ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
FIXED-INCOME PORTFOLIOS - INVESTOR CLASS SHARES Seattle, WA 98101
PROSPECTUS - May 1, 1998 1-800-759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services 206-224-7420
- --------------------------------------------------------------------------------
SUPPLEMENT DATED SEPTEMBER 21, 1998 TO ACCESSOR FUNDS, INC.
FIXED-INCOME PORTFOLIOS - INVESTOR CLASS SHARES PROSPECTUS
DATED MAY 1, 1998
THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN
THE PROSPECTUS, AND SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS.
CAPITALIZED TERMS NOT DEFINED HEREIN SHOULD HAVE THE MEANINGS SET FORTH IN THE
PROSPECTUS.
From the inception of the Intermediate Fixed-Income Portfolio and the
Short-Intermediate Fixed-Income Portfolio until April 30, 1998, Smith Barney
Capital Management and Bankers Trust Company, respectively, were the money
managers of these portfolios. Beginning on May 1, 1998, Bennington Capital
Management L.P. ("Bennington") invested the assets of these two portfolios
directly. On September 9, 1998, the Board of Directors of Accessor Funds, Inc.
(the "Fund") including all of the Directors who are not "interested persons" of
the Fund, has approved the appointment of Cypress Asset Management ("Cypress")
as money manager of the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio, effective September 21, 1998. The
appointment of Cypress will not require shareholder approval. This procedure for
adding or replacing money managers was approved by the Portfolios' shareholders
at a Special Meeting of Shareholders held on August 15, 1995, and was authorized
by an exemptive order issued to the Fund by the Securities and Exchange
Commission on September 4, 1996.
In accordance with the exemptive order and interpretations of the Securities and
Exchange Commission, at any time Bennington replaces a money manager, Bennington
may negotiate a change in the fee schedule payable to the new money manager
(including a reduction) provided there is no increase in the aggregate fee
payable by the Fund. In the case of the Intermediate Fixed-Income Portfolio and
the Short-Intermediate Fixed-Income Portfolio, the overall maximum fee for the
first five calendar quarters payable to the former money managers was 0.15%
(comprised of a basic fee of 0.07% and a portfolio management fee of 0.08%).
Although Bennington has currently negotiated a reduction in the Money Manager
fee to a maximum of 0.04% payable to the money manager of the Intermediate
Fixed-Income and Short-Intermediate Fixed-Income Portfolios during the first
five calendar quarters of management (as described below), there is a
possibility of future modifications to such fee. In no event, however, shall the
maximum Money Manager fee payable by the Fund be greater than 0.15% during the
first five complete calendar quarters.
In the case of the Intermediate Fixed-Income Portfolio and the
Short-Intermediate Fixed-Income Portfolio, the overall maximum fee from the
sixth calendar quarter forward payable to the former money managers was 0.25%
(comprised of a basic fee of 0.07% and a maximum annual performance fee of
0.18%). Although Bennington has currently negotiated a reduction in the Money
Manager fee to a maximum of 0.17% payable to the money manager of the
Intermediate Fixed-Income and Short-Intermediate Fixed-Income Portfolios from
the sixth calendar quarter of management forward (as described below), there is
a possibility of future modifications to such fee. In no event, however, shall
the maximum Money Manager fee payable by the Fund be greater than 0.25% from the
sixth calendar quarter of management forward.
The fundamental policies, investment restrictions, investment practices
and benchmark indices utilized for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio, by Bennington, Smith Barney and
Bankers Trust, respectively, have been consistent since the inception of these
Portfolios and such practices or indices will remain consistent under the money
management of Cypress. With the exception of the fee schedule, the Money Manager
Agreements among Bennington, the Fund and Cypress relating to the Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio are
substantially similar to that between Bennington, the Fund and previous money
managers of the Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio. The fee schedule for Cypress is set forth below:
For the first five complete calendar quarters of management of the
Account by Cypress, the Fund will pay Cypress on a quarterly basis at the
following annual fee rates, applied to the average daily net assets of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, respectively.
Portfolio Total
Management Annual
Basic Fee Fee Fee
--------- --------- ------
0.02% 0.02% 0.04%
Commencing with the sixth calendar quarter of management by Cypress for
the Account, the Fund will pay Cypress on a quarterly basis an annual fee based
on the schedule below as applied to the average daily net assets of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, respectively, capped at a maximum of 0.17%.
<TABLE>
<CAPTION>
Average Annual Performance Total
Differential vs. Benchmark Annual Annual
Basic Fee Index Performance Fee Fee
- --------- -------------------------- --------------- -------
<S> <C> <C> <C>
0.02% less than 0.35% 0.00% 0.02%
greater than or equal to
0.35% and less than or
equal to 0.50% 0.05% 0.07%
greater than 0.50% and
less than or equal
to 0.70% 0.05% plus 1/2 (P-0.50%)* Up to 0.17%
greater than 0.70% 0.15% 0.17%
</TABLE>
- -----------------------
*P = Performance. Example: If Cypress outperforms the benchmark index by 0.60%,
the fee would be calculated as [0.02% basic fee + 0.05% Performance Fee +
{(0.60%-0.50%)/2}] = 0.12%
The duties to be performed under these Money Manager Agreements are similar, and
the standard of care and termination provisions of the agreement are identical
to the other Money Manager Agreements with the other money managers of the Fund.
The Money Manager Agreements will remain in effect until September 21, 2000.
Cypress makes investment decisions for the assets of the Intermediate
Fixed-Income Portfolio and Short Intermediate Fixed-Income Portfolio allocated
to it by Bennington, and continuously reviews, supervises, and administers the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment programs with respect to these assets. Cypress is
independent of Bennington and discharges its responsibilities subject to
Bennington's and the Board of Directors' supervision and in a manner consistent
with the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment objectives, policies and limitations.
In connection with the appointment of Cypress as the Money Manager of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, the following language is inserted in the following sections of the
Fixed-Income Portfolios - Investor Class Shares Prospectus:
- --------------------------------------------------------------------------------
On page 3, the following paragraphs are replaced in their entirety:
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 organizations (individually
the "Money Manager" or collectively the "Money Managers") of the Portfolios are
set forth below:
o INTERMEDIATE FIXED-INCOME PORTFOLIO - Cypress Asset Management1 -- 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 or more than ten years.
o SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO - Cypress Asset Management2 --
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 or more than five
years.
- ------------------------
1 Managed by Smith Barney Capital Management from inception through April 30,
1998 and by Bennington Capital Management from May 1, 1998 through
September 20, 1998. See Statement of Additional Information for more
information.
2 Managed by Bankers Trust Company from inception through April 30, 1998, and
by Bennington Capital Management from May 1, 1998, through September 20,
1998. See Statement of Additional Information for more information.
- --------------------------------------------------------------------------------
On page 6, the following replaces the "Annual Portfolio Operating Expenses"
Table in its entirety:
<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) 0.40% 0.40% 0.59% 0.25%
12b-1 Fees(c) 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.38% 0.40% 0.323% 0.34%
Administrative Fee(d) 0.25% 0.25% 0.25% 0.25%
----- ----- ----- -----
Total Other Expenses 0.63% 0.65% 0.57% 0.59%
----- ----- ----- -----
Total Portfolio Operating Expenses 1.28% 1.30% 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 fees paid to the Money Managers of the Intermediate
Fixed-Income, Short-Intermediate Fixed Income and Mortgage Securities
Portfolios. Bennington receives only the management fee and not a Money
Manager fee for the Portfolio 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:
<TABLE>
<CAPTION>
Portfolios
-------------------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------------ ---------- ---------------
<S> <C> <C> <C> <C>
One Year $13 $13 $14 $11
Three Years $41 $41 $45 $35
Five Years $70 $71 $77 $60
Ten Years $155 $157 $169 $133
- --------------------------------------------------------------------------------
On page 25, the following replaces the first two full paragraphs in the section
entitled "Money Manager Fees" in their entirety:
</TABLE>
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are based on the assets of the Portfolio and on the number of complete calendar
quarters of management by the Money Manager. During the first five calendar
quarters, the Money Manager fee has two components, the basic fee (the "Basic
Fee") and the portfolio management fee (the "Portfolio Management Fee"). See
"Money Manager Fees--Money Manager Fee Schedule For Portfolios Managed Less Than
Five Complete Calendar Quarters by Manager" in the Statement of Additional
Information. The Money Manager for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio has not completed five complete
calendar quarters. During the first five calendar quarters the Money Manager for
the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio will receive a Basic Fee of 0.02% and a Portfolio Management Fee of
0.02%.
Commencing with the sixth calendar quarter of management by a Money
Manager of an operating Portfolio, such Portfolio will pay its Money Manager
based on the "Money Manager Fee Schedule For A Manager From a Manager's Sixth
Calendar Quarter of Management Forward." The Money Manager Fee commencing with
the sixth quarter consists of two components, the Basic Fee and the performance
fee (the "Performance Fee"), which varies with a Portfolio's performance. The
Money Manager for the Mortgage Securities Portfolio has completed the first five
calendar quarters of management of its respective Account, as defined below, and
the Performance Fee is in effect. If at any time a Money Manager should be
replaced, the new Money Manager for the applicable Portfolio will receive the
fee negotiated by Bennington. In accordance with the exemptive order and
interpretations of the Securities and Exchange Commission, at any time
Bennington replaces a Money Manager, Bennington may negotiate a change in the
fee schedule payable to the new Money Manager (including a reduction) provided
there is no increase in the aggregate fee payable by the Fund. Although
Bennington may negotiate a reduction in the Money Manager fee payable to the
Money Manager either during the first five complete calendar quarters or from
the sixth calendar quarters of management forward, there is a possibility of
future modifications to such fee. In no event, however, shall the maximum Money
Manager fee payable by the Fund be greater than 0.15% during the first five
calendar quarters of management by a Money Manager or greater than 0.25% after
the sixth calendar quarter of management forward. See the table "Money Manager
Fee Schedule for Portfolios Managed Less Than Five Complete Calendar Quarters"
and "Money Manager Fee Schedule From a Manager's Sixth Calendar Quarter of
Management Forward" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
On page 39 the following replaces the first full paragraph under "MONEY MANAGER
PROFILE" in its entirety and adds the information concerning the Money Manager:
The following information as to the Money Managers 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.
Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio
Cypress Asset Management ("Cypress"), is a California corporation and
registered investment adviser. Cypress is a registered investment adviser with
the SEC and with the State of California. Mr. Xavier Urpi, President and Chief
Investment Officer, is primarily responsible for the day-to-day management and
investment decisions for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio and is supported by Ms. Rosemary
Brooks, Manager of Operations, who assists in the management of the Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio. Mr. Urpi
founded Cypress in 1995. Prior to that, Mr. Urpi was at Smith Barney Capital as
a Director of Fixed-Income from March 1989 to September 1995. Ms. Brooks joined
Cypress in January 1998. Prior to that, Ms. Brooks was owner of Brooks Finance,
and a registered representative with H.D. Vest from June 1994 to July 1997.
<PAGE>
ACCESSOR(R) FUNDS, INC. 1420 Fifth Avenue
Suite 3130
FIXED-INCOME PORTFOLIOS - ADVISOR CLASS SHARES Seattle, WA 98101
PROSPECTUS - May 1, 1998 1-800-759-3504
- --------------------------------------------------------------------------------
New Account Information and Shareholder Services 206-224-7420
- --------------------------------------------------------------------------------
SUPPLEMENT DATED SEPTEMBER 21, 1998 TO ACCESSOR FUNDS, INC.
FIXED-INCOME PORTFOLIOS - ADVISOR CLASS SHARES PROSPECTUS
DATED MAY 1, 1998
THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN
THE PROSPECTUS, AND SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS.
CAPITALIZED TERMS NOT DEFINED HEREIN SHOULD HAVE THE MEANINGS SET FORTH IN THE
PROSPECTUS.
From the inception of the Intermediate Fixed-Income Portfolio and the
Short-Intermediate Fixed-Income Portfolio until April 30, 1998, Smith Barney
Capital Management and Bankers Trust Company, respectively, were the money
managers of these portfolios. Beginning on May 1, 1998, Bennington Capital
Management L.P. ("Bennington") invested the assets of these two portfolios
directly. On September 9, 1998, the Board of Directors of Accessor Funds, Inc.
(the "Fund") including all of the Directors who are not "interested persons" of
the Fund, has approved the appointment of Cypress Asset Management ("Cypress")
as money manager of the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio, effective September 21, 1998. The
appointment of Cypress will not require shareholder approval. This procedure for
adding or replacing money managers was approved by the Portfolios' shareholders
at a Special Meeting of Shareholders held on August 15, 1995, and was authorized
by an exemptive order issued to the Fund by the Securities and Exchange
Commission on September 4, 1996.
In accordance with the exemptive order and interpretations of the Securities and
Exchange Commission, at any time Bennington replaces a money manager, Bennington
may negotiate a change in the fee schedule payable to the new money manager
(including a reduction) provided there is no increase in the aggregate fee
payable by the Fund. In the case of the Intermediate Fixed-Income Portfolio and
the Short-Intermediate Fixed-Income Portfolio, the overall maximum fee for the
first five calendar quarters payable to the former money managers was 0.15%
(comprised of a basic fee of 0.07% and a portfolio management fee of 0.08%).
Although Bennington has currently negotiated a reduction in the Money Manager
fee to a maximum of 0.04% payable to the money manager of the Intermediate
Fixed-Income and Short-Intermediate Fixed-Income Portfolios during the first
five calendar quarters of management (as described below), there is a
possibility of future modifications to such fee. In no event, however, shall the
maximum Money Manager fee payable by the Fund be greater than 0.15% during the
first five complete calendar quarters.
In the case of the Intermediate Fixed-Income Portfolio and the
Short-Intermediate Fixed-Income Portfolio, the overall maximum fee from the
sixth calendar quarter forward payable to the former money managers was 0.25%
(comprised of a basic fee of 0.07% and a maximum annual performance fee of
0.18%). Although Bennington has currently negotiated a reduction in the Money
Manager fee to a maximum of 0.17% payable to the money manager of the
Intermediate Fixed-Income and Short-Intermediate Fixed-Income Portfolios from
the sixth calendar quarter of management forward (as described below), there is
a possibility of future modifications to such fee. In no event, however, shall
the maximum Money Manager fee payable by the Fund be greater than 0.25% from the
sixth calendar quarter of management forward.
The fundamental policies, investment restrictions, investment practices
and benchmark indices utilized for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio, by Bennington, Smith Barney and
Bankers Trust, respectively, have been consistent since the inception of these
Portfolios and such practices or indices will remain consistent under the money
management of Cypress. With the exception of the fee schedule, the Money Manager
Agreements among Bennington, the Fund and Cypress relating to the Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio are
substantially similar to that between Bennington, the Fund and previous money
managers of the Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio. The fee schedule for Cypress is set forth below:
For the first five complete calendar quarters of management of the
Account by Cypress, the Fund will pay Cypress on a quarterly basis at the
following annual fee rates, applied to the average daily net assets of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, respectively.
Portfolio Total
Management Annual
Basic Fee Fee Fee
--------- ---------- ------
0.02% 0.02% 0.04%
Commencing with the sixth calendar quarter of management by Cypress for
the Account, the Fund will pay Cypress on a quarterly basis an annual fee based
on the schedule below as applied to the average daily net assets of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, respectively, capped at a maximum of 0.17%.
Average Annual Performance Total
Differential vs. Benchmark Annual Annual
Basic Fee Index Performance Fee Fee
- --------- -------------------------- --------------- ------
0.02% less than 0.35% 0.00% 0.02%
greater than or equal to
0.35% and less
than or equal to
0.50% 0.05% 0.07%
greater than 0.50% and
less than or equal
to 0.70% 0.05% plus 1/2 (P-0.50%)* Up to 0.17%
greater than 0.70% 0.15% 0.17%
- ---------------------------
*P = Performance. Example: If Cypress outperforms the benchmark index by 0.60%,
the fee would be calculated as [0.02% basic fee + 0.05% Performance Fee +
{(0.60%-0.50%)/2}] = 0.12%
The duties to be performed under these Money Manager Agreements are similar, and
the standard of care and termination provisions of the agreement are identical
to the other Money Manager Agreements with the other money managers of the Fund.
The Money Manager Agreements will remain in effect until September 21, 2000.
Cypress makes investment decisions for the assets of the Intermediate
Fixed-Income Portfolio and Short Intermediate Fixed-Income Portfolio allocated
to it by Bennington, and continuously reviews, supervises, and administers the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment programs with respect to these assets. Cypress is
independent of Bennington and discharges its responsibilities subject to
Bennington's and the Board of Directors' supervision and in a manner consistent
with the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment objectives, policies and limitations.
In connection with the appointment of Cypress as the Money Manager of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, the following language is inserted in the following sections of the
Fixed-Income Portfolios - Advisor Class Shares Prospectus:
- --------------------------------------------------------------------------------
On page 3, the following paragraphs are replaced in their entirety:
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 organizations (individually
the "Money Manager" or collectively the "Money Managers") of the Portfolios are
set forth below:
o INTERMEDIATE FIXED-INCOME PORTFOLIO - Cypress Asset Management3 -- 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 or more than ten years.
o SHORT-INTERMEDIATE FIXED-INCOME PORTFOLIO - Cypress Asset Management4 --
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 or more than five
years.
- -------------------
3 Managed by Smith Barney Capital Management from inception through April 30,
1998 and by Bennington Capital Management from May 1, 1998 through
September 20, 1998. See Statement of Additional Information for more
information.
4 Managed by Bankers Trust Company from inception through April 30, 1998, and
by Bennington Capital Management from May 1, 1998, through September 20,
1998. See Statement of Additional Information for more information.
- --------------------------------------------------------------------------------
On page 6, the following replaces the "Annual Portfolio Operating Expenses"
Table in its entirety:
<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) 0.40% 0.40% 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 0.73% 0.75% 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" 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 fees paid to the Money Managers of the Intermediate
Fixed-Income, Short-Intermediate Fixed Income and Mortgage Securities
Portfolios. Bennington receives only the management fee and not a Money
Manager fee for the Portfolio that 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:
<TABLE>
<CAPTION>
Portfolios
-------------------------------------------------------------------------
Intermediate Short-Intermediate Mortgage U.S. Government
Fixed-Income Fixed-Income Securities Money
------------ ------------------ ---------- -----
<S> <C> <C> <C> <C>
One Year $7 $8 $9 $6
Three Years $23 $24 $27 $17
Five Years $41 $42 $48 $30
Ten Years $91 $93 $106 $68
</TABLE>
- --------------------------------------------------------------------------------
On pages 26-27, the following replaces the first two full paragraphs in the
section entitled "Money Manager Fees" in their entirety:
Money Manager Fees. The fees paid to the Money Manager of a Portfolio
are based on the assets of the Portfolio and on the number of complete calendar
quarters of management by the Money Manager. During the first five calendar
quarters, the Money Manager fee has two components, the basic fee (the "Basic
Fee") and the portfolio management fee (the "Portfolio Management Fee"). See
"Money Manager Fees--Money Manager Fee Schedule For Portfolios Managed Less Than
Five Complete Calendar Quarters by Manager" in the Statement of Additional
Information. The Money Manager for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio has not completed five complete
calendar quarters. During the first five calendar quarters the Money Manager for
the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio will receive a Basic Fee of 0.02% and a Portfolio Management Fee of
0.02%.
Commencing with the sixth calendar quarter of management by a Money
Manager of an operating Portfolio, such Portfolio will pay its Money Manager
based on the "Money Manager Fee Schedule For A Manager From a Manager's Sixth
Calendar Quarter of Management Forward." The Money Manager Fee commencing with
the sixth quarter consists of two components, the Basic Fee and the performance
fee (the "Performance Fee"), which varies with a Portfolio's performance. The
Money Manager for the Mortgage Securities Portfolio has completed the first five
calendar quarters of management of its respective Account, as defined below, and
the Performance Fee is in effect. If at any time a Money Manager should be
replaced, the new Money Manager for the applicable Portfolio will receive the
fee negotiated by Bennington. In accordance with the exemptive order and
interpretations of the Securities and Exchange Commission, at any time
Bennington replaces a Money Manager, Bennington may negotiate a change in the
fee schedule payable to the new Money Manager (including a reduction) provided
there is no increase in the aggregate fee payable by the Fund. Although
Bennington may negotiate a reduction in the Money Manager fee payable to the
Money Manager either during the first five complete calendar quarters or from
the sixth calendar quarters of management forward, there is a possibility of
future modifications to such fee. In no event, however, shall the maximum Money
Manager fee payable by the Fund be greater than 0.15% during the first five
calendar quarters of management by a Money Manager or greater than 0.25% after
the sixth calendar quarter of management forward. See the table "Money Manager
Fee Schedule for Portfolios Managed Less Than Five Complete Calendar Quarters"
and "Money Manager Fee Schedule From a Manager's Sixth Calendar Quarter of
Management Forward" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
On page 42 the following replaces the first full paragraph under "MONEY MANAGER
PROFILE" in its entirety and adds the information concerning the Money Manager:
The following information as to the Money Managers 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.
Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio
Cypress Asset Management ("Cypress"), is a California corporation and
registered investment adviser. Cypress is a registered investment adviser with
the SEC and with the State of California. Mr. Xavier Urpi, President and Chief
Investment Officer, is primarily responsible for the day-to-day management and
investment decisions for the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio and is supported by Ms. Rosemary
Brooks, Manager of Operations, who assists in the management of the Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio. Mr. Urpi
founded Cypress in 1995. Prior to that, Mr. Urpi was at Smith Barney Capital as
a Director of Fixed-Income from March 1989 to September 1995. Ms. Brooks joined
Cypress in January 1998. Prior to that, Ms. Brooks was owner of Brooks Finance,
and a registered representative with H.D. Vest from June 1994 to July 1997.
<PAGE>
ACCESSOR(R) FUNDS, INC.
1420 Fifth Avenue, Suite 3130
Seattle, WA 98101
(206) 224-7420/(800) 759-3504
Supplement dated September 21, 1998 to
Statement of Additional Information
Dated May 1, 1998
THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN
THE STATEMENT OF ADDITIONAL INFORMATON, AND SHOULD BE READ IN CONJUNCTION WITH
SUCH STATEMENT OF ADDITIONAL INFORMATION. CAPITALIZED TERMS NOT DEFINED HEREIN
SHOULD HAVE THE MEANINGS SET FORTH IN THE STATEMENT OF ADDITIONAL INFORMATION.
From the inception of the Intermediate Fixed-Income Portfolio and the
Short-Intermediate Fixed-Income Portfolio until April 30, 1998, Smith Barney
Capital Management and Bankers Trust Company, respectively, were the money
managers of these portfolios. Beginning on May 1, 1998, Bennington Capital
Management L.P. ("Bennington") invested the assets of these two portfolios
directly. On September 9, 1998, the Board of Directors of Accessor Funds, Inc.
(the "Fund") including all of the Directors who are not "interested persons" of
the Fund, has approved the appointment of Cypress Asset Management ("Cypress")
as money manager of the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio, effective September 21, 1998. The
appointment of Cypress will not require shareholder approval. This procedure for
adding or replacing money managers was approved by the Portfolios' shareholders
at a Special Meeting of Shareholders held on August 15, 1995, and was authorized
by an exemptive order issued to the Fund by the Securities and Exchange
Commission on September 4, 1996.
With the exception of the fee schedule, the Money Manager Agreements among
Bennington Capital Management L.P. ("Bennington"), the Fund and Cypress relating
to the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio are substantially similar to that between Bennington, the Fund and
previous money managers of the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio. The fee schedule is set forth below:
For the first five complete calendar quarters of management of the Account by
the Money Manager, the Fund will pay the Money Manager on a quarterly basis at
the following annual fee rates, applied to the average daily net assets of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, respectively.
Portfolio Total
Management Annual
Basic Fee Fee Fee
--------- ---------- -----
0.02% 0.02% 0.04%
Commencing with the sixth calendar quarter of management by the Money
Manager for the Account, the Fund will pay the Money Manager on a quarterly
basis an annual fee based on the schedule below as applied to the average daily
net assets of the Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio, respectively, capped at a maximum of 0.17%.
Average Annual Performance Total
Differential vs. Benchmark Annual Annual
Basic Fee Index Performance Fee Fee
- --------- ----- --------------- ---
0.02% less than 0.35% 0.00% 0.02%
greater than or equal
to 0.35% and less
than or equal to 0.50% 0.05% 0.07%
greater than 0.50% and
less than or equal
to 0.70% 0.05% plus 1/2 (P-0.50%)* Up to 0.17%
greater than 0.70% 0.15% 0.17%
- -----------------------
*P = Performance. Example: If Money Manager outperforms the benchmark index by
0.60%, the fee would be calculated as [0.02% basic fee + 0.05% Performance Fee +
{(0.60%-0.50%)/2}] = 0.12%
The duties to be performed under these Money Manager Agreements are similar, and
the standard of care and termination provisions of the agreement are identical
to the other Money Manager Agreements with the other money managers of the Fund.
The Money Manager Agreements will remain in effect until September 21, 2000.
Cypress makes investment decisions for the assets of the Intermediate
Fixed-Income Portfolio and Short Intermediate Fixed-Income Portfolio allocated
to it by Bennington, and continuously reviews, supervises, and administers the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment programs with respect to these assets. Cypress is
independent of Bennington and discharges its responsibilities subject to
Bennington's and the Board of Directors' supervision and in a manner consistent
with the Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio's investment objectives, policies and limitations.
In connection with the appointment of Cypress as the Money Manager of the
Intermediate Fixed-Income Portfolio and Short-Intermediate Fixed-Income
Portfolio, the following language is inserted in the following sections of the
Statement of Additional Information:
- --------------------------------------------------------------------------------
On page B-25, the following replaces in its entirety the first paragraph in the
section entitled Money Managers.
Money Managers. The Money Manager Agreement for the U.S. Government
Money Portfolio was terminated on September 7, 1994. Currently, Bennington
currently invests all of the assets of the U.S. Government Money Portfolio. Each
other Portfolio of the Fund currently has one Money Manager investing all or
part of its assets. Bennington 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.
- --------------------------------------------------------------------------------
On page B-26, the following replaces in its entirety the third paragraph:
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. Bennington
invested all of the assets of the Intermediate Fixed-Income and
Short-Intermediate Fixed-Income Portfolios from May 1, 1998, through September
20, 1998. New Money Manager Agreements effective September 21, 1998, for the
Intermediate Fixed-Income and Short-Intermediate Fixed-Income Portfolios in
connection with a change in Money Managers to Cypress were 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 Agreements
on September 9, 1998. 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.
- --------------------------------------------------------------------------------
On page B-28, the following is added to the end of list of Money Managers:
o Cypress Asset Management ("Cypress"), a California corporation
and registered investment advisor with the Securities and
Exchange Commission and the State of California, is the Money
Manager of the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio. Cypress is a
California corporation, owned by Mr. Xavier Urpi, President
and Chief Investment Officer. The Money Manager's strategy for
both the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio is to use sector
rotation and overweight the most attractive and highest
yielding sectors of the Lehman Brothers Government/Corporate
Index and the Lehman Brothers 1-5 Years Government/Corporate
Index, respectively. Cypress' strength and focus is on
analyzing each individual security to target undervalued
opportunities. Specifically, Cypress looks to add incremental
return over an index while controlling duration, convexity and
yield curve risk. As of June 30, 1998, Cypress managed assets
of approximately $330 million.
- --------------------------------------------------------------------------------
On Page B-29, the following replaces in its entirety the first paragraph under
"Money Manager Fees paid to the Growth, Value and Income and International and
Mortgage Securities Portfolios Money Managers":
Money Manager Fees paid to the Growth, Value and Income, International,
Intermediate Fixed-Income, Short-Intermediate Fixed-Income 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 "Money Manager Fee Schedule For Portfolios Managed Less Than Five
Complete Calendar Quarters by Manager For Growth, Value and Income,
International, Intermediate Fixed-Income, Short-Intermediate Fixed-Income and
Mortgage Securities Portfolios" based on the average daily net assets of the
Portfolio managed by such Money Manager. With the exception of the Growth
Portfolio5, Intermediate Fixed-Income Portfolio and Short-Intermediate
Fixed-Income Portfolio6, 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.
- ---------------
5 Geewax, Terker commenced investment operations for the Growth Portfolio on
July 21, 1997.
6 Cypress commenced investment operations for both the Intermediate
Fixed-Income and Short-Intermediate Fixed-Income Portfolios on September
21, 1998.
- --------------------------------------------------------------------------------
On page B-30, the following paragraph is inserted:
In accordance with the exemptive order and interpretations of the Securities and
Exchange Commission, at any time the Manager replaces a Money Manager, the
Manager may negotiate a change in the fee schedule payable to the new Money
Manager (including a reduction) provided there is no increase in the aggregate
fee payable by the Fund. In the case of the Intermediate Fixed-Income Portfolio
and the Short-Intermediate Fixed-Income Portfolio, the overall maximum fee for
the first five calendar quarters payable to the former Money Managers was 0.15%
(comprised of a basic fee of 0.07% and a portfolio management fee of 0.08%) and
from the sixth calendar quarter forward payable to the former Money Managers was
0.25% (comprised of a basic fee of 0.07% and a maximum annual performance fee of
0.18%). Although the Manager has currently negotiated a reduction in the Money
Manager fee to a maximum of 0.04% during the first five calendar quarters and
0.17% payable to the Money Manager of the Intermediate Fixed-Income and
Short-Intermediate Fixed-Income Portfolios from the sixth calendar quarter of
management forward (as described below), there is a possibility of future
modifications to such fee. In no event shall the maximum Money Manager fee
payable by the Fund be greater than 0.25% after the sixth calendar quarter of
management forward.
- --------------------------------------------------------------------------------
On page B-30, the table entitled "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" is replaced in its
entirety as follows:
MONEY MANAGER FEE SCHEDULE FOR PORTFOLIOS
MANAGED LESS THAN FIVE COMPLETE CALENDAR QUARTERS BY MANAGER
FOR GROWTH, VALUE AND INCOME, INTERNATIONAL, INTERMEDIATE FIXED-INCOME,
SHORT-INTERMEDIATE FIXED-INCOME AND MORTGAGE SECURITIES
PORTFOLIOS
<TABLE>
<CAPTION>
Portfolio Total
Management Annual
Portfolio Basic Fee Fee Fee
--------- --------- --- ---
<S> <C> <C> <C> <C>
Growth 0.10% 0.10% 0.20%
Value and Income 0.10% 0.10% 0.20%
International 0.20% 0.20% 0.40%
Intermediate Fixed-Income* 0.02% 0.02% 0.04%
Short-Intermediate Fixed-Income* 0.02% 0.02% 0.04%
Mortgage Securities 0.07% 0.08% 0.15%
</TABLE>
* In accordance with the exemptive order and interpretations of the
Securities and Exchange Commission, at any time Bennington replaces a Money
Manager, Bennington may negotiate a change in the fee schedule payable to
the new Money Manager (including a reduction) provided there is no increase
in the aggregate fee payable by the Fund. Although Bennington has
negotiated a reduction in the Money Manager fee payable to the Money
Manager for the Intermediate Fixed-Income and Short-Intermediate
Fixed-Income Portfolios during the first five complete calendar quarters,
there is a possibility of future modifications to such fee. In no event,
however, shall the maximum Money Manager fee payable by the Fund to a Money
Manager of the Intermediate and Short-Intermediate Fixed-Income Portfolios
be greater than 0.15% during the first five calendar quarters of management
by a Money Manager.
- --------------------------------------------------------------------------------
On page B-30, the following information is added to the table entitled "Money
Manager Fee Schedule From A Manager's Sixth Calendar Quarter Of Management
Forward", to include the Intermediate Fixed-Income Portfolio and
Short-Intermediate Fixed-Income Portfolio:
<TABLE>
<CAPTION>
Average Annual Total
Performance Differential Annual Annual
Portfolio Basic Fee vs. Benchmark Index Performance Fee Fee
- --------- --------- ------------------- --------------- ------
<S> <C> <C> <C> <C>
Intermediate Fixed-Income* 0.02% less than 0.35% 0.00% 0.02%
Short-Intermediate Fixed- greater than or equal
Income* to 0.35% and less
than or equal to
0.50% 0.05% 0.07%
greater than 0.50% and
less than or equal
to 0.70% 0.05% plus 1/2 (P-0.50%)** Up to 0.17%
greater than 0.70% 0.15% 0.17%
</TABLE>
- ---------------------------
* In accordance with the exemptive order and interpretations of the
Securities and Exchange Commission, at any time Bennington replaces a Money
Manager, Bennington may negotiate a change in the fee schedule payable to
the new Money Manager (including a reduction) provided there is no increase
in the aggregate fee payable by the Fund. Although Bennington has
negotiated a reduction in the Money Manager fee payable to the Money
Manager for the Intermediate Fixed-Income and Short-Intermediate
Fixed-Income Portfolios from the sixth calendar quarter forward, there is a
possibility of future modifications to such fee. In no event, however,
shall the maximum Money Manager fee payable by the Fund to a Money Manager
of the Intermediate and Short-Intermediate Fixed-Income Portfolios be
greater than 0.25% from the sixth calendar quarter forward.
**P = Performance. Example: If Money Manager outperforms the benchmark index by
0.60%, the fee would be calculated as [0.02% basic fee + 0.05% Performance
Fee + {(0.60%-0.50%)/2}] = 0.12%
- --------------------------------------------------------------------------------
On page B-31, the table entitled "Benchmark Indices" is amended to include the
Intermediate Fixed-Income and Short-Intermediate Income Portfolios, as follows:
BENCHMARK INDICES
<TABLE>
<CAPTION>
Portfolio Index
--------- -----
<S> <C> <C>
Intermediate Fixed-Income Lehman Brothers Government/Corporate Index
Short-Intermediate Fixed-Income Lehman Brothers Government/Corporate 1-5 Year Index
</TABLE>
- --------------------------------------------------------------------------------
On page 33, the paragraph entitled "Money Manager Fees - Intermediate
Fixed-Income Portfolio and Short-Intermediate Fixed-Income Portfolio" is
deleted.
