/1/97-
Portfolio 12/31/95 12/31/96 12/31/97
- --------- -------- ------- --------
Growth $143,280 $266,304 $367,893
Value and Income $105,099 $139,463 $278,827
Small to Mid Cap1 $222,426 $344,080 $692,048
International $132,843 $305,524 $649,695
Intermediate Fixed-Income $124,073 $168,696 $177,340
Short-Intermediate Fixed-Income $120,579 $127,117 $145,308
Mortgage Securities $133,615 $226,073 $326,347
Municipal Intermediate Fixed-Income2 $43,032 $0 $0
U.S. Government Money $60,535 $122,068 $139,972
Institutional Investor Fixed-Income3 $61,473 $0 $0
- ----------
1 Until September 15, 1995, referred to as the Small Cap Portfolio.
2 Municipal Portfolio was closed on December 4, 1995.
3 Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995.
Bennington provides transfer agent, registrar and dividend disbursing
agent services to the Fund pursuant to a Transfer Agency and Administration
Agreement between Bennington and the Fund (the ATransfer Agency Agreement").
Sub-transfer agent and compliance services previously provided by Bennington
under the Sub-Administration Agreement are provided to the Fund under the
Transfer Agency Agreement. Bennington also provides certain administrative and
recordkeeping services under the Transfer Agency Agreement. For providing these
services, Bennington receives (i) a fee equal to 0.13% of the average daily net
assets of each Portfolio of the Fund, and (ii) a transaction fee of $0.50 per
transaction. Bennington is also reimbursed by the Fund for certain out-of-pocket
expenses including postage, taxes, wire transfer fees, stationery and telephone
expenses.
FEES PAID TO BENNINGTON UNDER
TRANSFER AGENT AGREEMENT
Period from 1/1/96 - 1/1/97 -*
Portfolio 12/1/95 - 12/31/95 12/31/96 12/31/97
- --------- ------------------ -------- --------
Growth $4,251 $71,198 $102,701
Value and Income $3,397 $41,055 $78,723
Small to Mid Cap $4,743 $68,977 $142,852
International $3,505 $66,815 $145,429
Intermediate Fixed-Income $3,733 $56,981 $62,731
Short-Intermediate Fixed-Income $3,552 $42,994 $51,705
Mortgage Securities $4,868 $75,564 $113,090
U.S. Government Money $4,252 $60,098 $69,929
- ----------
* Transfer Agent Agreement amended February 19, 1998, to increase the
annual fee from 0.12% to 0.13%.
Custodian and Fund Accounting Agent. The Fifth Third Bank, 38 Fountain
Square Plaza, Cincinnati, Ohio 45263, a banking company organized under the laws
of the State of Ohio, has acted as Custodian of the Portfolios= assets since
October, 1996, and through an agreement between Fifth Third and the Fund may
employ sub-custodians outside the United States which have been approved by the
Board of Directors. Fifth Third holds all portfolio securities and cash assets
of the Portfolio and is authorized to deposit securities in securities
depositories or to use the services of sub-custodians. Fifth Third is paid by
the Portfolios an annual fee and also is reimbursed by the Fund for certain
out-of-pocket expenses including postage, taxes, wires, stationery and
telephone. Fifth Third acts as Custodian for investors of the Portfolios with
respect to the individual retirement accounts ("IRA Accounts"). Fifth Third also
provides basic recordkeeping required by each of the Portfolios for regulatory
and financial reporting purposes. Fifth Third is paid by the Portfolios an
annual fee plus specified transactions costs per Portfolio for these services,
and is reimbursed by the Fund for certain out-of-pocket expenses including
postage, taxes, wires, stationery and telephone.
Independent Auditors. Deloitte & Touche LLP, 1700 Courthouse Plaza NE,
Dayton, Ohio 45402, serves as the Fund's independent auditors and in that
capacity audits the Fund's annual financial statements.
Fund Counsel. Mayer, Brown & Platt, 1675 Broadway, New York, New York
10019, serves as the Fund=s outside legal counsel.
Money Managers. The Money Manager Agreement for the U.S. Government
Money Portfolio was terminated on September 7, 1994. The Money Manager
Agreements for the Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio were terminated effective May 1, 1998. Currently,
Bennington invests all of the assets of the Intermediate Fixed-Income Portfolio,
Short-Intermediate Fixed-Income Portfolio and U.S. Government Money Portfolio.
Each other Portfolio of the Fund currently has one Money Manager investing all
or part of its assets. Bennington may also invest each Portfolio=s liquidity
reserves, and all or any portion of the Portfolio=s other assets not assigned to
a Money Manager.
The Money Managers selected by Bennington have no affiliation with or
relationship to the Fund or Bennington other than as discretionary managers for
each Portfolio's assets. In addition, some Money Managers and their affiliates
may effect brokerage transactions for the Portfolios. See "Portfolio Transaction
Policies--Brokerage Allocations."
Revised Money Manager Agreements for the Growth, Value and Income,
Intermediate Fixed Income, Short-Intermediate Fixed-Income and Mortgage
Securities Portfolios containing the same terms and conditions as the former
agreements for those portfolios, except for a change in the method of
calculating the fees paid to the Money Managers, were approved by the Board of
Directors, including all the Directors who are not "interested persons" of the
Fund and who have no direct or indirect interest in the Money Manager
Agreements, on May 17, 1993 and by the shareholders of those portfolios on
September 1, 1993.
The Revised Money Manager Agreement for the International Portfolio was
approved by the Board of Directors, including all Directors who are not
"interested persons" and who have no direct or indirect interest in the Money
Manager Agreements, on May 17, 1993. The Money Manager Agreement for the
International Portfolio was approved by the sole shareholder as of September 30,
1994 and following the initial two year period is reviewed annually by the Board
of Directors, most recently at a meeting on August 20, 1997, and renewed for the
forthcoming year.
The Money Manager Agreements for the Intermediate Fixed-Income,
Short-Intermediate Fixed-Income are reviewed annually by the Board of Directors
most recently at a meeting on August 20, 1997, and renewed for the forthcoming
year. The Money Manager Agreements for the Intermediate Fixed-Income Portfolio
and Short-Intermediate Fixed-Income Portfolio were terminated by the Board of
Directors on February 19, 1998, effective May 1, 1998.
A new Money Manager Agreement for the Mortgage Securities Portfolio
providing for the change of ownership of BlackRock was approved by the Board of
Directors, including all the Directors who are not "interested persons" of the
Fund and who have no direct or indirect interest in the Money Manager Agreement,
on November 10, 1994, and by the shareholders of the Mortgage Securities
Portfolio at a Special Meeting of Shareholders held on January 27, 1995, and
following the initial two year period is reviewed annually by the Board of
Directors, most recently at a meeting on February 19, 1998, and renewed for the
forthcoming year.
A new Money Manager Agreement for the Small to Mid Cap Portfolio in
connection with a change in Money Manager to Symphony Asset Management, Inc. was
approved by the Board of Directors, including all the Directors who are not
"interested persons" of the Fund and who have no direct or indirect interest in
the Money Manager Agreement, on June 15, 1995, and by the shareholders of the
Small to Mid Cap Portfolio at a Special Meeting of Shareholders held on August
15, 1995, and following the initial two year period is reviewed annually by the
Board of Directors, most recently at a meeting on August 20, 1997, and renewed
for the forthcoming year.
A new Money Manager Agreement for the Value and Income Portfolio in
connection with the proposed change of ownership of Martingale Asset Management
L.P. ("Martingale") was approved by the Board of Directors, including all the
Directors who are not "interested persons" of the Fund and who have no direct or
indirect interest in the Money Manager Agreement, on June 15, 1995, and by the
shareholders of the Value and Income Portfolio at a Special Meeting of
Shareholders held on August 15, 1995, and following the initial two year period
is reviewed annually by the Board of Directors, most recently at a meeting on
August 20, 1997, and renewed for the forthcoming year.
A new Money Manager Agreement effective July 21, 1997, for the Growth
Portfolio in connection with a change in Money Manager to Geewax, Terker &
Company was approved by the Board of Directors at a special meeting of the Board
of Directors called for that purpose, including all the Directors who are not
"interested persons" of the Fund and who have no direct or indirect interest in
the Money Manager Agreement, on June 7, 1997. The Money Manager Agreement
following the initial two year period will be reviewed annually by the Board of
Directors and renewed for the forthcoming year.
A new Money Manager Agreement for the Small to Mid Cap Portfolio in
connection with the modification of the fee structure for the Money Manager was
approved by the shareholders of the Small to Mid Cap Portfolio at a Special
Meeting of Shareholders held on April 30, 1998. The new Money Manager Agreement
was among the Fund, Bennington and Symphony Asset Management LLC ("Symphony
LLC") and will be effective as of July 1, 1998, for a period of one year. For a
description of Symphony LLC, see the description below.
Listed below are the Money Managers selected by Bennington to invest
certain of the Portfolios' assets:
o Geewax, Terker & Company ("Geewax Terker"), a Pennsylvania
general partnership whose general partners are John J. Geewax
and Bruce Terker, is the Money Manager for the Growth
Portfolio. The Money Manager expects to maintain a
well-diversified portfolio of stocks in the Growth Portfolio,
holding market representation in all major economic sectors.
Geewax Terker capitalizes on the overly optimistic
expectations of most growth stock investors by avoiding
holdings with potential problems. Specifically, stocks with
poor financial quality, questionable ability to finance future
growth and/or high downside price volatility are avoided.
Portfolios are constructed through a disciplined process that
identifies potential risks and systematically eliminates the
riskiest of growth stocks from consideration. Large
capitalization growth stocks that pass the screens are
purchased. Benchmark-relative risk is controlled by owning a
core group of the very largest stocks in the benchmark, and by
capitalization-weighting portfolio holdings. As of December
31, 1997, Geewax Terker managed assets of approximately $2.6
billion.
o Martingale Asset Management, L.P. ("Martingale") is the Money
Manager for the Value and Income Portfolio. Martingale is a
Delaware limited partnership which consists of two general
partners, Martingale Asset Management Corporation ("MAMC"), a
Massachusetts corporation and Commerz Asset Management USA
Corporation ("CAM"), and four limited partners. CAM, a
Delaware Corporation, is a wholly-owned subsidiary of Commerz
International Capital Management GmbH ("CICM") headquartered
in Frankfurt, Germany. Commerzbank AG ("Commerzbank") is the
parent company of CICM. Arnold S. Wood and William E. Jacques
each own 32.26% of MAMC and are active in the management of
the firm. Martingale emphasizes diversified individual stocks
which it believes will eventually produce smooth results. The
portfolio created has a combination of value characteristics
and growth opportunities. The portfolio does not attempt to
produce returns through market timing, sector or industry
selection. The firm uses a proprietary valuation process which
appraises stocks based on each stock's earnings, dividends,
book value, growth and risk. Industry and risk characteristics
are controlled through rigorous portfolio construction. As of
December 31, 1997, Martingale managed assets of approximately
$1.3 billion.
o Symphony Asset Management, Inc. ("Symphony Inc.") is the Money
Manager of the Small to Mid Cap Portfolio until July 1, 1998,
when the Money Manager will become Symphony Asset Management
LLC ("Symphony LLC"). Symphony Inc. is a California
corporation founded in March, 1994. Symphony Inc. is
registered as an investment adviser under the Investment
Advisers Act of 1940, as amended. Symphony Inc. 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 by Jeffrey L. Skelton, Neil L. Rudolph, Praveen
K. Gottipalli and Michael J. Henman, each of whom hold
management roles with Symphony LLC.
o Symphony Inc. is an investment management firm dedicated to
exploiting information inefficiencies in global financial
markets. Symphony LLC will continue to be an investment
management firm dedicated to exploiting information
inefficiencies in global financial markets. Symphony Inc. has
developed an approach to investing that combines the qualities
of both systematic and traditional investment management.
Symphony Inc.'s process begins with a factor-return-based
valuation model identifying securities that are relatively
under- or over-valued, which will be continued by Symphony
LLC. Symphony's Inc.'s factor model is the product of a decade
of work by BARRA=s active strategies group and has been used
as the basis for much of BARRA's successful subadvisory
business. As of December 31, 1997, Symphony Inc. managed
assets of approximately $688.2 million and Symphony LLC
managed assets of approximately $1.990 billion.
o Nicholas-Applegate Capital Management ("Nicholas-Applegate")
is the Money Manager for the International Portfolio.
Nicholas-Applegate is a California limited partnership and is
a registered investment adviser whose sole general partner is
Nicholas-Applegate Capital Management Holdings, L.P., a
California limited partnership controlled by Arthur E.
Nicholas. Nicholas-Applegate's investment approach reflects a
focus on individual security selection. Nicholas-Applegate
integrates fundamental and quantitative analysis to exploit
the inefficiencies within international markets. The firm=s
bottom-up approach drives the portfolio toward issues
demonstrating positive fundamental change, evidence of
sustainability and timeliness. These criteria are defined
differently in each country to adjust for accounting, economic
and cultural differences, and varying reporting requirements.
As of December 31, 1997, Nicholas-Applegate managed assets of
approximately $31.5 billion.
o BlackRock, Inc. ("BlackRock") is the Money Manager of the
Mortgage Securities Portfolio. BlackRock (formerly BlackRock
Financial Management, Inc.) is a Delaware corporation which is
a wholly-owned subsidiary of PNC Asset Management Group, Inc.,
which is a wholly-owned indirect subsidiary of PNC Bank, N.A.
("PNC"). Approximately 20% of BlackRock is owned by its 37
managing directors and the remaining 80% by PNC. PNC is a
commercial bank whose principal office is in Pittsburgh, PA
and is wholly-owned by PNC Bank Corp., a bank holding company.
BlackRock's investment strategy and decision-making process
emphasize:: (i) duration targeting, (ii) relative value sector
and security selection, (iii) rigorous quantitative analysis
to evaluate securities and portfolios and (iv) intense credit
analysis. Portfolios are managed in a narrow band around a
duration target determined by the client. Specific investment
decisions are made using a relative value approach that
encompasses both fundamental and technical analysis. In
implementing its strategy, BlackRock utilizes macroeconomic
trends, supply/demand analysis, yield curve structure and
trends, volatility analysis, and security specific
option-adjusted spreads (OAS). BlackRock's Investment Strategy
Group has primary responsibility for setting the broad
investment strategy and for overseeing the ongoing management
of all client portfolios. BlackRock serves as investment
adviser to fixed income and equity investors in the United
States and overseas through funds and institutional accounts
with combined total assets at December 31, 1997, of
approximately $108 billion.
MONEY MANAGERS' FEES
The Money Managers have received the following fees pursuant to their
Money Manager Agreements, since inception:
FEES PAID TO MONEY MANAGERS SINCE INCEPTION
<TABLE>
1/1/95 - 1/1/96 - 1/1/97 -
Portfolio Money Manager 12/31/95 12/31/96 12/31/97
- --------- ------------- -------- -------- --------
<S> <C> <C> <C> <C>
Growth1 State Street/ $101,767 $188,312 $72,872
Geewax, Terker NA NA $84,965
Value and Income Martingale $70,037 $78,232 $180,881
Small to Mid Cap2 WFNIA/Symphony $78,335 $114,693 $369,071
International Nicholas Applegate $96,625 $204,067 $660,458
Intermediate Fixed-Income3 Smith Barney $51,705 $70,290 $73,891
Short-Intermediate Fixed-Income4 Bankers Trust $50,323 $52,966 $60,545
Mortgage Securities BlackRock $85,091 $144,435 $188,413
Municipal Intermediate Fixed-Income5 Lazard Freres $14,370 $0 $0
Institutional Investor Fixed-Income6 Smith Barney $0 $0 $0
U.S. Government Money State Street7 $0 $0 $0
</TABLE>
- ----------
1 Until July 21, 1997, State Street Bank and Trust Company was the Money
Manager for the Growth Portfolio and received fees until that date.
Beginning on July 22, 1997, Geewax, Terker & Company became the Money
Manager for the Growth Portfolio and received pro-rated fees from that
date.
2 Until September 15, 1995, referred to as the Small Cap Portfolio, whose
money manager, Wells Fargo Nikko Investment Advisors ("WFNIA"), was paid
fees through that date. Beginning September 15, 1996, Symphony received
fees as the money manager.
3 Until April 30, 1998, Smith Barney was the Money Manager for the
Intermediate Fixed-Income Portfolio and received fees until that date.
Beginning on May 1, 1998, Bennington invests the assets of the Intermediate
Fixed-Income Portfolio. No money manager fees are paid to Bennington.
4 Until April 30, 1998, Bankers Trust was the Money Manager for the
Short-Intermediate Fixed-Income Portfolio and received fees until that
date. Beginning on May 1, 1998, Bennington invests the assets of the
Short-Intermediate Fixed-Income Portfolio. No money manager fees are paid
to Bennington.
5 The Municipal Portfolio was closed on December 4, 1995.
6 Institutional Investor Fixed-Income Money Manager was terminated on January
1, 1995, and the Portfolio was closed on August 28, 1995.
7 State Street was terminated as the money manager of the U.S. Government
Money Portfolio on September 7, 1994. Prior to that, the money manager fee
was paid by Bennington.
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are paid pursuant to a Money Manager Agreement among the Fund, Bennington and
the Money Manager. The fees are based on the assets of the Portfolio and the
number of complete calendar quarters of management by the Money Manager.
Bennington will attempt to have each Portfolio managed so that the Portfolio's
investment performance equals or exceeds the total return performance of a
relevant index (each a "Benchmark Index" and collectively the "Benchmark
Indices"), set forth below. See Appendix A for a description of the Benchmark
Indices.
Money Manager Fees paid to the Growth, Value and Income and
International and Mortgage Securities Portfolios Money Managers. For the first
five complete calendar quarters managed by a Money Manager of each Portfolio,
such Portfolio will pay its respective Money Manager on a monthly basis the
following annual fee set forth below in AMoney Manager Fee Schedule For A
Manager=s First Five Calendar Quarters of Management@ based on the average daily
net assets of the Portfolio managed by such Money Manager. With the exception of
the Growth Portfolio, whose money manager commenced investment operations on
July 21, 1997, the Money Managers for the Value and Income, International Equity
and Mortgage Securities Portfolios have completed five calendar quarters. During
the first five calendar quarters of management, the Money Manager Fee has two
components, the Basic Fee and Portfolio Management Fee.
MONEY MANAGER FEE SCHEDULE FOR PORTFOLIOS
MANAGED LESS THAN FIVE COMPLETE CALENDAR QUARTERS BY MANAGER
FOR GROWTH, VALUE AND INCOME, INTERNATIONAL AND MORTGAGE SECURITIES PORTFOLIOS
Portfolio
Management
Portfolio Basic Fee Fee Total
- --------- --------- --- -----
Growth 0.10% 0.10% 0.20%
Value and Income 0.10% 0.10% 0.20%
International 0.20% 0.20% 0.40%
Mortgage Securities 0.07% 0.08% 0.15%
Commencing with the sixth calendar quarter of management by a Money
Manager of an operating Portfolio, such Portfolio will pay its Money Manager
based on the "Money Manager Fee Schedule For A Money Manager From The Sixth
Calendar Quarter Of Management Forward." The Money Manager Fee commencing with
the sixth quarter consists of two components, the "Basic Fee" and "Performance
Fee."
MONEY MANAGER FEE SCHEDULE FROM A MANAGER'S
SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Growth Portfolio 0.10% greater than or equal to 2.00% 0.22%
Value and Income greater than or equal to 1.00% and less than 2.00% 0.20%
Portfolio greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
International Portfolio 0.20% greater than or equal to 4.00% 0.40%
greater than or equal to 2.00% and less than 4.00% 0.30%
greater than or equal to 0.00% and less than 2.00% 0.20%
greater than or equal to -2.00% and less than 0.00% 0.10%
less than -2.00% 0%
Mortgage 0.07% greater than or equal to 2.00% 0.18%
Securities greater than or equal to 0.50% and less than 2.00% 0.16%
Portfolio greater than or equal to 0.25% and less than 0.50% 0.12%
greater than or equal to -0.25% and less than 0.25% 0.08%
greater than or equal to -0.50% and less than -0.25% 0.04%
less than -0.50% 0%
</TABLE>
The fee based on annualized performance will be adjusted each quarter and paid
monthly based on the annualized investment performance of each Money Manager
relative to the annualized investment performance of the "Benchmark Indices" set
forth below, which may be changed only with the approval of the Board of
Directors (shareholder approval is not required). A description of each
benchmark index is contained in Appendix A to the Equity Portfolios' Prospectus
and the Fixed-Income Portfolios' Prospectus. As long as the Growth or Value and
Income or the Mortgage Securities Portfolios' performance either exceeds the
index, or trails the index by no more than 0.50%, a Performance Fee will be paid
to the applicable Money Manager. As long as the International Portfolio's
performance either exceeds the index, or trails the index by no more than 2%, a
Performance Fee will be paid to the Money Manager. A Money Manager's performance
is measured on the portion of the assets of its respective Portfolio managed by
it (the "Account"), which excludes assets held by Bennington for circumstances
such as redemptions or other administrative purposes.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Growth S&P/BARRA Growth Index
Value and Income S&P/BARRA Value Index
International Morgan Stanley Capital International EAFE(R)+ EMF Index2
Mortgage Securities Lehman Brothers Mortgage-Backed Securities Index
- ----------
1 Effective October 1, 1995, the benchmark index was changed from the
BARRA Institutional Small Index to the Wilshire 4500 Index.
2 Through the close of business on April 30, 1996, the benchmark index
used for the International Portfolio was the Morgan Stanley Capital
International EAFE(R) Index. Effective May 1, 1996, the benchmark index
is the Morgan Stanley Capital International EAFE (R) + EMF Index. See
Appendix A to the Equity Portfolios Prospectus for additional
information.
From the sixth to the 14th calendar quarter of investment operations,
each Money Manager's performance differential versus the applicable index is
recalculated at the end of each calendar quarter based on the Money Manager's
performance during all calendar quarters since commencement of investment
operations except that of the immediately preceding quarter. Commencing with the
14th calendar quarter of investment operations, a Money Manager's average annual
performance differential will be recalculated based on the Money Manager's
performance during the preceding 12 calendar quarters (other than the
immediately preceding quarter) on a rolling basis. A Money Manager's performance
will be calculated by Bennington in the same manner that the total return
performance of the Portfolio's index is calculated, which is not the same method
used for calculating the Portfolio's performance for advertising purposes as
described under "Calculation of Portfolio Performance." See Appendix B to this
Statement of Additional Information for a discussion of how performance fees are
calculated.
The "performance differential" is the percentage amount by which the
Account's performance is greater than or less than that of the relevant index.
For example, if an index has an average annual performance of 10%, an Equity
Portfolio Account's average annual performance would have to be equal to or
greater than 12% for the Money Manager to receive an annual performance fee of
0.22% (i.e., the difference in performance between the Account and the index
must be equal to or greater than 2% for an equity portfolio Money Manager to
receive the maximum performance fee.) Because the maximum Performance Fee for
the Domestic Equity and Bond Portfolios applies whenever a Money Manager=s
performance exceeds the index by 2.00% or more, the Money Managers for those
Portfolios could receive a maximum Performance Fee even if the performance of
the Account is negative. Also, because the maximum Performance Fee for the
International Portfolio applies whenever a Money Manager=s performance exceeds
the index by 4.00% or more, the Money Manager for the International Portfolio
could receive a maximum Performance Fee even if the performance of the Account
is negative. In April 1972, the SEC issued Release No. 7113 under the Investment
Company Act (the "Release") to call the attention of directors and investment
advisers to certain factors which must be considered in connection with
investment company incentive fee arrangements. One of these factors is to "avoid
basing significant fee adjustments upon random or insignificant differences"
between the investment performance of a fund and that of the particular index
with which it is being compared. The Release provides that "preliminary studies
(of the SEC staff) indicate that as a 'rule of thumb' the performance difference
should be at least "10 percentage points" annually before the maximum
performance adjustment may be made. However, the Release also states that
"because of the preliminary nature of these studies, the Commission is not
recommending, at this time, that any particular performance difference exist
before the maximum fee adjustment may be made." The Release concludes that the
directors of a fund "should satisfy themselves that the maximum performance
adjustment will be made only for performance differences that can reasonably be
considered significant." The Board of Directors has fully considered the Release
and believes that the performance adjustments are entirely appropriate although
not within the "10 percentage points per year range suggested by the Release.
Money Manager Fees - Small to Mid Cap Portfolio. For the period May 1,
1998 through June 30, 1998, the Money Manager fee for the Money Manager of the
Small to Mid Cap Portfolio has two components, the basic fee (the "Basic Fee")
and the performance fee (the "Performance Fee"). On July 1, 1998, a new Money
Manager Agreement among the Fund, Bennington and the Money Manager of the Small
to Mid Cap Portfolio takes effect. Pursuant to this Money Manager Agreement, the
Money Manager for the Small to Mid Cap Portfolio has completed the first five
calendar quarters of management of its Account. If at any time the Money Manager
of the Small to Mid Cap Portfolio should be replaced, the new Money Manager will
not receive a Base Fee but will receive a Portfolio Management Fee of 0.20% for
the first five calendar quarters of management by the new Money Manager.
For the period May 1, 1998 through June 30, 1998, the Money Manager fee
for the Small to Mid Cap Portfolio has two components, the basic fee (the "Basic
Fee") and the performance fee (the "Performance Fee"). The Basic Fee is 0.10%
and the Performance Fee is 0.22%. The Money Manager for the Small to Mid Cap
Portfolio has completed over five calendar quarters of management of its Account
and is being paid a Performance Fee under the following structure:
MONEY MANAGER FEE SCHEDULE FOR Small to Mid Cap
Portfolio For the Period from May 1, 1998 through
June 30, 1998
<TABLE>
Average Annualized
Performance Differential Vs. Annualized
Portfolio Basic Fee The Applicable Index Performance Fee
- --------- --------- -------------------- ---------------
<S> <C> <C> <C>
Small to Mid Cap 0.10% greater than or equal to 2.00% 0.22%
greater than or equal to 1.00% and less than 2.00% 0.20%
greater than or equal to 0.50% and less than 1.00% 0.15%
greater than or equal to 0.00% and less than 0.50% 0.10%
greater than or equal to -0.50% and less than 0.00% 0.05%
less than -0.50% 0%
</TABLE>
The Performance Fee component is adjusted each quarter and paid quarterly based
on the annualized investment performance of the Money Manager relative to the
annualized investment performance of its Benchmark Index, the Wilshire 4500
Index. A description of the Benchmark Index is contained in Appendix A of the
Equity Portfolios--Advisor Class Shares Prospectus or Equity
Portfolios--Investor Class Shares Prospectus. A change in the Benchmark Index
may be effected with the approval of only the Board of Directors and does not
require the approval of shareholders. As long as the Small to Mid Cap
Portfolio's performance either exceeds the index, or trails the index by no more
than 0.50%, a Performance Fee will be paid to the Money Manager.
Beginning July 1, 1998, when the new Money Manager Agreement among the
Fund, Bennington and the Money Manager for the Small to Mid Cap Portfolio takes
effect, the Money Manager Fee schedule from the sixth calendar quarter of
management forward will be as follows:
MONEY MANAGER FEE SCHEDULE FOR
Small to Mid Cap Portfolio from July 1, 1998, for
THE SIXTH CALENDAR QUARTER OF MANAGEMENT FORWARD
Average annualized Annualized
performance differential vs. the Benchmark Index Money Manager 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 Money Manager Fee will be adjusted each quarter and paid quarterly based on
the annualized investment performance of the Small to Mid Cap Money Manager
relative to the annualized investment performance of the "Benchmark Index" as
described above. A change in an index may be effected with the approval of only
the Board of Directors and does not require the approval of shareholders. As
long as the Small to Mid Cap Portfolio's performance either exceeds the
Benchmark Index, or trails the Benchmark Index by no more than 1.50%, a Money
Manager Fee will be paid to the Money Manager. The Money Manager's performance
is measured on the Account.
The "performance differential" is the percentage amount by which the
Account's performance is greater or less than that of the relevant index. For
the Small to Mid Cap Portfolio, if the index has an average annual performance
of 10%, the Account's average annual performance would have to be equal to or
greater than 13% for the Money Manager to receive an annual Money Manager Fee of
0.42% (i.e., the difference in performance between the Account and the index
must be equal to or greater than 3.00% for the Money Manager to receive the
maximum Money Manager Fee). Because the maximum Money Manager Fee for the Small
to Mid Cap Portfolio applies whenever its Money Manager's performance exceeds
the index by 3.00% or more, the Small to Mid Cap Portfolio Money Manager could
receive the maximum Money Manager 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%, the Small to Mid Cap Portfolio Money
Manager would earn the maximum incentive fee.
The combined fees payable to Bennington and the Money Manager for the
Small to Mid Cap Portfolio may at times be higher than those paid by other
mutual funds. The Board of Directors believes that the fees payable by the Small
to Mid Cap Portfolio are appropriate, in light of its investment objective and
policies and the nature of the securities in which it invests.
Money Manager Fees - Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio. Beginning on May 1, 1998, the Intermediate Fixed-Income
Portfolio and Short-Intermediate Fixed-Income Portfolio are managed by
Bennington, which does not receive a Money Manager Fee. Should all or a portion
of the assets of these two Portfolios be managed by a Money Manager, the Money
Manager Fee Schedule would be the same as that described for the Mortgage
Securities Portfolio, above. The fee based on annualized performance would be
adjusted each quarter and paid monthly based on the annualized investment
performance of each Money Manager relative to the annualized investment
performance of the "Benchmark Indices" set forth below, which may be changed
only with the approval of the Board of Directors (shareholder approval is not
required). A description of each benchmark index is contained in Appendix A to
the Fixed-Income Portfolios' Prospectus. As long as the Intermediate
Fixed-Income Portfolio or Short-Intermediate Fixed-Income Portfolios'
performance either exceeded the index, or trailed the index by no more than
0.50%, a Performance Fee paid to the applicable Money Manager. A Money Manager's
performance is measured on the portion of the assets of its respective Portfolio
managed by it (the "Account"), which excludes assets held by Bennington for
circumstances such as redemptions or other administrative purposes.
BENCHMARK INDICES
Portfolio Index
- --------- -----
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate Fixed-Income Lehman Brothers Government/Corporate 1-5
Year Index
Bennington intends to use the same benchmark indices that a Money Manager would
use, as described above, in its management of the Intermediate Fixed-Income
Portfolio and Short-Intermediate Fixed-Income Portfolio.
PORTFOLIO EXPENSES
The Portfolios will pay all their expenses other than those expressly assumed by
Bennington. Fund expenses include: (a) expenses of all audits and other services
by independent public accountants; (b) expenses of the transfer agent, registrar
and dividend disbursing agent; (c) expenses of the Custodian, administrator and
sub-administrator; (d) expenses of obtaining quotations for calculating the
value of the Portfolios' net assets; (e) expenses of obtaining Portfolio
activity reports and analyses for each Portfolio; (f) expenses of maintaining
each Portfolio's tax records; (g) salaries and other compensation of any of the
Fund's executive officers and employees, if any, who are not officers,
directors, shareholders or employees of Bennington or any of its partners; (h)
taxes levied against the Portfolios; (i) brokerage fees and commissions in
connection with the purchase and sale of portfolio securities for the
Portfolios; (j) costs, including the interest expense, of borrowing money; (k)
costs and/or fees incident to meetings of the Portfolios, the preparation and
mailings of prospectuses and reports of the Portfolios to their shareholders,
the filing of reports with regulatory bodies, the maintenance of the Fund's
existence, and the registration of shares with federal and state securities
authorities; (l) legal fees, including the legal fees related to the
registration and continued qualification of the Portfolios' shares for sale; (m)
costs of printing stock certificates representing shares of the Portfolios; (n)
Directors' fees and expenses of Directors who are not officers, employees or
shareholders of Bennington or any of its partners; (o) the fidelity bond
required by Section 17(g) of the Investment Company Act, and other insurance
premiums; (p) association membership dues; (q) organizational expenses; (r)
extraordinary expenses as may arise, including expenses incurred in connection
with litigation, proceedings, other claims, and the legal obligations of the
Fund to indemnify its Directors, officers, employees and agents with respect
thereto; and (s) any expenses allocated or allocable to a specific class of
shares ("Class-specific expenses"). Class-specific expenses include
distribution, service fees and administration fees as described below payable
with respect to Investor Class Shares, and may include certain other expenses if
these expenses are actually incurred in a different amount by that class or if
the class receives services of a different kind or to a different degree than
the other class, as permitted by the Fund=s Multi-Class Plan adopted pursuant to
Rule 18f-3 under the Investment Company Act and subject to review and approval
by the Directors. Class-specific expenses do not include advisory or custodial
fees or other expenses related to the management of the Fund's assets. The
Portfolios are also responsible for paying a management fee to Bennington.
Additionally, they pay a Basic Fee and Portfolio Management Fee in the first
five quarters of investment operations to the applicable Money Managers, and a
Basic Fee and Performance Fee in the sixth quarter of investment operations to
the applicable Money Managers, as described below. Certain expenses attributable
to particular Portfolios are charged to those Portfolios, and other expenses are
allocated among the Portfolios affected based upon their relative net assets.
Dividends from net investment income with respect to Investor Class Shares will
be lower than those paid with respect to Advisor Class Shares, reflecting the
payment of administrative and/or service and/or distribution fees by the
Investor Class Shares.
Bennington subsidized operating expenses other than Bennington=s and
Money Managers' fees ("Other Expenses") above certain levels for certain of the
Portfolios. By December 31, 1995, Bennington had discontinued all such subsidies
for all Portfolios. These subsidies caused the yield and total return of the
Portfolios to be higher than would otherwise be the case.
EXPENSES SUBSIDIZED BY BENNINGTON
Portfolio 1/1/95 - 12/31/95
--------- -----------------
Small to Mid Cap1 $18
International $23,738
U.S. Government Money $60,112
Municipal Intermediate Fixed-Income3 $56,252
Institutional Investor Fixed-Income4 $0
- ----------
1 Until September 15, 1995, referred to as the Small Cap Portfolio.
2 Municipal Portfolio was closed on December 4, 1995.
3 Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995.
MULTI-CLASS STRUCTURE
The Board of Directors of the Fund, including a majority of the non-interested
Directors (as defined in the Investment Company Act), voted in person at the
Board meeting on February 19, 1998, to adopt a Rule 18f-3 Plan (the "Multi-Class
Plan") pursuant to Rule 18f-3 under the Investment Company Act. The Directors
determined that the Multi-Class Plan is in the best interests of each class
individually and the Fund as a whole. The Directors established two classes, the
Advisor Class and the Investor Class. The existing shares of the Fund have been
redesignated as Advisor Class Shares.
Under the Multi-Class Plan, shares of each class of each Portfolio represent an
equal pro rata interest in such Portfolio and, generally, have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class has a different designation; (b) each class of shares bears any
class-specific expenses allocated to it; and (c) each class has exclusive voting
rights on any matter submitted to shareholders that relates solely to its
distribution or service arrangements, and each class has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class.
As described in the Multi-Class Plan, the Fund, on behalf of each Portfolio's
Investor Class Shares, has adopted a Shareholder Service Plan, a Distribution
Plan and an Administrative Services Plan, all as described below. Pursuant to
the appropriate plan, the Fund may enter into arrangements with financial
institutions, retirement plans, broker-dealers, depository institutions,
institutional shareholders of record, registered investment advisers and other
financial intermediaries and various brokerage firms or other industry
recognized service providers of fund supermarkets or similar programs
(collectively "Service Organizations") who may provide distribution services,
shareholder services and/or administrative and accounting services to or on
behalf of their clients or customers who beneficially own Investor Class Shares.
Investor Class Shares are intended to be offered directly from the Fund and may
be offered by Service Organizations to their clients or customers, which may
impose additional transaction or account fees. Bennington may enter into
separate arrangements with some Service Organizations to provide accounting
and/or other services with respect to Investor Class Shares and for which
Bennington will compensate the Service Organizations from its revenue.
As described in the Multi-Class Plan, the Fund has not adopted a Distribution
Plan, Shareholder Service Plan or Administrative Plan for the Advisor Class
Shares. Advisor Class Shares shall be offered by the Fund at net asset value
with no distribution, shareholder or administrative service fees paid by the
Advisor Class Shares of the Portfolios. Advisor Class Shares are offered
directly from the Fund and may be offered through Service Organizations that may
impose additional or different conditions on the purchase or redemption of Fund
shares and may charge transaction or account fees. The Fund, on behalf of the
Advisor Class Shares, pays no compensation to Service Organizations and receives
none of the fees or transaction charges. Bennington may enter into separate
arrangements with some Service Organizations to provide administrative,
accounting and/or other services with respect to Advisor Class Shares and for
which Bennington will compensate the Service Organizations from its revenue.
Distribution Plan. The Fund has adopted a Distribution Plan (the
"Distribution Plan") under Rule 12b-1 ("Rule 12b-1") of the Investment Company
Act with respect to the Investor Class Shares of each Portfolio. Under the terms
of the Distribution Plan, the Fund is permitted, out of the assets attributable
to the Investor Class Shares of each Portfolio (i) to make directly or cause to
be made, payments for costs and expenses to third parties or (ii) to reimburse
third parties for costs and expenses incurred in connection with providing
services. Such distribution services, include but are not limited to (a) costs
of payments made to employees that engage in the distribution of Investor Class
Shares; (b) costs relating to the formulation and implementation of marketing
and promotional activities, including but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (c)
costs of printing and distributing prospectuses, statements of additional
information and reports of the Fund to prospective holders of Investor Class
Shares; (d) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund and (e) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that the Fund may, from time to time, deem advisable (the
"Distribution Services"). The Fund may enter into arrangements with Service
Organizations primarily intended to result in the sale of Investor Class Shares.
Subject to the limitations of applicable law and regulations, including rules of
NASD, the payments made directly to third parties or the reimbursements for such
distribution related costs or expenses, shall be in combination with the service
fee pursuant to the Shareholder Service Plan. The total annual rate shall be up
to but not more than 0.25% of the average daily net assets of the Portfolios
attributable to the Investor Class Shares. Any expense payable hereunder may be
carried forward for reimbursement for up to twelve months beyond the date in
which it is incurred, subject always to the limit (in combination with the
service fee pursuant to the Shareholder Service Plan) that not more than 0.25%
of the average daily net assets of the Portfolios shall be attributable to
Investor Class Shares. Investor Class Shares shall incur no interest or carrying
charges for expenses carried forward. In the event the Distribution Plan is
terminated, the Investor Class Shares shall have no liability for expenses that
were not reimbursed as of the date of termination.
Any Service Organization entering into an agreement with the Fund under
the Distribution Plan may also enter into a Shareholder Service Agreement or an
Administrative Services Agreement with regard to its Investor Class Shares,
which will not be subject to the terms of this Distribution Plan. The total
combination of fees paid to any Service Organization pursuant to the
Distribution Plan and Shareholder Service Plan shall not be more than 0.25% of
the average daily net assets of the Portfolios attributable to Investor Class
Shares. The Fund under this Distribution Plan may enter into more than one
agreement for its Investor Class Shares, with different Service Organizations
providing services to different groups of shareholders.
The Distribution Plan may be terminated with respect to the Fund by a
vote of a majority of the "non-interested" Directors who have no direct or
indirect financial interest in the operation of the Distribution Plan (the
"Qualified Directors") or by the vote of a majority of the outstanding voting
securities of the relevant class of the Fund. Any change in the Distribution
Plan that would materially increase the cost to the class of shares of the Fund
to which the Distribution Plan relates requires approval of the affected class
of shareholders of the Fund. The Distribution Plan requires the Board to review
and approve the Distribution Plan annually and, at least quarterly, to receive
and review written reports of the amounts expended under the Distribution Plan
and the purposes for which such expenditures were made. The Distribution Plan
may be terminated at any time upon a vote of the Qualified Directors.
Shareholder Service Plan. The Fund has adopted a Shareholder Service
Plan with respect to Investor Class Shares of each Portfolio. Under the
Shareholder Service Plan the Fund is authorized to enter into Shareholder
Service Agreements with Service Organizations who provide personal and/or
account maintenance services to their clients (the "Clients") who may from time
to time beneficially own Investor Class Shares of the Portfolios. Each Portfolio
will pay directly to Service Organizations a non distribution related
shareholder service fee under the Shareholder Service Plan at an annual rate of
up to 0.25% of the average daily net assets of the Portfolio attributable to the
Investor Class Shares beneficially owned by the clients of the Service
Organizations (the "Shareholder Service Fee"), subject always to the limit (in
combination with the distribution service fee pursuant to the Distribution Plan)
that not more than 0.25% of the average daily net assets of the Portfolios shall
be attributable to Investor Class Shares. By way of example, such services may
include some or all of the following: (i) shareholder liaison services; (ii)
providing information periodically to Clients showing their positions in New
Class Shares and integrating such statements with those of other transactions
and balances in Clients' other accounts serviced by the Service Organizations;
(iii) responding to Client inquiries relating to the services performed by the
Service Organizations; (iv) responding to routine inquiries from Clients
concerning their investments in Investor Class Shares; and (v) providing such
other similar services to Clients as the Fund may reasonably request to the
extent the Service Organizations are permitted to do so under applicable
statutes, rules and regulations. The Shareholder Service Plan will continue from
year to year provided that it is reviewed and approved by the Board of Directors
of the Fund annually. In addition, the Board of Directors will ratify all
agreements entered into pursuant to this Shareholder Service Plan and shall
review at each quarterly meeting of the Directors the amounts expended under the
Shareholder Service Plan and the purposes for which those expenditures were
made. The Shareholder Service Plan may be terminated at any time by a vote of
the Qualified Directors.
Administrative Services Plan. The Fund has adopted an Administrative
Services Plan whereby the Fund is authorized to enter into Administrative
Service Agreements on behalf of the Investor Class Shares of the Portfolios (the
"Agreements"), the form of which has been approved by the Board of Directors of
the Fund (the "Board") and each Agreement will be ratified by the Board of
Directors at the next quarterly meeting after the arrangement has been entered
into. Each Portfolio will pay an administrative services fee under the
Administrative Services Plan at an annual rate of up to 0.25% of the average
daily net assets of the Investor Class Shares of the Portfolio (the
"Administrative Services Fee") beneficially owned by the clients of the Service
Organizations. Provided, however, that no Portfolio shall directly or indirectly
pay any distribution related amounts that will be allocated under the Fund's
Distribution Plan. Administrative Services Fees may be used for payments to
Service Organizations who provide administrative and support servicing to their
customers who may from time to time beneficially own Investor Class Shares of
the Fund, which, by way of example, may include: (i) establishing and
maintaining accounts and records relating to shareholders; (ii) processing
dividend and distribution payments from the Portfolio on behalf of shareholders;
(iii) providing information periodically to shareholders showing their positions
in shares and integrating such statements with those of other transactions and
balances in shareholders other accounts serviced by such financial institution;
(iv) arranging for bank wires; (v) providing transfer agent or sub-transfer
agent services, recordkeeping, custodian or subaccounting services with respect
to shares beneficially owned by shareholders, or the information to the
Portfolio necessary for such services; (vi) if required by law, forwarding
shareholder communications from the Portfolio (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to shareholders; (vii) assisting in processing purchase,
exchange and redemption requests from shareholders and in placing such orders
with our service contractors; or (viii) providing such other similar services,
which are not considered "service fees" as defined in the NASD Rule 2830(b)(9),
as the Portfolio may reasonably request to the extent the Service Organization
is permitted to do so under applicable laws, statutes, rules and regulations.
The Administrative Services Plan may be terminated at any time by a vote of the
Qualified Directors. The Directors shall review and approve the Administrative
Services Plan annually and quarterly shall receive a report with respect to the
amounts expended under the Administrative Services Plan and the purposes for
which those expenditures were made
The Directors believe that the Distribution Plan, Shareholder Service Plan and
Administrative Services Plan will provide benefits to the Fund. The Directors
believe that the multi-class structure may increase investor choice, result in
efficiencies in the distribution of Fund shares and allow Fund sponsors to
tailor products more closely to different investor markets. The Directors
further believe that multiple classes avoid the need to create clone funds,
which require duplicative portfolio and fund management expenses.
The Distribution Plan provides that it may not be amended to materially increase
the costs which Investor Class shareholders may bear under the Plan without the
approval of a majority of the outstanding voting securities of Investor Class,
and by vote of a majority of both (i) the Directors of the Fund and (ii) those
Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of the Plan or any agreements related to it (the "Qualified
Directors"), cast in person at a meeting called for the purpose of voting on the
plans and any related amendments.
The Administrative Services Plan, Shareholder Service Plan and Distribution Plan
provide that each shall continue in effect so long as such continuance is
specifically approved at least annually by the Directors and the Qualified
Directors defined above, and that the Directors shall review at least quarterly,
a written report of the amounts expended pursuant to each plan and the purposes
for which such expenditures were made.
The Distribution Plan and Shareholder Service Plan provide that expenses payable
under each plan may be carried forward for reimbursement for up to twelve months
beyond the date in which the expense is incurred, subject to the combined limit
that not more that 0.25% of the average daily net assets attributable to the
Investor Class Shares may be used to pay distribution expenses and/or service
fees under each plan.
DEFENSIVE DISTRIBUTION PLAN - Advisor Class Shares
Prior to the approval by the Board of the Multi-Class structure, the
Fund had adopted a defensive distribution plan (the "Defensive Distribution
Plan") pursuant to Rule 12b-1 with respect to the redesignated Advisor Class
Shares. The Defensive Distribution Plan was terminated by the Board of Directors
on March 23, 1998, at a special meeting of the Board of Directors. Bennington
made no payments to Qualified Recipients pursuant to the Defensive Distribution
Plan.
VALUATION OF PORTFOLIO SHARES
The net asset value per share is calculated for each Portfolio on each
business day on which shares are offered or orders to redeem may be tendered. A
business day is one on which the New York Stock Exchange, Fifth Third and
Bennington are open for business. Non-business days for 1998 will be New Year's
Day, Presidents' Day, Martin Luther King Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day.
The International Portfolio's portfolio securities trade primarily on
foreign exchanges which may trade on Saturdays and on days that the Portfolio
does not offer or redeem shares. The trading of portfolio securities on foreign
exchanges on such days may significantly increase or decrease the net asset
value of the Portfolio's shares when the shareholder is not able to purchase or
redeem Portfolio shares.
Each Portfolio's liabilities are allocated among its classes. The total
of such liabilities allocated to a class plus that class's distribution and/or
servicing fees and any other expenses specially allocated to that class are then
deducted from the class's proportionate interest in the Portfolio's assets, and
the resulting amount for each class is divided by the number of shares of that
class outstanding to produce the class's "net asset value" per share. Generally,
for Portfolios that pay income dividends, those dividends are expected to differ
over time by approximately the amount of the expense accrual differential
between a particular Portfolio's classes.
Under certain circumstances, the per share net asset value of the
Investor Class Shares of the Portfolios may be lower than the per share net
asset value of the Advisor Class Shares as a result of the daily expense
accruals of the service and/or distribution fees applicable to the Investor
Class Shares. Generally, for Portfolios that pay income dividends, those
dividends are expected to differ over time by approximately the amount of the
expense accrual differential between the classes.
PORTFOLIO TRANSACTION POLICIES
Generally, securities are purchased for the Portfolios (other than the
U.S. Government Money Portfolio) for investment income and/or capital
appreciation and not for short-term trading profits. However, the Portfolios may
dispose of securities without regard to the time they have been held when such
action, for defensive or other purposes, appears advisable to their Money
Managers.
If a Portfolio changes Money Managers, it may result in a significant
number of portfolio sales and purchases as the new Money Manager restructures
the former Money Manager's portfolio.
Portfolio Turnover Rate. The portfolio turnover rate for each Portfolio
is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular year, by the monthly average value of the
portfolio securities owned by the Portfolio during the year. For purposes of
determining the rate, all short-term securities are excluded.
Brokerage Allocations. Transactions on United States stock exchanges
involve the payment of negotiated brokerage commissions; on non-United States
exchanges, commissions are generally fixed. There is generally no stated
commission in the case of securities traded in the over-the-counter markets,
including most debt securities and money market instruments, but the price
includes an undisclosed "commission" in the form of a mark-up or mark-down. The
cost of securities purchased from underwriters includes an underwriting
commission or concession.
Subject to the arrangements and provisions described below, the
selection of a broker or dealer to execute portfolio transactions is usually
made by the Money Manager. The Management Agreement and the Money Manager
Agreements provide, in substance and subject to specific directions from the
Board of Directors and officers of Bennington, that in executing portfolio
transactions and selecting brokers or dealers, the principal objective is to
seek the best net price and execution for the Portfolios. Securities will
ordinarily be purchased from the markets where they are primarily traded, and
the Money Manager will consider all factors it deems relevant in assessing the
best net price and execution for any transaction, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis).
In addition, the Management Agreement and the Money Manager Agreements
authorize Bennington and the Money Managers, to consider the "brokerage and
research services" (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) in selecting brokers to execute a
particular transaction and in evaluating the best net price and execution,
provided to the Portfolios. Brokerage and research services include (a)
furnishing advice as to the value of securities, the advisability of investing,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
monetary and fiscal policy, portfolio strategy, and the performance of accounts;
and (c) effecting securities transactions and performing functions incidental
thereto (such as clearance, settlement, and custody). Bennington or a Money
Manager may select a broker or dealer that has provided research products or
services such as reports, subscriptions to financial publications and
compilations, compilations of securities prices, earnings, dividends and similar
data, and computer databases, quotation equipment and services,
research-oriented computer software and services, consulting services and
services of economic benefit to the Fund. In certain instances, Bennington or
the Money Manager may receive from brokers or dealers products or services which
are used both as investment research and for administrative, marketing, or other
non-research purposes. In such instances, Bennington or the Money Managers will
make a good faith effort to determine the relative proportions of such products
or services which may be considered as investment research. The portion of the
costs of such products or services attributable to research usage may be
defrayed by Bennington or the Money Managers through brokerage commissions
generated by transactions of the Portfolios, while the portions of the costs
attributable to non-research usage of such products or services is paid by
Bennington or the Money Managers in cash. In making good faith allocations
between administrative benefits and research and brokerage services, a conflict
of interest may exist by reason of Bennington or the Money Managers allocation
of the costs of such benefits and services between those that primarily benefit
Bennington or the Money Managers and those that primarily benefit the Fund.
As a general matter, the Fund does not intend to pay commissions to
brokers who provide such brokerage and research services for executing a
portfolio transaction, which are in excess of the amount of commissions another
broker would charge for effecting the same transaction. Nevertheless, occasional
transactions may fall under these circumstances. Bennington or the Money Manager
must determine in good faith that the commission was reasonable in relation to
the value of the brokerage and research services provided in terms of that
particular transaction or in terms of all the accounts over which Bennington or
the Money Manager exercises investment discretion.
In addition, if requested by the Fund, Bennington, when exercising
investment discretion, and the Money Managers may enter into transactions giving
rise to brokerage commissions with brokers who provide brokerage, research or
other services to the Fund or Bennington so long as the Money Manager or
Bennington believes in good faith that the broker can be expected to obtain the
best price on a particular transaction and the Fund determines that the
commission cost is reasonable in relation to the total quality and reliability
of the brokerage and research services made available to the Fund, or to
Bennington for the benefit of the Fund for which it exercises investment
discretion, notwithstanding that another account may be a beneficiary of such
service or that another broker may be willing to charge the Fund a lower
commission on the particular transaction.
Bennington does not expect the Portfolios ordinarily to effect a
significant portion of the Portfolios' total brokerage business with brokers
affiliated with Bennington or their Money Managers. However, a Money Manager may
effect portfolio transactions for the Portfolio assigned to the Money Manager
with a broker affiliated with the Money Manager, as well as with brokers
affiliated with other Money Managers, subject to the above considerations
regarding obtaining the best net price and execution. Any transactions will
comply with Rule 17e-1 of the Investment Company Act.
Brokerage Commissions. The Board of Directors will review, at least
annually, the allocation of orders among brokers and the commissions paid by the
Portfolios to evaluate whether the commissions paid over representative periods
of time were reasonable in relation to commissions being charged by other
brokers and the benefits to the Portfolios. Certain services received by
Bennington or Money Managers attributable to a particular transaction may
benefit one or more other accounts for which investment discretion is exercised
by the Money Manager, or a Portfolio other than that for which the particular
portfolio transaction was effected. The fees of the Money Managers are not
reduced by reason of their receipt of such brokerage and research services.
The Bond Portfolios and the U.S. Government Money Portfolio do not pay
a stated brokerage commission.
BROKERAGE COMMISSIONS PAID BY EQUITY PORTFOLIOS
1/1/95- 1/1/96- 1/1/97 -
Portfolio 12/31/95 12/31/96 12/31/97
--------- -------- -------- --------
Growth $66,971 $57,658 $149,7061
Value and Income $52,424 $47,418 $119,1572
Small to Mid Cap3 $90,974 $120,336 $239,300
International $131,316 $467,230 $1,465,4334
- ----------
1 Of this amount, $256 was paid to an affiliated broker (Smith Barney,
Inc.) and $40,897 was directed by Bennington or the Money Manager to
pay for research products or services, as described in Brokerage
Allocations, above.
2 Of this amount $118,527 was directed by Bennington or the Money Manager
to pay for research products or services, as described in Brokerage
Allocations, above.
3 Until September 15, 1995, referred to as the Small Cap Portfolio.
4 Of this amount,$3,077 was paid to affiliated brokers (Salomon Brothers,
Inc. and Smith Barney Inc.) and $14,579 was directed by Bennington or
the Money Manager to pay for research products or services, as
described in Brokerage Allocations, above.
PERFORMANCE INFORMATION
Yield and Total Return Quotations. The Portfolios (other than the U.S.
Government Money Portfolio) compute their average annual total return by using a
standardized method of calculation required by the SEC. Average annual total
return is computed by finding the average annual compounded rates of return on a
hypothetical initial investment of $1,000 over the one, five and ten year
periods (or life of the Portfolios, as appropriate), that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
one, five or ten year period at the end of
the one, five or ten year period (or
fractional portion thereof)
The calculation assumes that all dividends and distributions of each
Portfolio are reinvested at the price stated in the Prospectuses on the
reinvestment dates during the period, and includes all recurring fees.
The average annual total returns, calculated using the above method:
1/1/95- 1/1/96- 1/1/97 -
Portfolio 12/31/95 12/31/96 12/31/97
--------- -------- -------- --------
Growth 34.32% 19.83% 33.24%
Value and Income 33.25% 23.94% 32.94%
Small to Mid Cap1 31.98% 24.85% 36.14%
International 7.63% 13.78% 10.96%
Intermediate Fixed-Income 18.26% 2.56% 8.62%
Short-Intermediate Fixed-Income 11.42% 3.63% 6.33%
Mortgage Securities 16.03% 4.95% 9.53%
Municipal Intermediate Fixed-Income2 N/A N/A N/A
- ----------
1 Until September 15, 1995, referred to as the Small Cap Portfolio.
2 The Municipal Portfolio was closed on December 4, 1995.
Yields are computed by using standardized methods of calculation
required by the SEC. Yields for the Bond Portfolios are calculated by dividing
the net investment income per share earned during a 30-day (or one month) period
by the maximum offering price per share on the last day of the period, according
to the following formula:
YIELD = 2[(a-b)+1)6-1]
----
(cd)
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding
during the period that were entitled to
receive dividends; and
d = the maximum offering price per share on the
last day of the period.
The annualized yields for the Bond Portfolios, calculated using the above
method:
As of As of As of
Portfolio 12/31/95 12/31/96 12/31/97
--------- -------- -------- --------
Intermediate Fixed-Income 5.36% 6.04% 5.52%
Short-Intermediate Fixed-Income 4.74% 5.39% 5.00%
Mortgage Securities 5.77% 5.90% 6.20%
Municipal Intermediate Fixed-Income1 N/A N/A N/A
Institutional Investor Fixed-Income2 N/A N/A N/A
- ----------
1 Municipal Portfolio was closed on December 4, 1995.
2 Institutional Investor Fixed-Income Portfolio was closed on August 28,
1995.
The U.S. Government Money Portfolio computes its current annualized and
compound effective yields using standardized methods required by the SEC. The
annualized yield for this Portfolio is computed by (a) determining the net
change, exclusive of capital changes, in the value of a hypothetical account
having a balance of one share at the beginning of a seven calendar day period;
(b) dividing the difference by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends from
the original share and dividends declared on both the original share and any
such additional shares, and all fees, other than nonrecurring account or sales
charges, that are charged to all shareholder accounts in proportion to the
length of the base period, but does not include realized gains and losses from
the sale of securities or unrealized appreciation and depreciation. Compound
effective yields are computed by adding 1 to the base period return (calculated
as described above), raising that sum to a power equal to 365/7 and subtracting
1.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the U.S. Government Money Portfolio's yield fluctuates,
its yield cannot be compared with yields on savings accounts or other investment
alternatives that provide an agreed-to or guaranteed fixed yield for a stated
period of time. However, yield information may be useful to an investor
considering temporary investments in money market instruments. In comparing the
yield of one money market fund to another, consideration should be given to each
fund's investment policies, including the types of investments made, length of
maturities of portfolio securities, the methods used by each fund to compute the
yield (methods may differ) and whether there are any special account charges
which may reduce effective yield.
The annualized yield for the U.S. Government Money Portfolio:
7-day Compounded
As of December 31 Annualized Yield Effective Yield
----------------- ---------------- ---------------
1994 4.91% 5.03%
1995 4.86% 4.90%
1996 4.79% 5.06%
1997 4.93% 5.10%
Current distribution information for the Investor Class Shares of a
Portfolio will be based on distributions for a specified period (i.e., total
dividends from net investment income), divided by the net asset value per
Investor Class share on the last day of the period and annualized. Current
distribution rates differ from standardized yield rates in that they represent
what Investor Class Shares of a Portfolio have declared and paid to shareholders
as of the end of a specified period rather than the Fund's actual net investment
income for that period.
CODE OF ETHICS
The Fund, on behalf of the Portfolios, has adopted a second amended and
restated Code of Ethics (the "Code of Ethics"), which established standards by
which certain covered persons of the Fund must abide relating to personal
securities trading conduct. Under the Code of Ethics, covered persons which
include, among others, directors and officers of the Fund and employees of the
Fund and Bennington, are prohibited from engaging in certain conduct, including
(1) the purchase or sale of any security being purchased or sold, or being
considered for purchase or sale, by a Portfolio, without prior approval by the
Fund or without the applicability of certain exemptions; (2) the recommendation
of a securities transaction without disclosing his or her interest in the
security or issuer of the security; (3) the commission of fraud in connection
with the purchase or sale of a security held by or to be acquired by a
Portfolio; (4) the purchase of any securities in an initial public offering or
private placement transaction eligible for purchase or sale by a Portfolio
without prior approval by the Fund; and (5) the acceptance of gifts of more than
a de minimus value from those doing business with or on behalf of the Fund or a
Portfolio. Certain transactions are exempt from item (1) of the previous
sentence, including: (1) purchases or sales on the account of a covered person
that are not under the control of or that are non-volitional with respect to
that person; (2) purchases or sales of securities not eligible for purchase or
sale by a Portfolio; (3) purchases or sales relating to rights issued by an
issuer pro rata to all holders of class of its securities; and (4) any
securities transaction, or series of related transactions, involving 500 or
fewer shares of an issuer having a market capitalization greater than $1
billion.
The Code of Ethics specifies that covered persons shall place the
interests of the shareholders of the Fund first, shall avoid potential or actual
conflicts of interest with the Fund first, and shall not take unfair advantage
of their relationship with any Portfolio. Covered persons are required by the
Code of Ethics to file quarterly reports of personal securities investment
transactions. However, a covered person is not required to report a transaction
over which he or she had no control. Furthermore, a director of the Fund who is
not an "interested person" (as defined in the Investment Company Act) of the
Fund is not required to report a transaction if such person did not know or, in
the ordinary course of his duties as a director of the Fund, should have known,
at the time of the transaction, that, within a 15 day period before or after
such transaction, the security that such person purchased or sold was either
purchased or sold, or was being considered for purchase or sale, by a Portfolio.
The Code of Ethics specifies that a designated supervisory person shall
supervise implementation and enforcement of the Code of Ethics and shall, at his
sole discretion, grant or deny approval of transactions required by the Code of
Ethics.
TAXES
Each Portfolio is treated as a separate entity for federal income tax
purposes. Each Portfolio has elected to qualify and intends to remain qualified
as a regulated investment company under Subchapter M of the Code. This relieves
each Portfolio (but not its shareholders) from paying federal income tax on any
net investment income and capital gains, if any, realized during the taxable
year which are distributed to shareholders, provided that it distributes
annually to its shareholders at least 90% of its investment company taxable
income (the sum of the net taxable investment income and the excess of net short
term capital gain over net long term capital loss) ("Distribution Requirement").
To qualify as a regulated investment company, each Portfolio must meet several
additional requirements. Among these requirements are the following: (i) at
least 90% of a Portfolio's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies ("Income Requirement"); (ii) at the close of each quarter of a
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other regulated investment companies and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Portfolio and that does not represent more than
10% of the outstanding voting securities of such issuer; and (iii) at the close
of each quarter of the Portfolio's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer or in two or more
issuers which the Portfolio controls and which are engaged in similar trades or
businesses (the "Asset Diversification Requirement").
Notwithstanding the Distribution Requirement described above, which
only requires each Portfolio to distribute at least 90% of its annual investment
company taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), each Portfolio will be subject to a nondeductible 4% excise tax
to the extent it fails to distribute by the end of any calendar year at least
98% of its ordinary income for that year and 98% of its capital gain net income
for the one-year period ending on October 31 of that year, plus certain other
amounts. For this and other purposes, dividends declared by each Portfolio in
October, November or December of any calendar year and payable to shareholders
of record on a date in such a month will be deemed to have been paid by such
Portfolio and received by shareholders on December 31 of such year if the
dividends are paid by such Portfolio at any time through the end of the
following January. Each Portfolio intends to make distributions so as to avoid
this excise tax.
All dividends out of net investment income, together with distributions
of net short-term capital gains, will be taxable as ordinary income to
shareholders whether or not reinvested. Distributions of net capital gains by a
Portfolio are taxable to shareholders as long-term capital gains at a maximum
rate of 20% or 28% (see discussion below), regardless of the length of time the
shares of the Portfolio have been held by such shareholders.
The Taxpayer Relief Act of 1997 made certain changes to the Code with
respect to taxation of long term capital gains earned by taxpayers other than a
corporation. In general, the maximum tax rate for individual taxpayers on net
long-term capital gains is lowered to 20% for most assets held for more than 18
months at the time of disposition. Capital gains on the disposition of assets
held for more than one year and up to 18 months at the time of disposition will
be taxed as "mid-term gain" at a maximum rate of 28%. A lower rate of 18% will
apply after December 31, 2000 for assets held for more than five years. However,
the 18% rate applies only to assets acquired after December 31, 2000 unless the
taxpayer elects to treat an asset held prior to such date as sold for fair
market value on January 1, 2001. In the case of individuals whose ordinary
income is taxed at a 15% rate, the 20% rate for assets held for more than 18
months is reduced to 10% and the 18% rate for assets held for more than five
years is reduced to 8%. Under a notice recently issued by the Internal Revenue
Service, regulated investment companies such as the Portfolios are entitled to
(but not required to) designate which portion of a capital gain distribution
will be taxed at a maximum rate of 20% and which portion will be taxed at a
maximum rate of 28%. If a Portfolio does not make such a designation, the
capital gain distribution will be taxed at a maximum rate of 28%.
To the extent that a Portfolio recognizes income from "conversion
transactions," as defined in Section 1258 of the Code, all or part of the
capital gain from the disposition or other termination of a position held as
part of such conversion transaction may be recharacterized as ordinary income. A
conversion transaction is a transaction, generally consisting of two or more
positions taken with regard to the same or similar property, where substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in the transaction. A transaction, however, is not a conversion
transaction unless it also satisfies one of the following four criteria: (1) the
transaction consists of the acquisition of property by the taxpayer and a
substantially contemporaneous agreement to sell the same or substantially
identical property in the future; (2) the transaction is a straddle, within the
meaning of Section 1092 (treating stock as personal property); (3) the
transaction is one that was marketed or sold to the taxpayer on the basis that
it would have the economic characteristics of a loan but the interest-like
return would be taxed as capital gain; or (4) the transaction is described as a
conversion transaction in regulations to be promulgated on a prospective basis
by the Secretary of the Treasury.
"Regulated futures contracts" and certain listed options which are not
"equity options" constitute "Section 1256 contracts" and will be required to be
"marked to market" for federal income tax purposes at the end of the Portfolios'
taxable year; that is, treated as having been sold at market value. Sixty
percent of any gain or loss recognized on such "deemed sales" and on actual
dispositions will be treated as long-term capital gain or loss. The Internal
Revenue Service has issued a notice stating that legislation would be introduced
clarifying that the long-term capital gain portion of a section 1256 contract
would be treated as gain from the sale of property held for more than 18 months
and thus subject to a maximum rate of 20%, and the remainder will be treated as
short-term capital gain or loss. Gain or loss on the sale, lapse or other
termination of options on narrowly-based stock indexes will be capital gain or
loss and will be long-term or short-term depending on the holding period of the
option. Certain of the Portfolio's transactions, including positions which are
part of a "straddle" may be subject to rules which apply certain wash sale and
short sale provisions of the Code. In the case of a straddle, a Portfolio may be
required to defer the recognition of losses on positions it holds to the extent
of any unrecognized gain on offsetting positions held by the Portfolio.
Gains or losses attributable to fluctuations in exchange rates which
occur between the time a Portfolio accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Portfolio actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly, gains or losses on
forward foreign currency exchange contracts or dispositions of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss. These gains,
referred to under the Code as "Section 988" gains or losses, increase or
decrease the amount of the Portfolio investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of the Portfolio's net capital gain, as was the case
prior to 1987. If Section 988 losses exceed other investment company taxable
income during a taxable year, the Portfolio would not be able to make any
ordinary dividend distributions, or distributions made before the losses were
realized would be recharacterized as a return of capital to shareholders, rather
than as an ordinary dividend, reducing each shareholder's basis in his or her
Portfolio shares.
Any loss realized on a sale, redemption or exchange of shares of a
Portfolio by a shareholder will be disallowed to the extent the shares are
replaced within a 61-day period (beginning 30 days before the disposition of
shares). Shares purchased pursuant to the reinvestment of a dividend will
constitute a replacement of shares. A shareholder who acquires shares of a
Portfolio and sells or otherwise disposes of such shares within 90 days of
acquisition may not be allowed to include certain sales charges incurred in
acquiring such shares for purposes of calculating gain or loss realized upon a
sale or exchange of shares of the Portfolio.
Dividends received by corporate shareholders of a Portfolio are
eligible for a dividends received deduction of 70% to the extent such
Portfolio's income is derived from qualified dividends received by the Portfolio
from domestic corporations. Capital gains distributions are not eligible for the
corporate dividends received deduction. Corporate shareholders should consult
their tax advisers regarding other requirements applicable to the dividends
received deduction.
Income received by the International Portfolio from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries. Income tax treaties between certain countries and the United States
may reduce or eliminate such taxes. It is impossible to determine in advance the
effective rate of foreign tax to which the International Portfolio will be
subject, since the amount of the International Portfolio's assets to be invested
in various countries is not known.
If the International Portfolio is liable for foreign income taxes, the
International Portfolio expects to meet the requirement of the Code for
"passing-through" to its shareholders foreign income taxes paid, but there can
be no assurance that the International Portfolio will be able to do so. If the
International Portfolio elects to "pass-through" the foreign taxes, shareholders
will be required to: (i) include in gross income (in addition to taxable
dividends actually received) their pro rata share of the foreign income taxes
paid by the International Portfolio; and (ii) treat their pro rata share of
foreign income taxes as paid by them. Shareholders will not be entitled to
credit or deduct their allocable share of foreign taxes imposed on the
International Portfolio if they have not held their shares in the International
Portfolio for 16 days or more during the 30 day period beginning 15 days before
the shares in the International Portfolio become ex-dividend. The holding period
will be extended if the shareholder's risk of loss with respect to such shares
is reduced by reason of holding an offsetting position. Shareholders are then
permitted either to deduct their pro rata share of foreign income taxes in
computing their taxable income or use it as a foreign tax credit against United
States income taxes. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Foreign shareholders may not deduct
or claim a credit for foreign tax in determining their U.S. income tax liability
unless the dividends paid to them by the Fund are effectively connected with a
United States trade or business.
The amount of foreign taxes for which a shareholder may claim a credit
in any year will generally be subject to a separate limitation for "passive
income," which includes, among other things, dividends, interest and certain
foreign currency gains. Gain or loss from the sale of a security or from a
Section 988 transaction which is treated as ordinary income or loss (or would
have been so treated absent an election by the Fund) will be treated as derived
from sources within the United States, potentially reducing the amount allowable
as a credit under the limitation.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are advised to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in the Fund.
Any dividends paid shortly after a purchase by an investor may have the
effect of reducing the per share net asset value of the investor's shares by the
per share amount of the dividends. Furthermore, such dividends, although in
effect a return of capital, are subject to federal income tax. This may be
magnified in the Portfolio that pay dividends annually-- such as the
International Portfolio. Therefore, prior to purchasing shares of the Fund, the
investor should carefully consider the impact of dividends, including capital
gains distributions, which are expected to be or have been announced.
State and Local Taxes. Depending upon the extent of a Portfolio's
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which it is
otherwise deemed to be conducting business, a Portfolio may be subject to the
tax laws of such states or localities. Further, in those states which have
income tax laws, the tax treatment of a Portfolio and of shareholders of the
Portfolio with respect to distributions by the Portfolio may differ from federal
tax treatment. Distributions to shareholders may be subject to additional state
and local taxes.
PURCHASES IN KIND
The Portfolios may accept certain types of securities in lieu of wired
funds as consideration for Portfolio shares. Under no circumstances will a
Portfolio accept any securities in consideration of the Portfolio=s shares the
holding or acquisition of which would conflict with the Portfolio's investment
objective, policies and restrictions or which Bennington or the applicable Money
Manager believes should not be included in the applicable Portfolio's portfolio
on an indefinite basis. Securities will not be accepted in exchange for
Portfolio shares if the securities are not liquid or are restricted as to
transfer either by law or liquidity of market; or have a value which is not
readily ascertainable (and not established only by evaluation procedures) as
evidenced by a listing on the American Stock Exchange, the New York Stock
Exchange, or NASDAQ. Securities accepted in consideration for a Portfolio's
shares will be valued in the same manner as the Portfolio's portfolio securities
in connection with its determination of net asset value. A transfer of
securities to a Portfolio in consideration for Portfolio shares will be treated
as a sale or exchange of such securities for federal income tax purposes. A
shareholder will recognize gain or loss on the transfer in an amount equal to
the difference between the value of the securities and the shareholder's tax
basis in such securities. Shareholders who transfer securities in consideration
for a Portfolio's shares should consult their tax advisers as to the federal,
state and local tax consequences of such transfers.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal years ended
December 31, 1993 and December 31, 1994, and the reports thereon of Deloitte &
Touche LLP, independent auditors, are included in the Fund's Annual Reports to
Shareholders dated December 31, 1993, December 31, 1994, December 31, 1995, and
December 31, 1996, respectively. The Fund's audited financial statements for the
fiscal year ended December 31, 1997, are contained in the Fund's Annual Report
to Shareholders for the fiscal year ended December 31, 1997, which is
incorporated herein by this reference and, unless previously provided, will be
delivered together herewith.
B-5
<PAGE>
APPENDIX A
RATINGS OF DEBT INSTRUMENTS
Corporate Bond Ratings
Moody's Investors Service ("Moody's")
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.
Those bonds in the Aa and A group which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1 and A1.
Standard & Poor's Corporation ("S&P")
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay interest and repay principal is very strong, and they differ
from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than issues in higher-rated
categories.
The AA and A ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the AA or A rating category,
respectively.
Note Ratings
Moody's
Moody's rating for short-term obligations will be designated Moody's
Investment Grade ("MIG"). This distinction is in recognition of the differences
between short-term credit risk and long-term risk. Factors affecting the
liquidity of the borrower are uppermost in importance in short-term borrowing,
while various factors of the first importance in bond risk are of lesser
importance in the short run. Symbols used are as follows:
MIG-1 - Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
MIG-2 - Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
S&P
An S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in three years or less will likely receive a
note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment.
Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
SP-1 - This designation denotes strong or very strong capacity to pay
interest and repay principal. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) sign designation.
SP-2 - This designation denotes satisfactory capacity to pay interest
and repay principal.
Commercial paper rated A by S&P has the following characteristics:
liquidity ratios are adequate to meet cash requirements. Long-term senior debt
is rated A or better. The issuer has access to at least two additional channels
of borrowing. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances. Typically, the issuer's industry is well
established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determine whether the issuer's commercial paper is
rated A-1, A-2 or A-3.
A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 - This designation indicates the capacity for timely payment on
issues with this designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
A-3 - This designation indicates a satisfactory capacity for timely
payment. Obligations carrying this designation are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
A-1
<PAGE>
APPENDIX B
CALCULATION OF PERFORMANCE FEES
Bennington and the Board of Directors have carefully considered Release No.
IC-7113, issued by the SEC in April 1972, which addresses the factors which must
be considered by directors and investment advisers in connection with
performance fees payable by investment companies. In particular, they have
considered the statement that "[e]lementary fiduciary standards require that
performance compensation be based only upon results obtained after [performance
fee] contracts take effect." Bennington and the Board of Directors believe that
the Portfolios' performance fee arrangement is consistent with the position of
the SEC articulated in Release No. IC-7113. No performance fees may be paid if
the Board of Directors determines that to do so would be unfair to the
Portfolios' shareholders.
For purposes of calculating the performance differential versus the applicable
index, the investment performance of each Portfolio (or Account) for any day
expressed as a percentage of its net assets at the beginning of such day, is
equal to the sum of: (i) the change in the net assets of each Portfolio (or
Account) during such day and (ii) the value of the Portfolio's (or Account's)
cash distributions accumulated to the end of such day. The return over any
period is the compounded return for all days over the period, i.e., one plus the
daily return multiplied together, minus one. The investment record of each index
for any period shall mean the sum of: (i) the change in the level of the index
during such period; and (ii) the value, computed consistently with the index, of
cash distributions made by companies whose securities comprise the index
accumulated to the end of such period; expressed as a percentage of the index
level at the beginning of such period. For this purpose cash distributions on
the securities which comprise the index shall be treated as reinvested in the
index at least as frequently as the end of each calendar quarter following the
payment of the dividend. For purposes of determining the fee adjustment for
investment performance, the net assets of the Portfolio (or Account) are
averaged over the same period as the investment performance of the Portfolio (or
Account) and the investment record of the applicable index are computed.
B-1
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
(1) Financial Statements included in Part A of
this Registration Statement:
Financial Highlights (Per Share Data and
Ratios/Supplemental Data).*
(2)(A) The following audited Financial Statements
for the years ended December 31, 1993,
December 31, 1994 and December 31, 1995, are
incorporated into Part B of this
Registration Statement by reference to the
relevant sections of the Fund's Annual
Reports dated December 31, 1993, December
31, 1994, December 31, 1995, and December
31, 1996, respectively:
Schedule of Investments
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
(2)(B) The following Audited Financial Statements
for the period ended December 31, 1997 are
incorporated into Part B of this
Registration Statement by reference to the
relevant sections of the Fund's Annual
Report to Shareholders for the period ended
December 31, 1997*:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
(b) Exhibits
(1)(a) Articles of Incorporation of the Registrant.
Incorporated by reference to Exhibit No. 1
to the Registration Statement on Form N-1A
filed on June 24, 1991 (File No. 33-41245).
(1)(b) Articles of Amendment to Articles of
Incorporation. Incorporated by reference to
Exhibit No. (1)(b) to Pre-Effective
Amendment No. 1 to the Registration
Statement on Form N-1A filed on August 28,
1991 (File No. 33-41245).
(1)(c) Articles of Amendment to Articles of
Incorporation. Incorporated by reference to
Exhibit No. (1)(c) to Pre-Effective
Amendment No. 2 to the Registration
Statement on Form N-1A filed on October 22,
1991 (File No. 33-41245).
(1)(d) Articles of Amendment to Articles of
Incorporation dated October 18, 1993 of the
Registrant. Incorporated by reference to
Exhibit No. (1)(d) to Post-Effective
Amendment No. 5 to the Registration
Statement on Form N-1A filed on February 25,
1994 (File No. 33-41245).
(2) Amended By-Laws of the Registrant.
Incorporated by reference to Exhibit No. (2)
to Pre-Effective Amendment No. 5 to the
Registration Statement on Form N-1A filed on
March 11, 1992 (File No. 33-41245).
(3) Not applicable.
(4) Specimen stock certificates. Incorporated by
reference to Exhibit No. (4) to
Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A filed on
October 22, 1991 (File No. 33-41245).
(5)(a) Management Agreement with Bennington Capital
Management. Incorporated by reference to
Exhibit No. 5(a) to Post-Effective Amendment
No. 1 to the Registration Statement on Form
N-1A filed on June 29, 1992 (File No.
33-41245).
(5)(b) Revised Form of Money Manager Agreements
among the Registrant, Money Managers and
Bennington Capital Management. Incorporated
by reference to Exhibit No. (5)(b) to
Pre-Effective Amendment No. 5 to the
Registration Statement on Form N-1A filed on
March 11, 1992 (File No. 33-41245).
(5)(c) New Management Agreement with Bennington
Capital Management. Incorporated by
reference to Exhibit 5(c) to Post-Effective
Amendment No. 2 to the Registration
Statement on Form N-1A filed on September 1,
1992 (File No. 33-41245).
(5)(c)(1) First Amendment to Management Agreement with
Bennington Capital Management L. P. dated
May 24, 1994. Incorporated by reference to
Exhibit (5)(c)(1) of Post-Effective
Amendment No. 6 to the Registration
Statement on Form N-1A filed on July 7, 1994
(File No. 33-41245).
(5)(d) New Form of Money Manager Agreements among
the Registrant, Money Managers and
Bennington Capital Management. Incorporated
by reference to Exhibit No. 5(d) to
Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A filed on
June 29, 1992 (File No. 33-41245).
(5)(e) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and Parametric Portfolio Associates, Inc.
Incorporated by reference to Exhibit A to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(f) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and State Street Bank and Trust Company.
Incorporated by reference to Exhibit B to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(g) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and Martingale Asset Management L. P.
Incorporated by reference to Exhibit C to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(g)(1) Form of New Money Manager Agreement among
the Registrant, Bennington Capital
Management L.P. and Martingale Asset
Management L.P. Incorporated by reference to
Exhibit A to Proxy Statement for Special
Meeting of Shareholders to be Held August
15, 1995, and filed on July 17, 1995 (File
No. 33-41245).
(5)(h) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and BlackRock Financial Management, L. P.
Incorporated by reference to Exhibit D to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(h)(1) New Form of Money Manager Agreement among
the Registrant, Bennington Capital
Management L.P. and BlackRock Financial
Management, Inc. the money manager of the
Mortgage Securities Portfolio. Incorporated
by reference to Exhibit No. 1 to the Proxy
Statement For Special Meeting of
Shareholders Held on January 27, 1995 and
filed on January 6, 1995 (File No.
33-41245).
(5)(i) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and Bankers Trust Company. Incorporated by
reference to Exhibit E to Proxy Statement
For Special Meeting of Shareholders to be
Held September 1, 1993 and filed on May 24,
1993 (File No. 33-41245).
(5)(j) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and Smith Barney Capital Management.
Incorporated by reference to Exhibit F to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(k) Revised Money Manager Agreement among the
Registrant, Bennington Capital Management
and Wells Fargo Nikko Investment Advisors.
Incorporated by reference to Exhibit G to
Proxy Statement For Special Meeting of
Shareholders to be Held September 1, 1993
and filed on May 24, 1993 (File No.
33-41245).
(5)(l) New Form of Revised Money Manager Agreement
among the Registrant, Bennington Capital
Management L. P. and the money managers of
the International Equity Portfolio,
International Fixed-Income Portfolio,
Municipal Intermediate Fixed-Income
Portfolio and Institutional Investor Fixed
Income Portfolio. Incorporated by reference
to Exhibit No. 5(l) to Post-Effective
Amendment No. 4 to the Registration
Statement on Form N-1A filed on September
15, 1993 (File No. 33-41245).
(5)(m) New Form of Money Manager Agreement among
the Registrant (on behalf of the Small Cap
Portfolio), Bennington Capital Management
L.P. and Symphony Asset Management, Inc.
Incorporated by reference to Exhibit B to
Proxy Statement For Special Meeting of
Shareholder to be Held August 15, 1995, and
filed on July 17, 1995 (File No. 33-41245).
(5)(n) New Form of Money Manager Agreement among
the Registrant (on behalf of the Small Cap
Portfolio), Bennington Capital Management
L.P. and Symphony Asset Management LLC.
Incorporated by reference to Exhibit A to
Proxy Statement For Special Meeting of
Shareholder to be Held April 30, 1998, and
filed on March 30, 1998 (File No. 33-41245).
(6) Not applicable.
(7) Not applicable.
(8)(a) Custodian Contract with State Street Bank
and Trust Company. Incorporated by reference
to Exhibit No. 8 to Post-Effective Amendment
No. 1 to the Registration Statement on Form
N-1A filed on June 29, 1992 (File No.
33-41245).
(8)(b) Form of Custodian Services Agreement with
PNC Bank, National Association. Incorporated
by reference to Exhibit (8)(b) of Post-
Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on
July 7, 1994 (File No. 33-41245).
(8)(b)(1) Custodian Services Agreement with PNC Bank,
National Association effective August 20,
1994. Incorporated by reference to Exhibit
(8)(b)(1) to Post-Effective Amendment No. 8
to the Registration Statement on Form N-1A
filed on March 6, 1995 (File No. 33-41245).
(8)(c) Global Custody Agreement dated as of October
28, 1992 between Barclays Bank PLC and
Provident National Bank and investment
companies signatory thereto, effective for
Registrant August 20, 1994. Incorporated by
reference to Exhibit (8)(c) to
Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on
March 6, 1995 (File No. 33-41245).
(8)(d) Agreement among Registrant, Bennington and
The Fifth Third Bank effective December 1,
1995. Incorporated by reference to Exhibit
(8)(d) to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A
filed on April 29, 1996 (File No. 33-41245).
(8)(e) Custody Agreement with Fifth Third Bank
dated October 4, 1996. Incorporated by
reference to Exhibit (8)(e) to
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A filed on
April 30, 1997 (File No. 33-41245).
(8)(f) First Amendment to Custody Agreement with
Fifth Third Bank dated November 14, 1997.*
(8)(g) Second Amendment to Custody Agreement with
Fifth Third Bank dated February 19, 1998.*
(9)(a) Transfer Agency and Registrar Agreement with
The Shareholder Services Group, Inc.
Incorporated by reference to Exhibit No.
9(a) to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-1A
filed on June 29, 1992 (File No. 33-41245).
(9)(a)(1) Transfer Agency and Subtransfer Agency
Agreement among the Registrant, Bennington
Capital Management and State Street Bank
and Trust Company. Incorporated by reference
to Exhibit No. 9(a)(1) to Post-Effective
Amendment No. 4 to the Registration
Statement on Form N-1A filed on September
15, 1993 (File No. 33-41245).
(9)(a)(2) Transfer Agency Agreement among the
Registrant, Bennington Capital Management L.
P. and State Street Bank and Trust Company
dated February 28, 1995. Incorporated by
reference to Exhibit (8)(c) to
Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A filed on
March 6, 1995 (File No. 33-41245).
(9)(a)(3) Transfer Agency and Administrative Agreement
among the Registrant and Bennington dated
December 1, 1995. Incorporated by reference
to Exhibit (9)(a)(3) to Post-Effective
Amendment No. 10 to the Registration
Statement on Form N-1A filed on April 29,
1996 (File No. 33-41245).
(9)(a)(4) Amended Appendix C dated February 19, 1998,
to Transfer Agency and Administrative
Agreement among the Registrant and
Bennington dated December 1, 1995.*
(9)(b) Remote Access and Related Services Agreement
among Bennington Capital Management, the
Registrant and The Shareholder Services
Group, Inc. Incorporated by reference to
Exhibit No. 9(a) to Post-Effective Amendment
No. 1 to the Registration Statement on Form
N-1A filed on June 29, 1992 (File
No. 33-41245).
(9)(c) Reporting and Accounting Agreement among
Bennington Capital Management, State Street
Bank and Trust Company and the Registrant.
Incorporated by reference to Exhibit No.
9(c) to Post-Effective Amendment No. 1 to
the Registration Statement on Form N-1A
filed on June 29, 1992 (File No. 33-41245).
(9)(c)(1) Administration Agreement for Reporting and
Accounting Services among the Registrant,
Bennington Capital Management and State
Street Bank and Trust Company. Incorporated
by reference to Exhibit No. 9(c)(1) to
Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
September 15, 1993 (File No. 33-41245).
(9)(c)(2) Form of Sub-Administration and Accounting
Services Agreement with PFPC Inc.
Incorporated by reference to Exhibit No.
(9)(c)(2) to Post-Effective Amendment No. 6
to the Registration Statement on Form N-1A
filed on July 7, 1994 (File No. 33-41245).
(9)(c)(2)(a) Sub-Administration and Accounting Services
Agreement with PFPC Inc. effective August
20, 1994. Incorporated by reference to
Exhibit (8)(c) to Post-Effective Amendment
No. 8 to the Registration Statement on Form
N-1A filed on March 6, 1995 (File No.
33-41245).
(9)(c)(3) Form of Administration Agreement with
Bennington Capital Management L. P.
Incorporated by reference to Exhibit No.
(9)(c)(3) to Post-Effective Amendment No. 6
to the Registration Statement on Form N-1A
filed on July 7, 1994 (File No. 33-41245).
(9)(c)(3)(a) Sub-Administration Agreement with Bennington
Capital Management L.P. effective September
7, 1994. Incorporated by reference to
Exhibit (8)(c) to Post-Effective Amendment
No. 8 to the Registration Statement on Form
N-1A filed on March 6, 1995 (File No.
33-41245).
(9)(c)(4) Fund Accounting and Other Services Agreement
with Fifth Third Bank and Bennington Capital
Management L.P. dated October 4, 1996.
Incorporated by reference to Exhibit
(9)(c)(4) to the Registration Statement on
Form N-1A filed on April 30, 1996 (File No.
33-41245).
(10) Opinion and Consent of Counsel. Incorporated
by reference to Exhibit No. 10 to
Pre-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
February 4, 1992
(File No. 33-41245).
(11) Consent of Independent Public Auditors.*
(12) Not applicable.
(13) Agreement related to initial capital.
Incorporated by reference to Exhibit No. 13
to Pre-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
February 4, 1992 (File No. 33-41245).
(14) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of December
1, 1995, including:
Instructions for Opening Your IRA
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover
Request Form
Incorporated by reference to Exhibit (14) to
Post-Effective Amendment No. 10 to the
Registration Statement filed on April 29,
1996 (File No. 33-41245).
(14)(a) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of December
16, 1996, including:
Instructions for Opening Your IRA
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption
Agreement Form
IRA Transfer Request/Direct
Rollover Request Form
IRA Withdrawal Form
Incorporated by reference to Exhibit (14)(a)
to Post-Effective Amendment No. 11 to the
Registration Statement filed on April 30,
1997. (File No. 33-41245)
(14)(a)(1) Accessor Funds, Inc. Individual Retirement
Custodial Account Plan dated as of November
11, 1997*, including:
Instructions for Opening Your IRA
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption
Agreement Form
IRA Transfer Request/Direct
Rollover Request Form
IRA Withdrawal Form
(15)(a) Form of Distribution Plan. Incorporated by
reference to Exhibit No. 15 to
Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A filed on
June 29, 1992 (File No. 33-41245).
(15)(b) Distribution Plan revised February 10, 1994.
Incorporated by reference to Exhibit No.
15(b) to Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A
filed on February 25, 1994 (File No.
33-41245).
(15)(c) Distribution Plan revised February 16, 1995.
Incorporated by reference to Exhibit No.
(15)(c) to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A
filed on March 6, 1995. (File No. 33-41245).
(15)(d) Distribution Plan revised February 6, 1996.
Incorporated by reference to Exhibit No.
(15)(d) to Post-Effective Amendment No. 10
to the Registration Statement on Form N-1A
filed on April 29, 1996.
(15)(e) Distribution Plan revised February 22, 1997.
Incorporated by reference to Exhibit No.
(15)(e) to Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A
filed on April 30, 1997. (File No. 41245).
(15)(f) Distribution Plan for Investor Class Shares
dated February 19, 1998.*
(15)(f)(1) Form of Dealer Agreement.*
(15)(g) Shareholder Service Plan dated February 19,
1998.*
(15)(g)(1) Form of Shareholder Service Agreement.*
(15)(h) Administrative Services Plan dated
February 19, 1998.*
(15)(h)(1) Form of Administrative Services Agreement.*
(16) Schedule of Computation of Performance
Calculation.*
(17) Financial Data Schedules.*
(18) Rule 18f-3 Plan dated February 19, 1998.*
- ---------------
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities as of April 24, 1998
Number of
Record
Title of Class Holders
- -------------- -------
Shares of Common Stock, $.001 Par
Value Per Share:
Growth Portfolio 478
Value and Income Portfolio 391
Small to Mid Cap Portfolio 406
International Equity Portfolio 372
Intermediate Fixed-Income Portfolio 195
Short-Intermediate Fixed-Income Portfolio 130
Mortgage Securities Portfolio 239
U.S. Government Money Portfolio 89
Item 27. Indemnification
---------------
As permitted by Section 17(h) and (i) of the Investment Company Act of
1940, as amended (the "1940 Act"), and pursuant to Article VI of the
Registrant's Articles of Incorporation, as amended (incorporated by reference to
Exhibit Nos. 1(a), 1(b), 1(c) to the Registration Statement on Form N-1A, filed
on June 24, 1991 (File No. 33-41245), Pre-Effective Amendment No. 1 thereto,
filed on August 28, 1991, Pre-Effective Amendment No. 2 thereto, filed on
October 22, 1991 and 1(d) to Post-Effective Amendment No. 5 thereto, filed on
February 25, 1994, respectively). Section 2-418 of the Maryland General
Corporation Law and Section 7 of the Management Agreement (incorporated by
reference to Exhibit Nos. 5(a) and 5(c) of the Registration Statement on Form
N-1A, filed on June 24, 1991 (File No. 33-41245) and Post-Effective Amendment
No. 2 thereto, filed on September 1, 1992, respectively) (the "Management
Agreement"), officers, directors, employees and agents of the Registrant will
not be liable to the Registrant, any stockholder, officer, director, employee,
agent or other person for any action or failure to act, except for bad faith,
willful misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions. Section 2-418 of Maryland General
Corporation Law permits indemnification of directors who acted in good faith and
reasonably believed that the conduct was in the best interests of the
Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers
and directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 7 of the Management Agreement and Section 12 of the Money
Manager Agreements (Exhibits 5(a) - 5(m), incorporated by reference to this
Registration Statement) limit the liability of Bennington Capital Management L.
P. ("Bennington") and the money managers, respectively, to liabilities arising
from willful misfeasance, bad faith or gross negligence in the performance of
their respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its Articles of Incorporation, By-Laws, Management Agreement,
Transfer Agent Agreement and Money Manager Agreements in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretations of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
See Registrant's Prospectuses sections "General Management of the
Portfolios", "The Money Managers" and "Money Manager Profiles", and the
Statement of Additional Information section "Investment Advisory and Other
Services" and "Money Managers".
Item 29. Principal Underwriters
----------------------
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
All accounts and records required to be maintained by section 31(a) of
the 1940 Act and Rules 31a-1 to 31a-3 thereunder are maintained in the following
locations:
Manager, Administrator
and Transfer Agent Custodian and Fund Accounting Agent
------------------ -----------------------------------
Bennington Capital Management L. P. Fifth Third Bank
1420 Fifth Avenue, Suite 3130 38 Fountain Square Plaza
Seattle, WA 98101 Cincinnati, OH 45263
Money Managers Custodian of IRA Accounts
-------------- -------------------------
See sections of the The Fifth Third Bank
prospectuses entitled "Money Manager 38 Fountain Square Plaza
Profiles" for names and addresses. Cincinnati, OH 45263
Item 31. Management Services
-------------------
None except as described in Parts A and B.
Item 32. Undertakings
------------
(a) The information called for by Item 5A of Form N-1A is
contained in the Fund's annual report to shareholders;
accordingly, the Fund hereby undertakes to furnish each
person to whom prospectuses are delivered with a copy of
the Fund's latest annual report, upon request and without
charge.
(b) Registrant undertakes to call, if requested by the holders
of at least 10% of the Registrant's outstanding shares, a
meeting of shareholders for the purpose of voting upon the
question of removal of a director or directors and to
assist in communications with shareholders as required by
Section 16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Seattle, and State of Washington, on the 27th
day of April, 1998.
ACCESSOR FUNDS, INC.
By: /s/ J. Anthony Whatley III
-------------------------------
J. Anthony Whatley III
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 13 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated:
Signature Title Date
--------- ----- ----
/s/ J. Anthony Whatley III 4/27/98
- ----------------------------- -----------------------------------------
J. Anthony Whatley III President, Principal Executive Officer
and Director
/s/ George G. Cobean III 4/27/98
- ----------------------------- -----------------------------------------
George G. Cobean III Director
/s/ Geoffrey C. Cross 4/27/98
- ----------------------------- -----------------------------------------
Geoffrey C. Cross Director
/s/ Ravindra A. Deo 4/27/98
- ----------------------------- -----------------------------------------
Ravindra A. Deo Principal Financial and Accounting Officer
<PAGE>
ACCESSOR FUNDS, INC.
EXHIBIT INDEX
Exhibit
Number Description Page Number
- ------ ----------- -----------
(8)(e)(1) 1st Amendment to Custody Agreement with
The Fifth Third Bank
(8)(e)(2) 2nd Amendment to Custody Agreement with
The Fifth Third Bank
(9)(a)(3)(A) Amended Appendix C dated February 19, 1998,
to Transfer Agency and Administrative Agreement
among the Fund and Bennington dated December 1,
1995.
(11) Consent of Independent Auditors
(14)(b) Registrant's Individual Retirement Custodial
Account Plan dated as of November 11, 1997,
including:
Instructions for Opening Your IRA
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
(15)(f) Distribution Plan for Investor Class Shares
adopted February 19, 1998
(15)(f)(1) Form of Dealer Agreement
(15)(g) Shareholder Service Plan adopted February 19, 1998
(15)(g)(1) Form of Shareholder Service Agreement
(15)(h) Administrative Services Plan adopted February 19, 1998
(15)(h)(1) Form of Administrative Services Agreement
(16) Computation of Performance Calculation
(17) Financial Data Schedules
(18) 18f-3 Plan adopted February 19, 1998
FIRST AMENDMENT TO THE
CUSTODY AGREEMENT
BETWEEN
ACCESSOR FUNDS, INC.,
AND
THE FIFTH THIRD BANK
This FIRST AMENDMENT TO THE CUSTODY AGREEMENT (the "First Amendment"),
is entered into this 11th day of November, 1997, by and between ACCESSOR FUNDS,
INC., a Maryland corporation (the "Fund"), and THE FIFTH THIRD BANK, a banking
company organized under the laws of the State of Ohio (the "Custodian").
BACKGROUND
A. The Fund and Fifth Third entered into a CUSTODY AGREEMENT on October
4, 1996, wherein the Fund desires that the Securities and cash of each of the
investment portfolios (such investment portfolios individually referred to
herein as a "Portfolio" and collectively as the "Portfolios"), be held and
administered by the Custodian pursuant to the Custody Agreement.
The Fund and Fifth Third each wish to amend Section 3.5(a) to the
Custody Agreement to reflect a change in the procedures for authorizing and
instructing the Custodian on an on-going basis to deposit securities of the Fund
in any Securities Depository or Book-Entry System.
AGREEMENT
Therefore, in consideration of the mutual covenants contained herein
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 3.5(a) of the Custody Agreement is amended in its
entirety to read as follows:
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Portfolios in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the
Portfolios in any Securities Depository or Book-Entry System,
the Portfolio shall deliver to the Custodian a resolution of
the Board of Directors, certified by an Officer, authorizing
and instructing the Custodian on an on-going basis to deposit
in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use of
such Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral
consisting of Securities. In the event of a change in the
Securities Depository or Book-Entry System employed for the
deposit of Securities of the Portfolios, the Fund shall review
and adopt a resolution and deliver a copy thereof, certified
by an Officer, to the Custodian.
IN WITNESS WHEREOF, the parties have entered into this First Amendment
to the Custody Agreement as of the day and year first above set forth.
ACCESSOR FUNDS, INC.
By: /s/ J. Anthony Whatley III, President
J. Anthony Whatley III, President
THE FIFTH THIRD BANK
By: /s/ Elizabeth M. Goldthwait
Name: Elizabeth M. Goldthwait
Title: Officer
SECOND AMENDMENT TO THE
CUSTODY AGREEMENT
BETWEEN
ACCESSOR FUNDS, INC.,
AND
THE FIFTH THIRD BANK
This SECOND AMENDENDMENT TO THE CUSTODY AGREEMENT (the "Second
Amendment"), is entered into this 19th day of February, 1998, by and between
ACCESSOR FUNDS, INC., a Maryland corporation (the "Fund"), and THE FIFTH THIRD
BANK, a banking company organized under the laws of the State of Ohio (the
"Custodian").
BACKGROUND
A. The Fund and Fifth Third entered into a CUSTODY AGREEMENT on October
4, 1996, wherein the Fund desires that the Securities and cash of each of the
investment portfolios (such investment portfolios individually referred to
herein as a "Portfolio" and collectively as the "Portfolios"), be held and
administered by the Custodian pursuant to the Custody Agreement.
The Fund and Fifth Third each wish to amend Section 3.5(e) to the
Custody Agreement to reflect that the Custodian shall promptly send to the Fund
reports it receives from the appropriate Federal Reserve Bank or clearing agency
on its respective system of internal accounting control.
AGREEMENT
Therefore, in consideration of the mutual covenants contained herein
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 3.5(e) of the Custody Agreement is amended in its entirety to
read as follows:
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Portfolios in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(e) Upon request, the Custodian shall provide the
Portfolio with copies of any report (obtained by the Custodian
from a Book-Entry System or Securities Depository in which
Securities of the Portfolio is kept) on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
The Custodian, or its agent which deposits the securities,
shall promptly send to the Fund reports it receives from the
appropriate Federal Reserve Bank or clearing agency on its
respective system of internal accounting control.
IN WITNESS WHEREOF, the parties have entered into this Second Amendment
to the Custody Agreement as of the day and year first above set forth.
ACCESSOR FUNDS, INC.
By:/s/J. Anthony Whatley III, President
J. Anthony Whatley III, President
THE FIFTH THIRD BANK
By:/s/Elizabeth M. Goldthwait
Name: Elizabeth M. Goldthwait
Title: Officer
AMENDED APPENDIX C
TO TRANSFER AGENCY AND ADMINISTRATIVE AGREEMENT
BETWEEN ACCESSOR FUNDS, INC. AND
BENNINGTON CAPITAL MANAGEMENT L.P. DATED
DECEMBER 1, 1995
Amended Fee Schedule
February 19, 1998
FEES:
Maintenance Fee Per Class of Shares Per Portfolio:
- --------------------------------------------------
Each Portfolio shall pay an annual maintenance fee of 0.13% of its' average
daily net assets of each Portfolio, which fee shall be calculated daily and
billed monthly.
Transaction Fee:
- ----------------
A transaction fee of $.50 per transaction will be calculated daily and billed
monthly.
Includes: cost of postage and mailing for statements, confirmations, etc.,
facsimile transmission charges, non-Fund stationery, paper, and most
out-of-pocket expenses with respect to transfer agent services.
OUT-OF-POCKET EXPENSES:
Transfer Agent Expenses:
- ------------------------
Includes: federal reserve wire processing fees, ACH processing fees, and check
processing charges, which will be billed to the Fund separately.
Administrative Expenses:
- ------------------------
Includes: forms for IRS tax reporting, shareholder tax reporting, state tax
reporting, forms for any Prototype retirement plans, postage, mailing, non-Fund
stationery, paper, copying expenses, and other out-of-pocket expenses, which
will be billed to the Fund separately.
Blue Sky Expenses:
- ------------------
Includes: cost of filing fees, postage, mailing, non-Fund stationery, paper,
copying expenses, and other out-of-pocket expenses, which will be billed to the
Fund separately.
Fund stationery
- ---------------
Fund stationery (paper, envelopes, statements) will be billed to the Fund
separately.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 13 to Registration
Statement under the Securities Act of 1933, filed under Registration Statement
No. 33-41245 of our report dated February 16, 1998, relating to Accessor Funds,
Inc., including Growth Portfolio, Value and Income Portfolio, Small to Mid Cap
Portfolio, International Equity Portfolio, Intermediate Fixed-Income Portfolio,
Short-Intermediate Fixed-Income Portfolio, Mortgage Securities Portfolio, and
U.S. Government Money Portfolio, incorporated by reference in the Statement of
Additional Information and to the references to us under the captions "Financial
Highlights" and "Independent Auditors", in such Registration Statement.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 27, 1998
CONTENTS
I. Procedures
Instructions For Opening Your IRA 1
Individual Retirement Custodial Account Disclosure Statement 1
Individual Retirement Custodial Account Agreement
(Under Section 408(a) Of the Internal Revenue Code) 1
II. Retirement Account Forms
Individual Retirement Custodial Account Application And
Adoption Agreement
IRA Transfer Request/Direct Rollover Request
Authorization For Distribution From Individual Retirement Account
<PAGE>
INSTRUCTIONS FOR OPENING YOUR IRA
DISCLOSURE
Accessor Funds, Inc. (the "Fund"), is a multi-managed, no-load, open-end
management investment company, known as a mutual fund, currently with eight
diversified investment portfolios, each with its own investment objective and
policies. While The Fifth Third Bank is the Custodian of your individual
retirement arrangement account ("IRA"), investments in the portfolios of the
Fund are not deposits or obligations of, or guaranteed or endorsed by any bank.
Further, investments in the portfolios are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency. The Fund's
Individual Retirement Custodial Account Plan consists of the following
documents.
DOCUMENTS
IRA Disclosure Statement
IRA Custodial Account Agreement
IRA Application and Adoption Agreement Form
IRA Transfer Request/Direct Rollover Request Form
Authorization For Distribution From IRA
Accessor Funds, Inc. Prospectuses
Please read each of these documents carefully as they contain the information
you need to establish an IRA. Since many of the benefits of an IRA are related
to income taxes, you are encouraged to discuss your IRA plans with your lawyer,
accountant or tax adviser. Neither Bennington Capital Management L.P. nor the
Custodian may act as your tax or investment adviser. You are responsible for
complying with the tax laws and financial considerations as they apply to your
situation.
OPENING YOUR IRA
1. Please complete and sign the IRA Application and Adoption Agreement Form.
This sets up an IRA in your name or, if a Spousal IRA, in your spouse's
name, permits rollovers, designates beneficiaries and specifies your
investment choices.
2. Please complete and sign the IRA Transfer Request/Direct Rollover Request
Form if your initial investment is from a transfer of assets or rollover
from another IRA or qualified plan. Complete a form for each organization
or account from which an IRA investment is to be transferred.
3. Remove the IRA Application and Adoption Agreement Form and the Transfer
Request/Direct Rollover Request (if applicable) and deliver them to your
investment adviser. Retain the IRA Disclosure Statement and the IRA
Custodial Account Agreement for your records.
DISTRIBUTIONS
Please contact your investment adviser or Bennington Capital Management L.P. at
(800) 759-3504 for information on taking a distribution from your IRA.
FEES AND MINIMUMS
The fees are set out on the Application and Adoption Agreement form. Currently,
there are no IRA fees if your aggregate IRA investment is $10,000 at year-end.
IRA's under $10,000 will be debited for an annual $25.00 maintenance fee in
January of each year. The fees can be changed with 30 days' written notice to
you.
The minimum initial investment to open an IRA is $1,000 in the aggregate.
Subsequent investments are $100 in the aggregate. These minimums can be changed
with 30 days' written notice to you.
MAILING INSTRUCTIONS
Check to be sure you have properly completed all necessary information and
forms. Your IRA cannot be opened without the properly completed documents.
Please deliver all of the completed and signed forms to your investment adviser,
who will deliver them to Accessor Funds, Inc., P.O. Box 1748, Seattle WA 98111.
<PAGE>
ACCESSOR FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT DISCLOSURE STATEMENT
INTRODUCTION
This disclosure statement contains information about your Individual Retirement
Custodial Account ("IRA") for investment in Accessor Funds, Inc. (the "Fund"), a
multi-managed, no-load, open-end management investment company, known as a
mutual fund. The Fund currently consists of eight diversified investment
portfolios, each with its own investment objective and policies. Your interest
in the IRA is nonforfeitable. All assets of the IRA are registered in the name
of The Fifth Third Bank, a banking company organized under the laws of the State
of Ohio (the "Custodian") or of a suitable nominee as custodian for your
benefit, or that of your beneficiary. Bennington Capital Management L.P.
("Bennington") acts as investment adviser, manager and transfer agent to the
Fund. Through an agreement between the Fund, Bennington and the Custodian,
Bennington provides administrative services on behalf of the Fund and the
Custodian to the IRA. Your IRA is a custodial account established for your
exclusive benefit or that of your named beneficiary or beneficiaries as
described in Section 408 of the Internal Revenue Code of 1986, as amended (the
"Code").
Your IRA is established through the use of the provisions of Internal Revenue
Service ("IRS") Form 5305-A (on Form 5305-SA in the case of a SIMPLE IRA), which
is a model custodial account agreement that meets the requirements of Section
408(a) of the Code and has been automatically approved as to form by the IRS.
The IRS approval applies only to the model form; it is not an endorsement of the
Fund-sponsored IRA. Accessor Funds, Inc. Individual Retirement Custodial Account
Plan consists of the Individual Retirement Custodial Account Agreement (the
"Custodial Account Agreement"),this Disclosure Statement, the Application an
Adoption Agreement (the "Adoption Agreement") and the other appropriate forms,
which will be amended from time to time to comply with the provisions of the IRS
Code and related regulations. Other amendments may be made with the consent of
the persons whose signatures appear on the Adoption Agreement.
RIGHT TO REVOKE
You may revoke a newly established IRA at any time within seven days after the
date on which you establish your account. An IRA established more than seven
days after the date of your receipt of this Disclosure Statement may not be
revoked.
To revoke your IRA, mail or deliver a written notice of revocation to:
Accessor Funds, Inc.
P.O. Box 1748
Seattle WA 98111-1748
Mailed notice will be deemed given on the date that it is postmarked (or, if
sent by certified or registered mail, on the date of certification or
registration). If you revoke your IRA within the seven-day period, you are
entitled to a return of the entire amount you contributed into your IRA, without
adjustment for such items as sales charges, administrative expenses or
fluctuations in market value. Your initial investment in the IRA will be
invested in the U.S. Government Money Portfolio for seven days and then invested
in the Portfolios of the Fund in accordance with the directions on your Adoption
Agreement.
TAX ADVANTAGES
Your IRA gives you several tax benefits. Earnings on the assets held in your IRA
are not subject to federal income tax until withdrawn by you. You may be able to
deduct all or part of your IRA contribution on your federal income tax return.
State income tax treatment of your IRA may differ from federal treatment; ask
your state tax department or your personal tax adviser for details.
If you are eligible to receive a distribution from a tax qualified retirement
plan as a result of, for example, termination of employment, plan
discontinuance, or retirement, all or part of the distribution may be
transferred directly into your IRA. This is a called a "direct rollover." Or, if
your distribution is paid directly to you, you may make a "regular rollover" to
your IRA within 60 days. By making a rollover, you can defer income taxes on the
amount rolled over until you subsequently make withdrawals from your IRA.
Since many of the benefits of an IRA are related to income taxes, you are
encouraged to discuss your IRA plans with your lawyer, accountant or tax
adviser. Neither Bennington nor the Custodian may act as your tax adviser. You
must be responsible for complying with the tax laws and financial considerations
as they apply to your situation.
ESTABLISHING YOUR IRA
All IRAs must meet certain requirements. Contributions generally must be made in
cash. The IRA trustee or custodian must be a bank or other person who has been
approved by the Secretary of the Treasury. Your contributions may not be
invested in life insurance or be commingled with other property except in a
common trust or investment fund. Your interest in the account must be
nonforfeitable at all times. The annual earnings for your IRA consist of all
dividends and distributions on the Portfolio shares held in your account. Fund
dividends and distributions are reinvested in additional shares and accumulate
on a tax deferred basis.
You may obtain further information on IRAs from any district office of the IRS
or by requesting Publication 590, "Individual Retirement Arrangements" from the
IRS.
FEES AND EXPENSES
Fees and other expenses of maintaining your IRA account are described in the
Adoption Agreement and in the letter you receive confirming the acceptance of
your IRA and may be changed from time to time, as provided in the Custodial
Agreement.
ELIGIBILITY
Whether you are an employee or a self-employed individual, you are eligible to
contribute to an IRA even if you are already covered under another tax-qualified
plan. Your employer may contribute to an IRA established by you and you may
contribute to an IRA used as part of a Simplified Employee Pension Plan ("SEP")
or Savings Incentive Match Plan for Employees ("SIMPLE") described below. You
are eligible to establish and contribute to an IRA for any year if you received
taxable compensation during the year for personal services you rendered and you
did not reach age 70 1/2 during the year. Taxable compensation includes wages,
salaries, tips, commissions, fees, bonuses, taxable alimony and separate
maintenance payments. Income not considered compensation includes pension income
or earnings and profits from property, such as dividend, interest, rental or
capital gains income.
TYPES OF IRAS
Regular IRA
If you have taxable compensation and are under age 70 1/2, you may make a
contribution to a Regular IRA of $2,000 or 100% of your compensation, whichever
is less. To determine the tax deductibility of your contribution, see
"Deductible IRA Contributions" on page 17. However, rollover contributions and
contributions to a simplified employee pension (SEP) or a simple retirement plan
(SIMPLE), as explained below, can be more than $2,000 per year.
Spousal IRA
You may be eligible to establish an additional but separate and independent
account for your unemployed spouse. To qualify, you must be married at the end
of the tax year, you and your spouse must file a joint return, your spouse must
be under age 70 1/2, at least one of the spouses must have compensation or
earned income from personal services rendered. For a spousal IRA, your spouse
must set up a different IRA, separate from yours, to which you contribute. The
maximum total contribution to your IRA and to a Spousal IRA may not exceed the
lesser of $4,000 or 100% of your combined compensation. The contribution does
not have to be equally divided between the two accounts; however, the maximum
contribution to either account is $2,000 or 100% of compensation. To determine
the amount of your income tax deduction for your IRA contribution and the amount
that can be contributed to each account, see the IRS instruction booklets for
Forms 1040 and 1040A. Although you may not continue contributing to your Regular
IRA once you have reached age 70 1/2, you may continue contributing to a Spousal
IRA until the year in which your spouse reaches age 70 1/2. With the exception
of the contribution limits, all rules that apply to a Regular IRA also apply to
a Spousal IRA.
If you or your spouse earn more than $250 in taxable compensation in any tax
year, you or your spouse may make contributions to your respective regular IRAs
equal to the lesser of $2,000 or 100% of taxable compensation.
Rollover IRA
Generally, a rollover is a tax-free transfer of cash or other assets from one
retirement program to which you contribute to another. The rollover must be
completed by the 60th day after the day you receive the distribution to be valid
and may only be done once in any one-year period (measured from the date you
receive the distribution). This rule applies separately to each IRA you own,
although for purposes of the rule, the Fund-sponsored IRA is considered one IRA
regardless of how many Portfolios of the Fund you choose. Exchanges of IRA money
between the Portfolios are restricted by the Fund's exchange policies, but not
by this rule. See IRS Publication 590 for more information about rollover IRAs.
There are two types of rollover contributions:
Rollover from one IRA to another. You may withdraw part or all of the
assets from one IRA and reinvest them in another IRA. You are not required
to receive a complete distribution from your IRA in order to make a
rollover contribution to another IRA, nor are you required to roll over the
full amount you received. Any amount you keep will generally be taxable
(unless it is a return of nondeductible contributions) in the year it is
received, and it will generally be subject to a 10% penalty tax if you are
under age 59 1/2. Once you reach age 70 1/2, your required minimum
distributions are not eligible for rollover treatment. However, you may
make rollover contributions, even though you may not make Regular IRA
contributions.
Rollover from an Employer's Qualified Plan to an IRA. This type of rollover
IRA is an IRA that contains only eligible distributions from an employer's
qualified retirement plan (e.g., profit sharing, pension, 401(k), or 403(b)
plan). By maintaining a separate IRA for this money (called a "Conduit
IRA"), you may subsequently roll it over into another employer's qualified
retirement plan (provided that the employer's plan accepts rollovers). If
you commingle this money with your Regular IRA contributions, you may not
roll it over into another employer's qualified retirement plan. These
rollover contributions, if properly made, are not included in your gross
income and therefore are not deductible from it; neither will rollover
contributions count toward the maximum allowable nondeductible
contribution. When you deposit an eligible rollover distribution from an
employer's qualified plan into an IRA, you are making an irrevocable
election indicating that the distribution be treated as a rollover
contribution. Consult your tax adviser before electing to roll over to an
IRA. By signing the Application, you are irrevocably electing to treat your
qualified plan distribution as a rollover.
If you receive an eligible rollover distribution from a qualified
retirement plan, you may roll over the amount you have received to an IRA,
as long as the rollover is completed by the 60th day after the day you
receive such amount. Any part of an eligible rollover distribution that is
made payable to you, even if you intend to roll it over into an individual
retirement account (or eligible retirement plan) is subject to mandatory
20% withholding for Federal income tax by the employer. You can avoid this
withholding by using the Direct Rollover Option discussed below.
Your plan or 403(b) sponsor is required to provide you with information
about direct and regular rollovers and withholding taxes before you receive
your distribution and must comply with your directions to make a direct
rollover. Read this information carefully before receiving any
distributions from a qualified retirement plan or 403(b) annuity. The rules
governing rollovers are complicated. Be sure to consult your tax adviser or
the IRA if you have a question about rollovers.
Direct Rollover Option. If you are entitled to an eligible distribution of
$200 or more from a qualified retirement plan, you may ask your employer to
make a direct rollover of the distribution to the Custodian. By electing a
direct rollover you are exempt from the 20% tax withholding requirements
that would apply if the distribution were made payable to you. The employer
must make the check payable to the Custodian/Trustee of the receiving IRA;
however, the employer has the option of giving the check to you for
delivery or mailing it directly to the IRA. The employer must report a
direct rollover on Form 1099-R and the Custodian will report the rollover
contribution on Form 5498.
The maximum amount you may roll over is the amount of employer contributions and
earnings distributed. You may not roll over any after-tax employee contributions
you made to the employer retirement plan. If you are over age 70 1/2, you may
not roll over any amount required to be distributed to you under the minimum
distribution rules. Also, if you are receiving periodic payments over your or
your and your designated beneficiary's life expectancy or for a period of at
least 10 years, you may not roll over these payments.
Once you have established a Rollover IRA, you will not be taxed until you take
distributions.
Special Rules for Surviving Spouses, Alternate Payees, and Other Beneficiaries.
If you are a surviving spouse, you may have an eligible rollover distribution
rolled directly into an IRA or paid to you. If you have the distribution paid to
you, you can keep it or roll it over to an IRA, but you cannot roll it over to
an employer's qualified plan. If you are a beneficiary other than the surviving
spouse, you cannot choose a direct rollover, and you cannot roll over the
distribution. If you are the spouse or former spouse alternate payee under a
Qualified Domestic Relations Order, you may have an eligible rollover
distribution rolled directly into an IRA or a qualified employer plan or have it
paid to you. If the distribution is paid to you, you may roll it over to an IRA
or another employer's qualified plan.
Exceptions to Rollover Contributions. Almost all distributions from employer
plans or 403(b) arrangements (for employees of tax-exempt employers) are
eligible for rollover to an IRA. The main exceptions are
o payments over the lifetime or life expectancy of the participant (or
participant and a designated beneficiary),
o installment payments for a period of 10 years or more,
o required distributions after age 70 1/2, and
o payments of employee after-tax contributions.
Transfer to a Successor Trustee/Custodian. A transfer is the movement of your
IRA funds directly from one trustee or custodian to another. You and the
accepting trustee or custodian use a Transfer Request to direct the current
trustee to transfer the IRA. Because you do not take physical receipt of the
money, the transaction is not reported to the IRS. Institutional transfers are
not subject to the one-year restriction that applies to rollovers; you may
transfer IRA money from one trustee or custodian to another as often as you
wish.
Simplified Employee Pension Plan ("SEP")
A separate IRA may be established for use by your employer as part of a SEP
arrangement. Your employer may contribute to your SEP-IRA up to a maximum of 15%
of your compensation or $30,000, whichever is less. If your SEP-IRA is used as
part of a salary reduction SEP ("SAR-SEP), you may elect to reduce your annual
compensation, up to a maximum of 15% of your compensation or $7,000 (indexed to
reflect cost-of-living adjustments), whichever is less, and have your employer
contribute that amount to your SEP-IRA. Beginning January 1, 1997, the SAR-SEP
plan was discontinued, although employers may continue to operate already
existing plans. If your employer maintains both a salary reduction SEP and a
regular SEP, the annual contribution limit to both SEPs together is 15% of your
compensation or $30,000, whichever is less. You may contribute, in addition to
the amount contributed by your employer to your SEP-IRA, an amount not in excess
of the limits referred to under the Regular IRA above. It is your and your
employer's responsibility to see that contributions in excess of normal IRA
limits are made under a valid SEP and are, therefore, proper. The amount of
compensation that may be used in 1998 for calculating contributions is $160,000.
The compensation limit reduces the maximum dollar amount that can be contributed
to a SEP-IRA in any given year from $30,000 to $24,000 (0.15 x $160,000).
Employer contributions under a SEP-IRA are immediately vested and belong to the
employee even if the employee leaves the company. The 70 1/2 age limit for
contributing to a Regular IRA does not apply to employer contributions made for
the benefit of eligible SEP participants.
SIMPLE RETIREMENT PLANS ("SIMPLE IRAs")
A SIMPLE IRA may be established for use by your employer as part of a SIMPLE
retirement plan. If your employer maintains a SIMPLE retirement plan, you may
elect to reduce your annual compensation by a percentage you choose (up to
$6,000, indexed to reflect cost-of-living adjustments) and have your employer
contribute that amount to your SIMPLE IRA. Your employer will either make a
matching contribution equal to 100% of your contributions (up to 3% of your
compensation) or make a non-elective contribution of 2% of compensation for each
eligible employee. You may contribute, in addition to the amount contributed by
your employer to your SIMPLE IRA, an amount not in excess of the limits referred
to under the Regular IRA above. It is your and your employer's responsibility to
see that contributions in excess of normal IRA limits are made under a valid
SIMPLE retirement plan and are, therefore, proper. Employer contributions under
a SIMPLE IRA are immediately vested and belong to the employee even if the
employee leaves the company. The 70 1/2 age limit for contributing to a Regular
IRA does not apply to employer contributions made for the benefit of eligible
SIMPLE retirement plan participants.
CONTRIBUTIONS
You may make a contribution to your existing IRA or establish a new IRA for a
taxable year at any time from the beginning of the tax year up to the date for
filing your federal tax return for that year (not including any extensions).
Usually this is April 15 of the following year. You do not have to contribute to
an IRA every year. Contributions must be in the form of a check, money order, or
similar cash item. No part of your IRA can be used to buy a life insurance
policy. Your account's assets cannot be commingled with other property, except
in a common trust fund or common investment fund. Your IRA may not be invested
in collectibles, such as gems, art or coins (other than certain gold, silver or
platinum coins issued by the United States or certain bullion).
Deductible Contributions. The amount of your deduction depends upon whether you
are (or in some cases your spouse is) an active participant in any
employer-sponsored retirement plan. If neither you nor your spouse is an active
participant of any employer-sponsored retirement plan, the entire IRA
contribution is deductible. If you are not an active participant in any
employer-sponsored retirement plan, your entire IRA contribution will generally
be deductible even if your spouse is an active participant in an
employer-sponsored retirement plan. If you are covered by an employer-sponsored
retirement plan at any time during a year, you are an "active participant" for
that year, even if you are not vested in your retirement benefit or are not
currently making contributions to the plan.
As an active participant to an employer-sponsored retirement plan, there may be
limitations on the deductibility of your contribution to your IRA. This depends
on the amount of your income.
Your Form W-2 (or your spouse's W-2) should indicate if you were an active
participant in an employer-sponsored retirement plan during a year. If you have
a question, you should ask your employer or the plan administrator.
The portion of your contribution that is deductible depends upon your filing
status and the amount of your adjusted gross income ("AGI"). AGI is your gross
income minus those deductions which are available to all taxpayers even if they
don't itemize. Instructions to calculate your AGI are provided with your income
tax Form 1040 or 1040A. The following table shows the deduction rules that apply
for 1998.
FOR ACTIVE RETIREMENT PLAN -- PARTICIPANTS
-------------------------------------------------------
If You Are Married Then Your IRA
If You Are Single Filing Jointly Contribution Is
-------------------------------------------------------
Up to Up to Fully
$30,000 $50,000 Deductible
Adjusted -------------------------------------------------------
Gross Over $30,000 Over $50,000 Partly
Income But less than But less than Deductible
$40,000 $60,000
-------------------------------------------------------
$40,000 $60,000 Not
and up and up Deductible
-------------------------------------------------------
If your AGI falls in the partly deductible range, you must calculate the portion
of your contribution that is deductible. To do this, multiply your contribution
by a fraction in which the numerator is the amount by which your AGI exceeds the
lower limit of the partly deductible range and the denominator is $10,000.
Subtract this from your contribution and then round up to the nearest $10. The
deductible amount is the greater of the amount calculated or $200 (provided you
contributed at least $200). If your contribution was less than $200, then the
entire contribution is deductible.
For example, assume that you make a $2,000 contribution to your IRA in a year in
which you are an active participant in your employer's retirement plan. Also
assume that your AGI for the year is $57,555 and you are married, filing
jointly. You would calculate the deductible portion of your contribution this
way:
<PAGE>
1. The amount by which your AGI exceeds the lower limit of the partly
deductible range:
(57,555-50,000) = 7,555
2. Divide this by 10,000: 7,555/10,000 = 0.7555
3. Multiply this by your contribution:
0.7555 x $2,000 = $1,511
4. Subtract this from your contributions:
($2,000 - $1,551) = $489
5. Round this up to the nearest $10: = $490
6. Your deductible contribution is the greater of this amount or $200.
If your spouse is an "active participant" for any part of a year but you are not
an active participant at any time in the year, separate income phase out limits
apply if you and your spouse file a joint return. Your IRA contribution will be
fully deductible if your joint AGI is $150,000 or less and partly deductible if
your joint AGI is over $150,000 but less than $160,000. If your joint AGI is
$160,000 or more, your IRA contribution will not be deductible. In one
situation, your spouse's "active participant" status will not affect the
deductibility of your contributions to your IRA. This rule applies only if you
and your spouse file separate tax returns for the taxable year and you lived
apart at all times during the taxable year.
Nondeductible IRA Contributions. Even though part or all of your contribution is
not deductible, you may still contribute to your IRA up to the limit on
contributions ($2,000, or $4,000 for a Regular IRA and a Spousal IRA. To the
extent that your contribution exceeds the deductible limits, it will be
nondeductible. However, earnings on all IRA contributions are tax deferred until
distribution. When you file your tax return for the year (including extensions),
you must designate the amount of nondeductible IRA contributions for the year by
using IRS Form 8606. If you overstate the amount of nondeductible contributions
for a taxable year, a penalty of $100 will be assessed for each overstatement
unless you can show that the overstatement was due to a reasonable cause.
Excess Contributions. The maximum contribution you can make to a Regular IRA is
$2,000 ($4,000 for your Regular IRA and a Spousal IRA) or 100% of compensation
or earned income, whichever is less. Any amount contributed to the IRA above the
maximum is considered an "excess contribution." The excess is calculated using
your contribution limit, not the deductible limit. An excess contribution is
subject to excise tax of 6% for each year it remains in the IRA.
Excess contributions may be corrected without paying a 6% penalty. To do so, you
must withdraw the excess and any earnings on the excess before the due date
(including extensions) for filing your federal income tax return for the year
for which you made the excess contribution. A deduction should not be taken for
any excess contribution. Earnings on the amount withdrawn must also be
withdrawn. The earnings must be included in your income for the tax year for
which the contribution was made and may be subject to a 10% premature withdrawal
tax if you have not reached age 59 1/2.
Any excess contribution withdrawn after the tax return due date (including any
extensions) for the year for which the contribution was made will be subject to
the 6% excise tax. There will be an additional 6% excise tax for each year the
excess remains in your account. You, not your account, are liable for the excise
tax.
Under limited circumstances, you may correct an excess contribution after tax
filing time by withdrawing the excess contribution (leaving the earnings in the
account). This withdrawal will not be includible in income nor will it be
subject to any premature withdrawal penalty if (1) your contributions to all
Regular and Spousal IRAs do not exceed $4,000 and (2) you did not take a
deduction for the excess amount (or you file an amended return (Form 1040X)
which removes the excess deduction).
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includible in taxable income and may be subject to a 10% premature
withdrawal penalty. No deduction will be allowed for the excess contribution for
the year in which it is made.
Excess contributions may be corrected in a subsequent year to the extent that
you contribute less than your maximum amount. As the prior excess contribution
is reduced or eliminated, the 6% excise tax will become correspondingly reduced
or eliminated for subsequent tax years. Also, you may be able to take an income
tax deduction for the amount of excess that was reduced or eliminated, depending
on whether you would be able to take a deduction if you had instead contributed
the same amount.
INVESTMENTS
You control the investment and reinvestment of contributions to your IRA.
Investments must be in one or more of the Portfolios available from time to time
as listed in the Application. You direct the investment of your IRA by giving
your investment instructions to Bennington. Since you control the investment of
your IRA, you are responsible for any losses; neither the Custodian, the Fund
nor Bennington has any responsibility for any loss or diminution in value
occasioned by your exercise of investment control. Transactions for your IRA
will generally be effected at the applicable public offering price or net asset
value for shares of the Portfolios involved next established after Bennington
receives proper investment instructions from you; consult the current prospectus
for the Portfolios involved for additional information.
Before making any investment, read carefully the current prospectus for any
Portfolio you are considering as an investment for your IRA. The prospectus will
contain information about the Portfolio's investment objective and policies, as
well as any minimum initial investment or minimum balance requirements and any
sales, redemption or other charges.
Because you control the selection of investments for your IRA, the growth in
value of your IRA cannot be guaranteed or projected.
PROHIBITED TRANSACTIONS
The tax-exempt status of your IRA will be revoked if you or your beneficiary
engages in any of the prohibited transactions listed in Section 4975 of the tax
code. The fair market value of your IRA will be includible in your taxable
income in the year in which such prohibited transaction takes place. The fair
market value of your IRA may also be subject to a 10% penalty tax as a premature
withdrawal if you have not yet reached the age of 59 1/2.
Any investment in a collectible (for example, rare stamps) by your IRA is
treated as a taxable withdrawal; the only exception involves certain types of
government-sponsored coins or bullion.
Generally, a prohibited transaction is any improper use of the assets in your
IRA. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your IRA or
a family member.
o Transfer of any property from your IRA to yourself or a family member or
from yourself or a family member to your IRA.
Your IRA could lose its tax exempt status if you use all or part of your
interest in your IRA as security for a loan or borrow any money from your IRA.
Any portion of your IRA used as security for a loan will be taxed as ordinary
income in the year in which the money is borrowed. If you are under age 59 1/2,
this amount will also be subject to a 10% penalty tax as a premature
distribution.
WITHDRAWALS AND DISTRIBUTIONS
You may withdraw from your IRA at any time. However, withdrawals before age 59
1/2 may be subject to a 10% penalty tax in addition to regular income taxes (see
below). Amounts withdrawn by you are includible in your gross income in the
taxable year that you receive them, and are taxable as ordinary income. Lump sum
withdrawals from an IRA are not eligible for averaging treatment available to
certain lump sum distributions from qualified employer retirement plans.
Methods of Distribution. Assets may be distributed from your IRA according to
one or more of the following methods selected by you:
o total distribution;
o distribution over a specified period
o purchase of an annuity contract
(See Article IV of your IRA Custodial Agreement for a full description of these
distribution methods.)
Latest Time to Withdraw. If you have not withdrawn your entire IRA by the April
1 following the year in which you reach 70 1/2, you must begin minimum
withdrawals by April 1 of that year in order to avoid penalty taxes. Subsequent
distributions must be made by December 31 of each following year over the
distribution period. If you maintain more than one IRA, you may take from any of
your IRAs the aggregate amount to be withdrawn.
Minimum Distributions. Once distributions are required to begin, they must not
be less than the amount each year (determined by actuarial tables) which
exhausts the value of the account over the required distribution period, which
is generally your life expectancy or the joint life expectancy of you and your
beneficiary. The minimum withdrawal rules are complex. Consult your tax adviser
for assistance. The penalty tax for not withdrawing enough is 50% of the
difference between the minimum withdrawal amount and your actual withdrawals
during a year.
Premature Withdrawals. Since the purpose of the IRA is to accumulate funds for
retirement, your receipt or use of any portion of your IRA before you attain age
59 1/2 generally will be considered as an early withdrawal and subject to a 10%
penalty tax.
The 10% penalty tax for early withdrawal will not apply if the distribution:
o was a result of your death or disability, or
o covers deductible medical expenses, or
o pays health insurance premiums for individuals who have received
unemployment compensation for at least 12 consecutive weeks, or
o qualifies as a first home purchase, orois one of a scheduled series of
substantially equal periodic payments for your life or life expectancy (or
the joint lives or life expectancies of you and your beneficiary), or
o the distribution is rolled over to another qualified retirement plan.
If there is an adjustment to the scheduled series of payments, the 10% penalty
tax will apply. For example, if you begin receiving payments at age 50 under a
withdrawal program providing for substantially equal payments over your life
expectancy, and at age 58 you elect to receive the remaining amount in your IRA
in a lump-sum, the 10% penalty tax will apply to the lump sum and to the amounts
previously paid to you before age 59 1/2.
Distribution Upon Disability. A distribution on account of your disability will
not be subject to the "additional tax on early distributions" under Code Section
72(t). For that purpose, you will be considered disabled if you can prove, as
provided in Code Section 72(m)(7), that you are unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or be of
long-continued and indefinite duration. For additional information about
Disabilities see IRS Publication No. 522.
Distribution Upon Death. The assets remaining in your IRA will be distributed
upon your death to the Beneficiary(ies) named by you on record with the
Custodian. If there is no Beneficiary designated for your IRA in the Custodian's
records, or if the Beneficiary you had designated dies before you do, your IRA
will be paid to your surviving spouse, or if none, to your estate. If your
spouse was your Primary Beneficiary and you had started to receive distributions
from your IRA, but die before receiving the balance of your IRA, your spouse has
several options. Your spouse can either keep receiving distributions from your
IRA at least as rapidly, or roll over all or part of your IRA into an IRA in his
or her name. If distributions from your IRA had not yet begun, your spouse may
defer taking distributions until April 1 of the year you would have turned 70
1/2, and then receive distributions over his or her life expectancy, or roll
over the account into an IRA in his or her name, and treat the IRA as his or her
own. If your Beneficiary is not your spouse, and distributions had begun from
your account, your Beneficiary may continue to receive them at least as rapidly
as the payment schedule you had established. If distributions had not yet begun,
your Beneficiary must deplete your account within 5 years of your death, or
start taking distributions from your account within one year of your death over
his or her own life expectancy.
Minimum Distribution Incidental Benefit (MDIB) Rule. This rule specifies that
benefits provided under a retirement plan must be for the primary benefit of a
participant rather than for the beneficiary or beneficiaries. If your spouse is
your sole beneficiary, this special MDIB rule does not apply. In some cases, the
distribution under the MDIB rule may exceed the amount required under the normal
age 70 1/2 required minimum distribution rules. If someone other than, or in
addition to, your spouse is a named beneficiary, the minimum distribution
required is the greater of either the amount determined under the regular rules
or the amount determined under the MDIB rule. For additional information, please
see IRS Publication 590 and consult your tax adviser.
Distribution of Nondeductible Contributions. To the extent that a withdrawal
constitutes the return of your nondeductible contributions (not including
earnings), it will be tax-free. However, if you made both deductible and
nondeductible IRA contributions, then each distribution will be treated as
partly a return of your nondeductible contributions (not taxable) and partly a
distribution of deductible contributions and earnings (taxable). The nontaxable
amount is the portion of the amount withdrawn which bears the same ratio as your
total nondeductible IRA contributions bear to the total balance of all your IRAs
(including rollover IRAs and SEPs).
<PAGE>
For example, in 1997 a participant's IRA comprised the following:
Total Deductible Contributions $5,000
Total Nondeductible Contributions $2,000
Earnings On IRAs as of 12/31/97 $1,000
Less 1997 Withdrawal $ 500
Total Account Balance as of 12/31/97 $7,500
To determine the nontaxable portion of your 1996 withdrawal, the total 1997
withdrawal ($500) must be multiplied by a fraction, in which the numerator of
the fraction is the total of all nondeductible contributions remaining in the
account before the 1997 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-97 ($7,500) plus the 1997 withdrawal ($500) or
$8,000. The calculation is:
Total Remaining Nondeductible
Contributions $2,000 x $500 = $ 125
-------------
Total Account Balance $8,000
Thus, $125 of the $500 withdrawal in 1997 will not be included in your taxable
income. The remaining $375 will be taxable for 1997. In addition, for future
calculations the remaining nondeductible contribution total will be $2,000 minus
$125, or $1,875.
A loss in your IRA investment may be deductible. You should consult your tax
adviser for further details on the appropriate calculation for this deduction if
applicable.
Tax Withholding. Federal income tax will be withheld from distributions you
receive from an IRA unless you elect not to have tax withheld. However, if IRA
distributions are to be delivered outside of the United States, this tax is
mandatory and you may not elect otherwise unless you certify to the Custodian
that you are not a U.S. citizen residing overseas or a "tax avoidance
expatriate" as described in Code Section 877. Federal income tax will be
withheld at the rate of 10%. The tax withheld from an annuity or a similar
periodic payment is based on your marital status and the number of withholding
allowances you claim on your withholding certificate (Form W-4P). If you have
not filed a certificate, the tax withheld will be determined by treating you as
a married individual claiming three withholding allowances. Generally, tax will
be withheld at a 10% rate on lump-sum distributions.
TAX MATTERS
You will receive a report from the Custodian and Bennington not later than 60
days after the close of each calendar year (or after the Custodian's resignation
or removal) reflecting the transactions effected by the Custodian or Bennington
during the calendar year and the assets of your IRA custodial account at its
close. You must respond within 60 days to correct any information on these
reports.
State tax treatment of your distributions may differ from federal treatment.
Consult your state tax authorities or personal tax adviser for details.
Custodian IRS Reporting
The Custodian will report all withdrawals from your account to the IRS and the
recipient on the appropriate form. This report will include a description (e.g.
premature, normal, etc.) of the distribution. For reporting purposes, a direct
transfer of assets to a successor custodian or trustee is not considered a
withdrawal.
The Custodian will report to the IRS the year-end value of your account and the
amount of any rollover or accumulated contributions made during a calendar year,
as well as the tax year for which a contribution is made. Unless the Custodian
receives an indication from you to the contrary, it will treat any amount as a
contribution for the tax year in which it is received. It is most important that
a contribution for the prior year made between January and April 15th be clearly
designated as such.
How to File IRA Information with the IRS
Contributions to your IRA must be reported on your federal income tax return
(see Form 1040 or 1040A instructions for details). If you make a designated
nondeductible contribution to any IRA for any tax year, you must attach Form
8606 to your tax return for that year. If you make nondeductible IRA
contributions and you do not file Form 8606, Nondeductible IRAs (Contributions,
Distributions, and Basis), with your tax return, you may have to pay a $50
penalty. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional information on
your tax return. The information required includes: (1) the amount of your
nondeductible contributions for that year; (2) the amount of withdrawals from
IRAs in that year; (3) the amount by which your total nondeductible
contributions for all years exceeds the total amount of your distributions
previously excluded from gross income; and (4) the total value of all your IRAs
as of the end of the year. If you fail to report any of this information, the
IRS will assume that all your contributions were deductible. This will result in
the taxation of the portion of your withdrawals that should be treated as a
nontaxable return of your nondeductible contributions.
You must file Form 5329 with the IRS for each taxable year for which you made an
excess contribution, or you take a premature withdrawal, or you withdraw less
than the required minimum amount from your IRA.
If you overstate the amount of nondeductible contributions for a taxable year, a
$100 penalty will be assessed unless you can justify the overstatement with a
reasonable cause.
Federal income tax will be withheld at a flat rate of 10% from any withdrawal
from your IRA, unless you elect not to have tax withheld. Withdrawals from an
IRA are not subject to the mandatory 20% income tax withholding that applies to
most distributions from qualified plans or 403(b) accounts that are not directly
rolled over to another plan or IRA.
Any earnings on investments held in your IRA are generally exempt from federal
income taxes and will not be taxed until withdrawn by you, unless the tax exempt
status of your IRA is revoked.
ACCOUNT TERMINATION
You may terminate your IRA at any time after its establishment by sending a
complete withdrawal form, or a transfer authorization form, to:
Accessor Funds, Inc.
P.O. Box 1748
Seattle WA 98111-1748
Your IRA with Accessor Funds, Inc. will terminate upon the first to occur of the
following:
o The date your properly executed withdrawal form (as described above) is
received and accepted by Bennington or, if later, the termination date
specified in the withdrawal form.
o The date the IRA ceases to qualify under the tax code. This will be deemed
a termination.
o The transfer of the IRA to another custodian/trustee.
o The rollover of the amounts in the IRA to another custodian/trustee.
o Any outstanding fees must be received prior to such a termination of your
account.
The amount you receive from your IRA will be treated as a withdrawal, and thus
the rules relating to IRA withdrawals will apply. For example, if the IRA is
terminated before you reach age 59 1/2, the 10% early withdrawal penalty may
apply on the amount you receive.
IRS DOCUMENTS
For additional information, please consult the district office of the IRS, or
the following IRS publications:
Publication 522, "Disability Payments";
Publication 560, "Retirement Plans for the Self-Employed";
Publication 575, "Pension and Annuity Income (Including Simplified General
Rule)";
Publication 590, "Individual Retirement Arrangements IRAs)."
<PAGE>
ACCESSOR FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT AGREEMENT (UNDER SECTION 408(A) OF THE
INTERNAL REVENUE CODE)
The Depositor whose name appears on the attached Individual Retirement Custodial
Account Application and Adoption Agreement (the "Adoption Agreement") is
establishing an individual retirement account under Section 408(a) of the
Internal Revenue Code to provide for the Depositor's retirement. The Custodian
has given the Depositor the disclosure statement required under Regulation
section 1.408-6. The following provisions of Articles I to VII are in the form
promulgated by the Internal Revenue Service in Form 5305-A for use in
establishing an individual retirement custodial account.
The Depositor has deposited with Custodian an initial contribution in cash, as
set forth in the attached Adoption Agreement and the Depositor and the Custodian
make the following agreement.
Article I.
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993 include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code or an
employer contribution to a simplified employee pension plan as described in
section 408(k).
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
Article IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with section 408(a)(6) and Proposed Regulations section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of
the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy
of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy
of the Depositor and the Depositor's designated beneficiary, or the life
expectancy of the designated beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy
(or joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of a distribution in accordance
with paragraph 4(b)(ii), determine life expectancy using the attained age
of the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
Article V.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Adoption Agreement.
Article VIII.
1. Definitions. As used in this Article VIII the following terms have the
following meanings:
"Account" or "Custodial Account" means the custodial account established
hereunder in the name of the Custodian for the benefit of Depositor.
"Agreement" means the Accessor Funds, Inc. Individual Retirement Account
Custodial Agreement, as may be amended from time to time, including the
information and provisions set forth in any Account Adoption Agreement that
goes with this Agreement.
"Adoption Agreement" means the Individual Retirement Custodial Account
Application and Adoption Agreement form by which this Agreement is
established between the Depositor and the Custodian. The statements
contained herein shall be incorporated into this Agreement. "Authorized
Agent" means an investment adviser appointed by the Depositor on the
Adoption Agreement or on a signed form acceptable to and filed with
Bennington, to issue investment directions or issue orders for the purchase
or sale of shares of one or more of the Portfolios in the Depositor's
Account. "Beneficiary" means the person or persons (including a trust or
estate) designated as such by the Depositor, and as may be amended from
time to time, on a signed form acceptable to and filed with Bennington
pursuant to Article VIII, paragraph 5 of this Agreement. "Bennington" means
Bennington Capital Management L.P., a Washington limited partnership and
registered investment adviser. Bennington is the manager and transfer agent
of the Fund and has entered into an agreement with the Custodian to perform
various administrative duties of either the Custodian or the Fund with
respect to Accounts, including the services described herein. "Code" means
the Internal Revenue Code of 1986, as amended. "Custodian" means The Fifth
Third Bank, a banking company organized under the laws of the State of Ohio
, or its successors, as specified in the Account Adoption Agreement.
"Depositor" means the person named in the Account Adoption Agreement. If
Depositor has designated an Authorized Agent on the Adoption Agreement
Form, the Authorized Agent shall have the authority to act as the Depositor
under this Agreement to issue investment directions or issue orders for the
sale or purchase of shares of one or more Portfolios to Bennington and such
authority shall remain in force until terminated in writing by Depositor.
"Fund" means Accessor Funds, Inc., a multi-managed, no-load, open-end
management investment company, known as a mutual fund. The Fund currently
consists of eight diversified investment portfolios, each with its own
investment objective and policies. "Portfolio" (collectively "Portfolios")
means one or more of the diversified investment portfolios of the Fund
which is specified in the Adoption Agreement, or which is designated by the
Fund, as being available as an investment for the custodial account;
provided, however, that the Fund and the Portfolios must be legally offered
for sale in the state of the Depositor's residence in order to be a
Portfolio hereunder.
2. Contributions. All assets in the Custodial Account shall be invested and
reinvested in full and fractional shares of one or more Portfolios. Such
investments shall be made in such proportions and/or in such amounts as
Depositor or the Authorized Agent may direct; provided that the Depositor's
initial contribution to the Custodial Account as indicated on the Adoption
Agreement shall be invested and held in the U.S. Government Money Portfolio
until seven (7) days have elapsed from the date of acceptance of the
Adoption Agreement by or on behalf of the Custodian.
Bennington shall be responsible for promptly executing all investment
directions by the Depositor for the purchase or sale of shares of one or
more of the Portfolios hereunder. Any purchase or redemption of shares of a
Portfolio for or from the Depositor's Account will be effected at the net
asset value of such Portfolio (as described in the then effective
prospectus for such Portfolio) next established after Bennington has
received the Depositor's investment directions in good order. However, if
investment directions with respect to the investment of any contribution
hereunder are not received from the Depositor as required or, if received,
are unclear or incomplete in the opinion of Bennington, the contribution
shall be invested in the U.S. Government Money Portfolio until clear or
complete instructions are received, without liability for loss of income or
appreciation. If Bennington does not receive clear or complete instructions
from the Depositor within a reasonable time, the contribution shall be
returned to the Depositor. If any directions or other orders by the
Depositor with respect to the sale or purchase of shares of one or more
Funds for the Custodial Account are unclear or incomplete in the opinion of
Bennington, Bennington will refrain from carrying out such investment
directions or from executing any such sale or purchase, without liability
for loss of income or for appreciation or depreciation of any asset,
pending receipt of clarification or completion from the Depositor.
All investment directions by Depositor will be subject to any minimum
initial or additional investment or minimum balance rules applicable to a
Portfolio as described in its prospectus.
All dividends and capital gains or other distributions received on the
shares of any Portfolio held in the Depositor's Account shall be retained
in the account and (unless received in additional shares) shall be
reinvested in full and fractional shares of such Portfolio.
3. Rollover Contributions. Only rollover contributions that are in the form of
a check, money order or similar cash item will be accepted for the
Custodial Account, except that securities may be accepted at the sole
discretion of the Fund, in kind, as described in the prospectuses of the
Fund. The Depositor shall designate each rollover contribution as such to
the Custodian, and by such designation shall confirm to the Custodian that
a proposed rollover contribution qualifies as a rollover contribution
within the meaning of sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of
the Code or an employer contribution to a plan described in section 408(k)
of the Code.
The Custodian, upon written direction of the Depositor and after submission
to the Custodian of such documents as it may reasonably require, shall, to
the extent permitted, transfer the assets held under this Agreement
(reduced by any amounts referred to in paragraph 9) to a successor
individual retirement account, individual retirement annuity (other than an
endowment contract) or retirement bond for the Depositor's benefit or to an
exempt employee's trust established under a plan that satisfies the
qualification requirements of section 401(a) of the Code. Any amounts
received or transferred by the Custodian under this paragraph shall be
accompanied by such records and other documents as the Custodian deems
necessary to establish the nature, value and extent of the assets and of
the various interests therein.
Neither Bennington, the Fund, the Custodian nor any other party providing
services to the Custodial Account will have any responsibility for
rendering advice with respect to the investment and reinvestment of
Depositor's Custodial Account, nor shall such parties be liable for any
loss or diminution in value which results from Depositor's exercise of
investment control over his custodial account. Depositor shall have and
exercise exclusive responsibility for and control over the investment of
the assets of his Custodial Account, and neither Bennington, the Fund, the
Custodian nor any other such party shall have any duty to question his
directions in that regard or to advise him regarding the purchase,
retention or sale of shares of one or more Funds for the Custodial Account.
The parties do not intend to confer any fiduciary duties on Custodian, the
Fund or Bennington, and none shall be implied. None of the Custodian, the
Fund or Bennington shall be liable (or assume any responsibility) for the
collection of contributions, the proper amount, time or deductibility of
any contribution to the Custodial Account or the propriety of any
contributions under this Agreement, or the purpose, time, amount (including
any minimum distribution amounts) or propriety of any distribution
hereunder, which matters are the responsibility of Depositor and
Depositor's Beneficiary.
4. Distributions. Subject to the provisions of Article IV of the Agreement,
the Custodian shall make distributions from the Account in accordance with
written instructions from the Depositor (or the Beneficiary if Depositor is
deceased). It is the responsibility of the Depositor (or the Beneficiary)
by appropriate distribution instructions to the Custodian to ensure that
the distribution requirements of Code Section 401(a)(9) and Article IV
above are met. Neither Custodian nor any other party providing services to
the Custodial Account assumes any responsibility for the tax treatment of
any distribution from the Custodial Account; such responsibility rests
solely with the person ordering the distribution. The Custodian or
Bennington shall not incur any liability for errors in calculations as a
result of any reliance on information provided by the Depositor (or the
Depositor's Authorized Agent, Beneficiary, executor or administrator).
Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order of Depositor (or Beneficiary if
Depositor is deceased) containing such information as the Custodian may
reasonably request.
5. Designation of Beneficiary. The Depositor shall have the right by written
notice to the Custodian to designate or to change a beneficiary to receive
any benefit to which Depositor may be entitled in the event of Depositor's
death prior to the complete distribution of such benefit. The form last
accepted by the Custodian before such distribution is to commence, provided
it was received by the Custodian (or deposited in the U.S. Mail or with a
delivery service) during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the Custodial Account,
thereupon shall revoke all such forms previously filed by that person. If
no such designation is in effect at the time of Depositor's death, or if
the designated Beneficiary has predeceased the Depositor, the Depositor's
beneficiary shall be his or her estate.
6. Amending the Agreement. Articles I through VII of this Agreement are in the
form promulgated by the Internal Revenue Service. It is anticipated that if
and when the Internal Revenue Service promulgates changes to Form 5305-A,
the Custodian will amend this Agreement correspondingly. The Custodian
shall amend in the same manner all agreements comparable to this one; and
may amend retroactively if necessary or appropriate in the opinion of the
Custodian in order to conform this Custodial Account to pertinent
provisions of the Code and other laws or successor provisions of law, or to
obtain a governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this Agreement,
or as otherwise may be advisable in the opinion of the Custodian. Such an
amendment by the Custodian shall be communicated in writing to Depositor,
and Depositor shall be deemed to have consented thereto unless, within 30
days after such communication to Depositor is mailed, Depositor gives
Custodian a written order for a complete distribution or transfer of the
Custodial Account in accordance with paragraph 10 of this Article VIII.
Pending the adoption of any amendment necessary or desirable to conform
this Custodial Account document to the requirements of any amendment to the
Internal Revenue Code or regulations or rulings thereunder, the Custodian
and Bennington may operate the Depositor's Custodial Account in accordance
with such requirements to the extent that the Custodian and/or Bennington
deem necessary to preserve the tax benefits of the Account.
This paragraph 6 shall not be construed to restrict the Custodian's right
to substitute fee schedules in the manner provided by paragraph 9 below,
and no such substitution shall be deemed to be an amendment of this
Agreement.
7. Delivery of Prospectuses, Proxies. Bennington shall deliver, or cause to be
delivered, to Depositor all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting materials
relating to the shares of the Portfolios credited to the Custodial Account.
No shares shall be voted, and no other action shall be taken pursuant to
such documents, except upon receipt of adequate written instructions from
Depositor.
8. Indemnification. Depositor shall always fully indemnify Bennington, the
Fund, the Portfolios and Custodian and save them harmless from any and all
liability whatsoever which may arise either (i) in connection with this
Agreement and the matters which it contemplates, except that which arises
directly out of Bennington's, the Fund's or Custodian's negligence or
willful misconduct, or (ii) with respect to making or failing to make any
distribution, other than for failure to make distribution in accordance
with an order therefor which is in full compliance with paragraph 10.
Neither Bennington nor Custodian shall be obligated or expected to commence
or defend any legal action or proceeding in connection with this Agreement
or such matters unless agreed upon by that party and Depositor, and unless
fully indemnified for so doing to that party's satisfaction.
The appointment by the Depositor of an Authorized Agent will be in effect
until written notice to the contrary is received by Bennington. Custodian
and Bennington may each conclusively rely upon and shall be protected in
acting upon any written order from Depositor or Beneficiary, or any
Authorized Agent appointed by the Depositor, or any other notice, request,
consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed, and so long as it acts in good
faith, in taking or omitting to take any other action in reliance thereon.
In addition, Custodian will carry out the requirements of any apparently
valid court order relating to the Custodial Account and will incur no
liability or responsibility for so doing.
9. Fees and Expenses. The Custodian shall serve as such without compensation
from the Account and the Custodian hereby waives any right it may have
otherwise to have any fees, commissions or other compensation from the
Account. The Depositor shall pay an annual maintenance charge as specified
on the applicable schedule. The schedule originally applicable shall be the
one attached to the Adoption Agreement furnished to the Depositor. The
Custodian may substitute a different schedule at any time upon 30 days'
written notice to Depositor and no such substitution shall be deemed to be
an amendment of this Agreement.
Any purchase, exchange, transfer or redemption of shares of a Portfolio for
or from the Depositor's Account will be subject to any applicable charge as
described in the then effective prospectus for such Portfolio.
Any income, gift, estate and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Custodial Account, that may
be levied or assessed in respect to such assets, and all other
administrative expenses incurred by Bennington in the performance of its
duties (including fees for legal services rendered to it in connection with
the Custodial Account) shall be charged to the Custodial Account.
All such fees and taxes and other administrative expenses charged to the
Custodial Account shall, to the extent not paid directly by the Depositor,
be collected either from the amount of any contribution or distribution to
or from the account, or (at the option of the person entitled to collect
such amounts) to the extent possible under the circumstances by the
conversion into cash of sufficient shares of one or more Portfolios held in
the Custodial Account (without liability for any loss incurred thereby).
Conversion into cash of shares of the Portfolio will occur first from the
U.S. Government Money Portfolio, followed in ascending order of risk
through the Portfolios of the Fund. Notwithstanding the foregoing,
Bennington may make demand upon the Depositor for payment of the amount of
such fees, taxes and other administrative expenses. Fees which remain
outstanding after 60 days may be subject to a collection charge.
If the Depositor has appointed an Authorized Agent and has elected on the
Adoption Agreement to cause the fees of the Authorized Agent to be paid
from the Custodial Account, the Custodian and Bennington shall pay such
fees upon the written request from the Authorized Agent to the Authorized
Agent from the Custodial Account hereunder. Such election to authorize the
payment of fees by the Depositor shall remain in full force until
terminated in writing by Depositor. The Authorized Agent must make a
written request each time a fee is requested by the Authorized Agent.
10. Termination of Agreement. This Agreement may be terminated by the Depositor
upon written notice of such termination to the Custodian and Bennington, or
by the receipt by Custodian of a direction from Depositor or his Authorized
Agent to make a complete distribution or transfer of the Custodial Account
assets. Upon termination of the Agreement, Custodian shall terminate the
Custodial Account by distributing all assets thereof in a single payment in
cash or in kind to Depositor or transferring all such assets to another
financial institutional in accordance with the directions of Depositor,
subject to Custodian's right to reserve funds as provided in paragraph 11,
below. Upon termination of the Custodial Account, this Custodial Account
document shall have no further force and effect, and Custodian shall be
relieved from all further liability hereunder or with respect to the
Custodial Account and all assets thereof so distributed.
11. Change of Custodian. In the event the Custodian shall be converted into,
merged or consolidated with, shall sell and transfer substantially all of
its assets and business to, or shall transfer substantially all of its
Custodial Accounts maintained pursuant to agreements comparable to this
Agreement to a bank, financial institution or other organization approved
by the Secretary of the Treasury to hold assets of individual retirement
accounts (a "Successor"), such Successor shall thereupon become and be the
Custodian of the Account with the same effect as though specifically so
named. The Depositor shall be provided with 30 days' prior written notice
of any change of Custodian pursuant to this paragraph, and shall be deemed
to have consented thereto unless, within 30 days after such notice to
Depositor is mailed, Depositor gives Custodian a written order for a
complete distribution or transfer of the Custodial Account assets in
accordance with paragraph 10. Upon receipt by Custodian of written
acceptance by its Successor of such Successor's appointment, Custodian
shall transfer and pay over to such Successor the assets of the Custodial
Account and all records (or copies thereof) of Custodian pertaining
thereto, provided that the Successor agrees not to dispose of any such
records without the Custodian's consent. Custodian is authorized, however,
to reserve such sum of money or property as it may deem advisable for
payment of all its fees, compensation, costs, and expenses, or for payment
of any other liabilities constituting a charge on or against the assets of
the Custodial Account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over
to the Successor.
No Custodian shall be liable for the acts or omissions of its predecessor
or its successor.
12. Notices. Any notice or distribution from Custodian or Bennington to any
person provided for in this Agreement shall be effective if sent by
first-class mail to such person at that person's last address on the
Custodian's records. The Custodian shall not be bound by any certificate,
notice, order information or other communication unless and until it has
been received in writing at its place of business.
13. Prohibited Actions. Depositor or Depositor's Beneficiary shall not have the
right or power to anticipate any part of the Custodial Account or to sell,
assign, transfer, pledge or hypothecate any part thereof. The Custodial
Account shall not be liable for the debts of Depositor or Depositor's
Beneficiary or subject to any seizure, attachment, execution or other legal
process in respect thereof. At no time shall it be possible for any part of
the assets of the Custodial Account to be used for or diverted to purposes
other than for the exclusive benefit of the Depositor or his/her
Beneficiary.
14. Entire Agreement. When accepted by the Custodian, this Agreement together
with the Adoption Agreement attached hereto constitutes the entire
agreement between the parties and is accepted in and shall be construed and
administered in accordance with the laws of the State of Washington. Any
action involving the Custodian brought by any other party must be brought
in a state or federal court in such state.
This Agreement is intended to qualify under Code Section 408(a) as an
individual retirement Custodial Account and to entitle Depositor to the
retirement savings deduction under Code Section 219 if available, and if
any provision hereof is subject to more than one interpretation or any term
used herein is subject to more than one construction, such ambiguity shall
be resolved in favor of that interpretation or construction which is
consistent with that intent. Neither the Custodian nor Bennington shall be
responsible for whether or not such intentions are achieved through use of
this Agreement.
<PAGE>
SECTION II
RETIREMENT ACCOUNT FORMS
ACCESSOR FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT APPLICATION AND ADOPTION AGREEMENT
I, the person signing this Individual Retirement Custodial Account Application
and Adoption Agreement (the "Adoption Agreement") establish an Individual
Retirement Account (the "Account") with Accessor Funds, Inc. (The Fifth Third
Bank, as Custodian). I agree to the terms of my Account, which are contained in
the document entitled "ACCESSOR FUNDS, INC. Individual Retirement Custodial
Account Agreement" and this Adoption Agreement. I certify the accuracy of the
information in this Adoption Agreement. My Account will be effective upon
acceptance by Accessor Funds, Inc. and The Fifth Third Bank, as Custodian.
(Please print all information).
ACCOUNT REGISTRATION
Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code: U.S. Citizen (circle one): Yes/No
Daytime Phone: Alien Resident (circle one): Yes/No
Evening Phone: If no, country of citizenship:
TYPE OF IRA
/__/ Regular IRA: /__/ Spousal IRA (each spouse must
complete an original Adoption
Agreement form)
Spouse's Name:
Spouse's Social Security Number:
$_________ contribution for Spouse's Accessor Funds, Inc. IRA
the 19__ tax year Account No:
$_________ contribution for
the 19__ tax year
/__/ Direct Transfer of an Choose this Transfer if you wish to
Existing IRA authorize Bennington to transfer your
existing IRA from another custodian to
Fifth Third. You must also complete the
IRA Transfer Form.
/__/ Direct Rollover from Choose this Rollover only if you are
Employer-Sponsored Plan funding this IRA with money you
/__/ Conduit (do not commingle) accumulated
in an employer's retirement plan which
is eligible for rollover. You must also
complete the IRA Transfer Form.
/__/ 60 Day Rollover Choose this Rollover if you are funding
this IRA with money you have received
from another custodian within 60 days of
establishing this Account.
/__/ SEP/IRA (Each eligible For a Simplified Employee Pension Plan
employee must complete established by an employer.
an IRA Adoption Agreement)
Name of Employer:
Must attach copy of employer SEP Plan.
/__/ SIMPLE/IRA (Each eligible For a SIMPLE Retirement Plan
employee must established by an employer.
complete an IRA Adoption
Agreement) Name of Employer:
Must attach copy of employer SIMPLE
Retirement Plan.
<PAGE>
INVESTMENT INFORMATION
Please fill a percentage next to those portfolios in which you plan to invest.
The minimum investment is an aggregate of $1000. Subsequent investments are an
aggregate of $100. Be sure to read the prospectuses of the portfolios you
choose.
Growth Portfolio % Intermediate Fixed-Income %
Value and Income Portfolio % Short-Intermediate Fixed-Income %
Small to Mid Cap Portfolio % Mortgage Securities %
International Equity Portfolio % U.S. Government Money %
PURCHASE INSTRUCTIONS
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
mail to: Bennington Capital Management L.P.
P.O. Box 1748
Seattle WA 98111-1748
Fed-wire payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management, L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
BENEFICIARY DESIGNATION
I hereby designate the persons named below as primary beneficiaries to receive
payment of the value of my IRA account upon my death:
Primary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If no primary beneficiary is living at
the time of my death, I hereby specify that the balance be distributed
to my contingent beneficiaries below.
<PAGE>
Secondary Beneficiaries
1. Name: 2. Name:
Social Security Number: Social Security Number:
Relationship: Relationship:
Date of Birth: Date of Birth:
Address: Address:
City, State Zip: City, State Zip:
Percent: Percent:
Note: Percent must add up to 100%. If more than one beneficiary is named
and no percentages are indicated, payment shall be made in equal shares
to my primary beneficiary(ies) who survives me. If a percentage is
indicated and a primary beneficiary(ies) does not survive me, the
percentage of that beneficiary's designated share shall be divided
equally among the surviving primary beneficiary(ies).
If no beneficiary(ies) is designated, my beneficiary will be my
surviving spouse, or, if I do not have a surviving spouse, my estate. I
am aware that this form becomes effective when received by Bennington
and will remain in effect until I deliver to Bennington another form
with a later date.
To change or revoke your beneficiary designation, contact Bennington for
the appropriate form. All forms must be dated and signed by you. THIS
DESIGNATION OF BENEFICIARY CAN RESULT IN IMPORTANT TAX OR ESTATE
PLANNING CONSEQUENCES. CONSULT YOUR ATTORNEY OR TAX ADVISER FOR
ADDITIONAL INFORMATION AND ADVICE.
If you live in a community property state or marital property state (i.e.
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or
Wisconsin) and have not named your spouse as sole Primary Beneficiary, have
him/her sign below. /__/ Check here if you do not have a spouse.
I certify that I am the spouse of the individual named above. I approve
and consent to the naming of a beneficiary other than myself. I transfer
any community property interest I have in this IRA into the separate
property of my spouse.
Signature of Spouse: Date:
FEES AND EXPENSES
Custodian Fee None
Account Installation Fee None
Annual Maintenance Charge $25.00*
Charge for Termination, Rollover,
or Transfer of Account to
Successor Custodian None
* This Annual Maintenance Charge is waived for any Account which maintains
an aggregate balance of $10,000 or more as of December 31. The Annual
Maintenance Charge will be debited from each applicable Account during
the month of January of each year. If the Account is debited, the charge
will be debited first from the U.S. Government Money Portfolio and in
ascending order of risk from the other Portfolios of Accessor Funds,
Inc. Fees may be changed upon 30 days' written notice to you.
Additional Charges
You may be charged for reasonable expenses for services not covered by this fee
schedule such as wire transfer fees, or check processing charges.
There may be other charges associated with the purchase or redemption of
shares of a Portfolio in which your Account is invested. Be sure to read
carefully the current prospectus of any Portfolio you are considering as
an investment for your Account for a description of applicable charges.
When you appoint an Authorized Agent to issue investment directions or
issue orders for the purchase or sale of shares of one or more of the
Portfolios in your Account and you elect to pay any fees from your
Account, these fees may be charged to your Account. The appointment of
an Authorized Agent and your election to pay any fees are made on this
Adoption Agreement form, below.
DESIGNATION OF AUTHORIZED AGENT AND AUTHORIZATION OF PAYMENT OF FEES
Name of Organization:
Address:
City: State: Zip Code: Telephone:
Name of Authorized Agent:
Title: Telephone: Fax:
Signature of Authorized Agent: Date:
/__/ I elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account. I
acknowledge that my Authorized Agent send a written request to
Bennington each time a request for payment of fees is made.
/__/ I do not elect to have my investment advisory fees paid to the
above-referenced Authorized Agent directly from my IRA Account.
If no election is made, fees will not be paid to the Authorized Agent
from the Account.
AGREEMENTS
I hereby adopt the Accessor Funds, Inc. Individual Retirement Custodial Account
Agreement, appointing The Fifth Third Bank as Custodian. I understand that
administrative services will be performed for the Account on behalf of The Fifth
Third Bank by Bennington Capital Management L.P. and that a successor custodian
or agent may be appointed in accordance with the terms of this Individual
Retirement Custodial Account Agreement.
I acknowledge receipt of the Individual Retirement Account Disclosure Statement
and the Individual Retirement Custodial Account Agreement, both of which are
incorporated in this Adoption Agreement by reference. I accept and agree to be
bound by the terms and conditions contained in the Individual Retirement
Custodial Account Agreement.
I certify to receiving and reading the current prospectus(es) for the portfolios
selected and understand that although The Fifth Third Bank is a bank, mutual
fund shares are not obligations of or guaranteed by a bank, nor are they insured
by the FDIC.
I indemnify The Fifth Third Bank, Accessor Funds, Inc. and Bennington Capital
Management L.P. when making distributions in accordance with my beneficiary
designation on file or in accordance with the Individual Retirement Custodial
Account Agreement, absent any such designation.
I certify that any rollover or direct contribution herein does not include any
employee contributions to any qualified plan (other than accumulated deductible
employee contributions); that any assets transferred in kind by me are the same
assets received by me in the distribution being rolled over; if the distribution
is from an IRA, that no rollover into such IRA has been made within the one-year
period immediately preceding this rollover; and that such distribution was
received within 60 days of making the rollover to the Account.
I acknowledge that I have been advised to seek advice from my attorney regarding
the legal consequences (including but not limited to federal and state tax
matters) of entering into this Agreement, contributing to the Account, and
ordering The Fifth Third Bank, as Custodian to make distributions from the
Account. I acknowledge that The Fifth Third Bank, Accessor Funds, Inc. and
Bennington Capital Management L.P. (and any company associated therewith) are
prohibited by law from rendering such advice.
I acknowledge that I have been informed and I agree that the maintenance fee
described in this Adoption Agreement shall be automatically debited from my
Account, if appropriate, in January of each year.
I appoint the organization listed above in Authorized Representatives as my
Authorized Agent for this account. My Authorized Agent shall have the authority
to issue investment directions or issue orders for the sale or purchase of
shares of one or more Portfolios to Bennington and such authority shall remain
in force until terminated in writing by me. The Authorized Agent(s) has/have
executed this Form on the dates indicated and such is/are the genuine signatures
of the Authorized Agent(s).
I certify under penalty of perjury that I am of legal age to enter into this
agreement and that the Social Security Number on this form is true, correct and
complete.
Signature: Date:
CUSTODIAN ACCEPTANCE
The Fifth Third Bank hereby accepts this Individual Retirement Custodial
Agreement in accordance with the terms of IRS Form 5305-A as supplemented by
Article VIII.
The Fifth Third Bank: Date:
Accepted by:
BENNINGTON CAPITAL MANAGEMENT L.P.
Agent of The Fifth Third Bank
Signature: Date:
<PAGE>
Accessor Funds, Inc.
IRA Transfer Request/Direct Rollover Request
Complete this form to transfer Individual Retirement Account ("IRA") assets or
directly rollover a qualified retirement plan distribution from an existing
Retirement Plan Custodian/Trustee to the Accessor Funds IRA with The Fifth Third
Bank as the new IRA custodian. All applicable sections must be fully completed
and signed. (Please use one form for each IRA account to be transferred.)
NAME AND ADDRESS OF DEPOSITOR
Full Name: Social Security No.:
Address: Birthdate:
City, State, Zip Code:
Daytime Phone: ( ) Evening Phone: ( )
/__/ Deposit Transfer/Rollover proceeds to my existing Accessor Funds IRA
accounts as follows:
Accessor Funds Account Number:
(Provided by Accessor Funds, Inc.)
OR
/__/ I am opening a new Accessor Funds IRA (minimum $1,000). My completed
IRA Application and Adoption Agreement is attached.
If you are moving funds from an existing IRA or IRA Rollover Account to an IRA
or an IRA Rollover with the Accessor Funds, please fill out the section below:
IRA TRANSFER REQUEST OPTION
Type of IRA: /__/ Regular IRA /__/ Spousal IRA
/__/ Rollover /__/ SEP-IRA /__/ SIMPLE-IRA
Name of Current Custodian:
Custodian Contact:
Street Address:
City State Zip Telephone No.
1. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
2. Account No.
Investment Name (e.g., name of fund:)
Liquidate: /__/ All /__/ Part $
When: /__/ Immediately /__/ At maturity on
AUTHORIZATION TO LIQUIDATE AND TRANSFER
To Current Custodian: Please liquidate and transfer my IRA in the manner
described above directly to my IRA with Accessor Funds, Inc. I intend to avoid
constructive receipt of the liquidation proceeds, and I understand that you may
assess fees or penalties for this liquidation. (Sign below and, if applicable,
check box) /__/ I am over 70 1/2; please do not include my required minimum
distribution for the current calendar year in the transfer.
Signature of Account Owner: Date:
If you are moving funds from your company pension plan or 403(b) to an IRA
Rollover with the Accessor Funds, please fill out the section below:
DIRECT ROLLOVER REQUEST
Type of pension plan /__/ 401(k) /__/ 403(b) /__/ Pension Plan
/__/ Profit Sharing /__/ Other:
Benefits Representative:
Street Address:
City: State: Zip: Telephone No.:
Plan Name: Account No.:
Employee No. Distribution to be made (month/year):
Amount: /__/ All /__/ Part $
DIRECT ROLLOVER ELECTION
I elect a Direct Rollover of my eligible retirement distribution to my IRA at
Accessor Funds, Inc. I understand that this is an irrevocable election and that
if I commingle this Rollover with contributory IRA assets I may be precluded
from rolling it into another qualified retirement plan or tax-sheltered annuity
at a future date. Further, I understand that Rollover proceeds must be delivered
in the form of a check or other cash item.
Signature of Account Owner: Date:
<PAGE>
PLEASE LIQUIDATE ACCOUNT ASSETS AND TRANSFER ASSETS TO ACCESSOR FUNDS, INC.
IRA CUSTODIAN AS FOLLOWS:
Check payable to: Accessor Funds, Inc. IRA - The Fifth Third Bank,
Custodian F/B/O:
Shareholder Name:
Account No.:
Please write "IRA Transfer" or "Direct Rollover"
on the check. Do not include after tax
contributions or required minimum distributions.
Mail check to Bennington Capital Management L.P.,
P.O. Box 1748, Seattle, WA 98111-1748 ATTN:
Operations
Fed-wires payable to: ABA # 125000024
Seafirst Bank -- Main Branch
Seattle WA 98164
Credit: Bennington Capital Management, L.P., F/B/O
Accessor Funds Inc. Account 68388-503
For further credit to: The Fifth Third Bank,
Custodian F/B/O
Shareholder Name:
Accessor Account No.:
SIGNATURE OF DEPOSITOR (Required for acceptance by Accessor Funds, Inc.)
Signature of Depositor: Date:
SIGNATURE GUARANTEE (ONLY if required by present custodian)
Signature Guaranteed by: Date:
(Name of Bank or Dealer Firm) Date:
(Signature of Officer and Title)
ACCEPTANCE OF ACCOUNT BY FIFTH THIRD BANK OR BENNINGTON CAPITAL MANAGEMENT L.P.
Fifth Third Bank has agreed to accept transfer of the above amount for deposit
to the Depositor's Accessor Funds, Inc. (Fifth Third Bank, as Custodian)
Individual Retirement Custodial Account, and requests the liquidation and
transfer of assets as indicated above.
Bennington Capital Management L.P., ACCEPTING AS AGENT FOR FIFTH THIRD BANK, the
Custodian, pursuant to a Power of Attorney. (To be signed by Bennington Capital
Management L.P.)
By: Title: Date:
Accessor Funds, Inc. IRA Account No.:
<PAGE>
Accessor Funds, Inc.
AUTHORIZATION FOR DISTRIBUTION
FROM INDIVIDUAL RETIREMENT ACCOUNT
(INCLUDING FEDERAL INCOME TAX WITHHOLDING ELECTION)
Please Print
- ----------------------------------- ---------------------------------------
Name of IRA Account Holder Participant's Accessor Funds, Inc.
Account Number
- ----------------------------------- ---------------------------------------
Name of Recipient, if different Recipient's Social Security Number
- ----------------------------------- ---------------------------------------
Relationship to IRA Account Holder Recipient's Date of Birth
- -----------------------------------
- -----------------------------------
- -----------------------------------
Address of Recipient
- -----------------------------------
Recipient's Daytime Telephone Number
You should consult with your tax adviser
regarding the tax consequences of making
withdrawals from your individual
retirement plan.
Instructions: Please fill out one choice in each of Sections I, II, III and IV.
Section IV must be completed. Sign the completed form in Section V and return to
advisor.
I. Reason for Distribution:
|_| Normal Participant is over age 59-1/2.
|_| Disability Participant must provide physician's statement
that he/she is unable to engage in any substantial gainful
activity by reason of medically determinable physical or
mental impairment which can be expected to be of
long-continued or indefinite duration or to result in death.
|_| Premature Participant is under age 59-1/2 and not disabled.
By indicating this type of distribution, the participant
acknowledges that the taxable portion of their distribution
may be subject to a 10% penalty tax in addition to regular
income tax for the year the distribution is received.
|_| Death Each beneficiary of a deceased participant must
complete this form and have his/her signature guaranteed.
Additionally, we must receive a certified copy of the death
certificate. If there is no designated beneficiary the legal
representative of the estate must complete this form and
have his/her signature guaranteed and enclose a copy of
his/her court appointment and a certified copy of the death
certificate.
Please do not use this form to request a return of an excess contribution. A
separate form must be completed. Please contact your Advisor for the appropriate
form.
NOTE: If you are requesting a normal, disability, or death distribution (as
indicated in Section I) of less than your total Individual Retirement
Arrangement Account ("IRA") balance and you elect not to have federal income tax
withheld (Section IV), the election not to have federal income tax withheld
shall remain in effect until you revoke it in writing.
II. Method of Distribution:
I hereby direct the Custodian to make the distribution indicated below:
|_| Total Distribution/Account Termination
|_| Partial Distribution Specify Amount
|_| Periodic Distribution Specify Amount
Commencing on (Month)
Specify Frequency: |_| Monthly |_| Quarterly
|_| Semiannually |_| Annually
Specify Date: |_| 1st of the month (or) |_| 15th of the month
If the distribution date chosen falls on a weekend or a holiday, payment will be
made on the last business day preceding the regularly scheduled distribution
date.
I hereby direct the Custodian to make the distribution from the Portfolio(s)
indicated below:
|_|Growth ___% or $_____
|_|Value and Income ___% or $_____
|_|Small to Mid Cap ___% or $_____
|_|International Equity ___% or $_____
|_|Intermediate Fixed-Income ___% or $_____
|_|Short-Intermediate Fixed-Income ___% or $_____
|_|Mortgage Securities ___% or $_____
|_|U.S. Government Money ___% or $_____
Life Expectancy Distribution: If you wish to receive distributions based upon
your life expectancy, we recommend that you consult with your tax advisor to
determine the required dollar amount of your distribution. Then submit a
completed distribution form to us annually, at least 30 days prior to your
selected distribution date.
III. Payment method:
I hereby direct the Custodian to send my distribution as directed
below.
|_| Federal Funds Wire
Bank Name:
City, State, Zip Code:
Bank ABA#
Account Name:
Account #:
For Further Credit To:
Name:
Account #:
|_| Check
Payable to:
Mail to:
IV. Notice of Withholding
Non-Periodic distributions from your IRA are subject to income tax
withholding at a rate of 10% unless you elect not to have withholding
apply. Withholding will apply to the entire amount of each distribution
even if you have made nondeductible contributions that are not subject
to income tax.
I.R.S. Form W-4P must accompany periodic distribution requests. Please
contact Bennington Capital Management, your financial advisor, or the
Internal Revenue Service to obtain Form W-4P.
You may elect not to have withholding apply to your IRA distributions
by completing the election below and signing and dating this
distribution form. Your election will remain in effect until you revoke
it. You may revoke your election at any time by completing another
distribution form and returning it to the address indicated on the
first page of the form. You may make and revoke elections not to have
withholding apply as often as you wish. Additional distribution forms
are obtainable from your advisor.
If you do not complete the Withholding Election below, or elect to have
withholding apply, Federal income tax will be withheld from your IRA
distribution at a rate of ten percent (10%).
If you elect not to have withholding apply, or do not have enough
Federal income tax withheld from your IRA distributions, you may be
responsible for payment of estimated tax. You may incur penalties under
the estimated tax rules if your withholding and estimated tax payments
are not sufficient.
Withholding Election Instructions: Check Box A if you do not want
Federal income tax withheld from your IRA distributions. Check Box B if
you want Federal income tax withheld from your IRA distribution or you
wish to revoke a previous election not to have withholding apply. Make
sure to sign and date this distribution form. You may also be
responsible for state or local taxes. Check with your tax adviser.
If you elect not to have withholding apply, or do not have enough
Federal income tax withheld from your IRA distributions, you may be
responsible for payment of estimated tax. You may incur penalties under
the estimated tax rules if your withholding and estimated tax are not
sufficient.
|_| Box A: I do not want to have Federal income tax
withheld from my IRA distributions.
|_| Box B: I want to have Federal income tax withheld
from my IRA distributions.
V. Signature Section:
Signature of Recipient Date
SIGNATURE GUARANTEE (Signature must be guaranteed if
recipient is not IRA Account Holder or if
distribution address is not the address of
record)
Signature Guaranteed by: Date:
(Name of Bank or Dealer Firm)
Date:
(Signature of Officer and Title)
ACCESSOR FUNDS, INC.
DISTRIBUTION PLAN FOR
INVESTOR CLASS SHARES
This distribution plan (the "Distribution Plan") is adopted as of
February 19, 1998, in accordance with Rule 12b-1 under the Investment Company
Act of 1940, as amended (the "1940 Act") by Accessor Funds, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"). The Fund is a
registered, no-load, open-end management investment company, currently
consisting of eight diversified series (each a "Portfolio" and collectively, the
"Portfolios") as set forth in Schedule A, as amended from time to time. The Fund
adopts this Distribution Plan on behalf of a class of shares of its Portfolios
(the "Investor Class Shares"), subject to the following terms and conditions:
Section 1. (a) The Fund shall make directly, or cause to be made,
payments for costs and expenses to third parties out of the assets of the Fund,
or to provide for the reimbursement of expenses to third parties incurred in
connection with providing services primarily intended to result in the sale of
Investor Class Shares (the "Distribution Services").
(b) The Fund shall enter into distribution or dealer agreements (the
"Distribution Agreements") with respect to the Investor Class Shares pursuant to
this Distribution Plan with various financial institutions, retirement plans,
broker-dealers, depository institutions, institutional shareholders of record,
registered investment advisers and other financial intermediaries and various
brokerage firms or other industry recognized service providers of fund
supermarkets or similar programs (collectively "Service Organizations")
directly, pursuant to which the Service Organization will make available or
offer Investor Class Shares of the Portfolios for sale to the public and
reimburse such Service Organizations with which the Fund, regarding the Investor
Class Shares of a Portfolio, has an agreement, for providing Distribution
Services at a rate specified in Section 2 below, based upon the average daily
net assets of the Portfolios attributable to the Investor Class Shares, which
are owned by customers of the Service Organization.
Section 2. Subject to the limitations of applicable law and
regulations, including rules of the National Association of Securities Dealers,
Inc. ("NASD"), the payments shall be made directly to third parties or such
parties shall be reimbursed for such distribution related costs or expenses as
necessary, such that in combination with the service fee pursuant to the
Shareholder Service Plan the total annual rate shall be up to but not more than
0.25% on an annual basis of the average daily net assets of the Portfolio
attributable to the Investor Class Shares. Any expense payable hereunder may be
carried forward for reimbursement for up to twelve months beyond the date in
which it is incurred, subject always to the limit that not more than 0.25% on an
annual basis of the average daily net assets of the Portfolio are attributable
to Investor Class Shares (in combination with the service fee pursuant to the
Fund's Shareholder Service Plan). Investor Class Shares shall incur no interest
or carrying charges for expenses carried forward. In the event the Distribution
Plan is terminated as herein provided, the Investor Class Shares shall have no
liability for expenses that were not reimbursed as of the date of termination.
Section 3. The payment to a Service Organization is subject to
compliance by the Service Organization with the terms of the agreement between
the Service Organization and the Fund. If a shareholder of the Investor Class
Shares ceases to be a client of a Service Organization that has entered into an
agreement with the Fund but continues to hold Investor Class Shares, the Service
Organization will be entitled to receive a similar payment with respect to the
services provided to such investors, except that the Fund may determine that the
Service Organization shall no longer be entitled to such payment if the client
becomes a client of another Service Organization that has an agreement with the
Fund. For the purposes of determining the payments or reimbursements payable
under the Distribution Plan, the average daily net asset value of the Portfolio
attributable to the Investor Class Shares shall be computed in the manner
specified in the Fund's Articles of Incorporation and current prospectus.
Section 4. The Distribution Services, if any, will cover certain
expenses primarily intended to result in the sale of Investor Class Shares,
including, but not limited to: (a) costs of payments made to employees that
engage in the distribution of Investor Class Shares; (b) costs relating to the
formulation and implementation of marketing and promotional activities,
including but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (c) costs of printing and
distributing prospectuses, statements of additional information and reports of
the Fund to prospective holders of Investor Class Shares; (d) costs involved in
preparing, printing and distributing sales literature pertaining to the Fund and
(e) costs involved in obtaining whatever information, analyses and reports with
respect to marketing and promotional activities that the Fund may, from time to
time, deem advisable if such costs are primarily intended to directly or
indirectly result in the sale of Investor Class Shares of the Portfolios.
Section 5. Any Service Organization entering into an agreement with the
Fund under this Distribution Plan may also enter into a Shareholder Service
Agreement and/or an Administrative Services Agreement with regard to its
Investor Class Shares with the Fund pursuant to a Shareholder Service Plan or an
Administrative Services Plan adopted by the Fund, which will not be subject to
the terms of this Distribution Plan, except that in combination with the service
fee pursuant to the Shareholder Service Plan the Fund may not pay more than
0.25% on an annual basis of the average daily net assets of the Portfolio shall
be attributable to Investor Class Shares. The Fund under this Distribution Plan
may enter into more than one agreement for its Investor Class Shares, with
different Service Organizations providing services to different groups of
shareholders.
Section 6. The Distribution Plan shall not take effect until it has
been approved, together with any related agreements and supplements, by votes of
a majority of both (a) the Board of Directors of the Fund, and (b) those
Directors of the Fund who are not "interested persons" (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of the
Distribution Plan or any agreements related to it (the "Qualified Directors"),
cast in person at a meeting (or meetings) called for the purpose of voting on
the Distribution Plan and such related agreements.
Section 7. The Distribution Plan shall continue in effect so long as
such continuance is specifically approved at least annually in the manner
provided for approval of the Distribution Plan in paragraph 6.
Section 8. Any person authorized to direct the disposition of monies
paid or payable by Investor Class Shares pursuant to the Distribution Plan or
any related agreement shall provide to the Fund's Board of Directors, and the
Board shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 9. Any agreement related to the Distribution Plan, as such
phrase is used in Rule 12b-1 under the 1940 Act, shall be in writing and shall
provide: (a) that such agreement may be terminated at any time as to a
Portfolio, without payment of any penalty, by vote of a majority of the
Qualified Directors, or by vote of a majority of the outstanding voting
securities of the Investor Class Shares of a Portfolio, on not more than sixty
(60) days' written notice to any other party to the agreement; and (b) that such
agreement shall terminate automatically in the event of its assignment.
Section 10. The Distribution Plan may be amended at any time with
respect to a Portfolio by the Board of Directors, provided that (a) for so long
as required pursuant to Rule 12b-1 under the 1940 Act, any amendment to increase
materially the costs which the Investor Class Shares may bear for distribution
pursuant to the Distribution Plan shall be effective only upon approval by a
vote of a majority of the outstanding voting securities of the Investor Class
Shares of the Portfolios, and (b) any material amendments of the terms of the
Distribution Plan shall become effective only upon approval as provided in
paragraph 7 hereof.
Section 11. While the Distribution Plan is in effect, the selection and
nomination of Qualified Directors shall be committed to the discretion of the
Qualified Directors.
Section 12. The Fund shall preserve copies of the Distribution Plan,
any related agreement and any report made pursuant to paragraph 8 hereof, for a
period of not less than six (6) years from the date of the Distribution Plan,
such agreement or report, as the case may be, the first two (2) years of which
shall be in an easily accessible place.
Section 13. The Distribution Plan may be terminated with respect to the
Fund by a vote of a majority of the Qualified Directors or by the vote of a
majority of the outstanding voting securities of the Investor Class of the
Portfolios. Any change in the Distribution Plan that would materially increase
the cost to the Invest Class Shares of the Portfolios to which the Distribution
Plan relates requires approval of the affected shareholders of the Portfolios.
IN WITNESS WHEREOF, the Fund has adopted this Distribution Plan
effective as of the 19th day February, 1998.
ACCESSOR FUNDS, INC.
INVESTOR CLASS SHARES
By:_________________________________________________
J. Anthony Whatley III
Principal Executive Officer and President
[Name of Service Organization]
Address
City, State Zip
Attention: [Name of Contact]
Re: DEALER AGREEMENT
INVESTOR CLASS SHARES
ACCESSOR FUNDS, INC.
Dear [Name of Contact]
Accessor Funds, Inc. (the "Fund") is a registered open-end investment
management company currently with eight portfolios as set forth on Schedule A,
as may be amended from time to time (each a "Portfolio" and collectively, the
"Portfolios"). This letter will confirm our understanding and agreement with
respect to payments to be made to you pursuant to a plan of distribution adopted
by Accessor Funds, Inc. (the "Fund"), pursuant to Rule 12b-1 (the "Distribution
Plan") under the Investment Company Act of 1940, as amended (the "1940 Act").
The Distribution Plan and a form of this Dealer Agreement have been approved by
a majority of the Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Distribution Plan or any related
agreements (the "Qualified Directors"), cast in person at a meeting called for
the purpose of voting thereon. Such approval included a determination that, in
the exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Distribution Plan will benefit
the Fund and its shareholders.
The terms and conditions of this Agreement are as follows:
Section 1. To the extent you provide services primarily intended to
result in the sale of Investor Class Shares (the "Distribution Services"),
including but not limited to:
The Distribution Services, if any, will cover certain expenses
primarily intended to result in the sale of Investor Class Shares,
including, but not limited to: (a) costs of payments made to employees
that engage in the distribution of Investor Class Shares; (b) costs
relating to the formulation and implementation of marketing and
promotional activities, including but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass
media advertising; (c) costs of printing and distributing prospectuses,
statements of additional information and reports of the Fund to
prospective holders of Investor Class Shares; (d) costs involved in
preparing, printing and distributing sales literature pertaining to the
Fund and (e) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional activities that
the Fund may, from time to time, deem advisable if such costs are
primarily intended to directly or indirectly result in the sale of
Investor Class Shares of the Portfolios.
We will pay you a fee of 0.25% on an annual basis of the average daily
net assets of Investor Class Shares which are owned by your customers. We
reserve the right to increase, decrease or discontinue to fee at any time in our
sole discretion upon written notice to you.
The fee will be calculated and accrued daily and paid monthly. Payment
of such monthly shall be made within 15 days after the close of each month for
which such fee is payable.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Investor Class
Shares except those contained in our then current prospectuses and statement of
additional information, copies of which will be supplied by us to you, or in
such supplemental literature or advertising as may be authorized by us in
writing.
Section 4. (a) For all purposes of this Agreement you will be deemed to
be an independent contractor. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder. Upon request, you will provide
the Fund or its representatives reasonable information regarding the nature of
the services being provided and your compliance with the terms of this
Agreement.
(b) Except as otherwise expressly provided for in this Agreement,
neither you nor any of your affiliates shall use any trademark, trade name,
service mark or logo of the Fund, or any variation of any such trademark, trade
name, service mark or logo, without the Fund's prior written consent, the
granting of which shall be at the Fund's sole option.
Section 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment therefor,
a distribution related fee, in combination with amounts paid for
non-distribution related services pursuant to the Accessor Funds, Inc. Investor
Class Shares Shareholder Service Plan, an annual rate of up to 0.25% of the
average daily net asset value of the Investor Class Shares beneficially owned by
your Clients, which fee will be computed and accrued daily and payable monthly.
Provided, however, that we shall not directly or indirectly pay you any amounts
that exceed any applicable limits imposed by law or the National Association of
Securities Dealers, Inc. (the "NASD"). Further provided, however, if the NASD
adopts a definition of "service fee" for purposes of 2830 of the NASD Conduct
Rules that differs from the definition of "service fee" as presently used in the
Distribution Plan or this Agreement, or if the NASD adopts a related definition
intended to define the same concept, the definition of "service fee" as used in
the Distribution Plan or herein shall be automatically amended to conform to the
NASD definition. For purposes of determining the fees payable under this Section
5, the average daily net asset value of the Clients' Investor Class Shares will
be computed in the manner specified in our Registration Statement (as the same
is in effect from time to time) in connection with the computation of the net
asset value of Investor Class Shares for purposes of purchases and redemptions.
The fee rate stated above may be prospectively increased or decreased by us, in
our sole discretion, at any time upon notice to you. Further, we may, in our
discretion and without notice, suspend or withdraw the sale of Investor Class
Shares, including the sale of Investor Class Shares to you for the account of
any Client or Clients.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Directors, and our Directors will review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made. In addition, you will furnish us or our designees with such information as
we or they may reasonably request and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to our Board of Directors concerning
this Agreement and the monies paid or payable by us pursuant hereto, as well as
any other reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with any other
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you in connection with
the investment of your Clients' assets in Investor Class Shares will be
disclosed by you to your Clients, will be authorized by your Clients and will
not be excessive; (ii) the services provided by you under this Agreement will in
no event be primarily intended to result in the sale of Investor Class Shares
and (iii) the receipt of the fees described in Section 5 and the provision of
distribution-related services to Clients by you does not and will not constitute
a non-exempt "prohibited transaction" or "conflict of interest" prohibited by
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4075 of the Internal Revenue Code of 1986, as amended (the
"Code").
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue automatically for successive annual
periods provided such continuance is specifically approved at least annually by
the Directors in the manner described in Section 12. This Agreement is
terminable without penalty at any time by us (which termination may be by a vote
of a majority of the Qualified Directors as defined in Section 12) or by you
upon written notice to the other party hereto.
Section 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunication device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Washington and is non-assignable by the parties hereto.
Section 12. This Agreement has been and all annual and quarterly
reviews will be approved by a vote of a majority of (i) our Board of Directors
and (ii) those Directors who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended) of us and have no direct or indirect
financial interest in this Agreement (the "Qualified Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
Section 13. The names "Accessor Funds, Inc." and the "Board of
Directors" refer respectively to the Fund created and the Directors, as
Directors but not individually or personally, acting from time to time under
Articles of Incorporation filed at the office of the State Secretary of State of
Maryland.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, at 1420 Fifth Avenue, Suite 3130, Seattle, WA 98101.
Very truly yours,
ACCESSOR FUNDS, INC.
Date: ____________________ By: ________________________
(Authorized Officer)
Title:
Accepted and Agreed to:
[NAME OF COMPANY]
Date: ____________________ By: ________________________
(Authorized Officer)
Title:
<PAGE>
SCHEDULE A
This Dealer Agreement shall be entered into with respect to the Investor
Class shares of the following Portfolios of Accessor Funds, Inc.:
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
ACCESSOR FUNDS, INC.
INVESTOR CLASS SHARES
SHAREHOLDER SERVICE PLAN
This shareholder service plan (the "Shareholder Service Plan") is
adopted as of February 19, 1998, by Accessor Funds, Inc., a corporation
organized under the laws of the State of Maryland, (the "Fund"). The Fund is a
registered, open-end management company with eight diversified portfolios (each
a "Portfolio" and collectively, the "Portfolios"). The Fund adopts this
Shareholder Service Plan on behalf of a class of shares (the "Investor Class
Shares") of its Portfolios as set forth in Schedule A, as amended from time to
time, subject to the following terms and conditions:
Section 1. Service Agreements; Annual Fees.
Shareholder Service Agreements. The Fund is authorized to enter into
shareholder service agreements on behalf of the Portfolios (the "Shareholder
Service Agreements"), with financial institutions, retirement plans,
broker-dealers, depository institutions, institutional shareholders of record,
registered investment advisers and other financial intermediaries and various
brokerage firms or other industry recognized service providers of fund
supermarkets or similar programs (collectively "Service Organizations") who
provide personal and/or account maintenance services to their clients (the
"Clients") who may from time to time beneficially own Investor Class Shares of
the Portfolios of the Fund as set forth in this Shareholder Service Plan. The
form of the Shareholder Service Agreements has been approved by the Board of
Directors of the Fund (the "Board of Directors") and each Shareholder Service
Agreement shall be ratified by the Board of Directors at the next quarterly
meeting.
Shareholder Service Fee. The Fund, on behalf of each Portfolio, will
pay directly to Service Organizations a non-distribution related shareholder
service fee under the Shareholder Service Plan, in combination with amounts paid
for distribution related services pursuant to the Fund's Investor Class Shares
Distribution Plan, an annual rate not to exceed 0.25% of the average daily net
assets of the Portfolios attributable to the Investor Class Shares beneficially
owned by the Clients of the Service Organizations (the "Service Fee"). Provided,
however, that no Portfolio shall directly or indirectly pay any amounts that
exceed any applicable limits imposed by law or the National Association of
Securities Dealers, Inc. (the "NASD"). Further provided, however, if the NASD
adopts a definition of "service fee" for purposes of 2830 of the NASD Conduct
Rules that differs from the definition of "service fee" as presently used, or if
the NASD adopts a related definition intended to define the same concept, the
definition of "service fee" as used herein shall be automatically amended to
conform to the NASD definition.
Payment of Fees. The Service Fees will be calculated and accrued daily
and paid monthly or at such other intervals as the Board of Directors may
determine by each Portfolio with respect to the Investor Class Shares at the
annual rates indicated above.
Section 2. Expenses Covered by the Shareholder Service Plan.
Non-distribution related Service Fees may be used for payments to
Service Organizations who provide personal and/or account maintenance services
to their Clients who may from time to time beneficially own Investor Class
Shares of the Portfolios of the Fund to the extent the Service Organization is
permitted to do so under applicable statutes, rules and regulations. By way of
example, such services may include some or all of the following: (i) shareholder
liaison services; (ii) providing information periodically to Clients showing
their positions in Investor Class Shares and integrating such statements with
those of other transactions and balances in Clients' other accounts serviced by
the Service Organizations; (iii) responding to Client inquiries relating to the
services performed by the Service Organizations; (iv) responding to routine
inquiries from Clients concerning their investments in Investor Class Shares;
and (v) providing such other similar services to Clients as the Fund may
reasonably request to the extent the Service Organizations are permitted to do
so under applicable statutes, rules and regulations.
Section 3. Approval of Directors.
Neither the Shareholder Service Plan nor any related agreements will
take effect until approved by a majority of both (a) the full Board of Directors
of the Fund and (b) those Directors who are not interested persons (as such term
is defined under the Investment Company Act of 1940, as amended, by the
Securities and Exchange Commission) of the Fund and who have no direct or
indirect financial interest in the operation of the Shareholder Service Plan or
in any Shareholder Service Agreements related to it (the "Qualified Directors"),
cast in person at a meeting called for the purpose of voting on the Shareholder
Service Plan and the related Shareholder Service Agreements.
Section 4. Continuance of the Shareholder Service Plan.
The Shareholder Service Plan will continue in effect until February
1999, and thereafter for successive twelve-month periods: provided, however,
that such continuance is specifically approved at least annually by the
Directors of the Fund and by a majority of the Qualified Directors, in the
manner described in Section 3 above.
Section 5. Termination.
The Shareholder Service Plan may be terminated at any time with respect
to a Portfolio by a vote of the Qualified Directors. The Shareholder Service
Plan may remain in effect with respect to a Portfolio even if the Shareholder
Service Plan has been terminated in accordance with this Section 5 with respect
to any other Portfolio.
Section 6. Amendments.
No material amendment to the Shareholder Service Plan may be made
unless approved by the Portfolio's Board of Directors in the manner described in
Section 3 above.
Section 7. Written Reports.
In each year during which the Shareholder Service Plan remains in
effect, a person authorized to direct the disposition of monies paid or payable
by a Portfolio pursuant to the Shareholder Service Plan or any related
Shareholder Service Agreement will prepare and furnish to the Board, and the
Board will review, at least quarterly, written reports which set out the amounts
expended under the Shareholder Service Plan and the purposes for which those
expenditures were made.
Section 8. Preservation of Materials.
The Fund will preserve copies of the Shareholder Service Plan, any
Shareholder Service Agreement relating to the Shareholder Service Plan and any
report made pursuant to Section 7 above, for a period of not less than six years
(the first two years in an easily accessible place) from the date of the
Shareholder Service Plan, Shareholder Service Agreement or report.
Dated: February 19, 1998.
<PAGE>
SCHEDULE A
This Shareholder Service Plan shall be entered into with respect to the
Investor Class shares of the following Portfolios of Accessor Funds, Inc.:
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
[Name of Service Organization]
Address
City, State Zip
Attention: [Name of Contact]
Re: SHAREHOLDER SERVICE AGREEMENT
INVESTOR CLASS SHARES
ACCESSOR FUNDS, INC.
Dear [Name of Contact]
Accessor Funds, Inc. (the "Fund"), a registered open-end investment
management company currently with eight portfolios as set forth on Schedule A,
as may be amended from time to time (each a "Portfolio" and collectively, the
"Portfolios"), wishes to enter into this shareholder service agreement (the
"Shareholder Service Agreement") with you concerning the provision of support
services to your clients ("Clients") who may from time to time beneficially own
a class of shares (the "Investor Class Shares") of the Portfolios offered by the
Fund.
The terms and conditions of this Agreement are as follows:
Section 1. You agree to provide personal and/or account maintenance
services to Clients who may from time to time beneficially own Investor Class
Shares to the extent permissible under applicable statutes, rules and
regulations. Such services may include, but are not limited to, some or all of
the following: (i) shareholder liaison services; (ii) providing information
periodically to Clients showing their positions in Investor Class Shares and
integrating such statements with those of other transactions and balances in
Clients' other accounts serviced by you; (iii) responding to Client inquiries
relating to the services performed by you; (iv) responding to routine inquiries
from Clients concerning their investments in Investor Class Shares; and (v)
providing such other similar services to Clients as we may reasonably request to
the extent you are permitted to do so under applicable statutes, rules and
regulations.
Section 2. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Investor Class
Shares except those contained in our then current prospectuses and statement of
additional information, copies of which will be supplied by us to you, or in
such supplemental literature or advertising as may be authorized by us in
writing.
Section 3. (a) For all purposes of this Agreement you will be deemed to
be an independent contractor. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder. Upon request, you will provide
the Fund or its representatives reasonable information regarding the nature of
the services being provided and your compliance with the terms of this
Agreement.
(b) Except as otherwise expressly provided for in this Agreement,
neither you nor any of your affiliates shall use any trademark, trade name,
service mark or logo of the Fund, or any variation of any such trademark, trade
name, service mark or logo, without the Fund's prior written consent, the
granting of which shall be at the Fund's sole option.
Section 4. In consideration of the services and performance of all
other obligations under this Shareholder Service Agreement provided by you, we
will pay to you, and you will accept as full payment therefor, a
non-distribution related shareholder service fee, in combination with amounts
paid for distribution related services pursuant to the Fund's Investor Class
Shares Distribution Plan, an annual rate not to exceed 0.25% of the average
daily net assets attributable to the Investor Class Shares of the Portfolios
beneficially owned by your Clients (the "Shareholder Service Fee"), which
Shareholder Service Fee will be computed and accrued daily and payable monthly.
Provided, however, that we shall not directly or indirectly pay you any amounts
that exceed any applicable limits imposed by law or the National Association of
Securities Dealers, Inc. (the "NASD"). Further provided, however, if the NASD
adopts a definition of "service fee" for purposes of 2830 of the NASD Conduct
Rules that differs from the definition of "service fee" as presently used in the
Shareholder Service Plan or this Agreement, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service fee"
as used in the Shareholder Service Plan or herein shall be automatically amended
to conform to the NASD definition. For purposes of determining the fees payable
under this Section 4, the average daily net assets attributable to the Clients'
Investor Class Shares will be computed in the manner specified in our
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Investor Class Shares
for purposes of purchases and redemptions. The Shareholder Service Fee may be
prospectively increased or decreased by us, in our sole discretion, at any time
upon notice to you.
Further, we may, in our discretion and without notice, suspend or
withdraw the sale of Investor Class Shares, including the sale of Investor Class
Shares to you for the account of any Client or Clients.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Directors, and our Directors will review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made. In addition, you will furnish us or our designees with such information as
we or they may reasonably request and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to our Board of Directors concerning
this Agreement and the monies paid or payable by us pursuant hereto, as well as
any other reports or filings that may be required by law.
Section 6. We may enter into other similar Agreements with any other
person or persons without your consent.
Section 7. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you in connection with
the investment of your Clients' assets in Investor Class Shares will be
disclosed by you to your Clients, will be authorized by your Clients and will
not be excessive; (ii) the services provided by you under this Agreement will in
no event be primarily intended to result in the sale of Investor Class Shares;
and (iii) the receipt of the fees described in Section 5 and the provision of
personal and/or account maintenance services to Clients by you does not and will
not constitute a non-exempt "prohibited transaction" or "conflict of interest"
prohibited by Section 406 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code").
Section 8. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue automatically for successive annual
periods provided such continuance is specifically approved at least annually by
the Directors in the manner described in Section 12. This Agreement is
terminable without penalty at any time by us (which termination may be by a vote
of a majority of the Qualified Directors as defined in Section 12) or by you
upon written notice to the other party hereto.
Section 9. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunication device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
Section 10. This Agreement will be construed in accordance with the
laws of the State of Washington and is non-assignable by the parties hereto.
Section 11. This Agreement has been and all annual and quarterly
reviews will be approved by a vote of a majority of (i) our Board of Directors
and (ii) those Directors who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended) of us and have no direct or indirect
financial interest in this Agreement (the "Qualified Directors"), cast in person
at a meeting called for the purpose of voting on such approval.
Section 12. The names "Accessor Funds, Inc." and the "Board of
Directors" refer respectively to the Fund created and the Directors, as
Directors but not individually or personally, acting from time to time under
Articles of Incorporation filed at the office of the State Secretary of State of
Maryland.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, at 1420 Fifth Avenue, Suite 3130, Seattle, WA 98101.
Very truly yours,
ACCESSOR FUNDS, INC.
Date: ____________________ By: ________________________
(Authorized Officer)
Title:
Accepted and Agreed to:
[NAME OF COMPANY]
Date: ____________________ By: ________________________
(Authorized Officer)
Title:
<PAGE>
SCHEDULE A
This Shareholder Service Agreement shall be entered into with respect
to the Investor Class shares of the following Portfolios of Accessor Funds,
Inc.:
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
ACCESSOR FUNDS, INC.
INVESTOR CLASS SHARES
ADMINISTRATIVE SERVICES PLAN
This administrative services plan (the "Administrative Services Plan")
is adopted as of February 19, 1998 by Accessor Funds, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"). The Fund is a
registered open-end investment management company, currently with eight
portfolios as set forth in Schedule A, as may be amended from time to time,
(each a "Portfolio" and collectively, the "Portfolios"). The Fund adopts this
Administrative Services Plan on behalf of a class of shares (the "Investor Class
Shares") of its Portfolios, subject to the following terms and conditions:
Section 1. Service Agreements; Annual Fees.
Administrative Services Agreements. The Fund is authorized to enter
into administrative services agreements on behalf of the Portfolios (the
"Administrative Services Agreements") with financial institutions, retirement
plans, broker-dealers, depository institutions, institutional shareholders of
record, registered investment advisers and other financial intermediaries and
various brokerage firms or other industry recognized service providers of fund
supermarkets or similar programs (collectively "Service Organizations") who
provide administrative, recordkeeping and support servicing to their customers
who may from time to time beneficially own Investor Class Shares of the
Portfolios as set forth in this Administrative Services Plan. The form of
Administrative Services Agreement has been approved by the Board of Directors of
the Fund (the "Board of Directors") and each Administrative Services Agreement
will be ratified by the Board of Directors at the next quarterly meeting,
Administrative Services Fee. Each Portfolio will pay directly to
Service Organizations a non-distribution related administrative services fee
under the Administrative Services Plan at an annual rate of up to 0.25% of the
average daily net assets of the Investor Class Shares of a Portfolio (the
"Administrative Services Fee") beneficially owned by the clients of Service
Organizations. No Portfolio shall directly or indirectly pay any distribution
related amounts under the Administrative Services Plan. Any distribution related
amounts will be paid under the Fund's Investor Class Shares Distribution Plan .
Adjustment to Fees. The Investor Class Shares of any Portfolio may pay
an Administrative Services Fee at a lesser rate than the fees specified in
Section 1 hereof as agreed upon by the Board of Directors and approved in the
manner specified in Section 3 of this Plan.
Payment of Fees. The Administrative Services Fees will be calculated
and accrued daily and paid monthly, or at such other interval as the Board of
Directors may determine, by each Portfolio with respect to the Investor Class
Shares at the annual rate indicated above.
<PAGE>
Section 2. Expenses Covered by the Plan.
Administrative Services Fees may be used for payments to Service
Organizations who provide administrative, recordkeeping and support servicing to
their customers who may from time to time beneficially own Investor Class Shares
of a Portfolio, which, by way of example, may include: (i) establishing and
maintaining accounts and records relating to shareholders; (ii) processing
dividend and distribution payments from a Portfolio on behalf of shareholders;
(iii) providing information periodically to shareholders showing their positions
in shares and integrating such statements with those of other transactions and
balances in shareholders other accounts serviced by such financial institution;
(iv) arranging for bank wires; (v) providing transfer agent or sub-transfer
agent services, recordkeeping, custodian or subaccounting services with respect
to shares beneficially owned by shareholders, or the information to a Portfolio
necessary for such services; (vi) if required by law, forwarding shareholder
communications from a Portfolio (such as proxies, shareholder reports, annual
and semi-annual financial statements and dividend, distribution and tax notices)
to shareholders; (vii) assisting in processing purchase, exchange and redemption
requests from shareholders and in placing such orders with our service
contractors; or (viii) providing such other similar services, which are not
considered "service fees" as defined in National Association of Securities
Dealers, Inc. (the "NASD") Rule 2830(b)(9), as a Portfolio may reasonably
request to the extent the Service Organization is permitted to do so under
applicable laws, statutes, rules and regulations, provided, however, if the NASD
adopts a definition of "service fee" for purposes of Rule 2830 of the NASD
Conduct Rules that differs from the definition of "service fee" as presently
used, or if the NASD adopts a related definition intended to define the same
concept, the definition of "service fee" as used herein shall be automatically
amended to conform to the NASD definition.
Section 3. Approval of Directors.
The Administrative Services Plan will not take effect until approved by
a majority of both (a) the full Board of Directors and (b) those Directors who
are not interested persons (deemed to have the same meaning that this term has
under the Investment Company Act of 1940, as amended, by the Securities and
Exchange Commission) of the Fund and who have no direct or indirect financial
interest in the operation of the Administrative Services Plan (the "Qualified
Directors"), cast in person at a meeting called for the purpose of voting on the
Administrative Services Plan.
Section 4. Continuance of the Administrative Services Plan.
The Administrative Services Plan will continue in effect until February
1999, and thereafter for successive twelve-month periods provided, however, that
such continuance is specifically approved at least annually by the Board of
Directors and by a majority of the Qualified Directors, in the manner described
in Section 3 above.
Section 5. Termination.
The Administrative Services Plan may be terminated at any time with
respect to a Portfolio, without the payment of any penalty, by a vote of a
majority of the Board of Directors, as well as by the Qualified Directors. The
Administrative Services Plan may remain in effect with respect to a Portfolio
even if the Administrative Services Plan has been terminated in accordance with
this Section 5 with respect to any other Portfolio.
Section 6. Amendments.
No material amendment to the Administrative Services Plan may be made
unless approved by the Board of Directors in the manner described in Section 3
above.
<PAGE>
Section 7. Written Reports.
In each year during which the Administrative Services Plan remains in
effect, a person authorized to direct the disposition of monies paid or payable
by a Portfolio pursuant to the Administrative Services Plan will prepare and
furnish to the Board of Directors, and the Board of Directors will review, at
least quarterly, written reports which set out the amounts expended under the
Administrative Services Plan and the purposes for which those expenditures were
made.
Section 8. Preservation of Materials.
The Fund will preserve copies of the Administrative Services Plan, any
Administrative Services Agreement relating to the Administrative Services Plan
and any report made pursuant to Section 7 above, for a period of not less than
six years (the first two years in an easily accessible place) from the date of
the Administrative Services Plan, Administrative Services Agreement or report.
Dated: February 19, 1998.
<PAGE>
SCHEDULE A
February 19, 1998
This Administrative Services Plan shall be adopted with respect to the
Investor Class Shares of the following Portfolios of Accessor Funds, Inc.:
Growth Portfolio
Intermediate Fixed-Income Portfolio
International Equity Portfolio
Mortgage Securities Portfolio
Short-Intermediate Fixed-Income Portfolio
Small to Mid Cap Portfolio
U.S. Government Money Portfolio
Value and Income Portfolio
FORM OF
ACCESSOR FUNDS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
INVESTOR CLASS SHARES
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made and
entered into as of the __________ day of __________________, 1998, by and
between Accessor Funds, Inc., a corporation organized under the laws of the
State of Maryland (the "Fund"), and a registered open-end investment management
company, currently with eight portfolios as set forth in Exhibit A, as may be
amended from time to time, (each a "Portfolio" and collectively, the
"Portfolios") on behalf of a class of shares of its Portfolios (the "Investor
Class Shares"), and __________ (the "Service Organization")./1/
WHEREAS, Service Organization provides administrative, recordkeeping
and/or support servicing to its customers who may from time to time beneficially
own Investor Class Shares of the Fund; and
WHEREAS, on the terms and conditions hereinafter set forth, the parties
desire to retain Service Organization to perform certain administrative,
recordkeeping and/or support servicing functions, and Service Organization is
willing and able to furnish such services;
NOW, THEREFORE the Fund and Service Organization agree as follows:
1. Appointment of Service Organization as an Agent./2/
2. Administrative Services. Service Organization agrees to provide all
administrative services to its customers who may from time to time beneficially
own Investor Class Shares of the Portfolios, including by way of example but not
limited to services specified in Exhibit B, as may be amended from time to time.
Service Organization agrees that it will maintain and preserve all records as
required by law and preserved in connection with providing the administrative
services. Service Organization will permit the Fund or its representative to
have reasonable access to its personnel and records, if required by law. Upon
request of the Fund, Service Organization shall provide copies of written
communications regarding the Fund to or from its customers. If, at any time, the
Fund determines Service Organization's practices, procedures or controls to be
inadequate, written notice of such inadequacy shall be given to Service
Organization, and Service Organization shall have fifteen (15) days plus any
additional time as provided by the Fund to correct such inadequacy. In the event
such inadequacy is not corrected by Service Organization, the Fund shall have
the right to immediately terminate this Agreement. Nothing in this Agreement
shall impose upon the Fund the obligation to review Service Organization's
practices, procedures and controls.
- ----------
/1/ Insert as applicable, name of Service Organization which may include
financial institutions, retirement plans, broker-dealers, depository
institutions, institutional shareholders of record, registered investment
advisers and other financial intermediaries and various brokerage firms or
other industry recognized service providers of fund supermarkets and
similar programs (collectively, "Service Organizations").
/2/ Insert as applicable: Appointment as agent for purpose of effecting
purchases and redemptions in the case where a Service Organization effects
transactions; or
To the extent Service Organization is involved in the purchase of shares of
any Fund by the Service Organization's customers, such involvement will be
as agent of such customers only.
<PAGE>
3. Transactions in the Fund. Service Organization agrees that it will
establish with the Fund either:
one or more separate omnibus accounts registered in Service
Organization's name for the exclusive benefit of its clients who are
shareholders of Investor Class Shares in the Portfolios and will
perform various services described in this Administrative Services
Agreement for the client shareholders in its accounts.
or
accounts registered in its clients names who will be shareholders of
Investor Class Shares in the Portfolios and will perform various
services described in this Administrative Services Agreement for its
clients' accounts.
4. Standard of Services. All services to be rendered by Service
Organization hereunder shall be performed in a professional, competent and
timely manner. The details of the services to be provided by Service
Organization in performance of this contract are described by way of example in
Exhibit B, which may be amended from time to time by agreement between Service
Organization and the Fund. Service Organization shall bear responsibility for
any discrepancies between its omnibus account(s), if applicable, and the client
account(s) and for the maintenance of all records regarding the client, all
transactions and the client's interest in the omnibus account(s).
5. Administrative Services Fee.
(a) In consideration of the administrative services and
performance of all other obligations under this Administrative
Services Agreement by Service Organization, Service
Organization will receive a fee at an annual rate not to
exceed 0.25% of the average daily net assets attributable to
the Investor Class Shares of the Portfolios beneficially owned
by the customers of Service Organization (the "Administrative
Services Fee") from the Fund, as set forth on Exhibit C.
(b) Except as otherwise agreed in writing with the Fund with
respect to specific expenditures by Service Organization,
Service Organization shall bear sole responsibility for all
costs and expenses of providing services under this Agreement.
Provided, however, the Fund shall be responsible for preparing
and providing sufficient copies of materials (such as
prospectuses, annual reports, etc.) to Service Organization
and Service Organization shall be responsible for forwarding
Fund materials to investors.
(c) It is agreed that the Administrative Services Fee provided
under this Section 6 shall be payable by the Fund pursuant to
the Fund's Administrative Services Plan. The parties agree
that the payments by the Fund to Service Organization are
solely for non-distribution related administrative or
recordkeeping services provided by Service Organization and do
not constitute payment in any manner for investment advisory
services or for costs of distribution.
(d) The Administrative Services Fee will calculated and accrued
daily and paid monthly, or at such other interval as may be
agreed upon between the parties. Payment of the Administrative
Services Fee will be made by wire transfer as described on
Exhibit D, as may be amended from time to time. The wire
transfer will be preceded by or followed by a statement
showing the calculation of the amounts being paid by the Fund
for the relevant month and such other supporting data as may
be reasonably requested by Service Organization.
(e) Service Organization represents and warrants that the receipt
of the fees described in Section 4 and the provision of
administrative services to its customers by the Service
Organization does not and will not constitute a non-exempt
"prohibited transaction" or "conflict of interest" prohibited
by Section 406 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code").
6. Transaction Charges.
Service Organization shall not, during the term of this Agreement,
assess against, or collect from, customers, any transaction fee upon the
purchase or redemption of any of the Fund's Investor Class Shares that meet the
minimum purchase criteria. Customer purchases not meeting the criteria may be
charged a transaction fee and any such fee shall not be included in
administrative fee invoices presented for payment.
7. Representations./3/
(a) Service Organization represents that it shall provide the
Administrative Services consistent with the terms of this
Agreement. Service Organization also hereby represents that it
has full power and authority to enter into and perform this
Agreement and that it will promptly notify the Fund in the
event that Service Organization is for any reason unable to
perform any of its obligations under this Agreement.
(b) Service Organization represents and warrants that it has and
will continue at all times to maintain necessary facilities,
equipment and personnel to perform its services hereunder.
(c) Service Organization represents and warrants that all its
customers are aware that they are transacting business with
Service Organization and not the Fund, and that they will look
only to Service Organization and not the Fund for resolutions
of problems or discrepancies in their account.
- ----------
/3/ Agreement to be modified to insert appropriate representations and
warranties in the case of a broker-dealer effecting transactions on behalf
of the Fund. Discuss with counsel as appropriate.
<PAGE>
8. Additional Covenants and Agreements. Service Organization shall
comply with all applicable federal and state securities, insurance and tax laws
applicable to the activities of Service Organization contemplated by this
Agreement. Service Organization shall not, without the written consent of the
Fund, make representations concerning the shares of the Fund except those
contained in the then current prospectus and in current printed sales literature
approved by the Fund. Provided, however, if Service Organization refers to the
Fund in marketing materials of the Service Organization, the Fund shall have a
reasonable opportunity to review and approve the materials. The Fund shall
comply with all laws, rules and regulations applicable to it as a result of the
transactions contemplated by this Agreement.
9. Relationship of Parties
(a) The relationship between Service Organization and the Fund
shall be that of independent contractors and neither party
shall be or represent itself to be an agent, employee, partner
or joint venturer of the other, nor shall either party have or
represent itself to have any power or authority to act for,
bind or commit the other.
(b) The parties acknowledge and agree that the services under this
Agreement are recordkeeping, shareholder communication, and
related services only and are not the services of an
underwriter or a principal underwriter within the meaning of
the Securities Act of 1933, as amended, or the 1940 Act.
(c) Except as otherwise expressly provided for in this Agreement,
neither Service Organization or any of its affiliates shall
use any trademark, trade name, service mark or logo of the
Fund, or any variation of such trademark, trade name, service
mark or logo, without the Fund's prior written consent, the
granting of which shall be at the Fund's sole option.
10. Indemnification
(a) Service Organization shall indemnify and hold harmless the
Fund, its directors, officers, employees, and agents
(hereinafter "Indemnified Parties") from and against any and
all losses, claims, liabilities and expenses (including, but
not limited to, reasonable attorney's fees) incurred by any of
them and arising as a result of: (i) Service Organization's
dissemination of information regarding the Fund that is
materially incorrect and that was not provided to Service
Organization by the Fund, or approved by the Fund, its
affiliated persons (as defined in the 1940 Act) or agents; or
(ii) Service Organization's willful misconduct or gross
negligence in the performance of, or failure to perform, its
obligations under this Agreement, except to the extent the
losses are a result of the negligence, willful misconduct, or
breach of this Agreement by an Indemnified Party.
(b) In any event, neither party shall be liable for any special,
consequential or incidental damages.
11. Termination; Withdrawal of Offering. Any party may terminate this
Agreement with respect to such party upon 30 days' prior written notice to the
other parties; provided, however, that the Fund reserves the right, without
prior notice, to suspend sales of shares of any of the Portfolios of the Fund,
in whole or in part, or to make a limited offering of shares of any of the
Portfolios in the event that (a) any regulatory body commences formal
proceedings against any of the Portfolios or Service Organization, which
proceedings the Fund believes will have a material adverse impact on the ability
of the Fund or Service Organization to perform its obligations under this
Agreement or (b) in the judgment of the Fund, declining to accept any additional
instructions for the purchase or sale of shares of any such Portfolio is
warranted by market, economic or political conditions. Notwithstanding the
foregoing, this Agreement may be terminated upon (i) a good faith determination
by the Fund that shares of any of the Portfolios are not being offered in
conformity with the terms of this Agreement, the then current prospectuses or
applicable law, or (ii) any other breach by a party, which breach is not cured
within 30 days after notice from the other party. Following termination, the
Fund shall not have any Administrative Services Fee obligation to Service
Organization.
12. Governing Law. The laws of the State of New York shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
13. Counterpart Execution. This Agreement may be executed in any number
of counterparts with the same effect as if the parties had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
14. Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any party under or in connection
with this Agreement shall be in writing and shall be sent via personal delivery,
via telephone facsimile transmission, via certified or registered mail, return
receipt requested, or via express courier or delivery service, addressed to such
party at such party's address or telephone facsimile number set forth below or
at such other address or telephone facsimile number as shall be designated by
such party in a written notice given to each other party complying as to
delivery with the terms of this Section:
Accessor Funds, Inc.: Accessor Funds, Inc.
c/o Bennington Capital Management
U.S. Bank Centre
1420 5th Avenue, Suite 3130
Seattle, Washington 98101
Service Organization: [To be inserted]
15. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
16. Non-Exclusivity. Each of the parties acknowledges and agrees that
this Agreement and the arrangement described herein are intended to be
non-exclusive and that each of the parties is free to enter into similar
agreements and arrangements with other entities.
17. Amendment. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged, or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
18. Successors and Assigns. This Agreement may not be assigned without
the written consent of all parties to the Agreement at the time of such
assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
19. Entire Agreement. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
ACCESSOR FUNDS, INC.
By:___________________________________
Name
Title
[NAME OF SERVICE ORGANIZATION]
By:_____________________________________
Name
Title
<PAGE>
EXHIBIT A
ACCESSOR FUNDS, INC.
as of February 19, 1998
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
<PAGE>
EXHIBIT B
TYPES OF SERVICES
Service Organization shall be responsible for performing administrative
and support servicing to their customers who may from time to time beneficially
own Investor Class Shares of the Fund, which by way of example may include:
1. Establishing and maintaining accounts and records relating to shareholders;
2. Processing dividend and distribution payments from the Portfolio on behalf
of shareholders;
3. Providing information periodically to shareholders showing their positions
in shares and integrating such statements with those of other transactions
and balances in shareholders other accounts serviced by such financial
institution;
4. Arranging for bank wires;
5. Providing transfer agent or sub-transfer agent services, recordkeeping,
custodian or subaccounting services with respect to shares beneficially
owned by shareholders, or the information to the Portfolio necessary for
such services;
6. If required by law, forwarding shareholder communications from the
Portfolio (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to
shareholders;
7. Assisting in processing purchase, exchange and redemption requests from
shareholders and in placing such orders with our service contractors;
8. Withholding taxes on non-resident alien accounts;
9. Withholding on dividends and distributions as may be required by state or
Federal authorities from time to time; and providing such other similar
services, which are not considered "service fees" as defined in National
Association of Securities Dealers, Inc. (the "NASD") Rule 2830(b)(9), as
the Portfolio may reasonably request to the extent the financial
institution, broker-dealer, registered investment adviser or fund
supermarket is permitted to do so under applicable laws, statutes, rules
and regulations, provided, however, if the NASD adopts a definition of
"service fee" for purposes of Rule 2830 of the NASD Conduct Rules that
differs from the definition of "service fee" as presently used, or if the
NASD adopts a related definition intended to define the same concept, the
definition of "service fee" as used herein shall be automatically amended
to conform to the NASD definition;
10. Transmittal of Purchase and Redemption Orders./4/
- --------
/4/ In case where Service Organization is transmitting purchase and redemption
orders, operation type disclosure must be added.
<PAGE>
EXHIBIT C
Service Organization
Portfolio Administrative Services Fee
- --------- ---------------------------
Growth
Value and Income
Small to Mid Cap
International Equity
Intermediate Fixed-Income
Short-Intermediate Fixed-Income
Mortgage Securities
U.S. Government Money
<PAGE>
EXHIBIT D
WIRE TRANSFER INFORMATION
Bank Name:
ABA#:
Account#:
For Credit to:
Special Instructions:
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BB 8/24/92 12
BB 8/31/92 12.12283 12.12283 0 0
BB 9/30/92 12.19869 12.19869 0 0
BB 10/30/92 12.50885 12.50885 0 0
BB 11/30/92 13.21688 13.21688 0 0
BB 12/31/92 13.063 13.063 0.083125 0
BB 1/29/93 13.21251 13.21251 0 0
BB 2/26/93 13.08288 13.08288 0 0
BB 3/31/93 13.70198 13.70198 0 0
BB 4/30/93 13.26665 13.26665 0 0
BB 5/28/93 13.69437 13.69437 0 0
BB 6/30/93 13.363 13.363 0.218242 0
BB 7/30/93 13.05465 13.05465 0 0
BB 8/31/93 13.74422 13.74422 0 0
BB 9/30/93 13.72999 13.72999 0 0
BB 10/29/93 14.25851 14.25851 0 0
BB 11/30/93 14.31181 14.31181 0 0
BB 12/31/93 14.15642 14.15642 0.286746 0
BB 1/31/94 14.36033 14.36033 0 0
BB 2/28/94 14.12759 14.12759 0 0
BB 3/31/94 13.5944 13.5944 0 0
BB 4/29/94 13.67428 13.67428 0 0
BB 5/31/94 13.91633 13.91633 0 0
BB 6/30/94 13.6252 13.6252 0.010697 0
BB 7/29/94 13.95445 13.95445 0 0
BB 8/31/94 14.69311 14.69311 0 0
BB 9/30/94 14.45092 14.45092 0 0
BB 10/31/94 14.6592 14.6592 0 0
BB 11/30/94 14.27848 14.27848 0 0
BB 12/30/94 14.37413 14.37413 0.003174 0
BB 1/31/95 14.6965 14.6965 0 0
BB 2/28/95 15.23376 15.23376 0 0
BB 3/31/95 15.66434 15.66434 0 0
BB 4/28/95 16.25477 16.25477 0 0
BB 5/31/95 16.94995 16.94995 0 0
BB 6/30/95 17.34666 17.34666 0.011605 0
BB 7/31/95 17.92624 17.92624 0 0
BB 8/31/95 17.78211 17.78211 0 0
BB 9/29/95 18.37278 18.37278 0 0
BB 10/31/95 18.61918 18.61918 0 0
BB 11/30/95 19.13909 19.13909 0 0
BB 12/29/95 17.98717 17.98717 0.43517 0
BB 1/31/96 18.69246 18.69246 0 0
BB 2/29/96 19.04395 19.04395 0 0
BB 3/29/96 18.88654 18.88654 0 0
BB 4/30/96 19.33362 19.33362 0 0
BB 5/31/96 19.61337 19.61337 0 0
BB 6/28/96 19.25742 19.25742 0.075454 0
BB 7/31/96 18.31905 18.31905 0 0
BB 8/30/96 18.70877 18.70877 0 0
BB 9/30/96 19.72473 19.72473 0 0
BB 10/31/96 20.23384 20.23384 0 0
BB 11/29/96 21.69 21.69 0 0
BB 12/31/96 19.51 19.85 0.494053 0
BB 1/31/97 20.89879 20.89879 0 0
BB 2/28/97 21.02229 21.02229 0 0
BB 3/31/97 20.03465 20.03465 0 0
BB 4/30/97 21.45235 21.45235 0 0
BB 5/30/97 22.6987 22.6987 0 0
BB 6/30/97 23.86156 23.86156 0 0
BB 7/31/97 25.66865 25.66865 0 0
BB 8/31/97 23.54718 23.54718 0.169787 0
BB 9/30/97 24.69624 24.69624 0 0
BB 10/31/97 23.87264 23.87264 0 0
BB 11/28/97 25.15599 25.15599 0 0
BB 12/31/97 21.57396 21.63264 1.082388 0.632815
BB 1/30/98 22.33979 22.33979 0 0
BB 2/27/98 23.96132 23.96132 0 0
BB 3/31/98 25.02064 25.02064 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0 0
0 0 0 0.01 0 0
0 0.02794 0.02794 0.008906 0 0
0 0 0 0.02541 0 0
0 0 0 0.056755 0 0
0 0.02811 0.111234 -0.00369 0 0.07961
0 0 0 0.011486 0.011486 0.064951
0 0 0 -0.00984 0.001532 -0.00216
0 0.023965 0.023965 0.049232 0.050839 0.050839
0 0 0 -0.03139 0.017857 0.006299
0 0 0 0.031651 0.050072 0.048466
0.005761 0.03422 0.258223 -0.00524 0.044568 -0.00597
0 0 0 -0.0232 0.02033 0.002429
0 0 0 0.052874 0.074278 0.02305
0 0.039251 0.039251 0.002129 0.076565 0.030633
0 0 0 0.038601 0.118122 0.095845
0 0 0 0.003506 0.122043 0.044463
0.074974 0.043472 0.405192 0.017832 0.142052 0.060829
0 0 0 0.014125 0.014125 0.035828
0 0 0 -0.01602 -0.00212 0.015676
0 0.033961 0.033961 -0.03581 -0.03785 -0.03785
0 0 0 0.005886 -0.03219 -0.04567
0 0 0 0.018288 -0.01449 -0.0124
0.022027 0.029296 0.06202 -0.01638 -0.03063 0.007506
0 0 0 0.023478 -0.00787 0.025127
0 0 0 0.053047 0.044756 0.060119
0 0.028692 0.028692 -0.01438 0.029727 0.062267
0 0 0 0.014534 0.044692 0.052984
0 0 0 -0.02592 0.017613 -0.02598
0.178486 0.040916 0.222576 0.021889 0.039888 0.009868
0 0 0 0.022964 0.022964 0.01826
0 0 0 0.036054 0.059847 0.083046
0 0.023467 0.023467 0.029775 0.091403 0.091403
0 0 0 0.037676 0.132523 0.107098
0 0 0 0.043078 0.181308 0.114603
0.061144 0.043387 0.116136 0.030451 0.217279 0.115334
0 0 0 0.03343 0.257972 0.110771
0 0 0 -0.00837 0.247448 0.05599
0 0.041512 0.041512 0.035519 0.291755 0.061183
0 0 0 0.013609 0.309334 0.040828
0 0 0 0.027927 0.3459 0.078924
0.634089 0.042101 1.11136 -0.00202 0.343182 0.039813
0 0 0 0.03891 0.03891 0.065767
0 0 0 0.018726 0.058365 0.056229
0 0.042208 0.042208 -0.00566 0.052373 0.052373
0 0 0 0.023293 0.076886 0.036552
0 0 0 0.014486 0.092485 0.032239
0.304251 0.044493 0.424198 0.003785 0.096618 0.042043
0 0 0 -0.0488 0.043097 -0.03138
0 0 0 0.021289 0.065302 -0.02488
0 0.049348 0.049348 0.056621 0.12562 0.026446
0 0 0 0.025861 0.15473 0.107022
0 0 0 0.072169 0.238067 0.162176
0.959124 0.055686 1.508863 -0.03213 0.198283 0.064553
0 0 0 0.071246 0.071246 0.111648
0 0 0 0.005742 0.077397 0.042775
0 0.041467 0.041467 -0.04513 0.028779 0.028779
0 0 0 0.070893 0.101713 0.028442
0 0 0 0.058274 0.165915 0.082159
0 0.037884 0.037884 0.05277 0.227442 0.193105
0 0 0 0.075858 0.320555 0.198635
0.320711 0 0.490498 -0.06348 0.236728 0.060734
0 0.038615 0.038615 0.050471 0.299148 0.058417
0 0 0 -0.0336 0.255493 -0.04927
0 0 0 0.054043 0.323343 0.070035
2.046341 0.01124 3.772784 0.006849 0.332407 0.0256
0 0 0 0.035698 0.035698 0.099148
0 0 0 0.072517 0.110802 0.11841
0 0.018818 0.018818 0.045025 0.160818 0.160818
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.01 0.680075
0.018994 0.20396
0.044886 0.270231
0.104189 0.446488
0.100116 0.309931
0.112751 0.279927
0.1018 0.209542
0.156046 0.273381
0.119761 0.180351
0.155202 0.209383
0.149146 0.177842
0.122481 0.132058
0.181831 0.178122
0.184347 0.166047
0.230065 0.191673
0.234378 0.180571
0.256391 0.183695
0.274137 0.183451
0.253729 0.160962
0.208829 0.125844
0.215945 0.123467
0.238183 0.128512
0.217905 0.112486
0.246498 0.121019
0.312621 0.144218
0.293739 0.130383
0.312541 0.132463
0.278518 0.114394
0.306505 0.120455
0.336508 0.126322
0.384695 0.138159
0.425924 0.14622
0.479647 0.15763
0.543386 0.169801
0.590383 0.176845
0.643548 0.184512
0.629798 0.175607
0.687685 0.184001
0.710653 0.183522
0.758426 0.188491
0.754876 0.182917
0.823159 0.190851
0.857301 0.192435
0.846785 0.185935
0.889801 0.188537
0.917176 0.188446
0.92443 0.185524
0.830507 0.165986
0.869475 0.168438
0.975325 0.180415
1.026411 0.183645
1.172657 0.199357
1.102842 0.186051
1.252661 0.20065
1.265594 0.198445
1.163358 0.182526
1.316727 0.196417
1.451734 0.206979
1.581113 0.21583
1.776914 0.229829
1.600638 0.209633
1.731897 0.217622
1.640096 0.205735
1.782774 0.214533
1.801833 0.212098
1.901852 0.2164
2.112282 0.228587
2.252415 0.2343
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BC 8/24/92 12
BC 8/31/92 12.06471 12.06471 0 0
BC 9/30/92 12.07913 12.07913 0 0
BC 10/30/92 11.9833 11.9833 0 0
BC 11/30/92 12.40842 12.40842 0 0
BC 12/31/92 12.58385 12.58385 0.00669 0
BC 1/29/93 12.94356 12.94356 0 0
BC 2/26/93 13.33539 13.33539 0 0
BC 3/31/93 13.61534 13.61534 0 0
BC 4/30/93 13.45095 13.45095 0 0
BC 5/28/93 13.6746 13.6746 0 0
BC 6/30/93 13.70921 13.70921 0.062197 0
BC 7/30/93 13.80835 13.80835 0 0
BC 8/31/93 14.26755 14.26755 0 0
BC 9/30/93 14.11657 14.11657 0 0
BC 10/29/93 14.23975 14.23975 0 0
BC 11/30/93 14.00464 14.00464 0 0
BC 12/31/93 13.58277 13.58277 0.427203 0
BC 1/31/94 14.12632 14.12632 0 0
BC 2/28/94 13.66554 13.66554 0 0
BC 3/31/94 13.15117 13.15117 0 0
BC 4/29/94 13.25428 13.25428 0 0
BC 5/31/94 13.34863 13.34863 0 0
BC 6/30/94 12.93855 12.93855 0.016135 0
BC 7/29/94 13.29465 13.29465 0 0
BC 8/31/94 13.64183 13.64183 0 0
BC 9/30/94 13.16288 13.16288 0 0
BC 10/31/94 13.40139 13.40139 0 0
BC 11/30/94 12.91671 12.91671 0 0
BC 12/30/94 13.00971 13.00971 0 0
BC 1/31/95 13.30964 13.30964 0 0
BC 2/28/95 13.82741 13.82741 0 0
BC 3/31/95 14.12497 14.12497 0 0
BC 4/28/95 14.52717 14.52717 0 0
BC 5/31/95 15.25114 15.25114 0 0
BC 6/30/95 15.19921 15.19921 0 0
BC 7/31/95 15.62107 15.62107 0 0
BC 8/31/95 15.80628 15.80628 0 0
BC 9/29/95 16.15601 16.15601 0 0
BC 10/31/95 16.06061 16.06061 0 0
BC 11/30/95 16.79173 16.79173 0 0
BC 12/29/95 15.90767 15.90767 0.696693 0
BC 1/31/96 16.38068 16.38068 0 0
BC 2/29/96 16.58461 16.58461 0 0
BC 3/29/96 16.81314 16.81314 0 0
BC 4/30/96 17.0656 17.0656 0 0
BC 5/31/96 17.30007 17.30007 0 0
BC 6/28/96 16.77573 16.77573 0.115734 0
BC 7/31/96 16.08927 16.08927 0 0
BC 8/30/96 16.66896 16.66896 0 0
BC 9/30/96 17.31513 17.31513 0 0
BC 10/31/96 18.01472 18.01472 0 0
BC 11/29/96 19.43 19.43 0 0
BC 12/31/96 17.75 18.06 0.332946 0
BC 1/31/97 18.71191 18.71191 0 0
BC 2/28/97 18.82021 18.82021 0 0
BC 3/31/97 17.94232 17.94232 0 0
BC 4/30/97 18.80732 18.80732 0 0
BC 5/30/97 20.02888 20.02888 0 0
BC 6/30/97 20.65497 20.65497 0 0
BC 7/31/97 22.56266 22.56266 0 0
BC 8/31/97 21.57869 21.57869 0.051512 0
BC 9/30/97 22.91098 22.91098 0 0
BC 10/31/97 22.10611 22.10611 0 0
BC 11/28/97 22.75095 22.75095 0 0
BC 12/31/97 20.88372 20.81697 1.061211 0.586774
BC 1/30/98 20.74491 20.74491 0 0
BC 2/27/98 22.23184 22.23184 0 0
BC 3/31/98 23.51608 23.51608 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0 0
0 0 0 0.005 0 0
0 0.047506 0.047506 0.005597 0 0
0 0 0 -0.00828 0 0
0 0 0 0.035894 0 0
0 0.073773 0.080463 0.020183 0 0.048052
0 0 0 0.028617 0.028617 0.087043
0 0 0 0.030913 0.060414 0.081815
0 0.061046 0.061046 0.025566 0.087524 0.087524
0 0 0 -0.01248 0.07395 0.044072
0 0 0 0.016356 0.091517 0.02933
0 0.065674 0.127871 0.012281 0.10492 0.015996
0 0 0 0.007294 0.11298 0.036341
0 0 0 0.033309 0.150052 0.053628
0 0.060192 0.060192 -0.00629 0.142815 0.034296
0 0 0 0.008498 0.152527 0.035533
0 0 0 -0.01685 0.133103 -0.01474
0.099197 0.063914 0.590314 0.012165 0.146888 0.003563
0 0 0 0.040501 0.040501 0.03541
0 0 0 -0.03255 0.006627 0.018873
0 0.043491 0.043491 -0.03486 -0.02846 -0.02846
0 0 0 0.007604 -0.02107 -0.05918
0 0 0 0.007547 -0.01369 -0.02018
0.02966 0.069313 0.115108 -0.02209 -0.03547 -0.00722
0 0 0 0.027049 -0.00938 0.01194
0 0 0 0.026335 0.016705 0.030812
0 0.074448 0.074448 -0.02973 -0.01352 0.022756
0 0 0 0.018237 0.004467 0.013981
0 0 0 -0.03582 -0.03151 -0.04743
0.010925 0.062034 0.072959 0.012614 -0.0193 -0.00585
0 0 0 0.02306 0.02306 -0.00115
0 0 0 0.039069 0.063029 0.076437
0 0.074068 0.074068 0.026325 0.091013 0.091013
0 0 0 0.029036 0.122692 0.097387
0 0 0 0.049552 0.178325 0.10846
0.000926 0.083909 0.084835 0.002285 0.181017 0.082495
0 0 0 0.027632 0.213651 0.081016
0 0 0 0.012164 0.228413 0.042508
0 0.086413 0.086413 0.027603 0.262322 0.068843
0 0 0 -0.00619 0.254511 0.033667
0 0 0 0.045455 0.311534 0.067664
0.361353 0.08975 1.147796 0.015951 0.332453 0.055557
0 0 0 0.029542 0.029542 0.093506
0 0 0 0.012211 0.042113 0.058734
0 0.075 0.075 0.018395 0.061283 0.061283
0 0 0 0.015467 0.077697 0.046775
0 0 0 0.013474 0.092218 0.048081
0.259172 0.03912 0.414026 -0.00613 0.085527 0.022845
0 0 0 -0.04112 0.040889 -0.03415
0 0 0 0.036047 0.078411 -0.01264
0 0.064579 0.064579 0.042867 0.124638 0.03603
0 0 0 0.039838 0.169442 0.123503
0 0 0 0.078845 0.261646 0.169913
0.964689 0.063055 1.36069 -0.01764 0.239396 0.102041
0 0 0 0.054084 0.054084 0.117139
0 0 0 0.00588 0.060281 0.041582
0 0.059286 0.059286 -0.04361 0.014044 0.014044
0 0 0 0.048496 0.06322 0.008667
0 0 0 0.064859 0.13218 0.067811
0 0.06659 0.06659 0.034278 0.170989 0.154773
0 0 0 0.092495 0.279299 0.203229
0.087503 0 0.139015 -0.03728 0.231609 0.087822
0 0.073432 0.073432 0.065033 0.311705 0.120171
0 0 0 -0.03492 0.265901 -0.01047
0 0 0 0.028946 0.302544 0.057595
0.622663 0.062191 2.332839 0.020639 0.32943 0.013513
0 0 0 -0.0067 -0.0067 0.043143
0 0 0 0.071842 0.064655 0.086629
0 0.068912 0.068912 0.061131 0.129736 0.129736
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.005 0.297014
0.010625 0.10989
0.002259 0.012368
0.038233 0.149979
0.059187 0.176682
0.089498 0.218983
0.123176 0.256021
0.151891 0.265763
0.137514 0.207883
0.15612 0.210649
0.170317 0.203433
0.178853 0.193202
0.21812 0.213606
0.210454 0.189361
0.220741 0.184019
0.200167 0.1547
0.214766 0.154593
0.263965 0.176874
0.222817 0.141988
0.180191 0.109099
0.189166 0.108669
0.198141 0.107712
0.171676 0.089449
0.203367 0.100737
0.235058 0.110218
0.198336 0.089918
0.220191 0.095296
0.176482 0.074275
0.191322 0.077317
0.218793 0.084528
0.266409 0.098459
0.299746 0.106093
0.337487 0.114759
0.403763 0.130394
0.40697 0.127307
0.445847 0.133888
0.463434 0.134421
0.50383 0.140739
0.494524 0.134401
0.562457 0.146294
0.587379 0.147999
0.634272 0.153566
0.654226 0.153824
0.684658 0.156027
0.710714 0.156854
0.733764 0.157164
0.723145 0.151959
0.652289 0.136041
0.711849 0.14311
0.78523 0.151668
0.85635 0.159135
1.002714 0.176689
0.967394 0.168061
1.0738 0.178491
1.085992 0.176735
0.995025 0.161896
1.091774 0.170615
1.227444 0.182931
1.303797 0.187679
1.516884 0.20558
1.423061 0.192717
1.580642 0.204109
1.490528 0.19226
1.562619 0.195671
1.615512 0.196625
1.597975 0.191908
1.784619 0.204053
1.954841 0.213341
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BD 8/24/92 12
BD 8/31/92 11.87245 11.87245 0 0
BD 9/30/92 11.97381 11.97381 0 0
BD 10/30/92 12.33812 12.33812 0 0
BD 11/30/92 13.14781 13.14781 0 0
BD 12/31/92 13.55656 13.55656 0 0
BD 1/29/93 13.92951 13.92951 0 0
BD 2/26/93 13.72073 13.72073 0 0
BD 3/31/93 14.17861 14.17861 0 0
BD 4/30/93 13.64678 13.64678 0 0
BD 5/28/93 14.14608 14.14608 0 0
BD 6/30/93 14.20593 14.20593 0 0
BD 7/30/93 14.37693 14.37693 0 0
BD 8/31/93 14.90868 14.90868 0 0
BD 9/30/93 15.16221 15.16221 0 0
BD 10/29/93 15.393 15.393 0 0
BD 11/30/93 14.95063 14.95063 0 0
BD 12/31/93 14.79178 14.79178 0.172644 0
BD 1/31/94 15.24281 15.24281 0 0
BD 2/28/94 15.01833 15.01833 0 0
BD 3/31/94 14.2495 14.2495 0 0
BD 4/29/94 14.32372 14.32372 0 0
BD 5/31/94 14.05098 14.05098 0 0
BD 6/30/94 13.64352 13.64352 0 0
BD 7/29/94 13.8539 13.8539 0 0
BD 8/31/94 14.59422 14.59422 0 0
BD 9/30/94 14.53384 14.53384 0 0
BD 10/31/94 14.5032 14.5032 0 0
BD 11/30/94 13.88524 13.88524 0 0
BD 12/30/94 14.08173 14.08173 0 0
BD 1/31/95 14.01117 14.01117 0 0
BD 2/28/95 14.43218 14.43218 0 0
BD 3/31/95 14.68975 14.68975 0 0
BD 4/28/95 15.00293 15.00293 0 0
BD 5/31/95 15.2374 15.2374 0 0
BD 6/30/95 15.97263 15.97263 0 0
BD 7/31/95 17.07503 17.07503 0 0
BD 8/31/95 17.33464 17.33464 0 0
BD 9/29/95 17.72856 17.72856 0 0
BD 10/31/95 17.14373 17.14373 0 0
BD 11/30/95 17.96999 17.96999 0 0
BD 12/29/95 17.60549 17.60549 0.2931 0
BD 1/31/96 17.54483 17.54483 0 0
BD 2/29/96 18.26831 18.26831 0 0
BD 3/29/96 18.5002 18.5002 0 0
BD 4/30/96 19.36636 19.36636 0 0
BD 5/31/96 19.81002 19.81002 0 0
BD 6/28/96 18.76785 18.76785 0.298293 0
BD 7/31/96 17.64246 17.64246 0 0
BD 8/30/96 18.93544 18.93544 0 0
BD 9/30/96 19.95796 19.95796 0 0
BD 10/31/96 20.05269 20.05269 0 0
BD 11/29/96 21.07 21.07 0 0
BD 12/31/96 18.82 18.75 1.142646 0
BD 1/31/97 19.32923 19.32923 0 0
BD 2/28/97 18.8001 18.8001 0 0
BD 3/31/97 18.03195 18.03195 0 0
BD 4/30/97 18.72209 18.72209 0 0
BD 5/30/97 20.37933 20.37933 0 0
BD 6/30/97 21.23484 21.23484 0 0
BD 7/31/97 23.17793 23.17793 0 0
BD 8/31/97 23.11226 23.11226 0.142466 0
BD 9/30/97 25.20636 25.20636 0 0
BD 10/31/97 24.19895 24.19895 0 0
BD 11/28/97 24.60281 24.60281 0 0
BD 12/31/97 21.81605 21.67732 1.791974 0.77442
BD 1/30/98 21.89866 21.89866 0 0
BD 2/27/98 23.83608 23.83608 0 0
BD 3/31/98 25.03403 25.03403 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0 0
0 0 0 -0.01083 0 0
0 0.014211 0.014211 0.009622 0 0
0 0 0 0.030911 0 0
0 0 0 0.06564 0 0
0 0.017796 0.017796 0.032532 0 0.13432
0 0 0 0.027286 0.027286 0.13033
0 0 0 -0.01508 0.011799 0.044715
0 0.011684 0.011684 0.03438 0.046585 0.046585
0 0 0 -0.03738 0.007467 -0.01929
0 0 0 0.03663 0.04437 0.032192
0.005597 0.013602 0.019199 0.005598 0.050216 0.00347
0 0 0 0.011964 0.06278 0.054904
0 0 0 0.036856 0.10195 0.055134
0 0.01217 0.01217 0.017583 0.121326 0.067711
0 0 0 0.015172 0.138338 0.071095
0 0 0 -0.02859 0.105793 0.003487
0.497717 0.005175 0.675536 0.034484 0.143925 0.020154
0 0 0 0.030427 0.030427 0.035485
0 0 0 -0.01444 0.015552 0.050571
0 0.008335 0.008335 -0.05071 -0.03595 -0.03595
0 0 0 0.004912 -0.03121 -0.05982
0 0 0 -0.01885 -0.04948 -0.06403
0.027392 0 0.027392 -0.02723 -0.07536 -0.04089
0 0 0 0.015396 -0.06113 -0.03088
0 0 0 0.05343 -0.01096 0.040521
0 0 0 -0.00411 -0.01503 0.06525
0 0 0 -0.00206 -0.01706 0.046932
0 0 0 -0.04207 -0.05841 -0.04798
0.071519 0 0.071519 0.018827 -0.04069 -0.02605
0 0 0 -0.00497 -0.00497 -0.02889
0 0 0 0.029979 0.024858 0.044153
0 0.013132 0.013132 0.018928 0.044256 0.044256
0 0 0 0.021103 0.066293 0.071621
0 0 0 0.016001 0.083354 0.057077
0.044932 0.012855 0.057787 0.051692 0.139354 0.091067
0 0 0 0.069505 0.218545 0.142787
0 0 0 0.014637 0.236381 0.141253
0 0.021343 0.021343 0.024314 0.266441 0.111543
0 0 0 -0.03328 0.224298 0.004721
0 0 0 0.048426 0.283585 0.038179
0.558806 0.014518 0.866424 0.028181 0.319759 0.0421
0 0 0 -0.00398 -0.00398 0.073687
0 0 0 0.041618 0.037478 0.066716
0 0.016686 0.016686 0.013502 0.051486 0.051486
0 0 0 0.047028 0.100935 0.105328
0 0 0 0.022715 0.125943 0.085269
0.290493 0.023037 0.611823 -0.02161 0.101606 0.047668
0 0 0 -0.0602 0.035286 -0.05963
0 0 0 0.073695 0.111583 -0.01275
0 0.014921 0.014921 0.054642 0.172323 0.064193
0 0 0 0.004509 0.177609 0.137471
0 0 0 0.050873 0.237517 0.113292
1.268106 0.017639 2.428391 0.008895 0.248526 0.065003
0 0 0 0.0271 0.0271 0.088954
0 0 0 -0.02742 -0.00106 0.007823
0 0.012941 0.012941 -0.04027 -0.04129 -0.04129
0 0 0 0.038269 -0.0046 -0.03086
0 0 0 0.088675 0.08367 0.084821
0 0.005514 0.005514 0.041979 0.12916 0.177787
0 0 0 0.091852 0.232875 0.23857
0.128564 0 0.27103 0.008671 0.243568 0.147552
0 0.000622 0.000622 0.090897 0.356603 0.201428
0 0 0 -0.04006 0.302253 0.056272
0 0 0 0.016529 0.323778 0.064501
0.891202 0 3.457605 0.028453 0.361441 0.003567
0 0 0 0.003666 0.003666 0.049284
0 0 0 0.088584 0.092575 0.123663
0 0 0 0.049916 0.147112 0.147112
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
- -0.01083 -0.43334
- -0.00132 -0.01292
0.029553 0.171945
0.097133 0.41236
0.132825 0.423152
0.163736 0.419489
0.146192 0.307027
0.185597 0.328093
0.141283 0.213754
0.183089 0.247999
0.18971 0.226947
0.203942 0.220485
0.248316 0.243117
0.270265 0.242602
0.289537 0.240289
0.252669 0.19434
0.295867 0.211064
0.335295 0.222661
0.316019 0.198719
0.249283 0.149246
0.25542 0.145044
0.231749 0.12519
0.198206 0.10272
0.216653 0.107021
0.281659 0.13077
0.276388 0.123143
0.273753 0.117031
0.220167 0.09168
0.24314 0.097007
0.23696 0.091129
0.274042 0.101086
0.298157 0.105573
0.325552 0.111032
0.34676 0.113586
0.416378 0.129947
0.514823 0.152041
0.536996 0.152999
0.574365 0.157739
0.521975 0.1409
0.595677 0.153696
0.640646 0.159372
0.634125 0.153536
0.702136 0.163226
0.725119 0.163679
0.806247 0.17404
0.847277 0.176795
0.807348 0.166336
0.698541 0.144036
0.823717 0.161256
0.92337 0.172774
0.932042 0.170246
1.03033 0.18047
1.048395 0.17893
1.103904 0.182322
1.046218 0.171731
0.963819 0.157923
1.038973 0.164244
1.219779 0.182076
1.312962 0.188651
1.52541 0.206406
1.547311 0.204653
1.778853 0.221694
1.667522 0.208139
1.711614 0.208573
1.788766 0.211041
1.798991 0.208354
2.046938 0.223869
2.199029 0.230659
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BE 10/3/94 12
BE 10/31/94 12.17463 12.17463 0 0
BE 11/30/94 11.55483 11.55483 0 0
BE 12/30/94 11.6661 11.6661 0 0
BE 1/31/95 10.99204 10.99204 0 0
BE 2/28/95 10.94713 10.94713 0 0
BE 3/31/95 11.21282 11.21282 0 0
BE 4/28/95 11.53505 11.53505 0 0
BE 5/31/95 11.37033 11.37033 0 0
BE 6/30/95 11.30749 11.30749 0 0
BE 7/31/95 12.10156 12.10156 0 0
BE 8/31/95 12.20634 12.20634 0 0
BE 9/29/95 12.43646 12.43646 0 0
BE 10/31/95 12.11945 12.11945 0 0
BE 11/30/95 12.28212 12.28212 0 0
BE 12/29/95 12.56292 12.56292 0 0
BE 1/31/96 12.54033 12.54033 0 0
BE 2/29/96 12.81852 12.81852 0 0
BE 3/29/96 13.25035 13.25035 0 0
BE 4/30/96 13.76761 13.76761 0 0
BE 5/31/96 13.78569 13.78569 0 0
BE 6/28/96 14.02391 14.02391 0 0
BE 7/31/96 13.31835 13.31835 0 0
BE 8/30/96 13.44844 13.44844 0 0
BE 9/30/96 13.63825 13.63825 0 0
BE 10/31/96 13.64186 13.64186 0 0
BE 11/29/96 14.20607 14.20607 0 0
BE 12/31/96 13.82554 13.74484 0.175519 0
BE 1/31/97 13.84451 13.84451 0 0
BE 2/28/97 13.88571 13.88571 0 0
BE 3/31/97 13.98876 13.98876 0 0
BE 4/30/97 14.05683 14.05683 0 0
BE 5/30/97 14.95778 14.95778 0 0
BE 6/30/97 15.76066 15.76066 0 0
BE 7/31/97 16.69768 16.69768 0 0
BE 8/31/97 15.56953 15.56953 0 0
BE 9/30/97 16.61567 15.85988 0 0
BE 10/31/97 15.14177 15.14177 0 0
BE 11/28/97 15.04486 15.04486 0 0
BE 12/31/97 14.82789 14.84394 0.144247 0.02864
BE 1/30/98 15.29572 15.29572 0 0
BE 2/27/98 16.05542 16.05542 0 0
BE 3/31/98 16.78081 16.78081 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0 0
0 0 0 0.014166 0 0
0 0 0 -0.05095 0 0
0 0 0 0.01039 0 0
0 0 0 -0.05827 -0.05827 0
0 0 0 -0.00364 -0.0617 0
0 0 0 0.023744 -0.03942 -0.03942
0 0 0 0.029438 -0.01114 0.050045
0 0 0 -0.01473 -0.02571 0.038356
0 0 0 -0.00528 -0.03085 0.008921
0 0 0 0.069849 0.036847 0.048527
0 0 0 0.009091 0.046272 0.073878
0 0 0 0.018837 0.065981 0.099911
0 0 0 -0.02572 0.03856 0.001653
0 0 0 0.013202 0.052271 0.005733
0 0 0 0.022801 0.076264 0.009647
0 0 0 -0.00159 -0.00159 0.034654
0 0 0 0.022328 0.0207 0.043974
0 0 0 0.033541 0.054936 0.054936
0 0 0 0.039245 0.096337 0.098086
0 0 0 0.001452 0.097929 0.075663
0 0 0 0.016679 0.116242 0.058113
0 0 0 -0.04993 0.060509 -0.03268
0 0 0 0.00976 0.070859 -0.02466
0 0 0 0.014126 0.085987 -0.0271
0 0 0 0 0.085987 0.024024
0 0 0 0.041789 0.131369 0.056505
0.28214 0 0.457659 0.005676 0.137791 0.047703
0 0 0 0.000723 0.000723 0.04846
0 0 0 0.003612 0.004339 0.010039
0 0 0 0.007199 0.011569 0.011569
0 0 0 0.005003 0.016631 0.015895
0 0 0 0.064012 0.081707 0.077033
0 0 0 0.053476 0.139552 0.126518
0 0 0 0.059645 0.20752 0.187767
0 0 0 -0.06767 0.125814 0.040775
0.044979 0 0.044979 0.070466 0.205143 0.057559
0 0 0 -0.08905 0.097826 -0.09084
0 0 0 -0.0066 0.090574 -0.0313
0.2998 0 0.47269 0.017446 0.1096 -0.07928
0 0 0 0.031693 0.031693 0.042756
0 0 0 0.049674 0.08294 0.101833
0 0 0 0.044832 0.131491 0.131491
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.014166 0.201257
- -0.0375 -0.21379
- -0.0275 -0.10922
- -0.08417 -0.23465
- -0.0875 -0.20214
- -0.06583 -0.12965
- -0.03833 -0.0666
- -0.0525 -0.07874
- -0.0575 -0.07694
0.008333 0.010114
0.0175 0.019256
0.036666 0.03708
0.01 0.009284
0.023333 0.020102
0.046666 0.037518
0.045 0.033681
0.068333 0.048057
0.104166 0.068876
0.1475 0.091264
0.149166 0.087349
0.168333 0.093701
0.11 0.058771
0.120833 0.061557
0.136666 0.066333
0.136666 0.063539
0.184166 0.081445
0.190887 0.080865
0.191749 0.078143
0.196054 0.077173
0.204665 0.077545
0.210693 0.077065
0.288191 0.099979
0.357078 0.11777
0.43802 0.1371
0.340717 0.105919
0.43519 0.128233
0.307387 0.090939
0.298752 0.08635
0.321408 0.089636
0.363287 0.097568
0.431005 0.110972
0.49516 0.122041
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BF 6/15/92 12 12.04328 0 0
BF 6/30/92 12.04328 12.04328 0 0
BF 7/31/92 12.24434 12.24434 0 0
BF 8/31/92 12.33213 12.33213 0 0
BF 9/30/92 12.44913 12.44913 0 0
BF 10/30/92 12.17912 12.17912 0 0
BF 11/30/92 12.03084 12.03084 0 0
BF 12/31/92 12.00394 12.00394 0.152588 0
BF 1/29/93 12.21135 12.21135 0 0
BF 2/26/93 12.38477 12.38477 0 0
BF 3/31/93 12.38644 12.38644 0 0
BF 4/30/93 12.45264 12.45264 0 0
BF 5/28/93 12.39511 12.39511 0 0
BF 6/30/93 12.56652 12.56652 0.010122 0
BF 7/30/93 12.5722 12.5722 0 0
BF 8/31/93 12.75997 12.75997 0 0
BF 9/30/93 12.76136 12.76136 0 0
BF 10/29/93 12.75008 12.75008 0 0
BF 11/30/93 12.56477 12.56477 0 0
BF 12/31/93 12.33765 12.33765 0.180178 0
BF 1/31/94 12.44732 12.44732 0 0
BF 2/28/94 12.10476 12.10476 0 0
BF 3/31/94 11.76181 11.76181 0 0
BF 4/29/94 11.59632 11.59632 0 0
BF 5/31/94 11.52162 11.52162 0 0
BF 6/30/94 11.4046 11.4046 0 0
BF 7/29/94 11.54176 11.54176 0 0
BF 8/31/94 11.47506 11.47506 0 0
BF 9/30/94 11.26495 11.26495 0 0
BF 10/31/94 11.16522 11.16522 0 0
BF 11/30/94 11.05783 11.05783 0 0
BF 12/30/94 11.03886 11.03886 0 0
BF 1/31/95 11.16065 11.16065 0 0
BF 2/28/95 11.33953 11.33953 0 0
BF 3/31/95 11.35762 11.35762 0 0
BF 4/28/95 11.43588 11.43588 0 0
BF 5/31/95 11.84815 11.84815 0 0
BF 6/30/95 11.86886 11.86886 0 0
BF 7/31/95 11.76448 11.76448 0 0
BF 8/31/95 11.84517 11.84517 0 0
BF 9/29/95 11.91649 11.91649 0 0
BF 10/31/95 12.0311 12.0311 0 0
BF 11/30/95 12.16399 12.16399 0 0
BF 12/29/95 12.29358 12.29358 0 0
BF 1/31/96 12.28748 12.28748 0 0
BF 2/29/96 11.98796 11.98796 0 0
BF 3/29/96 11.84347 11.84347 0 0
BF 4/30/96 11.71392 11.71392 0 0
BF 5/31/96 11.6364 11.6364 0 0
BF 6/28/96 11.72951 11.72951 0 0
BF 7/31/96 11.68857 11.68857 0 0
BF 8/30/96 11.59408 11.59408 0 0
BF 9/30/96 11.73377 11.73377 0 0
BF 10/31/96 11.92405 11.92405 0 0
BF 11/29/96 12.10082 12.10082 0 0
BF 12/31/96 11.90717 11.96902 0 0
BF 1/31/97 11.85232 11.85232 0 0
BF 2/28/97 11.81995 11.81995 0 0
BF 3/31/97 11.62185 11.62185 0 0
BF 4/30/97 11.7255 11.7255 0 0
BF 5/30/97 11.76498 11.76498 0 0
BF 6/30/97 11.8287 11.8287 0 0
BF 7/31/97 12.12561 12.12561 0 0
BF 8/31/97 11.92809 11.92809 0 0
BF 9/30/97 12.05327 12.05327 0 0
BF 10/31/97 12.1554 12.1554 0 0
BF 11/28/97 12.12132 12.12132 0 0
BF 12/31/97 12.18887 12.15813 0 0
BF 1/30/98 12.30783 12.30783 0 0
BF 2/27/98 12.20748 12.20748 0 0
BF 3/31/98 12.18901 12.18901 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0.0237 0.0237 0 0 0
0 0.0237 0.0237 0.005307 0 0
0 0.056575 0.056575 0.02131 0 0
0 0.060679 0.060679 0.012309 0 0
0 0.051841 0.051841 0.013937 0 0.048292
0 0.055988 0.055988 -0.01719 0 0.008773
0 0.05415 0.05415 -0.00787 0 -0.01134
0 0.053586 0.206173 0.014644 0 -0.01064
0 0.052603 0.052603 0.021883 0.021883 0.028689
0 0.047812 0.047812 0.017839 0.040112 0.055344
0 0.050394 0.050394 0.004879 0.045186 0.045186
0 0.035528 0.035528 0.007712 0.053244 0.030691
0 0.047962 0.047962 -0.00016 0.053071 0.01246
0 0.048557 0.058679 0.018443 0.072491 0.026128
0 0.045534 0.045534 0.003621 0.076377 0.021964
0 0.045128 0.045128 0.018705 0.09651 0.041252
0 0.046823 0.046823 0.00367 0.100535 0.026146
0 0.048831 0.048831 0.003044 0.103885 0.025554
0 0.048436 0.048436 -0.0111 0.091629 -0.00445
0.035007 0.046842 0.262027 0.003346 0.095281 -0.00478
0 0.050088 0.050088 0.012973 0.012973 0.005079
0 0.048543 0.048543 -0.02421 -0.01155 -0.00825
0 0.049675 0.049675 -0.02399 -0.03527 -0.03527
0 0.049692 0.049692 -0.00938 -0.04432 -0.05656
0 0.053909 0.053909 -0.00225 -0.04647 -0.03532
0.016853 0.053298 0.070151 -0.00433 -0.0506 -0.01588
0 0.055335 0.055335 0.017134 -0.03433 0.010456
0 0.055169 0.055169 -0.00042 -0.03473 0.01231
0 0.057247 0.057247 -0.01418 -0.04842 0.002295
0 0.058808 0.058808 -0.00277 -0.05105 -0.01732
0 0.056579 0.056579 -0.00478 -0.05559 -0.02161
0 0.057687 0.057687 0.003408 -0.05237 -0.00416
0 0.061485 0.061485 0.016438 0.016438 0.015025
0 0.054643 0.054643 0.021024 0.03781 0.041347
0 0.062693 0.062693 0.007291 0.045378 0.045378
0 0.059814 0.059814 0.012307 0.058243 0.041127
0 0.059284 0.059284 0.041021 0.101654 0.061517
0 0.063439 0.063439 0.007042 0.109412 0.061254
0 0.05603 0.05603 -0.00455 0.104367 0.043585
0 0.060284 0.060284 0.012779 0.11848 0.015276
0 0.056789 0.056789 0.010699 0.130448 0.018961
0 0.060107 0.060107 0.014271 0.146579 0.038224
0 0.057376 0.057376 0.015575 0.164439 0.041089
0 0.059587 0.059587 0.01559 0.182594 0.046128
0 0.061479 0.061479 0.005002 0.005002 0.036569
0 0.051368 0.051368 -0.02023 -0.01533 2.1E-05
0 0.05825 0.05825 -0.00765 -0.02286 -0.02286
0 0.047421 0.047421 -0.00697 -0.02968 -0.03451
0 0.053149 0.053149 -0.00144 -0.03107 -0.01599
0 0.05579 0.05579 0.012525 -0.01894 0.004016
0 0.0577 0.0577 0.001509 -0.01746 0.012592
0 0.058077 0.058077 -0.00359 -0.02098 0.010417
0 0.056134 0.056134 0.016923 -0.00441 0.014805
0 0.059315 0.059315 0.021254 0.016746 0.034812
0 0.061272 0.061272 0.020241 0.037326 0.059558
0 0.053498 0.053498 -0.0113 0.0256 0.030149
0 0.059771 0.059771 -1.9E-05 -1.9E-05 0.00869
0 0.05244 0.05244 0.001894 0.001875 -0.00945
0 0.058658 0.058658 -0.01196 -0.0101 -0.0101
0 0.056699 0.056699 0.014345 0.004096 0.004115
0 0.057828 0.057828 0.007487 0.011614 0.009722
0 0.075048 0.075048 0.012335 0.024091 0.034545
0 0.058219 0.058219 0.030281 0.055101 0.050796
0 0.060258 0.060258 -0.01152 0.042946 0.030973
0 0.060095 0.060095 0.015096 0.05869 0.033785
0 0.056031 0.056031 0.013779 0.073278 0.017227
0 0.052824 0.052824 0.001054 0.07441 0.030167
0 0.062609 0.062609 0.010954 0.086179 0.025965
0 0.058049 0.058049 0.014606 0.014606 0.0268
0 0.05049 0.05049 -0.00402 0.010525 0.021596
0 0.057015 0.057015 0.003032 0.013589 0.013589
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.005307 0.137458
0.02673 0.232829
0.03937 0.200867
0.053855 0.195943
0.03574 0.098074
0.027589 0.060911
0.042638 0.079593
0.065454 0.106827
0.084461 0.122554
0.089751 0.114663
0.098153 0.11308
0.097973 0.103309
0.118222 0.113301
0.122273 0.108153
0.143267 0.116909
0.147462 0.112233
0.150954 0.107856
0.138175 0.092678
0.141983 0.089721
0.156798 0.093465
0.128787 0.073554
0.101703 0.055544
0.091369 0.047834
0.088914 0.044443
0.084203 0.040404
0.102781 0.047218
0.102319 0.045046
0.086691 0.03692
0.083681 0.034371
0.078498 0.031192
0.082173 0.031548
0.099963 0.036889
0.123091 0.043818
0.131281 0.045174
0.145205 0.048401
0.192182 0.061209
0.200577 0.061954
0.195118 0.058677
0.210391 0.06127
0.223342 0.06318
0.240801 0.065954
0.260127 0.069102
0.279774 0.072176
0.286176 0.071789
0.260156 0.064318
0.250514 0.060776
0.241792 0.05745
0.240005 0.055801
0.255535 0.057968
0.257429 0.057049
0.25292 0.055005
0.274122 0.058013
0.301203 0.061943
0.327541 0.065584
0.312534 0.061622
0.31251 0.060455
0.314995 0.059867
0.299271 0.056123
0.31791 0.058238
0.327778 0.058837
0.344154 0.060392
0.384855 0.065543
0.368902 0.062078
0.389567 0.064092
0.408713 0.065756
0.4102 0.065009
0.425647 0.066007
0.446471 0.06776
0.440653 0.066066
0.44502 0.065591
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BG 5/18/92 12 11.97067 0 0
BG 5/29/92 11.97067 11.97067 0 0
BG 6/30/92 12.06602 12.06602 0 0
BG 7/31/92 12.20078 12.20078 0 0
BG 8/31/92 12.24873 12.24873 0 0
BG 9/30/92 12.34113 12.34113 0 0
BG 10/30/92 12.1769 12.1769 0 0
BG 11/30/92 12.0902 12.0902 0 0
BG 12/31/92 12.16034 12.16034 0.003757 0
BG 1/29/93 12.28159 12.28159 0 0
BG 2/26/93 12.38415 12.38415 0 0
BG 3/31/93 12.37969 12.37969 0 0
BG 4/30/93 12.41759 12.41759 0 0
BG 5/28/93 12.33876 12.33876 0 0
BG 6/30/93 12.41369 12.41369 0.004004 0
BG 7/30/93 12.38909 12.38909 0 0
BG 8/31/93 12.47457 12.47457 0 0
BG 9/30/93 12.46485 12.46485 0 0
BG 10/29/93 12.44661 12.44661 0 0
BG 11/30/93 12.36877 12.36877 0 0
BG 12/31/93 12.29304 12.29304 0.053999 0
BG 1/31/94 12.34816 12.34816 0 0
BG 2/28/94 12.18248 12.18248 0 0
BG 3/31/94 12.01049 12.01049 0 0
BG 4/29/94 11.91016 11.91016 0 0
BG 5/31/94 11.88133 11.88133 0 0
BG 6/30/94 11.85827 11.85827 0 0
BG 7/29/94 11.92329 11.92329 0 0
BG 8/31/94 11.90666 11.90666 0 0
BG 9/30/94 11.79342 11.79342 0 0
BG 10/31/94 11.75102 11.75102 0 0
BG 11/30/94 11.65063 11.65063 0 0
BG 12/30/94 11.62187 11.62187 0 0
BG 1/31/95 11.73813 11.73813 0 0
BG 2/28/95 11.87652 11.87652 0 0
BG 3/31/95 11.88954 11.88954 0 0
BG 4/28/95 11.95086 11.95086 0 0
BG 5/31/95 12.147 12.147 0 0
BG 6/30/95 12.14561 12.14561 0 0
BG 7/31/95 12.11646 12.11646 0 0
BG 8/31/95 12.14586 12.14586 0 0
BG 9/29/95 12.15592 12.15592 0 0
BG 10/31/95 12.21013 12.21013 0 0
BG 11/30/95 12.27317 12.27317 0 0
BG 12/29/95 12.32377 12.32377 0 0
BG 1/31/96 12.37343 12.37343 0 0
BG 2/29/96 12.23986 12.23986 0 0
BG 3/29/96 12.13985 12.13985 0 0
BG 4/30/96 12.06884 12.06884 0 0
BG 5/31/96 12.02098 12.02098 0 0
BG 6/28/96 12.07054 12.07054 0 0
BG 7/31/96 12.05288 12.05288 0 0
BG 8/30/96 12.02362 12.02362 0 0
BG 9/30/96 12.09502 12.09502 0 0
BG 10/31/96 12.20173 12.20173 0 0
BG 11/29/96 12.25882 12.25882 0 0
BG 12/31/96 12.16438 12.19748 0 0
BG 1/31/97 12.16707 12.16707 0 0
BG 2/28/97 12.13469 12.13469 0 0
BG 3/31/97 12.03365 12.03365 0 0
BG 4/30/97 12.08585 12.08585 0 0
BG 5/30/97 12.11261 12.11261 0 0
BG 6/30/97 12.13669 12.13669 0 0
BG 7/31/97 12.2496 12.2496 0 0
BG 8/31/97 12.16389 12.16389 0 0
BG 9/30/97 12.22441 12.22441 0 0
BG 10/31/97 12.27764 12.27764 0 0
BG 11/28/97 12.23048 12.23048 0 0
BG 12/31/97 12.26715 12.25189 0 0
BG 1/30/98 12.34937 12.34937 0 0
BG 2/27/98 12.29323 12.29323 0 0
BG 3/31/98 12.27227 12.27227 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0.019734 0.019734 0 0 0
0 0.019734 0.019734 -0.00086 0 0
0 0.042169 0.042169 0.011878 0 0
0 0.04486 0.04486 0.014487 0 0
0 0.049972 0.049972 0.008195 0 0
0 0.042642 0.042642 0.010829 0 0.033875
0 0.042071 0.042071 -0.00956 0 0.009372
0 0.042253 0.042253 -0.00392 0 -0.00276
0 0.042982 0.046739 0.009656 0 -0.00391
0 0.037274 0.037274 0.012933 0.012933 0.018706
0 0.029614 0.029614 0.010555 0.023624 0.033508
0 0.042712 0.042712 0.00345 0.027156 0.027156
0 0.049275 0.049275 0.007211 0.034562 0.021354
0 0.043499 0.043499 -0.00294 0.031522 0.007716
0 0.039424 0.043428 0.009192 0.041003 0.013483
0 0.03698 0.03698 0.001368 0.042428 0.007603
0 0.03862 0.03862 0.009575 0.052407 0.020248
0 0.037225 0.037225 0.002184 0.054705 0.013162
0 0.033063 0.033063 0.001852 0.056658 0.013653
0 0.036766 0.036766 -0.00347 0.052988 0.000552
0.028155 0.036742 0.118896 0.003144 0.056298 0.001512
0 0.039499 0.039499 0.008096 0.008096 0.007754
0 0.038926 0.038926 -0.01061 -0.0026 0.000533
0 0.037688 0.037688 -0.01086 -0.01344 -0.01344
0 0.035927 0.035927 -0.00534 -0.0187 -0.02658
0 0.037555 0.037555 0.000635 -0.01808 -0.01552
0 0.040089 0.040089 0.001691 -0.01642 -0.00302
0 0.040623 0.040623 0.008483 -0.00808 0.01083
0 0.043405 0.043405 0.002802 -0.0053 0.013019
0 0.046487 0.046487 -0.00617 -0.01144 0.005067
0 0.046667 0.046667 0.000565 -0.01088 -0.00282
0 0.045364 0.045364 -0.00465 -0.01548 -0.01024
0 0.044486 0.044486 0.001244 -0.01425 -0.00285
0 0.048703 0.048703 0.014518 0.014518 0.011057
0 0.045808 0.045808 0.015828 0.030575 0.031858
0 0.050186 0.050186 0.005066 0.035796 0.035796
0 0.049948 0.049948 0.009247 0.045374 0.030415
0 0.051563 0.051563 0.021051 0.067381 0.035713
0 0.052909 0.052909 0.004354 0.07203 0.03498
0 0.048131 0.048131 0.001491 0.07363 0.027026
0 0.052126 0.052126 0.006777 0.080904 0.012668
0 0.050048 0.050048 0.004941 0.086246 0.01326
0 0.051643 0.051643 0.008358 0.095325 0.020209
0 0.050243 0.050243 0.00903 0.105214 0.022491
0 0.050086 0.050086 0.008157 0.114229 0.025761
0 0.04952 0.04952 0.008077 0.008077 0.025478
0 0.04595 0.04595 -0.0068 0.001228 0.009395
0 0.04894 0.04894 -0.00417 -0.00295 -0.00295
0 0.047572 0.047572 -0.00185 -0.00479 -0.01277
0 0.05082 0.05082 6.6E-05 -0.00472 -0.00595
0 0.047992 0.047992 0.008153 0.00339 0.006359
0 0.05039 0.05039 0.002518 0.005916 0.010758
0 0.05013 0.05013 0.001671 0.007597 0.01238
0 0.049391 0.049391 0.010765 0.018442 0.015002
0 0.052613 0.052613 0.012612 0.031288 0.025223
0 0.047774 0.047774 0.008834 0.040398 0.032554
0 0.052095 0.052095 -0.00392 0.036319 0.017551
0 0.052529 0.052529 0.005142 0.005142 0.010045
0 0.047459 0.047459 0.000613 0.005759 0.001814
0 0.052614 0.052614 -0.00391 0.00183 0.00183
0 0.050199 0.050199 0.009161 0.011006 0.005835
0 0.050519 0.050519 0.005834 0.016903 0.011081
0 0.061782 0.061782 0.00758 0.02461 0.022739
0 0.051551 0.051551 0.013307 0.038245 0.026943
0 0.052188 0.052188 -0.00309 0.03504 0.017837
0 0.057036 0.057036 0.009624 0.045002 0.019901
0 0.054439 0.054439 0.009366 0.054788 0.015934
0 0.052469 0.052469 0.000201 0.055 0.019284
0 0.055634 0.055634 0.007826 0.063258 0.017471
0 0.0514 0.0514 0.010709 0.010709 0.018824
0 0.043924 0.043924 -0.0013 0.009394 0.017294
0 0.054404 0.054404 0.0028 0.012219 0.012219
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
- -0.00086 -0.02805
0.01101 0.097403
0.025656 0.133092
0.03406 0.123476
0.045257 0.127129
0.035268 0.079689
0.031209 0.0589
0.041167 0.067018
0.054633 0.078791
0.065764 0.085301
0.069441 0.080368
0.077154 0.081315
0.07399 0.071948
0.083862 0.074702
0.085345 0.070631
0.095736 0.073583
0.098128 0.070722
0.100162 0.068081
0.096342 0.061671
0.099789 0.060399
0.108693 0.062316
0.096926 0.053238
0.08501 0.044633
0.079221 0.039914
0.079905 0.038486
0.081732 0.037793
0.090909 0.040394
0.093966 0.040039
0.087214 0.035914
0.087828 0.034888
0.08277 0.031842
0.084117 0.031317
0.099857 0.035788
0.117265 0.040639
0.122926 0.041246
0.133309 0.043406
0.157167 0.049262
0.162206 0.049395
0.163941 0.048542
0.171827 0.049412
0.177619 0.049754
0.187463 0.050991
0.198184 0.052448
0.207958 0.053631
0.217715 0.054576
0.209441 0.051505
0.204396 0.049285
0.202172 0.047676
0.202254 0.046668
0.212055 0.047844
0.215106 0.047418
0.217136 0.046896
0.230237 0.048528
0.245753 0.050532
0.256758 0.051662
0.251829 0.049766
0.258267 0.04999
0.259038 0.049303
0.254119 0.047581
0.265607 0.048702
0.272989 0.049099
0.282636 0.049812
0.299705 0.051647
0.295693 0.050184
0.308163 0.05127
0.320414 0.052248
0.32068 0.051544
0.331016 0.052152
0.345271 0.053346
0.343519 0.052383
0.34728 0.052082
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BH 5/18/92 12 12.00074 0 0
BH 5/29/92 12.00074 12.00074 0 0
BH 6/30/92 12.0738 12.0738 0 0
BH 7/31/92 12.23477 12.23477 0 0
BH 8/31/92 12.28683 12.28683 0 0
BH 9/30/92 12.32305 12.32305 0 0
BH 10/30/92 12.09418 12.09418 0 0
BH 11/30/92 12.01604 12.01604 0 0
BH 12/31/92 12.01988 12.01988 0.106429 0
BH 1/29/93 12.15968 12.15968 0 0
BH 2/26/93 12.26468 12.26468 0 0
BH 3/31/93 12.26094 12.26094 0 0
BH 4/30/93 12.26163 12.26163 0 0
BH 5/28/93 12.23804 12.23804 0 0
BH 6/30/93 12.35835 12.35835 0 0
BH 7/30/93 12.37825 12.37825 0 0
BH 8/31/93 12.41325 12.41325 0 0
BH 9/30/93 12.38256 12.38256 0 0
BH 10/29/93 12.36995 12.36995 0 0
BH 11/30/93 12.30198 12.30198 0 0
BH 12/31/93 12.17342 12.17342 0.156187 0
BH 1/31/94 12.2533 12.2533 0 0
BH 2/28/94 12.08847 12.08847 0 0
BH 3/31/94 11.89687 11.89687 0 0
BH 4/29/94 11.76332 11.76332 0 0
BH 5/31/94 11.70146 11.70146 0 0
BH 6/30/94 11.6061 11.6061 0.009527 0
BH 7/29/94 11.77506 11.77506 0 0
BH 8/31/94 11.71945 11.71945 0 0
BH 9/30/94 11.50498 11.50498 0 0
BH 10/31/94 11.42687 11.42687 0 0
BH 11/30/94 11.32633 11.32633 0 0
BH 12/30/94 11.35726 11.35726 0 0
BH 1/31/95 11.52842 11.52842 0 0
BH 2/28/95 11.74404 11.74404 0 0
BH 3/31/95 11.73602 11.73602 0 0
BH 4/28/95 11.82345 11.82345 0 0
BH 5/31/95 12.11636 12.11636 0 0
BH 6/30/95 12.12828 12.12828 0 0
BH 7/31/95 12.06701 12.06701 0 0
BH 8/31/95 12.11838 12.11838 0 0
BH 9/29/95 12.1623 12.1623 0 0
BH 10/31/95 12.20444 12.20444 0 0
BH 11/30/95 12.30269 12.30269 0 0
BH 12/29/95 12.38264 12.38264 0 0
BH 1/31/96 12.39034 12.39034 0 0
BH 2/29/96 12.22009 12.22009 0 0
BH 3/29/96 12.10807 12.10807 0 0
BH 4/30/96 12.01777 12.01777 0 0
BH 5/31/96 11.92528 11.92528 0 0
BH 6/28/96 12.00791 12.00791 0 0
BH 7/31/96 11.9773 11.9773 0 0
BH 8/30/96 11.9077 11.9077 0 0
BH 9/30/96 12.04548 12.04548 0 0
BH 10/31/96 12.21447 12.21447 0 0
BH 11/29/96 12.37276 12.37276 0 0
BH 12/31/96 12.23588 12.2896 0 0
BH 1/31/97 12.24636 12.24636 0 0
BH 2/28/97 12.23574 12.23574 0 0
BH 3/31/97 12.04047 12.04047 0 0
BH 4/30/97 12.20134 12.20134 0 0
BH 5/30/97 12.27241 12.27241 0 0
BH 6/30/97 12.35765 12.35765 0 0
BH 7/31/97 12.51494 12.51494 0 0
BH 8/31/97 12.42113 12.42113 0 0
BH 9/30/97 12.51503 12.51503 0 0
BH 10/31/97 12.61047 12.61047 0 0
BH 11/28/97 12.57631 12.57631 0 0
BH 12/31/97 12.59705 12.56917 0.015115 0.03197
BH 1/30/98 12.69728 12.69728 0 0
BH 2/27/98 12.63033 12.63033 0 0
BH 3/31/98 12.62405 12.62405 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0.016435 0.016435 0 0 0
0 0.016435 0.016435 0.00137 0 0
0 0.044002 0.044002 0.0095 0 0
0 0.050335 0.050335 0.017426 0 0
0 0.041242 0.041242 0.008278 0 0
0 0.038026 0.038026 0.005535 0 0.031526
0 0.047793 0.047793 -0.01479 0 -0.00114
0 0.05246 0.05246 -0.00145 0 -0.01077
0 0.051724 0.158153 0.013159 0 -0.00328
0 0.052072 0.052072 0.01598 0.01598 0.027853
0 0.034631 0.034631 0.011071 0.027229 0.040745
0 0.049367 0.049367 0.004028 0.031365 0.031365
0 0.055907 0.055907 0.00456 0.036068 0.019772
0 0.042491 0.042491 0.001835 0.037969 0.010457
0 0.048687 0.048687 0.013781 0.052275 0.020274
0 0.047412 0.047412 0.005454 0.058013 0.021182
0 0.046655 0.046655 0.006192 0.064565 0.025621
0 0.043828 0.043828 0.001115 0.065751 0.012807
0 0.040436 0.040436 0.002457 0.068371 0.00979
0 0.045424 0.045424 -0.00199 0.066248 0.001582
0.002742 0.044169 0.203098 0.005943 0.072585 0.006412
0 0.03772 0.03772 0.009673 0.009673 0.013654
0 0.043276 0.043276 -0.00953 5.2E-05 0.005996
0 0.04274 0.04274 -0.01218 -0.01213 -0.01213
0 0.045192 0.045192 -0.00797 -0.02 -0.02939
0 0.048508 0.048508 -0.00098 -0.02096 -0.02101
0 0.046293 0.05582 -0.00292 -0.02382 -0.01183
0 0.052559 0.052559 0.019169 -0.0051 0.015199
0 0.054763 0.054763 -0.00045 -0.00555 0.015741
0 0.057504 0.057504 -0.01387 -0.01934 0.004592
0 0.053836 0.053836 -0.00141 -0.02071 -0.01569
0 0.057485 0.057485 -0.00372 -0.02436 -0.01892
0 0.061771 0.061771 0.0081 -0.01645 0.002937
0 0.065468 0.065468 0.020728 0.020728 0.025169
0 0.067256 0.067256 0.024046 0.045273 0.053739
0 0.065518 0.065518 0.005581 0.051106 0.051106
0 0.064253 0.064253 0.012287 0.064021 0.042414
0 0.06501 0.06501 0.030881 0.096878 0.049374
0 0.069208 0.069208 0.006535 0.104046 0.050368
0 0.057736 0.057736 -0.00019 0.10384 0.037425
0 0.06042 0.06042 0.009148 0.113938 0.015554
0 0.059155 0.059155 0.008182 0.123051 0.017216
0 0.060048 0.060048 0.008228 0.132292 0.025774
0 0.062456 0.062456 0.013316 0.14737 0.030013
0 0.058744 0.058744 0.01128 0.160312 0.033177
0 0.057502 0.057502 0.005452 0.005452 0.030335
0 0.051786 0.051786 -0.00954 -0.00414 0.007093
0 0.054936 0.054936 -0.0045 -0.00863 -0.00863
0 0.05484 0.05484 -0.0029 -0.01151 -0.01687
0 0.061862 0.061862 -0.00234 -0.01382 -0.00972
0 0.065424 0.065424 0.01219 -0.0018 0.006888
0 0.06433 0.06433 0.002858 0.001054 0.012707
0 0.062877 0.062877 -0.00059 0.000458 0.014481
0 0.064488 0.064488 0.017171 0.017635 0.01947
0 0.06314 0.06314 0.018519 0.036479 0.03539
0 0.059396 0.059396 0.017969 0.055103 0.054622
0 0.06492 0.06492 -0.00528 0.049529 0.031344
0 0.059142 0.059142 0.005648 0.005648 0.018312
0 0.055111 0.055111 0.003684 0.009351 0.004018
0 0.059189 0.059189 -0.0115 -0.00226 -0.00226
0 0.059111 0.059111 0.0182 0.015896 0.010194
0 0.06043 0.06043 0.010691 0.026757 0.017246
0 0.04897 0.04897 0.011326 0.038387 0.04074
0 0.062996 0.062996 0.017232 0.056281 0.039754
0 0.064719 0.064719 -0.00202 0.054146 0.026674
0 0.068485 0.068485 0.013565 0.068447 0.028949
0 0.062474 0.062474 0.012178 0.081459 0.023835
0 0.058062 0.058062 0.002225 0.083866 0.028192
0 0.065468 0.112559 0.010559 0.09531 0.025142
0 0.055691 0.055691 0.012356 0.012356 0.025322
0 0.05877 0.05877 -0.00088 0.011461 0.022141
0 0.055121 0.055121 0.003573 0.015075 0.015075
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.00137 0.046476
0.010883 0.096233
0.028499 0.148669
0.037013 0.134668
0.042754 0.119846
0.027332 0.061465
0.025842 0.04866
0.039341 0.06401
0.055949 0.080711
0.06764 0.087757
0.07194 0.083275
0.076828 0.080971
0.078803 0.076623
0.093671 0.083399
0.099636 0.082366
0.106445 0.081722
0.107678 0.077511
0.110402 0.074931
0.108196 0.069125
0.114782 0.069289
0.125564 0.071757
0.114839 0.062847
0.101261 0.052978
0.092486 0.046457
0.091418 0.04391
0.08823 0.040732
0.109091 0.048251
0.108597 0.046096
0.093227 0.038328
0.091691 0.036384
0.08763 0.033665
0.09644 0.035777
0.119166 0.042469
0.146078 0.050202
0.152474 0.050716
0.166634 0.053723
0.20266 0.062676
0.210519 0.063193
0.210294 0.061405
0.221365 0.062712
0.231357 0.063759
0.241488 0.064613
0.258019 0.067049
0.27221 0.068839
0.279146 0.068671
0.266941 0.064484
0.261233 0.061876
0.257571 0.059684
0.254627 0.057778
0.269921 0.059787
0.273551 0.059184
0.272793 0.05787
0.294647 0.060837
0.318621 0.064015
0.342314 0.067039
0.335224 0.064508
0.342767 0.064581
0.347711 0.064331
0.332207 0.060652
0.356451 0.063481
0.370953 0.064659
0.386481 0.065895
0.410374 0.068287
0.407523 0.066747
0.426616 0.068369
0.443991 0.06964
0.447204 0.069071
0.462486 0.06992
0.480557 0.071182
0.479247 0.070042
0.484532 0.06961
<PAGE>
QFundID PriceDate NAV NAVR STCGRate MTCGRate
- ------- --------- --- ---- -------- --------
BI 4/9/92 1 1 0 0
BI 4/30/92 1 1 0 0
BI 5/29/92 1 1 0 0
BI 6/30/92 1 1 0 0
BI 7/31/92 1 1 0 0
BI 8/31/92 1 1 0 0
BI 9/30/92 1 1 0 0
BI 10/30/92 1 1 0 0
BI 11/30/92 1 1 0 0
BI 12/31/92 1 1 7.08E-05 0
BI 1/29/93 1 1 0 0
BI 2/26/93 1 1 0 0
BI 3/31/93 1 1 0 0
BI 4/30/93 1 1 0 0
BI 5/28/93 1 1 0 0
BI 6/30/93 1 1 0 0
BI 7/30/93 1 1 0 0
BI 8/31/93 1 1 0 0
BI 9/30/93 1 1 0 0
BI 10/29/93 1 1 0 0
BI 11/30/93 1 1 0 0
BI 12/31/93 1 1 0.000708 0
BI 1/31/94 1 1 0 0
BI 2/28/94 1 1 0 0
BI 3/31/94 1 1 0 0
BI 4/29/94 1 1 0 0
BI 5/31/94 1 1 0 0
BI 6/30/94 1 1 0 0
BI 7/29/94 1 1 0 0
BI 8/31/94 1 1 0 0
BI 9/30/94 1 1 0 0
BI 10/31/94 1 1 0 0
BI 11/30/94 1 1 0 0
BI 12/30/94 1 1 0.00029 0
BI 1/31/95 1 1 0 0
BI 2/28/95 1 1 0 0
BI 3/31/95 1 1 0 0
BI 4/28/95 1 1 0 0
BI 5/31/95 1 1 0 0
BI 6/30/95 1 1 0 0
BI 7/31/95 1 1 0 0
BI 8/31/95 1 1 0 0
BI 9/29/95 1 1 0 0
BI 10/31/95 1 1 0 0
BI 11/30/95 1 1 0 0
BI 12/29/95 1 1 0 0
BI 1/31/96 1 1 0 0
BI 2/29/96 1 1 0 0
BI 3/29/96 1 1 0 0
BI 4/30/96 1 1 0 0
BI 5/31/96 1 1 0 0
BI 6/28/96 1 1 0 0
BI 7/31/96 1 1 0 0
BI 8/30/96 1 1 0 0
BI 9/30/96 1 1 0 0
BI 10/31/96 1 1 0 0
BI 11/29/96 1 1 0 0
BI 12/31/96 1 1 0 0
BI 1/31/97 1 1 0 0
BI 2/28/97 1 1 0 0
BI 3/31/97 1 1 0 0
BI 4/30/97 1 1 0 0
BI 5/30/97 1 1 0 0
BI 6/30/97 1 1 0 0
BI 7/31/97 1 1 0 0
BI 8/31/97 1 1 0 0
BI 9/30/97 1 1 0 0
BI 10/31/97 1 1 0 0
BI 11/28/97 1 1 0 0
BI 12/31/97 1 1 0 0
BI 1/30/98 1 1 0 0
BI 2/27/98 1 1 0 0
BI 3/31/98 1 1 0 0
LTCGRate DivRate TotDistr MnthlySECROR YTDSECROR QtrSECROR
- -------- ------- -------- ------------ --------- ---------
0 0.002183 0.002183 0 0 0
0 0.002183 0.002183 0.002183 0 0
0 0.00303 0.00303 0.00303 0 0
0 0.002978 0.002978 0.002978 0 0
0 0.003072 0.003072 0.003072 0 0
0 0.002828 0.002828 0.002828 0 0
0 0.002425 0.002425 0.002425 0 0.008348
0 0.002406 0.002406 0.002406 0 0.007679
0 0.002339 0.002339 0.002339 0 0.007187
0 0.002377 0.002448 0.002448 0 0.00721
0 0.00239 0.00239 0.00239 0.00239 0.007195
0 0.002079 0.002079 0.002079 0.004474 0.006933
0 0.002253 0.002253 0.002253 0.006738 0.006738
0 0.002183 0.002183 0.002183 0.008936 0.00653
0 0.002227 0.002227 0.002227 0.011183 0.006678
0 0.002177 0.002177 0.002177 0.013384 0.006602
0 0.002285 0.002285 0.002285 0.0157 0.006704
0 0.002312 0.002312 0.002312 0.018048 0.006789
0 0.002242 0.002242 0.002242 0.02033 0.006854
0 0.0023 0.0023 0.0023 0.022677 0.006869
0 0.002254 0.002254 0.002254 0.024982 0.006811
0 0.002347 0.003055 0.003055 0.028113 0.007628
0 0.002331 0.002331 0.002331 0.002331 0.007659
0 0.002102 0.002102 0.002102 0.004438 0.007506
0 0.002368 0.002368 0.002368 0.006817 0.006817
0 0.002656 0.002656 0.002656 0.009491 0.007143
0 0.002839 0.002839 0.002839 0.012357 0.007883
0 0.002929 0.002929 0.002929 0.015322 0.008448
0 0.003172 0.003172 0.003172 0.018543 0.008966
0 0.003259 0.003259 0.003259 0.021863 0.009389
0 0.00326 0.00326 0.00326 0.025194 0.009723
0 0.003548 0.003548 0.003548 0.028832 0.010102
0 0.003619 0.003619 0.003619 0.032555 0.010463
0 0.003989 0.004279 0.004279 0.036973 0.011489
0 0.004304 0.004304 0.004304 0.004304 0.012251
0 0.004016 0.004016 0.004016 0.008337 0.012652
0 0.004564 0.004564 0.004564 0.012939 0.012939
0 0.004506 0.004506 0.004506 0.017503 0.013143
0 0.004652 0.004652 0.004652 0.022236 0.013785
0 0.00445 0.00445 0.00445 0.026785 0.01367
0 0.004493 0.004493 0.004493 0.031398 0.013657
0 0.004437 0.004437 0.004437 0.035974 0.01344
0 0.004227 0.004227 0.004227 0.040353 0.013214
0 0.004229 0.004229 0.004229 0.044753 0.012948
0 0.004075 0.004075 0.004075 0.04901 0.012583
0 0.004124 0.004124 0.004124 0.053336 0.012479
0 0.004025 0.004025 0.004025 0.004025 0.012274
0 0.003663 0.003663 0.003663 0.007703 0.011859
0 0.003831 0.003831 0.003831 0.011564 0.011564
0 0.003737 0.003737 0.003737 0.015345 0.011273
0 0.003836 0.003836 0.003836 0.01924 0.011448
0 0.00371 0.00371 0.00371 0.023022 0.011326
0 0.003951 0.003951 0.003951 0.027064 0.011542
0 0.004016 0.004016 0.004016 0.031189 0.011723
0 0.003911 0.003911 0.003911 0.035222 0.011925
0 0.004087 0.004087 0.004087 0.039453 0.012063
0 0.003991 0.003991 0.003991 0.043601 0.012037
0 0.003983 0.003983 0.003983 0.047758 0.01211
0 0.004096 0.004096 0.004096 0.004096 0.012119
0 0.003698 0.003698 0.003698 0.007809 0.011824
0 0.004105 0.004105 0.004105 0.011947 0.011947
0 0.004051 0.004051 0.004051 0.016046 0.011901
0 0.00427 0.00427 0.00427 0.020385 0.012477
0 0.004145 0.004145 0.004145 0.024615 0.012519
0 0.004274 0.004274 0.004274 0.028994 0.012743
0 0.004262 0.004262 0.004262 0.03338 0.012734
0 0.004137 0.004137 0.004137 0.037655 0.012727
0 0.004254 0.004254 0.004254 0.042069 0.012707
0 0.004095 0.004095 0.004095 0.046336 0.012538
0 0.004216 0.004216 0.004216 0.050747 0.012617
0 0.00423 0.00423 0.00423 0.00423 0.012594
0 0.003799 0.003799 0.003799 0.008045 0.012295
0 0.004196 0.004196 0.004196 0.012275 0.012275
InceptSECROR AnnlInceptSECROR
- ------------ ----------------
0 0
0.002183 0.038629
0.005219 0.038731
0.008212 0.037075
0.011309 0.036992
0.014169 0.036306
0.016628 0.035199
0.019074 0.034384
0.021457 0.033524
0.023958 0.033021
0.026406 0.032774
0.02854 0.03231
0.030858 0.03165
0.033108 0.031279
0.035409 0.031154
0.037663 0.030649
0.040034 0.030492
0.042439 0.030253
0.044776 0.030106
0.047179 0.030067
0.049539 0.02985
0.052745 0.030179
0.055199 0.030067
0.057417 0.029973
0.059921 0.029899
0.062736 0.030055
0.065753 0.03017
0.068875 0.030393
0.072265 0.030745
0.07576 0.030968
0.079267 0.031279
0.083097 0.031652
0.087016 0.032062
0.091667 0.032697
0.096366 0.033238
0.100769 0.033774
0.105793 0.034376
0.110776 0.035022
0.115943 0.035525
0.120909 0.03603
0.125945 0.036492
0.130941 0.036915
0.135721 0.037314
0.140524 0.037608
0.145171 0.037902
0.149893 0.038225
0.154521 0.038395
0.15875 0.038572
0.163189 0.038785
0.167536 0.038886
0.172015 0.039034
0.176364 0.039222
0.181012 0.039334
0.185755 0.039532
0.190392 0.039674
0.195258 0.03985
0.200028 0.040047
0.204808 0.040164
0.209743 0.040325
0.214216 0.040465
0.219201 0.040617
0.22414 0.040775
0.229368 0.040973
0.234464 0.041118
0.23974 0.041283
0.245024 0.04144
0.250175 0.041591
0.255493 0.041738
0.260634 0.041913
0.265948 0.042003
0.271303 0.042153
0.276132 0.042264
0.281487 0.042361
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> INTERMEDIATE FIXED-INCOME PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 49,008,927
<INVESTMENTS-AT-VALUE> 52,722,678
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<PAID-IN-CAPITAL-COMMON> 54,900,191
<SHARES-COMMON-STOCK> 4,528,468
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<ACCUMULATED-NET-GAINS> (1,380,859)
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<ACCUM-APPREC-OR-DEPREC> 1,677,578
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251,232
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,834
<AVERAGE-NET-ASSETS> 49,504,048
<PER-SHARE-NAV-BEGIN> 11.90
<PER-SHARE-NII> 0.71
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.71)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.19
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 72,037,678
<INVESTMENTS-AT-VALUE> 87,647,128
<RECEIVABLES> 1,641,717
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 89,288,845
<PAYABLE-FOR-SECURITIES> 193,382
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,188,457
<TOTAL-LIABILITIES> 1,381,839
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 69,825,175
<SHARES-COMMON-STOCK> 4,074,644
<SHARES-COMMON-PRIOR> 3,105,644
<ACCUMULATED-NII-CURRENT> 1,717
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,470,664
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,609,450
<NET-ASSETS> 87,907,006
<DIVIDEND-INCOME> 1,193,289
<INTEREST-INCOME> 32,531
<OTHER-INCOME> 0
<EXPENSES-NET> 763,832
<NET-INVESTMENT-INCOME> 461,988
<REALIZED-GAINS-CURRENT> 16,907,790
<APPREC-INCREASE-CURRENT> 4,574,902
<NET-CHANGE-FROM-OPS> 21,944,680
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (460,271)
<DISTRIBUTIONS-OF-GAINS> (15,608,927)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,828,825
<NUMBER-OF-SHARES-REDEEMED> (1,370,970)
<SHARES-REINVESTED> 511,145
<NET-CHANGE-IN-ASSETS> 27,321,232
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,171,801
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 532,788
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 763,832
<AVERAGE-NET-ASSETS> 82,132,473
<PER-SHARE-NAV-BEGIN> 19.51
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 6.31
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (4.25)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.57
<EXPENSE-RATIO> .93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 146,430,882
<INVESTMENTS-AT-VALUE> 159,260,714
<RECEIVABLES> 661,594
<ASSETS-OTHER> 3,219
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 159,925,527
<PAYABLE-FOR-SECURITIES> 8,059,929
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 424,467
<TOTAL-LIABILITIES> 8,484,396
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138,760,264
<SHARES-COMMON-STOCK> 10,213,260
<SHARES-COMMON-PRIOR> 5,281,501
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (202,707)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,883,574
<NET-ASSETS> 151,441,131
<DIVIDEND-INCOME> 1,339,416
<INTEREST-INCOME> 260,249
<OTHER-INCOME> 0
<EXPENSES-NET> 1,836,369
<NET-INVESTMENT-INCOME> (236,704)
<REALIZED-GAINS-CURRENT> 4,905,193
<APPREC-INCREASE-CURRENT> 4,620,705
<NET-CHANGE-FROM-OPS> 9,289,194
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,905,193)
<DISTRIBUTIONS-OTHER> (202,707)
<NUMBER-OF-SHARES-SOLD> 6,193,641
<NUMBER-OF-SHARES-REDEEMED> (1,497,678)
<SHARES-REINVESTED> 235,796
<NET-CHANGE-IN-ASSETS> 78,421,751
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,293,655
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,836,369
<AVERAGE-NET-ASSETS> 118,475,419
<PER-SHARE-NAV-BEGIN> 13.83
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.83
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> MORTGAGE SECURITIES PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 122,571,645
<INVESTMENTS-AT-VALUE> 125,009,962
<RECEIVABLES> 10,977,060
<ASSETS-OTHER> 5,054
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 135,992,076
<PAYABLE-FOR-SECURITIES> 17,905,283
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,339,746
<TOTAL-LIABILITIES> 26,245,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,043,478
<SHARES-COMMON-STOCK> 8,712,125
<SHARES-COMMON-PRIOR> 6,037,920
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 303,719
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,437,396
<NET-ASSETS> 109,747,047
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,138,870
<OTHER-INCOME> 0
<EXPENSES-NET> 758,203
<NET-INVESTMENT-INCOME> 5,380,667
<REALIZED-GAINS-CURRENT> 1,115,943
<APPREC-INCREASE-CURRENT> 1,939,701
<NET-CHANGE-FROM-OPS> 8,436,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,380,667)
<DISTRIBUTIONS-OF-GAINS> (37,546)
<DISTRIBUTIONS-OTHER> (408,782)
<NUMBER-OF-SHARES-SOLD> 3,723,266
<NUMBER-OF-SHARES-REDEEMED> (1,168,546)
<SHARES-REINVESTED> 119,485
<NET-CHANGE-IN-ASSETS> 35,884,659
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (403,432)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 514,760
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 758,203
<AVERAGE-NET-ASSETS> 90,262,262
<PER-SHARE-NAV-BEGIN> 12.23
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> (0.72)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.6
<EXPENSE-RATIO> .84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> SHORT INTERMEDIATE FIXED-INCOME PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 39,930,096
<INVESTMENTS-AT-VALUE> 40,319,782
<RECEIVABLES> 667,166
<ASSETS-OTHER> 4,403
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,991,351
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,309
<TOTAL-LIABILITIES> 49,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,604,520
<SHARES-COMMON-STOCK> 3,337,535
<SHARES-COMMON-PRIOR> 3,017,500
<ACCUMULATED-NII-CURRENT> (4,419)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (47,745)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 389,686
<NET-ASSETS> 40,942,042
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,445,593
<OTHER-INCOME> 0
<EXPENSES-NET> 348,044
<NET-INVESTMENT-INCOME> 2,097,549
<REALIZED-GAINS-CURRENT> 6,148
<APPREC-INCREASE-CURRENT> 412,603
<NET-CHANGE-FROM-OPS> 2,516,300
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,098,114)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (4,419)
<NUMBER-OF-SHARES-SOLD> 1,669,600
<NUMBER-OF-SHARES-REDEEMED> (1,370,087)
<SHARES-REINVESTED> 20,522
<NET-CHANGE-IN-ASSETS> 4,241,523
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (54,597)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 205,853
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 348,044
<AVERAGE-NET-ASSETS> 40,470,233
<PER-SHARE-NAV-BEGIN> 12.16
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> (0.64)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.27
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> SMALL TO MID CAP PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 98,717,401
<INVESTMENTS-AT-VALUE> 122,027,785
<RECEIVABLES> 6,481,095
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,508,880
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,287,442
<TOTAL-LIABILITIES> 3,287,442
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,702,152
<SHARES-COMMON-STOCK> 5,739,844
<SHARES-COMMON-PRIOR> 3,479,886
<ACCUMULATED-NII-CURRENT> (102,695)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,311,597
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,310,384
<NET-ASSETS> 125,221,438
<DIVIDEND-INCOME> 1,186,042
<INTEREST-INCOME> 140,985
<OTHER-INCOME> 0
<EXPENSES-NET> 1,330,845
<NET-INVESTMENT-INCOME> (3,818)
<REALIZED-GAINS-CURRENT> 24,033,927
<APPREC-INCREASE-CURRENT> 14,019,209
<NET-CHANGE-FROM-OPS> 38,049,318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (19,306,498)
<DISTRIBUTIONS-OTHER> (102,695)
<NUMBER-OF-SHARES-SOLD> 5,314,273
<NUMBER-OF-SHARES-REDEEMED> (3,598,865)
<SHARES-REINVESTED> 544,550
<NET-CHANGE-IN-ASSETS> 59,742,602
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,525,504
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,046,056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,330,845
<AVERAGE-NET-ASSETS> 115,725,653
<PER-SHARE-NAV-BEGIN> 18.82
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 6.75
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (3.73)
<RETURNS-OF-CAPITAL> (0.02)
<PER-SHARE-NAV-END> 21.82
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> U.S.GOVERNMENT MONEY PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 42,668,383
<INVESTMENTS-AT-VALUE> 54,923,727
<RECEIVABLES> 1,940
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 54,925,667
<PAYABLE-FOR-SECURITIES> 3,783,749
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232,025
<TOTAL-LIABILITIES> 4,015,774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,914,742
<SHARES-COMMON-STOCK> 50,915,165
<SHARES-COMMON-PRIOR> 61,671,797
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,849)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 50,909,893
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,074,779
<OTHER-INCOME> 0
<EXPENSES-NET> 300,678
<NET-INVESTMENT-INCOME> 2,774,101
<REALIZED-GAINS-CURRENT> (5,036)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,769,065
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,774,283)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93,789,699
<NUMBER-OF-SHARES-REDEEMED> (104,606,175)
<SHARES-REINVESTED> 59,844
<NET-CHANGE-IN-ASSETS> (10,762,037)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 187
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139,970
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 300,678
<AVERAGE-NET-ASSETS> 55,681,111
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> VALUE & INCOME PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 63,149,537
<INVESTMENTS-AT-VALUE> 78,944,090
<RECEIVABLES> 2,321,295
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81,265,385
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 138,763
<TOTAL-LIABILITIES> 138,763
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 65,492,459
<SHARES-COMMON-STOCK> 3,884,680
<SHARES-COMMON-PRIOR> 2,048,702
<ACCUMULATED-NII-CURRENT> 259
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,201,534
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,432,370
<NET-ASSETS> 81,126,622
<DIVIDEND-INCOME> 1,268,314
<INTEREST-INCOME> 202,819
<OTHER-INCOME> 0
<EXPENSES-NET> 654,466
<NET-INVESTMENT-INCOME> 816,667
<REALIZED-GAINS-CURRENT> 9,186,661
<APPREC-INCREASE-CURRENT> 7,639,735
<NET-CHANGE-FROM-OPS> 17,643,063
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (816,408)
<DISTRIBUTIONS-OF-GAINS> (8,426,264)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,267,839
<NUMBER-OF-SHARES-REDEEMED> (749,022)
<SHARES-REINVESTED> 317,161
<NET-CHANGE-IN-ASSETS> 44,759,648
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 441,137
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 462,604
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 654,466
<AVERAGE-NET-ASSETS> 62,330,095
<PER-SHARE-NAV-BEGIN> 17.75
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 5.54
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> (2.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.88
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
ACCESSOR FUNDS, INC.
Rule 18f-3 Plan
Rule l8f-3 under the Investment Company Act of 1940, as amended (the
"1940 Act"), requires that the board of directors of an investment company
desiring to offer multiple classes of shares (each a "Class") pursuant to the
Rule adopt a plan setting forth the separate distribution arrangements and
expense allocations of each Class, and any related conversion features or
exchange privileges. The differences in distribution arrangements and expenses
among these Classes, and the exchange features of each Class, are set forth
below in this Rule 18f-3 Plan (the "18f-3 Plan"), which is subject to change, to
the extent permitted by law and by the governing documents of Accessor Funds,
Inc., a corporation organized under the laws of the State of Maryland (the
"Fund"), by action of the Board of Directors (the "Directors") of the Fund.
This 18f-3 Plan is adopted as of February 19, 1998 by the Directors of
the Fund, including a majority of the non-interested Directors, which desires to
offer multiple classes for the portfolios set forth on Schedule A (each a
"Portfolio" and collectively, the "Portfolios"), as may be amended from time to
time, and has determined that the following 18f-3 Plan is in the best interests
of each class individually and the Fund as a whole:
1. Class Designation: Each now existing and hereafter created Portfolio
of the Fund is authorized to issue from time to time its shares of beneficial
interest in two classes: Advisor Class Shares and Investor Class Shares.
2. Differences in Services: The services offered to shareholders of
each Class shall be substantially the same, except that financial institutions,
retirement plans, broker-dealers, depository institutions, institutional
shareholders of record, registered investment advisers and other financial
intermediaries and various brokerage firms or other industry recognized service
providers of fund supermarkets or similar programs (collectively "Service
Organizations") may be compensated or have their expenses reimbursed for
providing distribution services, shareholder services and/or administrative and
accounting services to or on behalf of their clients or customers who
beneficially own Investor Class Shares of the Portfolios.
3. Differences in Distribution Arrangements: Shares of each Class of
the Portfolios shall represent an equal pro rata interest in such Portfolio and,
generally, shall have identical voting, dividend, liquidation, and other rights,
preferences, powers, restrictions, limitations, qualifications and terms and
conditions, except that: (a) each Class shall have a different designation; (b)
each Class of shares shall bear any Class Expenses, as defined in Section 4
below and (c) each Class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one Class differ from the
interests of any other Class for which class voting is required under applicable
law, and each Class shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to its distribution, shareholder service or
administrative services arrangements. These features are subject to change, to
the extent permitted by law and by the Articles of Incorporation and By-Laws of
the Fund, by action of the Board of Directors of the Fund.
The Fund has not adopted an administrative service plan, distribution
plan or shareholder service plan with respect to Advisor Class shares, which
shall be offered by the Fund at net asset value with no distribution,
shareholder or administrative service fees paid by the Fund. Advisor Class
shares are available to investors whose minimum initial purchase is at least
$5,000 per Portfolio or $10,000 in aggregate across the Portfolios and
subsequent investments of $1,000 per Portfolio or $2,000 in aggregate across the
Portfolios, subject to such waivers or variations as from time to may be in
effect. Advisor Class Shares may be offered through certain Service
Organizations that may impose additional or different conditions on the purchase
or redemption of Fund shares and may charge transaction or account fees, which
charges or fees would not be imposed if the Investor Class Shares are purchased
directly from the Fund. Service Organizations are responsible for transmitting
to their customers a schedule of any such fees and conditions. The Fund pays no
compensation to such entities and receives none of the fees or transaction
charges. Bennington may separately enter into arrangements from time to time
with certain Service Organizations to provide administrative, accounting and/or
other services with respect to Advisor Class Shares and may directly compensate
the Service Organizations.
Investor Class Shares may be charged a fee pursuant to a Shareholder
Service Plan, a fee pursuant to an Administrative Services Plan and/or shall
make directly or cause to be made payments for costs and expenses to third
parties or reimbursement of expenses to third parties incurred in connection
with a Distribution Plan adopted under Rule 12b-1 of the 1940 Act. The amounts
of the payments or fees under the relevant Distribution Plan, Shareholder
Service Plan or Administrative Services Plan are set forth on Schedule B hereto.
The minimum initial purchase of Investor Class Shares shall be $5,000 per
Portfolio or $10,000 in aggregate across the Portfolios and subsequent purchases
of Investor Class Shares shall be $1,000 per Portfolio or $2,000 in aggregate
across the Portfolios. Additional payments may be made by Bennington from time
to time to Service Organizations for providing other services with respect to
Investor Class Shares. Various brokerage firms or other industry recognized
service providers of fund supermarkets or similar programs generally require
customers to pay either no or low transaction fees in connection with purchases
or redemptions. Certain features of the Investor Class Shares, such as the
initial and subsequent investment minimums, redemption fees and certain trading
restrictions, may be modified or waived by Service Organizations. Service
Organizations may impose transaction or administrative charges or other direct
charges, which charges or fees would not be imposed if the Investor Class Shares
are purchased directly from the Fund.
4. Income and Expense Allocation: The following expenses (the "Class
Expenses") will be allocated, to the extent practicable, on a Class-by-Class
basis: (a) payments or reimbursements under the Distribution Plan, fees under
the Shareholder Service Plan or Administrative Services Plan (as relevant); (b)
printing and postage expenses related to preparing and distributing materials,
shareholder reports, prospectuses and proxies to current shareholders of a
specific Class; (c) Securities and Exchange Commission and Blue Sky registration
fees incurred by a specific Class; (d) the expense of administrative personnel
and services as required to support the shareholders of a specific Class; (e)
litigation or other legal expenses relating solely to a specific Class; (f)
Board members' fees incurred as a result of issues relating to a specific Class;
(g) expenses incurred in connection with shareholders' meetings as a result of
issues relating to a specific class; (h) transfer agent fees identified by the
Fund's Transfer Agent as being attributable to a specific class; and (i) any
additional expenses, not including advisory or custodial fees or other expenses
related to the management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a Class, or if services are
provided with respect to a Class that are of a different kind or to a different
degree than with respect to one or more other Classes.
The distribution, shareholder and administrative services fees and
other expenses listed above, which are attributable to a particular Class are
charged directly to the net assets of the particular Class and, thus, are borne
on a pro rata basis by the outstanding shares of that Class; provided, however,
that the U.S. Government Money Portfolio and other Portfolios making daily
distributions of their net investment income may allocate these items on the
basis of relative net assets, after subtracting the value of subscriptions for
non-settled shares (i.e., shares for which payment in federal funds has not been
received, the "Settled Shares Method"). The gross income of each Portfolio, as
well as realized and unrealized capital gains and losses, shall be allocated to
each Class on the basis of net assets. All expenses not now or hereafter
designated as Class Expenses ("Fund Expenses") will be allocated to each class
and subtracted from the gross income on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Fund Expenses are expenses
incurred by the Fund (for example, advisory fees, custodial fees, or other
expenses relating to the management of the Fund's assets).
5. Exchange Privileges: Shares of a Class are exchangeable for shares
of the same Class of another Portfolio of the Fund. Shareholders may also
exchange shares of one Class of a Portfolio at net asset value for shares of the
same Class offered by another Portfolio, provided that the exchange is made in
states where the securities being acquired are properly registered. Advisor
Class Shares of a Portfolio may be exchanged for Investor Class Shares offered
by a Portfolio, or vice versa, provided that the Advisor Class or Investor Class
shareholder, as the case may be, meets the eligibility requirements of the class
into which the shareholder seeks to exchange, as described in the relevant
Prospectus of the Fund.
6. Dividends and Distributions: Each Portfolio pays out as dividends
substantially all of its net investment income (which comes from dividends and
interest it receives from its investments) and net realized short-term capital
gains. All dividends and/or distributions will be paid in the form of additional
shares of the Class of shares of the Fund to which the dividends and/or
distributions relate or, at the election of the shareholder, of another
Portfolio of the Fund at net asset value of such Portfolio, unless the
shareholder elects to receive cash. Dividends paid by each Portfolio are
calculated in the same manner and at the same time with respect to each Class.
7. Additional Information: This 18f-3 Plan is qualified by and subject
to the terms of the then current Prospectus for the applicable Class; provided,
however, that none of the terms set forth in any prospectus shall be
inconsistent with the terms of the Classes contained in this 18f-3 Plan. The
prospectus for each Class contains additional information about that Class and
the applicable Portfolio's multi class structure.
8. Board Review: The Board of Directors shall review this 18f-3 Plan as
frequently as it deems necessary, the initial expense allocations, and any
subsequent changes thereof, shall be reviewed and approved by the Directors,
including a majority of the those Directors who are not interested persons
(deemed to have the same meaning that this term has under the 1940 Act, by the
Securities and Exchange Commission) of the Fund and who have no direct or
indirect financial interest in the operation of the Administrative Services Plan
(the "Qualified Directors"), cast in person at a meeting called for the purpose
of voting on the 18f-3 Plan in light of the requirements of the 1940 Act and the
Internal Revenue Code of 1986, as amended. Prior to any material amendment(s) to
this 18f-3 Plan, the Board of Directors, including a majority of the Qualified
Directors, shall find that the 18f-3 Plan, as proposed to be amended (including
any proposed amendments to the method of allocating Class and/or Fund Expenses),
is in the best interest of each Class of shares of a Portfolio individually and
the Fund as a whole. In considering whether to approve any proposed amendment(s)
to the Plan, the Directors shall request and evaluate such information as they
consider reasonably necessary to evaluate the proposed amendment(s) to the Plan.
Dated: February 19, 1998.
<PAGE>
SCHEDULE A
February 19, 1998
This 18f-3 Plan shall be adopted with respect to the following
Portfolios of Accessor Funds, Inc.:
Growth Portfolio
Value and Income Portfolio
Small to Mid Cap Portfolio
International Equity Portfolio
Intermediate Fixed-Income Portfolio
Short-Intermediate Fixed-Income Portfolio
Mortgage Securities Portfolio
U.S. Government Money Portfolio
2
<PAGE>
SCHEDULE B
Amount of Distribution Plan--Each Portfolio shall pay directly or cause to be
paid to third parties on an annual basis based on the value of the average daily
net assets of the Portfolio attributable to the Investor Class Shares of no more
than:
Advisor Class Investor Class
------------- --------------
N/A 0.25%
No Portfolio shall directly or indirectly pay any distribution related amounts
that will be allocated under the Investor Class Distribution Plan and in
combination with the Shareholder Service fee paid under the Shareholder Service
Plan, which exceeds 0.25% on an annual basis of the average daily net assets of
the Investor Class Shares.
Amount of Shareholder Service Plan--Each Portfolio shall pay a non-distribution
related shareholder service fee on an annual basis based on the value of the
average daily net assets of the Portfolio attributable to the Investor Class
Shares as follows:
Advisor Class Investor Class
------------- ---------------
N/A 0.25%
The combined total of the amounts paid under the Distribution Plan and
Shareholder Service Plan shall not exceed 0.25% on an annual basis of the value
of the average daily net assets of Portfolio attributable to the Investor Class
Shares.
Amount of Administrative Services Plan--Each Portfolio shall pay a
non-distribution related administrative services fee on an annual basis based on
the value of the average daily net assets of the Investor Class Shares as
follows:
Advisor Class Investor Class
------------- --------------
N/A 0.25%
